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NTT made a surprise announcement that it will conduct a TOB (Public Offering of Share Purchase) to NTT Docomo (hereinafter Docomo) and will make it a wholly owned subsidiary. He explained that the goal is to strengthen competitiveness in collaboration with NTT Communications and others for Docomo, whose business performance is not growing as expected, but the impact on the industry as a whole is not small.
This TOB is also attracting attention because it coincides with the timing of the government’s request for price reduction, but I would like to consider NTT’s target and its impact on recent trends and the content announced by both companies.
Transfer of the NTT Communications business into a subsidiary
Leak reports that NTT would make Docomo a wholly owned subsidiary that exploded in the early morning of September 29, prompting a lot of attention. And on the same day, both companies officially announced the TOB. NTT currently owns approximately 66% of the shares of Docomo, but acquired shares from other shareholders for 3,900 yen per share and made Docomo a wholly owned subsidiary through a huge TOB of approximately 4.3 trillion yen. It’s supposed to be.
However, DoCoMo is the largest mobile phone company that Prime Minister Yoshii Suga has called “too profitable” and since it is originally an NTT Group company, it is not in conflict with NTT. However, why was it necessary to make it a wholly owned subsidiary? In a meeting held by the two companies on the same day, Mr. Jun Sawada, NTT’s president and CEO, explained that the purpose was to use the group’s resources to strengthen DoCoMo’s competitiveness.
From the joint NTT / NTT Docomo press conference held on September 29. NTT President Sawada (left) explains that the purpose of making Docomo a wholly owned subsidiary is to strengthen Docomo’s competitiveness.
Specifically, by making Docomo a wholly owned subsidiary, we will strengthen the cooperation with NTT Communications and NTT Comware, which are wholly owned subsidiaries of NTT. The company plans to integrate fixed and mobile networks to strengthen its corporate business, create new services and strengthen the competitiveness of its telecommunications business for 5G and 6G.
For that reason, NTT Communications is considering transferring the NTT Comware business to Docomo in some way. Mr Sawada said: “It is said that it is not legal for NTT East / West to provide NTT Docomo, but it is said that deepening the cooperation with NTT Communications and NTT Comware is not legal. I know there is nothing wrong with it,” he said.
After making Docomo a wholly owned subsidiary, it hopes to strengthen its network and services by strengthening the cooperation with NTT Communications and NTT Comware, which are also wholly owned subsidiaries.
Is it the reason for dissatisfaction with the achievements of DoCoMo?
Mr. Sawada cites changes in the competitive environment as one of the circumstances that led to this TOB. Looking at trends in the information and telecommunications market, as the fusion of fixed and mobile progresses, foreign companies are expanding the equipment and software needed for maintenance, and foreign companies such as GAFA are driving applications that run on it. Additionally, Japan is losing competitiveness as it has been noted to be far behind in its 5G efforts.
For that reason, Mr. Sawada said, “Is it not possible to introduce technologies, services and solutions that can lead the world, not just in Japan but globally”, merging the technology and research and development resources of NTT and DoCoMo, who have a large scale in Japan? It seems you came to TOB’s decision by thinking and moving quickly. By the way, discussions to turn Docomo into a wholly owned subsidiary began in the second half of April, and in June it was decided that it would become a subsidiary.
It appears that NTT decided that a major environmental change was necessary to respond to changes in the environment and societal trends surrounding information and communications, and decided to make Docomo a wholly owned subsidiary.
Another thing Sawada points out is DoCoMo’s declining competitiveness. DoCoMo’s mobile phone business originally had a 100% stake because it was only provided by the state-owned Nippon Telegraph and Telephone Corporation, which was NTT’s predecessor, but has now reached a 40% stake due to the rise of rivals such as KDDI and Softbank. It has been declining and number portability is said to still be over-migrated.
Furthermore, at the meeting, Mr. Sawada complained about Docomo’s low earnings. Currently, DoCoMo is behind KDDI and Softbank in terms of profits, and is at a disadvantage even in the competition between the three main national companies, so it is also said that the NTT side decided that it is necessary to put a lever to strengthen competitiveness. It seems to be a major factor that led to this TOB.
NTT’s intent can be seen in personnel matters. With the announcement of this TOB, DoCoMo plans to replace the current President and Representative Director Kazuhiro Yoshizawa with the current Representative Director and Vice President Motoyuki Ii on December 1.
NTT’s Mr. Ii (right) will be appointed President of Docomo in place of Mr. Yoshizawa (left), the current born president. A management system with a very strong NTT color will be taken.
And Mr. Ii, who will be the new president, was appointed vice president of Docomo in June, and he was the person who was vice president of NTT before that. Compared with Mr. Yoshizawa, who had a long career in Docomo, and Mr. Kaoru Kato, who was his predecessor, a person with a strong NTT color was selected, and the NTT side is not satisfied with the achievements and recent efforts by Docomo. You can see how it looks.
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