Vodafone India has reportedly begun negotiating with the Tata Group to buy its controlling stake in Tata Teleservices Limited (TTSL). In case the deal is successful, Vodafone India will become the country?s leading operator with the largest subscriber base.
The new merger and acquisition guidelines for the telecom industry have raised the cap on the market share of a merged entity in a circle from 35 per cent to 50 per cent, paving the way for the acquisition of smaller telecom companies by larger operators.
The Tata Group owns 59.45 per cent stake in TTSL and its Japan-based partner, NTT DOCOMO, holds more than one-fourth stake. According to the shareholders agreement between the Tata Group and NTT DOCOMO, if certain performance parameters are not met by TTSL by March 31, 2014 and NTT DOCOMO decides to exit, the Tata Group will have to find a buyer for its shares.
In case it fails to find another buyer, the Tata Group would have to acquire NTT DOCOMO?s stake. However, the right of first refusal lies with NTT DOCOMO. Further, if the Japanese company refuses to buy out the Tata Group?s share, the Indian partner can exercise its ?drag along? rights and ask NTT DOCOMO to sell its shares to a buyer of its choice.
