NTT Communications Corp. agreed to buy Virtela Technology Services Inc. for about 50 billion yen ($512 million) to expand in U.S. cloud computing, according to a person with direct knowledge of the situation.
The deal will increase overseas sales and enable NTT to boost its global cloud services business, the person said, asking not to be identified because the information isn’t public. NTT Communications is a unit of Nippon Telegraph & Telephone Corp., Japan’s largest fixed-line operator.
Telecommunications companies are expanding outside Japan, the world’s fastest-aging major economy, to tap new sales and reduce their reliance on stalling growth at home. Virtela provides fixed-line and wireless network management, security and cloud service, according to its website.
“NTT is seeking a growth engine overseas as the Japanese market is shrinking,” said Naoki Fujiwara, the Tokyo-based chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of more than $6 billion. “NTT’s infrastructure business is weak, so it has saved time by buying an established business.”
The Virtela deal was reported earlier today by Nikkei.
“No decision has been made on the acquisition,” said Minako Yamashita, a spokeswoman for NTT Communications. Jane Morrissey, a spokeswoman for Greenwood Village, Colorado-based Virtela, declined to comment.
Shares (9432) of Nippon Telegraph rose 1.6 percent to 5,130 yen as of 12:47 p.m. in Tokyo. The stock has gained 41 percent this year, outpacing a 39 percent advance for the benchmark Topix index.
Nippon Telegraph is the controlling shareholder of NTT Docomo Inc. (9437), Japan’s biggest wireless operator.
Competitor SoftBank Corp. (9984), the nation’s third-largest wireless company, this year paid $21.6 billion for control of Sprint Corp. (S:US) to add U.S. customers.
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