Carlyle and Kyocera are to pay KDDI $2 billion to acquire 90% of its DDI Pocket subsidiary.
Carlyle and Kyocera’s acquisition of DDI Pocket is the second major deal in the Japan telecoms market this year. In May, Japanese Internet service provider Softbank [9984.TO] bought Japan Telecom for $3 billion from US buyout firm Ripplewood to gain a foothold in Japan’s corporate telecom business.
Under terms of the latest deal, Carlyle will own 60% of the new company, Kyocera will increase its present 13% stake to 30%, while KDDI will retain a 10% share.
The low-cost personal handyphone system (PHS) service has been in decline in Japan in the face of the sophisticated products offered by the major operators, and currently has about three million subscribers. Designed to fill the gap between wireline and full mobility services, PHS has enormous potential in developing countries.
The technology also has potential for data services, and Microsoft’s Japanese subsidiary plans trials of a new data ‘push’ system, which will use PHS technology to communicate with personal digital assistants. It will use technology that will enable the PHS server to remotely ‘wake’ the PDA when information is available.
Carlyle Japan managing director Tamotsu Adachi told a news conference that he believes DDI is at a competitive advantage in the medium to long term, particularly in the corporate mobile data market.
Carlyle, which has about 30% of its funds invested in world telecoms operators, will gain a majority stake in an operation that makes considerable profits offering a low-cost service that needs less capital investment than more advanced technologies. Mobile phone and electronics parts maker Kyocera is also able to increase its commitment to the PHS system.
The deal also enables KDDI to cut debt and concentrate on its mobile ‘au’ operation, which has been gaining market share at the expense of the major operators.
