Nippon Telegraph & Telephone Corp (NTT) plans to turn its wireless carrier unit NTT Docomo Inc into a wholly owned subsidiary, a move that might help Japanese Prime Minister Yoshihide Suga’s policy push for lower phone tariffs.
NTT would pay ￥3,900 a share to acquire the shares it does not already hold, the companies said in a statement.
The buyout is worth about ￥4.25 trillion (US$40.3 billion), a more than 40 percent premium to Monday’s closing price in Tokyo. Given that parent NTT already controls 66 percent of the wireless carrier, any proposal is all but guaranteed to pass.
Photo: Reuters
Docomo’s board said that it is in favor of the takeover by its parent, which would fund the purchase through borrowings.
The tender offer, the largest for a Japanese company in history, is scheduled to start today and would be completed in the fiscal year ending March 31. When NTT spun out Docomo in 1998, it was also the biggest recorded initial public offering at the time.
The proposal to combine the former national companies comes just 15 days after Suga succeeded former Japanese prime minister Shinzo Abe.
With government documents showing data-heavy users in Tokyo pay more than three times for a monthly contract than users in Paris, Suga has made reducing phone bills charged by Docomo and Japan’s other major carriers a priority to score a quick policy win and avoid being seen as a caretaker leader, market watchers have said.
“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,” Nikko Asset Management Co chief global strategist John Vail wrote in a report.
“Lowering mobile phone costs will be the most popular with voters. Emphasis on the digitalization of the economy and antiquated government services is also likely popular and, thus, next on the list,” Vail said.
Docomo shares, which traded without the right to the next dividend, surged by their 18 percent limit at the close in Tokyo yesterday, having been untraded during market hours with buy orders exceeding offers after the Nikkei reported the plan first.
NTT shares, which yesterday also traded without the right to the next dividend, declined as much as 3.7 percent.
NTT would borrow about ￥4.3 trillion to finance the buyout, it said.
Japanese law requires the government to hold at least one-third of NTT, which would make it difficult for the company to issue new shares to raise funds. The firm had ￥1.09 trillion in cash and equivalents at the end of March.
“The deal would in the short run place a heavy burden on NTT’s finances and likely cap shareholder returns, in particular buybacks,” Citi Research analyst Mitsunobu Tsuruo wrote in a report.
NTT chief executive officer Jun Sawada told reporters in an online news conference that NTT Communications might be moved under Docomo, ruling out any plans to take NTT Data Corp private.
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