MUMBAI -- The Tata group and NTT Docomo are set to finally resolve a row dating to 2014 over a foundering telecom venture, adding a new wrinkle to an industry undergoing upheaval and leaving the Japanese carrier to rethink its overseas strategy.
The Indian conglomerate on Tuesday agreed to withdraw its objection to the enforcement of an international arbitration court's $1.17 billion award to Docomo over a dispute surrounding the terms of the Japanese company's exit from the partnership. India's central bank has not given its approval, citing doubts about the award's compliance with Indian law. Tata had relied on this rationale in its standoff with Docomo, but has decided to change tack. Whether the dispute actually will be laid to rest is now up to authorities.
A friendlier face
Tata's about-face owes to a transfer of power at the top. Cyrus Mistry was ousted as Tata Sons chairman in October, with Ratan Tata taking over temporarily. Natarajan Chandrasekaran, formerly head of Tata Consultancy Services, took the helm in late February.
After Docomo and Tata agreed to part ways and the dispute over terms began, Mistry apparently harbored misgivings over the deal. The relationship grew tepid. In a letter after his ouster, Mistry said the original structure of the Docomo deal "raises several questions about its appropriateness within the then prevailing Indian legal framework."
Ratan Tata took a less dim view of the arrangement, having been the one to approve it back in 2009. A Docomo official said that "Ratan's leadership paved the way for constructive dialogue."
A statement released Tuesday by the conglomerate cited "national interest" as one reason for the new accord with Docomo, hinting at Tata's sense of responsibility as a leading Indian business for contributing to foreigners' reluctance to invest in the country.
Furthermore, continuing the already protracted dispute with Docomo would put Tata's mobile business in a further bind. Telecommunications subsidiary Tata Teleservices has been mired in the red, with its share of the Indian mobile market failing to reach 5%.
In the meantime, new entrants such as Reliance Industries have sparked a rapid shakeout of the industry. A string of potential deals cropped up in the past six months, including merger negotiations between the Indian unit of Vodafone and Idea Cellular -- the No. 2 and No. 3 players in the market. Tata had been left on the sidelines, hamstrung by the Docomo spat.
Speculation is already swirling about a tie-up between Tata Teleservices and Reliance Communications. While Tata is not likely to emerge as a market leader, it is in a position to influence the industry landscape with the potential sale of its mobile business.
Lion at home, lamb abroad
As for Docomo, resolving the Tata dispute would mean the Japanese carrier's official exit from a massive growth market, adding to a litany of oversea troubles.
After its 1998 stock market debut, Docomo's market capitalization climbed as high as 40 trillion yen ($357 billion at current rates) during the technology bubble, outstripping parent Nippon Telegraph & Telephone. Riding this momentum, Docomo invested nearly 2 trillion yen in five major foreign carriers, including U.S.-based AT&T Wireless and KPN Mobile of the Netherlands.
Docomo had hoped to take its i-mode mobile internet service overseas. But the company's shares plummeted when the tech bubble burst, and Docomo lost out in carriers' scramble for customers as well. The company ate some 1 trillion yen in write-offs and other losses.
Though Docomo stuck to its home market for a time, it eventually was lured back out of its shell by the growth potential of emerging markets. The carrier invested more than 260 billion yen in Tata Teleservices in 2009. But the venture failed to keep up with fierce price competition, and Docomo sought to pull out in 2014. The carrier's overseas presence is now limited to small investments in telecom companies in markets such as Taiwan and Hong Kong.
Meanwhile, rival SoftBank Group acquired American carrier Sprint in 2013 -- a deal that is looking better as earnings improve -- while KDDI is making steady inroads into Myanmar and Mongolia. Even if Docomo recoups about 130 billion yen from the Tata venture as hoped, the largest of Japan's three big carriers seems to have no plans for meaningful steps outside its domestic comfort zone.
