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Softbank Buys Japan Telecom

$3 billion acquisition heralds a move into the business user market

May 27, 2004

2 Min Read
Softbank Buys Japan Telecom

Less than a year after taking control of fixed-line carrier Japan Telecom Co. Ltd. for ¥261.3 billion (US$2.34 billion), Ripplewood Holdings LLC and its fellow shareholders have sold the carrier to national broadband player Softbank in a deal worth ¥340 billion ($3.05 billion).

Ripplewood bought Japan Telecom, which specializes in services for businesses, from Vodafone Group plc (NYSE: VOD) last August (see Vodafone to Sell Japan Telecom). Now Softbank, which already had more than 4 million ADSL customers, has control of Japan's third largest fixed-line network, more than 10 million customers in total, and annual revenues of ¥1 trillion ($9 billion).

Softbank has already put massive pressure on Japan's two biggest carriers, NTT Group (NYSE: NTT) and KDDI Corp., with its aggressive broadband pricing and bundling of a VOIP service with its DSL access (see Japan: Unbundling Spurs Broadband). Now it's set to bring similar competitive pressures to bear in the business user market.

That should be good news for key systems suppliers Sonus Networks Inc. (Nasdaq: SONSE) and UTStarcom Inc. (Nasdaq: UTSI). (See Softbank BB Picks Sonus for VOIP and UTStarcom Scores $100M Deal.)

Japan Telecom's equipment suppliers include Cisco Systems Inc. (Nasdaq: CSCO), Juniper Networks Inc. (Nasdaq: JNPR), and Nortel Networks Ltd. (NYSE/Toronto: NT). (See Juniper Celebrates the T-Series, Japan Telecom Uses Nortel for VPNs, and Japan Telecom Picks Cisco Routers.)

Softbank will take on ¥164 billion in debt, ¥143 billion in common stock, and ¥32.5 billion in preferred shares. Apart from Ripplewood, five other shareholders, including Goldman Sachs & Co., sold their stakes to Softbank. The deal is set to close in November.

— Ray Le Maistre, International Editor, Boardwatch

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