Japan’s state-backed NTT said it will take its wireless carrier business private in a deal worth 4.25 trillion yen or $40 billion.
NTT will launch a tender offer for the 34 percent of NTT Docomo stock that it does not own, the firm said in a statement. The telecoms firm will offer 3,900 yen per share – a premium of 40.5 percent to Monday’s closing price.
The buyout comes as new prime minister Yoshihide Suga calls on wireless carriers to lower prices, with the government hoping resultant savings will stimulate consumer spending elsewhere in the economy. On Tuesday, Chief Cabinet Secretary Katsunobu Kato reiterated that call, saying there needs to be “visible progress on lowering mobile phone charges”.
The former state monopoly still counts the government as its largest shareholder with a 34 percent stake.
“Post acquisition, Docomo will no longer be answerable to shareholders. If the government instructs it to cut prices, it will oblige,” Jefferies analyst Atul Goyal wrote in a client note.
Government efforts to enhance competition have included backing Rakuten’s entry into the sector this year. The e-commerce firm’s low-cost plan model could suffer, however, should prices fall more broadly.
Meanwhile, government pricing pressure comes as carriers spend big to build fifth-generation services widely seen as critical to ensuring Japan’s competitiveness.
The buyout “is driven more by the potential to develop 5G and IoT services than regulatory pressure,” said analyst Kirk Boodry at Redex Research, referring to the Internet of Things.
NTT will fund the acquisition through loans from Japan’s three biggest banks. Mitsubishi UFJ Financial Group will be the largest lender.
The total loan package including lending from others will total 4 trillion yen, Nikkei reported. NTT will later turn to longer-term loans and debt issuance.
The telecoms firm had more than 1 trillion yen in cash and cash equivalents on its balance sheet at June-end.