In Japan, Vodafone Bows Out

Vodafone Group plc (NYSE: VOD) has decided to quit the Japanese mobile market, and is in talks with SoftBank Corp. about a potential sale, the mobile giant revealed this afternoon. (See Vodafone Mulls Japanese Sale.)

Vodafone has been having problems with its Japanese business, Vodafone K.K. , for some time, and only this week CEO Arun Sarin said the unit might be subject to a goodwill writedown in the near future. (See Vodafone Rings Warning Bell and Vodafone Suffers in Japan.)

The news cheered investors: Vodafone's share price shot up 9.5 pence, about 8.5 percent, to end the day at 121.5 pence on the London Stock Exchange .

With 15 million customers, Vodafone K.K. is the third biggest mobile operator in Japan, behind NTT DoCoMo Inc. (NYSE: DCM) and KDDI Corp. Analysts value the business at anywhere between £7.5 billion (US$13.2 billion) and £9 billion ($15.8 billion).

Softbank, best known for its fixed triple-play services, including IPTV, has been desperate to get into the mobile market for some time, trialing multiple cutting-edge wireless data and convergence technologies through its BB Mobile unit.

Then in November last year it was awarded a 3G license by the Japanese authorities and laid out plans to build out its own network infrastructure. A deal to buy Vodafone's business, or perhaps even become a partner, would leapfrog it into the market. (See BB Mobile, Nortel Demo 3-Way, Ericsson, BB Mobile Show IMS, and Nortel, BB Mobile Test HSDPA.)

"Softbank makes a good buyer," reckons Ovum Ltd. analyst Robin Hearn in a research note. "It has a long standing ambition to enter Japan's mobile market, and already owns a license. Acquiring Vodafone Japan would speed its market entry and give it a foothold in a market dominated by DoCoMo and KDDI. Of course it also needs to do rather more with it than Vodafone has been able to."

Hearn reckons the move will help Vodafone and its CEO. "Vodafone has been struggling with its Japanese unit for some time and attempts to turn it around have so far met with limited, if any, success," he says, adding that the problems in Japan had put Sarin under a great deal of pressure. "Without some form of positive action there are those that have said that his position would become untenable."

Selling the Japanese business might "buy Vodafone's management just a little respite after a very rough ride over the past few months," adds the Ovum man.

— Ray Le Maistre, International News Editor, Light Reading