THE ASAHI SHIMBUN
September 30, 2020 at 19:04 JST
Nippon Telegraph and Telephone Corp.’s takeover of its mobile carrier is seen as part of plans to compete against some of the richest and most influential companies in the world.
It also stemmed from apparent frustration at the top of NTT, the holding company.
But Japanese consumers who may be unable to fathom the incredible sums involved in the deal also stand to benefit.
NTT on Sept. 29 said it will spend around 4.3 trillion yen ($40.9 billion) to turn NTT Docomo Inc., Japan’s largest mobile carrier, into a wholly owned subsidiary.
NTT controls 66.2 percent of NTT Docomo, and it intends to scoop up all the remaining shares from Sept. 30 to Nov. 16.
The price of the takeover is expected to be the highest ever in Japan.
“The purpose of this (takeover) is to bolster Docomo’s competitiveness and growth,” Jun Sawada, NTT’s president, said at a news conference on Sept. 29. “We aim to evolve into a general information and communication technology company.”
The group expects more effective management and streamlined operations through the takeover.
That, in turn, will secure finances to make up for expected cuts in mobile charges that are being pushed by the Suga administration.
If the business is streamlined, “then, of course, we will have enough money to spare for the price reduction,” Sawada said.
Currently, NTT’s mobile phone packages are priced between 7,000 yen and 8,999 yen, after various discounts.
An official of the communications ministry said of the pricing, “There is plenty of room for price cuts.”
NTT Docomo has led the NTT group as a core company.
But in the business year ending in March 2020, NTT Docomo’s operating profit ranked third among carriers in Japan behind rivals KDDI Corp. and Softbank. It was a ranking expected to continue in the current business year.
“President Sawada’s patience ran out,” one industry insider said about the background of the takeover.
During the news conference, in fact, Sawada repeatedly said, “We are No. 3.”
The rise of global information technology giants, such as Google, Apple, Facebook and Amazon, also brought a sense of crisis to the NTT group.
To compete against these mega companies known collectively as GAFA, the NTT group recognized the need to work as a whole.
The two NTT companies began exploring the possibility of a takeover around June. And board meetings at both companies on Sept. 29 approved the buyout plan.
Once the takeover is completed, the company will have the largest domestic share in both fixed network connections and mobile services.
The NTT group also plans to bolster investment in 5G wireless technology, another subject of expected fierce global competition.
In addition, the group is seeking to increase business with corporate clients by, for example, putting NTT Communications Corp., which provides cloud services, and other companies under NTT Docomo.
NTT Docomo was spun off from NTT in 1991 and began providing on-vehicle telephone system services the following year, when landline phone services still ruled.
The takeover will be a “homecoming” for NTT Docomo after 28 years of separation.
When NTT was privatized in 1985, more than 80 percent of the group’s sales came from landline phone services.
The group had low expectations for NTT Docomo and mobile services. But NTT Docomo has grown steadily into a premium brand.
In 1999, it started a groundbreaking internet service called “i-mode.”
From the late 2000s to the 2010s, the company rode a wave of popularity for smartphones and earned the biggest profits in the group.
But it has struggled in recent years.
KDDI and Softbank created different, lower-priced brands and lured customers away from NTT Docomo.
In response to the revision of the Telecommunications Business Law last year, NTT Docomo started a new plan and offered a discount up to 40 percent. But its profits still declined significantly.
A change in leadership was also announced at the Sept. 29 news conference.
Kazuhiro Yoshizawa, the president of NTT Docomo, who was sitting next to Sawada, will step aside and become a board director in December.
Motoyuki Ii, NTT Docomo’s vice president who was sent from the holding company, will replace Yoshizawa.
(This article was written by Ryo Inoue and Tatsuro Kawai.)
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