Vodafone buys 15% stake in Japan Telecom

In a move widely viewed as an attempt to take on Japanese cellular giant NTT DoCoMo in its home market, Vodafone Group is to purchase stakes totaling 15% of Japan Telecom.

          In a move widely viewed as an attempt to take on Japanese cellular giant NTT DoCoMo in its home market, Vodafone Group Wednesday agreed to purchase stakes totaling 15% of Japan Telecom, the parent company of the country's third-largest mobile phone operator.

          Vodafone will purchase an 8.6% stake in Japan Telecom from West Japan Railway Co. and a 6.4% stake from Central Japan Railway Co. for a combined total of around 249 billion yen (US$2.2 billion), Japan Telecom said in a statement Wednesday.

          After the deals are completed, East Japan Railway Co. will remain the single largest shareholder in Japan Telecom with a 15.1% stake. Vodafone will tie British Telecommunications PLC and AT&T, which both purchased their shares in 1999 and now hold a 15% stake each, while West Japan Railway will be the fifth largest shareholder with a 1.6% stake.

          Japan Telecom is one of Japan's big three telecommunications companies. It was originally established as a long distance telecommunications offshoot of Japan's railway operators. Its cellular unit, J-Phone Communications Co. Ltd., is the number three player in Japan's fast moving cellular market, nipping at the heels of number two operator Au Group.

          While Vodafone, BT and AT&T will hold equal shareholdings in Japan Telecom, the move will give Vodafone greater control over J-Phone. Vodafone already holds a direct stake in the cellular carrier while BT and AT&T have indirect stakes through their Japan Telecom shareholdings. With Wednesday's deals, Vodafone's indirect stake in J-Phone will be equal to BT and AT&T, but Vodafone's direct stake in the cellular operator gives it greater control than its foreign rivals.

          AT&T, however, is looking to divest at least part of its stake in Japan Telecom. NTT DoCoMo's recent acquisition of a 16% stake in AT&T's wireless unit complicated things for the U.S. operator, which suddenly found itself a shareholder in one of NTT DoCoMo's main rivals in the Japanese carrier's home market. Earlier this month, an AT&T official said the company will divest the 5% stake in Japan Telecom held by the wireless unit.

          At the end of November this year, J-Phone had 9.3 million subscribers or a 16.4% share of Japan's cellular market, according to figures from the Japanese Telecommunication Carrier's Association. NTT DoCoMo in contrast had 33.6 million subscribers or a 58.9% market share while the Au Group had 10.3 million subscribers. Although all three carriers are still managing to increase the number of subscribers per month, J-Phone is growing faster than Au and slowly closing the gap that exists between the two.

          In the wireless Internet market, J-Phone is doing well. It announced last week that it had attracted 4 million subscribers to its J-Sky service representing 42.6% of its total subscribers. The number is not as high as NTT DoCoMo's 45.9% of subscribers on its I-mode service, but beats the 41.1% mobile Internet subscription rate that the Au Group has for its EZ Web service.

          Vodafone growing control over J-Phone will give it a stronger hand with which to battle NTT DoCoMo in its home market. Since it first took stakes in the J-Phone companies several years ago, the world's mobile communications landscape has changed dramatically. Through a series of acquisitions, Vodafone has become one of the world's leading cellular carriers while, until recently, NTT DoCoMo confined itself to the Japanese domestic market.

          Recently, however, NTT DoCoMo, no longer content with success at home, has turned its sights overseas. Since the dying days of 1999, the carrier has inked a series of international alliances through minority stakes in operators. Most recently it agreed to acquire minority stakes in AT&T Wireless and Taiwan's KG Telecommunications Co. Ltd., and the Japanese carrier has also jumped into bed with KPN Mobile NV, of the Netherlands, and Hong Kong's Hutchison Telephone Co. Ltd.

          Japan Telecom, in Tokyo, can be contacted at +81-3-5540-8020, or via the Web at http://www.japan-telecom.co.jp/. Vodafone, in Newbury, England, is at +44-1635-33251, or at http://www.vodafone.com/.

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