TOKYO-Vodafone Group, the largest mobile carrier in the world, announced in May it will acquire British Telecommunications’ (BT) entire stake in Japan Telecom Group (JT) for 652.3 billion yen (US$5.4 billion). Following the deal, Vodafone Group will hold a 45-percent stake in Japan Telecom and a 46-percent stake in J-Phone Group, the mobile unit of Japan Telecom.
It is widely acknowledged that Vodafone raised its stake in JT to target its mobile business. Chris Gent, chief executive of Vodafone Group, at a press conference in Tokyo on 2 May, said the firm will initially aim to make J-Phone the number-two mobile carrier in Japan and will eventually “press, giving NTT DoCoMo a hard time throughout Japan.”
J-Phone is currently the country’s third-largest carrier with a 16-percent market share.
Gent also stressed that NTT DoCoMo is far behind Vodafone in its international business. “We have a very strong position through Europe and most of the best markets in the world, including a key strategic position in China. We think DoCoMo has a lot of catching up to do, but we will give them a very hard time around the world,” he said.
Strategies
Although Vodafone is the largest mobile carrier in the world, its Japanese strategy has lagged behind other foreign carriers. Vodafone acquired a 15-percent stake in JT last December and an additional 10 percent from AT&T this year, along with the recent 20 percent from BT. The carrier has successfully increased its stake in JT from 0 percent to 45 percent in just five months. Vodafone acquired a 26-percent stake in J-Phone through its acquisition of U.S.-based carrier AirTouch in 1999.
Following completion of the BT deal, Vodafone will be the single largest shareholder of JT with a veto right over important corporate decisions. The second-largest shareholder in JT is East Japan Railway, which has 15.1 percent.
By fully using its strengthened position, Vodafone is expected to exert influence over J-Phone’s management. Gent said Vodafone would strengthen the J-Phone business by sharpening its marketing activities. J-Phone has been offering new, unique services to the market even earlier than NTT DoCoMo. But due to less sophisticated marketing, J-Phone has been failing to defeat NTT DoCoMo.
Japanese carriers plan to launch some of the first 3G services in the world. NTT DoCoMo will launch 3G services on a limited basis on 30 May, and J-Phone plans to launch its 3G service in June 2002. Vodafone has now secured a well-established channel to get information and skills about 3G technology through J-Phone.
In addition, Vodafone will be able to gain know-how regarding the successful Japanese mobile Internet access market. J-Phone provides the J-Sky Internet service with 6 million users. Vodafone and J-Phone kicked off a joint effort early this year to promote Internet services combining J-Sky services and Vizzavi, a joint venture between Vodafone and Vivendi.
JT’s history
JT surprised the Japanese telecommunications market in April 1999 by announcing a tie-up with AT&T and BT. At a press conference announcing that BT and AT&T would jointly hold a 30-percent stake in JT, Koichi Sakata, JT chairman, boldly said the company was ready to challenge NTT by winning support from two of the world’s leading carriers. However, two years later, both foreign carriers have withdrawn from the Japanese market by selling their entire stakes in JT to Vodafone.
Last December, two Japan Railway Group firms sold their stakes to Vodafone reportedly without consulting JT, triggering the further series of JT stake sales to Vodafone.
Gent said JT and J-Phone “need to be recognized as Japanese led-companies,” suggesting that both Chairman Sakata and President Haruo Murakami may hold their seats at least for the time being. “If you look at Vodafone companies around the world, we make sure that the best quality national management in the country concerned lead the businesses,” Gent explained.
Gent denied widely circulated rumors that Vodafone will eventually sell JT’s fixed-line business and keep only the J-Phone business and said his firm intends to continue to support the development of the fixed-line business. However, Vodafone will have five board members, two internal and three external, at JT. Vodafone may require JT to change its business strategies due to developments in the world telecom market and Vodafone’s global strategies.
NTT DoCoMo has been promoting its worldwide strategies through its partners, such as AT&T Wireless and KPN Mobile. However unlike Vodafone, NTT DoCoMo has limited its investments in foreign carriers to up to 20 percent. NTT DoCoMo does not intend to conduct mobile business in foreign markets by itself; rather it plans to spread its skills and knowledge of i-mode and 3G technologies throughout the world through its partners.
Now a direct battle between NTT DoCoMo and Vodafone in the Japanese market could determine the fate of further confrontations in the worldwide market.
