The battle for bundled customers in Japan is about to get more competitive, with KDDI set to spend $4 billion on a controlling stake in the country’s biggest cable operator, Jupiter Telecommunications (JCOM).
KDDI, Japan’s second largest cellco, will buy a 37.8% stake in JCOM from three companies affiliated with US media giant Liberty Global for 361.7 billion yen ($4 billion) in cash.
The price tag equates to 139,500 yen per JCOM share, which is a whopping 65% premium over Friday’s closing price.
KDDI hopes the transaction will enable it to attract more customers taking bundled services.
KDDI President Tadashi Onodera said the deal was critical because it allows KDDI to reduce its dependence on leasing fiber optic infrastructure from its rival the NTT group.
Tony Brown, senior broadband analyst for Asia-Pacific for UK research firm Informa Telecoms & Media, says the move makes sense for KDDI.
“This deal has been on the cards for a long time,” Brown told telecomasia.net. “It really is the only realistic way that KDDI can gain any kind of major footing in the fixed-line broadband market without deploying its own last-mile FTTH networks at a massive cost.”
“The deal gives KDDI access to a further 3.27 million subscribers -– including 1.6 million cable modem subscribers – in addition to its 2.85 million fiber-optic and ADSL customers.”
But Brown says that the KDDI will still trail the NTT group by a long way in the wake of the deal.
The NTT group had a combined 16.3 million broadband subscribers at end-December.
“If you look at the bigger picture, the fact is that although this deal does significantly increase the size of KDDI’s fixed-line operations they are still a long way behind NTT East and NTT West in the fixed-line broadband market in terms of scale – the NTT subsidiaries already have well over 12 million FTTH connections alone,” says Brown.
“However, what this deal does is to secure KDDI a place at the fixed-line broadband table, albeit at the biggest price they have ever paid for an M&A deal.”
In terms of the mobile market, Brown believes the deal gives KDDI access to more content for 3G services.
“But the prospect of fixed-mobile convergence services could be some way off given that JCOM’s networks are fragmented,” he adds.