TOKYO: Nippon Telegraph & Telephone Corp plans to turn its wireless carrier unit NTT Docomo Inc into a wholly owned subsidiary, a move that may help Prime Minister Yoshihide Suga’s policy push to lower phone tariffs.
NTT will pay 3,900 yen a share to acquire the shares it doesn’t already hold, the companies said in a statement. The buyout is worth around 4.25 trillion yen (US$40bil), a more than 40% premium to Monday’s closing price in Tokyo. Given that parent NTT already controls 66% of the wireless carrier, any proposal is all but guaranteed to pass.
Docomo’s board said it’s in favour of the takeover by its parent, which will fund the purchase through borrowings. The tender offer, the largest for a Japanese company in history, is scheduled to start Sept 30 and will be completed in the fiscal year ending March 31. When NTT spun out Docomo in 1998, it was also the biggest-ever initial public offering at the time.
While executives said talks on combining the two former national companies started in April, it comes at a fortuitous time for Suga, a little over two weeks after he succeeded Shinzo Abe as premier. Suga has made reducing phone bills charged by Docomo and Japan’s other major carriers an early priority, with data-heavy users in Tokyo paying more than three times for a monthly contract than those in Paris.
“In order to solidify his position, he must quickly deliver on some popular economic reforms and has likely already created a battle plan for a few, ” John Vail, chief global strategist at Nikko Asset Management, wrote in a report earlier this month. “Lowering mobile phone costs will be the most popular with voters. Emphasis on the digitalisation of the economy and antiquated government services is also likely popular and, thus, next on the list.”
Docomo shares, which traded without the right to the next dividend, surged by their 18% limit at the close in Tokyo, having been untraded during market hours with buy orders exceeding offers after the Nikkei reported the plan first.
NTT shares, which also traded yesterday without the right to the next dividend, declined as much as 3.7%.
NTT’s chief executive officer Jun Sawada acknowledged yesterday that a tariff cut was on the cards.
Both Sawada and Docomo CEO Kazuhiro Yoshizawa denied any link between government pressure for price cuts and the buyout. — Bloomberg