Japan’s NTT to spend $38 billion to buy out, take DoCoMo private

Although DoCoMo is the Japan’s market leader, its profits have been eroding, a factor that helped drive the decision to consolidate. (Kyodo News via AP)
Short Url
Updated 29 September 2020

Japan’s NTT to spend $38 billion to buy out, take DoCoMo private

  • Move is intended to enhance the competitiveness of the NTT group as it consolidates its services

MITO, Japan: Japanese telecoms giant Nippon Telegraph & Telephone, or NTT, announced Tuesday it will spend $38 billion to buy out and take private its mobile unit NTT DoCoMo in one of the largest ever deals of its kind.
NTT and NTT DoCoMo executives released details of the plan Tuesday.
The move is intended to enhance the competitiveness of the NTT group as it consolidates its services, said NTT’s CEO Jun Sawada.
“We want to be a game changer,” Sawada said.
He said that between Sept. 30-Nov. 16 the company would buy DoCoMo’s shares at a price of $34.46. DoCoMo’s shares were last trading at $28.39. NTT held about 66 percent of DoCoMo’s shares as of March 31.
The acquisition will be financed by bridge loans, not a share offering, the company said.
The restructuring dovetails with newly installed Prime Minister Yoshihide Suga’s push for lower telecoms rates and more consumer and business-friendly services. It is expected to enable DoCoMo to offer cheaper rates in competition with rivals such as SoftBank and KDDI.
Suga has made expanding digital services a main part of his policy agenda and has called for reforms of the industry’s complex pricing policies and relatively inflexible contract arrangements. Pressures to improve such services have intensified with the push for remote work during the coronavirus pandemic.
NTT’s shares fell 2.7 percent ahead of the announcement, which was made after markets closed. DoCoMo’s shares were suspended from trading. Share prices for other NTT subsidiaries surged ahead of the announcement.
NTT DoCoMo is Japan’s largest mobile carrier, with more than 70 million subscribers. It was founded in 1992. According to its website, it holds a 44.2 percent market share compared with the 32 percent share held by KDDI’s au brand. SoftBank is third ranked, with a nearly 24 percent share.
Although DoCoMo is the market leader, its profits have been eroding, a factor that helped drive the decision to consolidate.
Sawada said there was no direct link between the buyout and cutting mobile subscription prices.
“However, by doing this, DoCoMo will get stronger. That’s why we are doing this. As the result of this, we could build a stable foundation which apparently could give us power to decrease the price,” he said.
The NTT buy out is the biggest ever in Japan and one of the largest worldwide. The biggest so far was the $48 billion acquisition of Dallas, Texas-based energy utility TXU Corp., now known as Energy Future Holdings, by Kohlberg Kravis Roberts, the Texas Pacific Group and Goldman Sachs Capital Partners in 2007.
A trend toward such deals appears to be gathering pace, as Japanese companies sitting on big cash piles adjust their business strategies in a time of growing uncertainty.
NTT traces its roots to 1869, the early days of the telegraph in Japan. Founded in 1952 as the government phone utility, it was privatized in 1987. The company has expanded its network services as its fixed line business has been largely supplanted by mobile phones, at least for individual users.
Japan’s mobile phone rates are on average about half the costs charged in the US and much lower than in Canada and South Korea, according to a study by telecoms services research firm cable.co.uk.
At about $3.90 for 1 gigabyte (1G) of mobile data, however, costs in Japan are far higher than in many European and Asian countries, such as China, where 1G cost 61 cents and India, where the cost was only 9 cents.


Sweden bans Huawei, ZTE from upcoming 5G networks

Updated 33 min 42 sec ago

Sweden bans Huawei, ZTE from upcoming 5G networks

  • European governments have been reviewing the role of Chinese companies in building their networks
  • Sweden’s security service called China ‘one of the biggest threats against Sweden’
STOCKHOLM: Swedish regulators on Tuesday banned the use of telecom equipment from China’s Huawei and ZTE in its 5G network ahead of the spectrum auction scheduled for next month.
The Swedish Post and Telecom Authority (PTS) said auctions the setting of the license conditions followed assessments by the Swedish Armed Forces and security service.
European governments have been reviewing the role of Chinese companies in building their networks following pressure from the United States, which says they pose a security threat because, among other concerns, Chinese companies and citizens must by law aid the state in intelligence gathering.
Sweden’s security service called China “one of the biggest threats against Sweden.”
The United Kingdom in July ordered Huawei equipment to be purged completely from Britain’s 5G network by 2027, becoming one of the first European countries to do so.
Huawei and ZTE did not immediately respond to requests for comment on the decision by Sweden, home to Ericsson, one of Europe’s leading telecoms equipment suppliers.
“The ban leaves network operators with less options and risks slowing the rollout of 5G in markets where competition is reduced,” said Ben Wood, chief of research at CCS Insight.
The ban is likely to benefit rival telecom equipment makers Ericsson and Finland’s Nokia.
PTS said companies taking part in the auction must remove Huawei and ZTE gear from existing central functions by Jan. 1, 2025.
The regulator defined central functions as equipment used to build the radio access network, the transmission network, the core network and the service and maintenance of the network.
PTS said the license conditions were decided to address the assessments made by the armed forces and security service.
It has approved the participation of Hi3G Access, Net4Mobility, Telia Sverige and Teracom in the planned spectrum auction of 3.5 GHz and 2.3 GHz, key bands crucial for the rollout of 5G.
Tele2 and Telenor will participate together as Net4Mobility to secure spectrum for a joint nationwide 5G network.
Tele2, which uses Huawei equipment in its network, which had earlier called Huawei an important vendor, said the PTS decision “does not change our plans substantially.”
“We may have to phase different costs differently between years to meet security conditions on time,” a spokesman told Reuters.
The 5G spectrum auction was originally planned for early 2020, but last year PTS said it would delay the auction due to a security review. PTS announced in April this year that the auction would begin in November.