DoMoCo could look to raise 26% stake in Tata Teleservices

Japanese operator NTT DoCoMo is in discussions to increase its stake in Indian operator Tata Teleservices, according to media reports.

Apparently, DoCoMo has two call options – in March this year and March 2014 – which give it the right to increase its stake in the business under certain, unspecified, conditions.

However, it was also reported that the agreement gives Tata the option to buy-out the Japanese company, again if certain criteria are met.

DoCoMo currently holds a 26 per cent stake in Tata Teleservices, which it acquired for US$2.7 billion in 2008, and has also invested in the business since. It was not revealed under what conditions the company can increase its current holding.

Tata is believed to be able to buy back its stake from DoCoMo in 2014 if the Japanese company fails to find a strategic investor or if the Indian organisation fails to meet targets around subscriber numbers and additions, as well as revenue and profit, within a specified timeframe.

Sources said Tata Teleservices has failed to meet these milestones to date and is unlikely to by the time the 2014 call option comes around, due to market conditions and tight margins.