WW-153 -- Softbank's Acquisition of Vodafone K.K. Would Benefit Consumers

J@pan Inc presents the Wireless Watch Newsletter:


Commentary on Japan's Wireless World

Wireless Watch Newsletter
Issue No. 153
Thursday March 9, 2006

++ Viewpoint: Softbank's Acquisition of Vodafone K.K. Would Benefit Consumers

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++ Viewpoint: Softbank's Acquisition of Vodafone K.K. Would Benefit Consumers

Vodafone announced last week it was in talks with Softbank to sell
its Japan subsidiary. The price tag? USD15 to USD17 billion,
according to analysts' estimates. The news was well received
by the financial markets, driving up Softbank's market cap.
Not much was said, however, about Softbank's motives.

For starters, Softbank is a large group of Internet companies
headed by Masayoshi Son, who made a fortune as an early
investor in Yahoo. Softbank owns inter-portal Yahoo Japan and
operates Yahoo BB, an ISP and broadband provider. Thanks to
Yahoo BB's aggressive pricing strategy as a new entrant in the
broadband market, Japanese consumers get the cheapest
broadband services in the world. The Softbank portfolio also
includes gaming companies and a professional baseball team,
the Fukuoka-based Hawks, acquired from supermarket chain Daiei.

Yahoo has set up a subsidiary called BB Mobile, which has
acquired a 1.7Gz W-CDMA license. The license holder is
obliged to launch mobile services in 2007. Through the
acquisition of Vodafone K.K., Softbank would buy time and
a customer base of 15 million.

What will happen to the Vodafone brand in Japan? We expect
Softbank will rebrand Vodafone to BB Mobile or Yahoo Mobile,
as the Yahoo brand is much stronger than Vodafone in Japan.
Rebranding, however, is not only a costly exercise, but also time
consuming. Of course, Vodafone's marketing managers have
experience in rebranding. After all, they rebranded J-Phone
to Vodafone.

But even Vodafone's marketing managers will probably not be
able to rebrand in time for the introduction of number portability
later this year. Softbank will push its multi-channel provision of
broadband and mobile, offering bundled services. It will be
interesting to see if Softbank will compete in pricing as it did in
broadband. Consumers would benefit from the upcoming price battle.
Japan is very expensive in comparison with the US and Europe.

The acquisition could prove a tough call for Softbank. Vodafone is
a large company that still has many former Japan Railway
employees inherited from J-Phone. Masayoshi Son needs
a hands-on CEO to cut costs and grow the company in a very
competitive market -- something Vodafone, even with all its
mobile market experience, was not able to do. Will Softbank be
up to it? Stay tuned.

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Written by Arjen van Blokland; Edited by Burritt Sabin

(C) Copyright 2006 Japan Inc Communications KK. All Rights Reserved.