KOLKATA | MUMBAI: Ahead of international arbitration, Japan’s NTT DoCoMo has hardened its stand on its dispute with the Tatas on the modalities of its exit from Tata Teleservices (TTSL), saying it believes its Indian partner should pay as agreed in their shareholders pact, which comes to at least Rs 7,250 crore, or find a buyer for its 26% stake. “We think it is possible for Tata Sons to fulfil its obligations based on the shareholders agreement, and we will continue to say so in the London arbitration process,” said an NTT DoCoMo spokesman in an emailed response to ET’s queries. DoCoMo’s stance is significant given Reserve Bank of India’s rejection of a Tata Sons proposal last month to pay more than the current fair value of TTSL shares. Tata Sons, in turn, reiterated that its hands are tied as RBI is unwilling to play ball. A Tata Sons spokesperson said the company “has been committed to honouring its contractual obligations to DoCoMo.” However, RBI had said “it cannot accede to its request for special permission to pay DoCo-Mo a price higher than the current fair value of TTSL shares”. RBI said so because “it is not in conformity with extant Foreign Exchange Management Act (FEMA) regulations”. On whether Tatas would negotiate a lower price (below Rs 7,250 crore) with DoCoMo, the spokesman said, “Tata Sons would not be able to comment further as the matter is sub judice, and the issue would now have to be resolved in the arbitration between the parties.” Under the agreement between the two, which was signed in 2008-09, the Tata group was to ensure that DoCoMo gets the higher of either half the investment it made in TTSL, which amounts to Rs 7,250 crore, or the stake’s fair market price, in case Tata Tele’s performance falls short of certain targets agreed between the two shareholders. NTT DoCoMo had initiated arbitration in January after the 90 business days it gave to the Tatas to find a buyer for its stake lapsed on December 3. The Japanese company is now preparing for a long legal tussle with the Tatas as it believes the London arbitration proceedings could go on for up to two years. “Though we cannot say for certain, we think the process will take about a year-and-a-half to two years,” said the spokesman of Japan’s leading mobile carrier. Asked whether Tata Sons had suggested any alternative solution to meet its obligations under the shareholders pact in the aftermath of RBI’s rejection, the DoCoMo spokesman said, “We cannot comment on details”. According to a person familiar with the Tata-DoCoMo spat, ever since the last RBI ruling rejecting the ‘put option’, the Tata group had internally taken a call that there is in fact no need to pay DoCoMo anything, because by the RBI method, the equity value of the company is nil and the arbitration case is very weak. At the time of the spectrum auctions in March, Tata Tele had declared a negative net worth of Rs 8,985 crore. The reason the case is weak, he said, is that DoCoMo is arguing that the Tatas have breached the contract between them. Tata, in turn, is arguing that it wishes to pay, but is shackled by the laws of the land. Accordingly, the arbitrator per se cannot question the regulation, because it has existed since the contract was signed. Time to explore alternatives As far as the arbitration case is concerned, the date for the next hearing is likely towards end-2015, i.e. November or December, giving both parties time to explore alternatives. The thinking in the Tata Group is that if there is a delay and a strategic partner buys Tata Tele, the two parties might agree to the valuation the buyer offers. Such logic may be the reason for TTSL’s recent aggressive bidding for 800MHz airwaves in India’s costliest spectrum sale. In fact, having beefed up its LTE spectrum holdings in the 800 MHz band across key markets like Andhra Pradesh, Delhi, Mumbai, Haryana and Maharashtra, its network will be of superior quality and more cost-efficient compared with operators trying 4G on the 1800 MHz band. LTE is a new technology. Some analysts, in fact, think that once the government brings in spectrum trading and sharing norms, there will be suitors for Tata Tele. Tata Tele has long been reported to be in talks with potential suitors such as Vodafone and Telenor, though these negotiations have not fructified till now.