Vodafone sells its Japanese arm

Vodafone has faced tough competition in Japan

Vodafone has agreed to sell off its struggling Japanese phone business to internet and telecoms group Softbank.

The division is being sold for Y1.8 trillion ($15.5bn; £8.9bn).

Vodafone chief executive Arun Sarin said the price was "attractive", and promised to distribute £6 billion to shareholders.

The transaction, which is one of the largest acquisitions ever seen in Japan, is expected to be complete early next year.

Vodafone's Japanese subsidiary had been losing customers in the face of fierce competition from domestic operators such as NTT DoCoMo and KDDI.

The mobile giant bought the unit with a view to achieving cross-border economies of scale, but found the Japanese market was too different from Vodafone's operations elsewhere.

3G woes

The UK telecoms giant has faced a sequence of problems since a disappointing launch of its Japanese 3G service in 2004.

The underperforming Japanese unit has weighed on the group's share price for some time.

The Japanese sale is likely to increase pressure from shareholders for the sale of some of its other overseas holdings, such as its 45% stake in Verizon Wireless, a US joint venture.

I would like to see them get stuck into some emerging markets and move more strongly into countries like India Robin Hearn, Ovum Vodafone's global ambitions under scruntiny

Mr Sarin told reporters that the company had "no current plans" to exit Verizon.

Last month it revealed it would write down the value of its assets by up to £28bn and that earnings were likely to fall 1% in 2007.

Softbank, Japan's largest broadband internet provider, secured a licence to operate a mobile phone business last year.

The company has been targeting Japan's $78bn mobile market for several years and hopes to become a leading communications company, providing broadband, mobile and internet services.