The joint venture is expected to be beneficial for both sides because it will allow Softbank to tap in Vodafone’s R&D expertise in these areas. Softbank is Japan’s largest internet service provider but has very little expertise in the notoriously demanding Japanese mobile market.
The venture will also allow Newbury, UK-based Vodafone to keep an eye on industry developments in the Japanese market. This was the primary reason for Vodafone acquiring a Japanese operation in the first place, as Japan is regarded as one of the most technically advanced markets in the world.
By working together, we will be able to develop new mobile technologies and content for the benefit of our customers, as well as offering our developments under license, said Vodafone chief executive Arun Sarin.
The venture is a 50:50 operation between the two companies, and follows Vodafone’s decision in March this year to sell its Japanese unit, Vodafone KK, to Softbank for JPY 1.8 trillion ($15.5bn). Vodafone said it plans to distribute 6bn pounds ($10.53bn) to shareholders, either by way of a special dividend, or by issuing new shares.
The sale of the Japanese unit came after Sarin had succeeded in clearing out the old guard at Vodafone, including former CEO Sir Christopher Gent, following a widely reported boardroom battle over Sarin’s global strategy and leadership. Specifically, the dispute centered on Sarin’s willingness to offload Vodafone’s crown jewels, namely its assets in Japan and the US (its 40% stake in Verizon Wireless).
It was true that Vodafone’s Japanese unit had been a distance third in Japan’s mobile market, and analysts were critical of its attempt to use the same products and handsets in the Japanese market as in its other global markets.
The sale of Vodafone Japan was viewed as something of a personal setback for Sarin, especially as he had spent two years trying to turn around the fortunes of the unit. In early 2005, he shook up Vodafone Japan’s structure and management, and appointed the Vodafone UK boss Bill Morrow as its president. Morrow now returns as chief executive of the new joint venture.
Another problem was that Vodafone Japan was still a profitable unit at the time of its sale, although its ARPU figures were declining. For the six months ending September 30, 2005, Vodafone Japan had posted an operating profit of 191m pounds ($334m), down from 423m pounds ($741m) in the same six-month period in 2004. Revenue meanwhile had risen to 3.7bn pounds ($6.49bn) from 3.68bn pounds ($6.47bn) in 2004.
