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Vodafone Sells Japanese Unit To Softbank for $14.9 Billion
By a WALL STREET JOURNAL Staff Reporter
Friday, March 17, 2006

Vodafone Group PLC announced the sale of its Japanese subsidiary to Softbank Corp. in a deal valued at 8.5 billion ($14.9 billion).

In doing so, the United Kingdom cellphone giant turned down an approach by buyout firms Cerberus Partners LP and Providence Equity Partners Inc. of the U.S. to buy the unit.  The two firms had been preparing to make an offer for the unit.

The sale of the unit to Softbank allows Vodafone to exit from Japan quickly and focus on other issues, including the possible sale of the company's holding in Verizon Wireless to Verizon Communications Inc., which has indicated it wants to buy the U.K. firm's stake.  Vodafone indicated Friday that it has no plans to sell U.S. holding.

The purchase of Vodafone's Japan unit will allow Softbank to take over the more than 15 million Japanese users who have signed on to the carrier, as well as its mobile network, instead of building it from scratch.  Tokyo-based Softbank, which has scored success with its broadband service Yahoo! BB in Japan, has been trying to move into the mobile business.  Meanwhile, Vodafone, the world's largest mobile-phone company by revenue, has struggled to boost its business in Japan amid tough competition from the two biggest players, NTT DoCoMo and KDDI Corp.

Following the sale, Vodafone said it will return 6 billion in cash to shareholders through a special dividend.  The distribution is worth 10 pence a share, and the company said it will disclose final details with its preliminary results in May.  Vodafone also said it intends to complete its 6.5 billion share-buyback program in fiscal 2006.

Vodafone's sale of the Japanese unit marks the latest in a slew of telecom deals in the past 18 months.  Earlier this year, AT&T Inc. agreed to acquire BellSouth Corp. for $67 billion.

The prospect of the rival bid was seen as possibly nudging along Vodafone's discussions with Softbank, a Japanese Internet conglomerate.  Cerberus and Providence had been working to secure financing for a bid for Vodafone's Japanese mobile subsidiary, people close to the situation said.  The companies would have needed to assume billions of dollars of debt.

By buying the Vodafone unit, Softbank gains immediate access to a mobile-phone network.  Softbank had signaled its intent to enter the cellphone business by acquiring a mobile license, but building a network could take years, and negotiating to lease another company's network to become a so-called virtual network can be tricky.

Vodafone's unit is the third-largest wireless carrier in Japan with about 15 million customers.  Vodafone is the largest cellular carrier in the world by sales, operating in almost 30 countries.  The company has long viewed Japan as an important learning ground in the complex and quickly changing world of wireless telecommunications.  Vodafone's market share in Japan, however, recently has shrunk amid intense competition to 17% from 19% in 2003.

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