Vodafone buy moves it to No. 3 in Japan

Abstract

Vodafone's offer priced its shares at 450,000 ($3,718.39), 29% more that the price at which they closed the day before the bid's announcement. While this made the Vodafone offer highly attractive, the latest offer carried the lowest price of Vodafone's four successive investments in Japan Telecom. In December 2000, the company paid yen 520,000 per share for a 15% stake in Japan Telecom owned by two regional companies.

TOKYO - Vodafone Group plc has become the third-largest player in the Japanese market as a result of its successful bid for control of Japan Telecom Co. through a public tender.

The British mobile phone giant announced a "friendly" offer in September for 21.7% of Japan Telecom, owner of the fast-growing J- Phone Group wireless operator.

The offer closed Oct. 11, with the Vodafone bid attracting offers of 1.3 million ordinary shares - 63% more than the number needed to give Vodafone a controlling interest. Before announcing the tender offer, Vodafone had already built up a 45% stake in Japan Telecom through a series of transactions starting in December 2000.

Vodafone CEO Christopher Gent said the day the bid was announced that the company would accept no shares above the number needed to give it a 66.7% stake in Japan Telecom. The strong response to Vodafone's offer means that applications to sell the shares will be dealt with on a pro rata basis. A final settlement is expected Oct. 26

Vodafone's offer priced its shares at 450,000 ($3,718.39), 29% more that the price at which they closed the day before the bid's announcement. While this made the Vodafone offer highly attractive, the latest offer carried the lowest price of Vodafone's four successive investments in Japan Telecom. In December 2000, the company paid yen 520,000 per share for a 15% stake in Japan Telecom owned by two regional companies.

This was followed in February by the purchase of AT&T's 10% stake for 492,999 per share and British Telecommunications plc's sale of 20% stake in May at 473,000 per share.

Vodafone's total investment over 10 months was worth 1.36 trillion ($11.2 billion), with the final tender offer for Japan Telecom worth an estimated 312 billion. Including some holdings in J-Phone, the mobile subsidiary, the cumulative effect of the deals is to make Vodafone the largest foreign investor in Japan.

UBS Warburg advised Vodafone on all four of its Japan Telecom investments. Nomura Securities Co. advised Japan Telecom on the share tender.

Japan Telecom welcomed the tender, as did East Japan Railway Co., the company's largest shareholder after Vodafone, with a 15% stake. East Japan Railway is believed to have offered to sell Vodafone two- thirds of its holding, leaving it with a 5% stake. This was crucial to the bid's success.

Gent said two weeks ago that the group expects to compete aggressively for more of the Japanese mobile phone market. NTT DoCoMo Inc. dominates the market with 57% of subscribers. J-Phone ranks third at 16%, but that number is rising.

Second-ranking telecom operator KDDI runs two independently managed mobile telecom services - Tu-ka and au - but a U.S. investment group is likely to buy the relatively small Tu-ka. If this deal goes through, J-Phone will be within only a few percentage points of au by market share.

Gent said after the tender offer was announced that he was impressed by J-Phone's technology, including its handsets, which he described as "the best in the world." Vodafone, once it controls Japan Telecom and J-Phone, is expected to adapt some of J-Phone's phones for use outside Japan.

Vodafone will appoint a CEO and president for JT early next year. Current chairman Koichi Sakata will become a senior adviser.

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