Bloomberg News

DoCoMo Seeks Finance, Retail Takeovers as Japan Phone Sales Cool

February 13, 2013

NTT DoCoMo Inc., Japan’s biggest wireless operator, is holding talks on takeovers in the financial services, retail and digital-content industries to pare its reliance on mobile-phone calls.

The carrier has opened discussions with companies in these sectors, Chief Financial Officer Kazuto Tsubouchi said yesterday in an interview at the company’s headquarters in Tokyo. He declined to elaborate on potential targets.

DoCoMo aims to almost double revenue from non-traditional businesses to 1 trillion yen ($10.7 billion) by the year ending March 2016 as Japan’s shrinking population and market saturation saps growth in its main wireless operations. The company in January said it plans to buy online fashion retailer MAGAseek Corp., after announcing takeovers worth more than $425 million last year, according to data compiled by Bloomberg.

“We’ll need a jump via M&A deals to reach the 1 trillion yen target,” Tsubouchi said. DoCoMo can only get to as high as 800 billion yen growing its own businesses, he said. The company expects 520 billion yen this fiscal year.

Takeover targets may benefit from accessing DoCoMo’s customer base of about 60 million people or almost half of Japan’s population. To safeguard client data, DoCoMo will look to buy majority stakes when doing deals, Tsubouchi said.

“That information can be useful to many businesses that face slowing growth,” he said. “Still, it will only be used in a way where it remains under DoCoMo’s control.”

iPhone Considerations

The new-businesses push is also influencing whether DoCoMo will join competitors in offering Apple Inc. iPhones. The carrier, the only major Japanese operator that doesn’t offer the phones, is concerned that introducing them could hit growth in its retail and entertainment platforms, Tsubouchi said. Still, adding the devices may help retain customers, he said.

The carrier yesterday rose 0.6 percent to 139,100 yen in Tokyo. It has risen 12 percent this year, compared with an 11 percent advance for competitor Softbank Corp. and an 8.2 percent gain for Japan’s benchmark Nikkei 225 Stock Average.

DoCoMo will separately consider a possible bond sale as a way to help repay debt, Tsubouchi said. The company has 130 billion yen of bonds maturing this year, according to data compiled by Bloomberg.

“We can redeem the bonds with cash in hand, but it may not be wise to stay distant from capital markets,” Tsubouchi said.

The company had 340.4 billion yen of cash and near-cash items at the end of last year. Its net income in the nine months through December rose 5.5 percent to 416 billion yen.

Tata Teleservices

DoCoMo is also assessing developments in the Indian wireless market as it considers the future of its 26 percent stake in Tata Teleservices Ltd. The carrier has put options in regards to the stake, Tsubouchi said, without elaborating on how much of the holding it can sell, at what price or until when.

Teleservices has been struggling to improve earnings after failing to get a license for more bandwidth, Tsubouchi said. DoCoMo will also look at the Indian company’s earnings and industry consolidation before deciding on the fate of the stake it bought for $2.7 billion in 2009, the CFO said.

Teleservices is in discussions on a combination with Telenor ASA’s local operations, three people with knowledge of the matter told Bloomberg News in November.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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