Vodafone targets Japanese takeover

Japan is the world's second largest mobile phone market

British mobile phone giant Vodafone has launched a friendly bid to gain a controlling stake in Japan's third largest telecoms firm.

Vodafone says it is talks with the Japan Telecom's second largest shareholder, East Japan Railway, in order to increase its existing 39.6% stake by up to 15%.

Vodafone, the world's largest mobile operator, has made clear its desire to control Japan Telecom's crown jewel, the wireless unit J-Phone.

With a controlling stake in Japan Telecom, Vodafone would secure management control and would be able to sell the fixed line operations if it considers this arm to be unprofitable.

Expansion plans

At an analysts' briefing about two weeks ago, Vodafone chief executive Chris Gent gave strong hints of his firm's ambition to win a controlling stake in Japan Telecom.

Since last year, Vodafone has been raising its holdings in Japan Telecom and its wireless units, consolidating a foothold in the world's second-largest telecoms market.

J-Phone plans to launch third-generation (3G) services next June, offering Vodafone the chance to get hands-on market experience of the technology, which promises super-fast data and voice transmission.

A larger stake would also allow Vodafone to remove Japan Telecom executives and to sell those fixed-line operations it considers unprofitable.

Shares boost

Vodafone will control 39.7% of J-Phone after the mobile company is consolidated into a single company on 1 November.

According to a Japanese business paper report, Vodafone is expected offer to buy Japan Telecom shares at a 10% premium to the market price, valuing the deal at 220bn yen (£1.27bn; $1.85bn).

East Japan Railway is Japan Telecom's second largest shareholder, with a 15.1% stake.

Vodafone became Japan Telecom's largest shareholder through a series of acquisitions from other Japanese railways companies and telecom rivals BT and AT&T.

Japan Telecom shares closed 5.4% higher on the news.