As digitization accelerates, can Japan compete against the rest of the world? It is hoped that this move will lead to strengthening the competitiveness of Japan's information and communications industry.
NTT Corp. has announced that it will make NTT Docomo, Inc. -- a listed company in which NTT has a stake of about 66% -- a wholly owned subsidiary by paying more than 4 trillion yen in a tender offer to purchase the about 34% of its shares now held by general shareholders and others.
This will be one of the largest-ever tender offers for a Japanese company.
Japan's telecommunications industry has been lagging behind the rest of the world in the development of the 5G high-speed, high-capacity communications network and related businesses. The industry is also held back by the U.S. IT giants known as GAFA, and is in an inferior position in online services.
Recovering from such situations is an urgent task. It is understandable for NTT to aim at strengthening the group's unity, speeding up decision-making and improving business efficiency.
Instantaneous transmission of high-resolution images will be enabled by 5G technology, and it is expected that such items as autonomous driving, remote surgery and land survey by drones will become possible. In order to compete against GAFA in new fields, the question is how to create innovative services.
NTT intends to have Docomo and such group companies as long-distance carrier NTT Communications Corp. work together. It is hoped that NTT will be able to gather together the strengths of the group and utilize them for creating new business.
NTT had also entered into a capital and business tie-up with NEC Corp. with the aim at developing "domestic 5G" technology. NTT needs to strengthen cooperation with companies in different industries with the post-5G future in mind.
On the other hand, Docomo's market share in the mobile phone market, which was nearly 60% at its peak, has dropped to 37%. Its profits from its core business has dropped to third place in the industry.
One factor behind this is that Docomo was slow in responding to the age of smartphones and fell behind other companies in sales of iPhones from Apple Inc. of the United States. NTT must have judged that making Docomo a wholly owned subsidiary was necessary to leverage Docomo's business.
From now on, the focus will be the lowering of mobile phone fees, an idea that Prime Minister Yoshihide Suga has put forward.
"There will be room for fee reductions because the financial base will be strengthened," NTT President Jun Sawada emphasized at a press conference.
As Docomo will be delisted, there will be no general shareholders to give consideration. It will be important for Docomo to demonstrate its stance of returning profits to users.
The government intends to allow Docomo to become a wholly owned subsidiary of NTT, a move that could be seen as a regression to the old NTT. KDDI Corp., which runs the au mobile phone service, and SoftBank Corp. are wary of Docomo becoming overwhelmingly strong. The government also needs to be careful to secure a fair competition environment.
-- The original Japanese article appeared in The Yomiuri Shimbun on Oct. 3, 2020.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
