Willcom Seeks $1.5 Billion to Emerge From Bankruptcy (Update1)
March 12, 2010, 4:29 AM EST(Adds investor’s comment in fourth paragraph.)
By Pavel Alpeyev and Yoshinori Eki
March 12 (Bloomberg) -- Willcom Inc., the Japanese wireless carrier that filed for bankruptcy protection, is seeking financial aid of as much as 137.8 billion yen ($1.5 billion) to revive the company.
Willcom is asking for 114.5 billion yen in debt waivers, while investors led by Softbank Corp. and Advantage Partners LLP will buy 11.3 billion yen of shares in the company and a spinoff, Willcom said in a statement today. The mobile operator will also receive as much as 12 billion yen in financing from state-backed Enterprise Turnaround Initiative Corp. and banks, it said.
The funds would allow Willcom to reorganize and invest in networks to continue offering wireless data services in the world’s second-largest economy. Willcom’s bankruptcy proceedings are poised to wipe out the 220 billion yen the Carlyle Group and Kyocera Corp. invested in the company in 2004.
“Creditors had been expecting their burden to be rather significant,” said Yoshihiro Nakatani, who oversees about 80 billion yen ($882 million) as a senior fund manager at Asahi Life Asset Management Co. in Tokyo. “They’ll have to accept.”
Softbank and Advantage Partners will each own a third of the spun-off company, which will handle operations using a faster wireless technology, according to the release. Willcom will continue its existing personal handy-phone business with the help of a 300 million yen investment from Advantage, it said.
Washington, D.C.-based Carlyle, the world’s second-largest private-equity firm, owns 60 percent of closely held Willcom, while Kyocera has 30 percent and KDDI Corp. holds 10 percent.
Largest Telecom Bankruptcy
The bankruptcy filing is the largest in terms of debt by a Japanese telecommunications company, according to researcher Teikoku Databank Ltd. Heisei Denden Co. was the previous biggest failure in October 2005 with liabilities of 120 billion yen, while Willcom’s totaled 206 billion yen as of Feb. 18.
Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., Willcom’s biggest creditors, were each owed 17.6 billion yen as of March 31, 2009, according to financial statements on the phone company’s Web site.
Softbank rose 0.6 percent to close at 2,280 yen on the Tokyo Stock Exchange today, compared with a 0.8 percent gain in the benchmark Nikkei 225 Stock Average. Kyocera lost 0.1 percent, while KDDI advanced 0.4 percent.
Softbank Target
Willcom, which has about 4.4 million subscribers, saw its user base shrink 6 percent from the peak in July 2007, according to the company’s Web site. By comparison, Softbank added 1.7 million users in 2009 and DoCoMo, Japan’s largest wireless operator, increased its number of subscribers by 1.3 million, according to the carriers.
“We are talking about more than 4 million PHS subscribers that are a potential target” for Softbank’s data services, said Hitoshi Hayakawa, a Tokyo-based analyst at Credit Suisse Group AG. Hayakawa has an “outperform” rating on Softbank and recommends holding KDDI and DoCoMo stock.
The investment will give Softbank access to Willcom’s base stations, helping it speed up deployment of its own network, Softbank said in a separate statement today. The impact on its earnings the year ending March 31 will be “insignificant,” the Tokyo-based carrier said.
Willcom filed for bankruptcy protection last month after it failed to compete against faster services offered by NTT DoCoMo Inc., KDDI and Softbank.
DoCoMo, which stopped adding new customers to its PHS offering in April 2005, wrote off 61 billion yen worth of assets to end the service in January 2008.
China Telecom Corp., the country’s biggest fixed-line operator, said last March it stopped all investment in PHS services after demand fell. Revenue from the PHS division dropped 23 percent to 16.4 billion yuan ($2.4 billion) in 2008, according to the Beijing-based carrier, which said it will now focus on mobile-phone services.
-- With assistance from Yusuke Miyazawa in Tokyo. Editors: Suresh Seshadri, Young-Sam Cho, Jonathan Annells
To contact the reporter on this story: Yoshinori Eki in Tokyo at yeki@bloomberg.net; Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.
