Vodafone has launched a bid for Japan Telecom.
Vodafone, the world’s largest mobile operator, has launched a bid to gain control of Japan Telecom. The UK company, which currently owns 45% of JT and will own an additional 39.7% of its J-Phone mobile subsidiary when a restructuring finishes in November, wants to reach the 66.7% threshold where it can fully manage the Japanese firm.
Japan is one of the world’s largest mobile markets as well as the leader in mobile Internet. As a result, and given that it effectively owns the majority of J-Phone’s equity, it’s no surprise Vodafone is now seeking control.
J-Phone’s margins are currently just 18%, compared to Vodafone’s 31.4% globally; Vodafone feels it can use its mobile expertise to raise them. It has already shown a hands-on approach to managing J-Phone, by installing American Daryl Green as COO and removing former railway company personnel from executive positions.
As a result, Vodafone should be willing to pay the railway companies that founded JT and still own most of the shares a sufficient premium on the market price to win them over. Vodafone would then be likely to divest JT’s fixed-line operations, as it has done on acquiring other combined operators such as Mannesmann, and focus on the business it knows best. The question then is whether the acquisition will pay off.
The outlook could be positive. While J-Phone has lagged its rivals, with only around 20% of the market, it has done extremely well this summer. In August, it attracted 38% of new Japanese mobile subscribers. Recent launches such as its camera phone have caught the public’s attention.
It will face a tougher challenge when leading operator DoCoMo launches 3G services next month. While it’s not yet clear how much 3G will appeal to the Japanese public, it will certainly attract some of J-Phone’s technophile potential customers. Vodafone will need to ensure J-Phone’s 3G service launches on schedule in June 2002 with compelling applications and services to reap the full benefits of this acquisition.
