1.

DATE: 20 JULY 2015

2. SOURCE: ECONOMIC TIMES
3. M&A NEWS IN BRIEF:
Tata Teleservices (Maharashtra) shares Monday surged 20 per cent
amid reports that the Tata Group has offered to buy out Japanese
telecom major NTT Docomo's 26.5 per cent stake in unlisted Tata
Teleservices for Rs 23.34 a share, after the finance ministry and the
Reserve Bank of India (RBI) rejected the group's application to buy
back Docomo's shares at the pre-agreed valuation of Rs 58 a share.
The 60 per cent lower offer was made on the basis of a fair market
value determined on June 30, 2014. As per media reports, the latest
offer of Rs 23.34 a share is 60 per cent lower than the previous offer of
Rs 58. At Rs 23.34 a share, Tata Tele is valued at Rs. 11,000 crore,
against the pre-agreed valuation of Rs 27,000 crore at Rs 58 a share.
Media reports suggested that Docomo has now moved the London
Court of Arbitration to get a valuation of Rs 58 a share, which
translates into Rs 7,200 crore for its entire stake in Tata Tele.
Following the buzz, shares of Tata Tele (Maharashtra) jumped 20 per
cent to Rs 8.46, its highest trading permissible limit for the day on
BSE. At the NSE, shares of Tata Tele soared 19.86 per cent to touch its
upper circuit limit of Rs 8.45. On the volume front, 49.68 lakh shares of
the company changed hands at BSE and over one crore shares were
traded at the NSE during the day.
Market experts said that the stock rose sharply on hopes of less cash
outgo.
Tata Teleservices (Maharashtra) in a clarification to BSE today said:
"The news item pertains to equity shares of Tata Teleservices Limited
held by NTT Docomo and not of our company, Tata Teleservices
(Maharashtra) Limited and we are not in possession of any unpublished
price sensitive information that is required to be intimated to the
exchanges."
Tata Teleservices Ltd holds 36.54 per cent stake in Tata Teleservices
(Maharashtra), while NTT Docomo Inc. has 11.76 per cent stake, as per
the June quarter shareholding pattern.

History
NTT DOCOMO exit
According to the agreement between the Tata Group and NTT Docomo,
had the right to sell its stake if Tata Docomo missed perfomarance

targets, with Tata getting right of first refusal. On 25 April 2014, NTT
Docomo had announced that they would sell all of their shares in Tata
DoCoMo and exit the Indian telecom industry as they had incurred a
total loss of $1.3 billion. Under the joint venture agreement between
the two groups, NTT Docomo would either increase its stake from
26.5% to 51%, or sell all of its shares, depending on the performance
of Tata Docomo in the Indian market. Since Tata was unable to find a
buyer for the shares, they sought the approval of the RBI, in November
2014, to buy back the shares from NTT Docomo for $1.1 billion
(at 58.045 per share), half the price paid by them in 2009. The RBI
had approved the deal in January 2015, but however, went back on
their
decision
and
rejected
the
deal
in
March
2015,
citing FEMA regulations.
Following the RBI decision, the Tata Group offered to purchase
Docomo's stake at 23.34 a share on the basis of a fair market value
determined on 30 June 2014 by Price Waterhouse Cooper. NTT Docomo
then moved the London Court of International Arbitration seeking a a
valuation of 58 a share

4. ACQUIRER:
Tata Teleservices Maharashtra Limited (TTML) spearheads the Tata
group's presence in the telephony sector in the telecom circles of
Maharashtra (including Mumbai) and Goa.
TTML commenced landline operations in 1998 and today has the
largest wire line base in Mumbai and Maharashtra amongst all private
operators. It commenced full mobility wireless services on the CDMA1X platform in 2004-5.
The Company also has a significant presence in the GSM space,
through its joint venture with NTT DOCOMO of Japan, and offers
differentiated products and services under the TATA DOCOMO brand
name. Tata DOCOMO arises out of the Tata Groups strategic alliance
with Japanese telecom major NTT DOCOMO in November 2008. The
Company rolled out its GSM services under the brand name TATA
DOCOMO in Mumbai, Maharashtra and Goa.
Tata DOCOMO marks a significant milestone in the Indian telecom
landscape, and has already redefined the very face of telecoms in
India, being the first to pioneer the per-second tariff option - part of its
Pay for What You Use pricing paradigm. Tokyo-based NTT DOCOMO is
one of the worlds leading mobile operatorsin the Japanese market,

the company is the clear market leader, used by over 50 per cent of
the countrys mobile phone users.
With a full portfolio of products and services for different categories of
retail and enterprise consumers, and an excellent network backed by
good customer care, TTML is well positioned to lead the market. The
company has been rated as the no. 1 wireless operator in terms of
overall customer satisfaction across Maharashtra (including Mumbai)
and Goa, in surveys commissioned by the Telecom Regulatory
Authority of India (TRAI). The company is listed on the Bombay Stock
Exchange (BSE) and National Stock Exchange (NSE), and has around
500,000 shareholders.

5. TARGET COMPANY:
NTT DOCOMO, is the predominant mobile phone operator in Japan. The
name is officially an abbreviation of the phrase, "do communications
over themobile network", and is also from a compound word dokomo,
meaning "everywhere" in Japanese. Docomo provides phone, video
phone (FOMA and Some PHS), i-mode (internet), and mail (i-mode mail,
Short Mail, and SMS) services. The company has its headquarters in
the Sanno Park Tower, Nagatach, Chiyoda, Tokyo. At the beginning of
2015, it was the fourth largest public company in Japan when
measured by market capitalization.
Docomo was spun off from Nippon Telegraph and Telephone (NTT) in
August 1991 to take over the mobile cellular operations. It
provides 2G (mova) PDC cellular services on the 800 MHz band,
and 3G FOMA W-CDMAservices on the 2 GHz (UMTS2100) and 800 MHz
(UMTS800 (Band VI)) and 1700 MHz (UMTS1700 (Band IX)) bands,
and 4G LTE services. Its businesses also included PHS (Paldio), paging,
and satellite. Docomo ceased offering a PHS service on January 7,
2008.

6. TYPE OF TRANSACTION:
2009
March: NTT DoCoMo buys 26.5% stake in Tata Tele for $2.22 bn

2014
April: DoCoMo announces plan to exit loss-making Tata Tele
July: DoCoMo asks Tata to find a buyer for its stake, valued at Rs
7,200 cr
Dec: Tatas fail to find a buyer for DoCoMos stake within 90 days
2015
Jan: DoCoMo moves London court of arbitration, threatens to
foreclose Tata Sons assets
Jan: RBI allows Tata group to buy back DoCoMos 26.5% stake in Tata
Teleservices at Rs 58
a share

7. METHOD FOLLOWED:
In November 2008, NTT Docomo invested $2.2 billion in Tata
Teleservices, at 117 a share for a 26.5% stake in the latter. DoCoMo,
TTSL and Tata Sons had in March 2009 signed shareholder agreement
for the business alliance. In March 2009, DoCoMo acquired a 27.31% in
Tata Teleservices for Rs 12,924 crore and 20.25% in Tata Teleservices
(Maharashtra) Ltd, the listed arm of TTSL, for 949 crore. Overall,
DoCoMo holds 26.5%in Tata Teleservices. On 5 November 2010, Tata
DOCOMO became the first private sector telecom company to
launch 3G services in India. Tata DOCOMO had about 42.34 million
users at the end of December 2010

8.

Comment
Tata group should be allowed to buy back Docomos stake at a predetermined price of Rs 58 a share, despite the companys valuer, Price
Waterhouse, estimating the stake at Rs 23.34 a share 60 per cent
lower. The larger issue here is of fair commitment in contracts, in
relation to an investment, and a downside protection of an investment
rather than an assured return. Besides, our relationship with Japan in
terms of foreign direct investment flows is also a matter to be kept in
view. Therefore, we are inclined to accept the (Tata) proposal.