Japan’s Nippon Telegraph and Telephone Corp (NTT) said it is looking at taking full control of its wireless carrier business in a deal that could be worth approximately 4 trillion yen ($38bn) and pave the way for price cuts in the mobile phone industry.
The buyout will be discussed at a board meeting on Tuesday, NTT said in a statement after the Nikkei newspaper reported the deal.
The value of the 34 percent of NTT Docomo Inc’s shares not owned by NTT is based on a 30 percent premium to Monday’s closing price, Reuters calculations showed.
The move came as Japan’s new prime minister Yoshihide Suga launched a fresh attempt to push the country’s three biggest mobile network providers into cutting fees. The government is NTT’s biggest shareholder, with a 34 percent stake in the company.
At $38bn, the deal would be the fifth-largest M&A transaction involving a Japanese company, Refinitiv data showed. It would also be the largest-ever offer for a Japanese company, according to Nikkei.
A buyout will have broad implications for the sector, with any fee cuts likely to be followed by NTT Docomo rivals KDDI and SoftBank, and hitting profit margins.
NTT Docomo was spun off from Japan’s former state monopoly in 1992 as part of government efforts to drive competition in the sector. It was listed on the stock exchange in 1998.
“Post acquisition, Docomo will no longer be answerable to shareholders. If the government instructs it to cut prices, it will oblige,” Jefferies analyst Atul Goyal wrote in a client note.
The government wants lower fees to stimulate spending in other parts of the economy.
Pressure from Suga came as carriers invested in building fifth-generation services widely seen as critical to ensuring Japan’s competitiveness.
The buyout “is driven more by the potential to develop 5G and IoT services than regulatory pressure,” said analyst Kirk Boodry at Redex Research, referring to the Internet of Things. The industry is seeking “new, less regulated revenue streams”, he said.
Telecoms ministry efforts to enhance competition include backing the entry of e-commerce firm Rakuten this year. The company’s model of low-cost plans could come under strain, however, should broader prices fall.
NTT Docomo is a popular stock among retail investors meaning its potential exit from the market will likely make a big impact, said analyst Ichiro Kurihara at Tachibana Securities.
A buyout would also mark the end of a prominent “parent-child” listing – a practice frowned on in other economies but still common in Japan.
It was not immediately clear how NTT would fund the transaction – it had 1 trillion yen in cash ($9.48bn) and cash equivalents on its balance sheet at June-end, Refinitiv data showed.