Japan: Vodafone in Japan Telecom sell-off talks

Vodafone, the world's largest mobile phone operator, is in talks with Ripplewood, a US private equity group, to sell Japan Telecom, the fixed-line operator, in what could be the largest investment by a foreign fund in Japan, says the Financial Times

Vodafone, which would retain J-Phone, its mobile phone subsidiary in Japan, acquired Japan Telecom and J-Phone in stages for a total of $11.5bn and has since restructured the business to make it profitable.

The negotiations are continuing, and the terms of the deal--such as the price or timing of any purchase--are not yet determined, Ripplewood said.

"We will have a clearer idea (of the business strategy) after we conduct due diligence," added a Ripplewood official.

Vodafone shares bucked a negative market in London to rise 0.7% to 109.50p in morning trade as investors welcomed the deal and a number of brokers upgraded their forecasts for the stock following last week's positive figures from the company.

Banc of America upgraded its recommendation on the stock to "neutral" from "underweight", while Dresdner Kleinwort Wasserstein and Goldman Sachs raised their forecasts for the company.

The Ripplewood deal, if concluded, would allow Vodafone to concentrate on its mobile phone business in Japan through J-Phone, which has enjoyed strong growth on the back of its camera phones.

It would represent a major investment by Ripplewood, which already has investments in Shinsei Bank, a former nationalised bank, Seagaia resort in south-western Japan and Nihon Columbia.

A sale by Vodafone would be positive for the UK-based group, which needs to focus its resources on the third-generation mobile phone services that are expected to be launched this year. J-Phone was the first Vodafone subsidiary to start a 3G service in Japan, last December.

Vodafone was expected to try to off-load JT as soon as it acquired the group.

Last year Vodafone terminated discussions with Tokyo Electric Power over a potential sale of JT. It is understood the deal was hampered by differences over price.

However, the move raises questions about the future of not just Japan Telecom as an operator but of Japan's telecoms and IT strategy, analysts say.

"It has become uncertain what will happen now that JT, which has a role to play in the future of Japan's telecoms and IT, has fallen into the hands of foreign capital," says Hitoshi Hayakawa, an analyst at ING Barings in Tokyo.

(c) 2003 Financial Times Information Limited.

Source: Financial Times.