Japan’s former state telecoms monopoly is poised to take private the NTT DoCoMo mobile unit it listed 28 years ago, in what could become the country’s biggest ever tender offer.

Nippon Telegraph & Telephone’s planned move to buy the 34 per cent stake it does not own in its mobile telecoms unit will make the group more likely to yield to government pressure for aggressive price cuts on mobile fees, according to analysts.

Shares in NTT DoCoMo, Japan’s largest mobile company, were untraded and overwhelmed with bids on Tuesday. Brokers in Tokyo said the market was assuming NTT’s bid would place a hefty premium on the mobile business, which media reports put at 30 per cent. 

Based on Monday’s closing price, a 34 per cent stake in NTT DoCoMo was worth ¥3tn ($28bn). With a 30 per cent premium, the buyout would be more than ¥4tn ($38bn). That would make it the largest ever domestic tender offer for a Japanese company, according to the Nikkei report.

NTT’s move comes as Japan’s new prime minister, Yoshihide Suga has pledged to lower mobile phone fees. That has already driven a sell-off in shares of NTT DoCoMo and its peers since he took the post in mid-September.

Expectations of an impending price war, which the government calculates will be welcomed by a Japanese public who pay some of the highest mobile phone fees in the world, hit shares in NTT DoCoMo’s two main domestic rivals on Tuesday. Shares in SoftBank’s mobile unit fell as much as 6 per cent while KDDI dropped 5.3 per cent in early trading. NTT was down 5.8 per cent.

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“Post-acquisition, DoCoMo will no longer be answerable to shareholders. If the government instructs it to cut prices, it will oblige. And then it will be just a matter of time that KDDI, SoftBank will follow,” Jefferies analyst Atul Goyal wrote in a report. 

NTT DoCoMo said it would hold a board meeting on Tuesday to discuss the potential bid to turn the company into a wholly owned subsidiary, which was first reported by the Nikkei newspaper. Its parent group NTT said in a separate statement that its board would meet on the same day. 

People familiar with the discussions said the wireless carrier unit would be taken private if the tender offer was successfully completed. One of the people said talks about a full takeover were under way before Mr Suga’s push for mobile cost cuts and was also driven by a broader strategy of cost competitiveness in the 5G era.

Travis Lundy, an analyst at Quiddity Advisors, said NTT might not need to offer such a large premium to secure its prize. As of the end of March, NTT held 66.21 per cent of NTT DoCoMo, while corporate holders own just over 1 per cent.

“NTT doesn’t really need to add a premium to get this done. A token premium would suffice, practically speaking,” Mr Lundy wrote on research platform Smartkarma.

Via Financial Times