Docomo infuses Rs 784 cr in Tata Tele

Japan's NTT Docomo had bought a 26% stake in Tata Teleservices in 2008

Japanese telecom operator NTT Docomo, which bought a 26 per cent stake in Tata Teleservices in 2008 for Rs 13,070 crore ($2.7 billion) in November 2008, has infused an additional Rs 784 crore by subscribing to fresh equity in the company in the last two financial years ending March 2012, according to Tata Teleservices’s annual report. Docomo’s equity infusion coincides Tata Sons putting in Rs 1,593 crore to take its holding to 39.22 per cent at the end of March 2012 from 37.92 per cent a year ago.

However, Tata Tele’s annual report does not explain how this increased NTT Docomo’s holding in the company. Tata Tele is not listed on stock exchanges and its spokesperson declined to comment for the story.

A questionnaire sent to NTT Docomo to confirm its current share holding did not get any response either. Tata Teleservices is a laggard in the $100-billion Tata Group. It recorded a loss of Rs 4,227.9 crore in 2011-12, up from Rs 3,508 crore a year ago.

The Japanese company has an agreement with Tata Sons to sell its 26 per cent stake back to the Tata Group holding firm, if the company does not meet certain performance parameters by 31 March 2014.

“The agreement has five performance parameters, out of which three are met and two are slightly missed,” said a tata Group source who did not wish to be identified. “We are confident of meeting all five parameters by 31 March 2014 and there should not be any obligation to buy back those shares from Docomo,” he said without specifying the details.

“The capital infusion reflects the hardship that telecom companies are facing at a time when revenue growth is muted,” said Vivekanand Subbaraman, a telecom analyst with foreign brokerage Phillip Capital.

Tata Teleservices has been on a clean-up drive since Tata group veteran N Srinath took the reins of the company as managing director and CEO in January 2011.

Under his leadership, the company de-activated about 10 million inactive mobile subscribers, bringing down the subscriber base to 80.23 million at the end of the quarter ending June. Meanwhile, the company also started putting more focus on data services using the CDMA technology.

This is believed to have miffed NTT Docomo that partnered with Tata Teleservice for its launch of GSM based services. The Japanese company specialises in 3G technology and content in Japan. “There are a few Docomo executives who have moved from Japan to Tata Tele’s office in Delhi and Mumbai, and there are no issues between the two companies,” said the source. DOCOMO already has the right to appoint three directors on the Tata Teleservices board.