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NTT makes $40bn bid for mobile arm DoCoMo

Japanese telco group NTT has launched a ¥4.25 trillion ($40 billion) offer for the shares in mobile unit DoCoMo it doesn’t already own.

In a shareholder presentation, NTT said the move will help it capitalise on emerging industry and macro trends. These include competing in the digital services market, enabling fixed-mobile convergence, and supporting the shift to remote working. It said it will also help it defend against increasing competition from online platforms and new entrants, like Rakuten.

“Competition is intensifying due to the new entry from different industries and the expansion of market share by MVNOs,” NTT said, in a statement. “We will strive to further strengthen our competitiveness and grow by transforming into a new comprehensive ICT company that creates and provides a variety of high-value-added services that combine services in various fields one after another in a fusion of mobile and fixed.”

NTT already owns 66.2 percent of DoCoMo. It aims to buy the rest via a tender offer of ¥3,900 per share. The offer will open tomorrow, and close on 16 November. It is being funded by a bridge loan, with Reuters reporting that NTT has done deals with Japan’s three-biggest banks, led by Mitsubishi UFJ Financial Group.

NTT said that closer integration between its fixed and mobile divisions “will realise improvements, such as convenience in people’s lives, creating new business models, and improving productivity.

“Furthermore, with the worldwide expansion of the epidemic of the new coronavirus infection, efforts for the remote world, such as telecommuting, distance education, and distance medical care, are required.”

Indeed, Japan, with its staid corporate culture, was caught off-guard by COVID-19. The average business lacks the necessary IT tools and knowledge to support staff who work from home, simply because it is such an alien concept. Now, the once-distinct lines between work and home life are becoming forcibly blurred, and the winners from this seismic shift will be those that recognise how this effects changes in the consumption of telco services.

While taking full control of DoCoMo will doubtless strengthen NTT’s competitive position, it could also attract greater regulatory scrutiny.

DoCoMo still has a commanding lead of the mobile market. According to the most recent data from the Telecommunications Carriers Association (TCA), it ended the second quarter with 80.6 million subscribers. By comparison, second-placed KDDI had 59.2 million, followed by Softbank with 43.7 million.

New prime minister, Yoshihide Suga has a distinguished record of pressuring mobile operators to lower prices, and of attempting to foster more vigorous competition.

Nikkei reported earlier this month that Suga’s stance has not changed, and among other things his communications ministry is keen to do away with bundled services that tie customers down to long, expensive contracts.

That could spell trouble for players like DoCoMo, which is in the midst of rolling out 5G, and is facing down a newly-emboldened rival in Rakuten. The e-commerce giant is ruffling a few feathers with its plan to disrupt the market with a 5G service running on OpenRAN infrastructure.

NTT will have to move quickly with the full integration of DoCoMo in order to stave off the threat posed by new and nimble competitors.

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