Categories
games Japanese investments in EU mobile

Supercell: Softbank increases ownership to 73.2%

Supercell valued at US$ 5.3 billion

Softbank and GungHo jointly acquired 51% in October 2013 for US$ 1.5 billion

by Gerhard Fasol

On June 1, 2015, SoftBank announced an investment to increase the ownership of Supercell stock from 50.5% to 73.2% on a fully diluted basis. This transaction had closed on May 29, 2015.

While Softbank did not officially disclose details of this transaction, VentureBeat/GamesBeat reported that SoftBank this time paid US$ 1.2 billion for this additional 22.7% of ownership. Thus by dividing US$ 1.2 billion by 22.7% we can calculate a market value of US$ 5.3 billion.

Supercell is reported to have achieved revenues of US$ 1.7 billion and income of US$ 0.5 billion in 2014.

SoftBank and GungHo together acquired 51% of Supercell for US$ 1.5 billion in October 2013: SoftBank invested US$ 1.2 billion (80%), while GungHo invested US$ 306 million (20%). GungHo sold its share to SoftBank in August 2014.

Clash of Clans ranked No. 7 top grossing in Japan’s iOS app store

Supercell achieved an important position in Japan’s smartphone game market:

Currently Clash of Clans is ranked No. 7 top grossing app in Japan’s iOS app store, and No. 6 in the Games category (source: Apple App Store ranking).

According to AppAnnie, on June 1, 2015, Supercell’s games Clash of Clans, Hay Day and Boom Beach were ranked as the No. 1 top grossing games for iPad in 149, 128 and 112 countries respectively.

Learn about Japan’s game makers and markets – our report

pdf-file, approx. 398 pages, 141 Figures, 95 Photos, 98 tables, 5 Mbyte

Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

Categories
Japanese investments in EU M&A mobile

MixRadio: from Nokia to Microsoft to LINE

Messaging giant LINE continuous globalization

MixRadio will complement LINE’s local Japanese LINE Music service

by Gerhard Fasol

In December 2014, LINE and Microsoft announced that LINE will acquire the streaming music service MixRadio from Microsoft.

LINE already operates a Japan-only streaming music service “LINE Music”. Since music licensing is largely country or region specific, with this acquisition, LINE can develop global streaming music services building on existing licenses.

MixRadio

The service was developed as “NOKIA comes with Music” by NOKIA in 2007, a streaming music service which was built into certain NOKIA phones. Over the years, NOKIA also used the product names Nokia Music, Nokia Music Store and OVI Music Store for this streaming music service.

With the acquisition of NOKIA’s handset unit by Microsoft, the company became part of Microsoft, and Microsoft changed the name to “MixRadio”.

The company operates currently in 31 countries, and has a catalogue of about 36 million songs using the MP3 file format without Digital Rights Management (DRM) protection.

Competitors are Spotify and others.

Headquarters are in Bristol, UK, current CEO is Jyrki Rosenberg.

LINE Corporation

LINE Corporation is a Japanese/Korean messaging group, which is also the No. 1 top grossing global iOS and Android app provider.

For detailed discussion, see Japan game market report (398 pages, pdf-file):

Copyright 2015 Eurotechnology Japan KK All Rights Reserved

Categories
internet Japanese investments in EU M&A

NTT Communications reportedly in talks to acquire German data center operator e-shelter facility services GmbH

NTT Communications to continue global expansion

e-shelter offers about 90,000 square meters of data center space in 9 locations

NTT Communications is reported by Nikkei to be in negotiations to acquire Frankfurt based e-shelter facility services GmbH for approximately YEN 100 billion (US$ 840 million).

NTT Communications acquisition is driven by the need to grow outside of Japan, and by the need to offer global services.

e-shelter facility services GmbH

e-shelter facility services GmbH was founded in 2000, and offers 90,000 square meters of data center space in 9 locations across Germany, Switzerland and Austria.

e-shelter data centers

NTT Communications

NTT Communications was created with the privatization of NTT, which is formerly was Japan’s domestic monopoly telecommunications operator (KDD was had the monopoly for overseas telecommunications from Japan).

NTT Communications started globalization with the acquisition of US internet access, hosting and service provider VERIO for a approximately US$ 5.5 billion, announced on May 8, 2000.

Copyright·©2015 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
EU investments in Japan IT M&A

Colt to acquire KVH – the Tokyo based cloud and data center service provider

Colt to acquire KVH for YEN 18.595 billion (€ 130.3 million = US$ 160 million)

by Gerhard Fasol

The acquisition

Both Colt and KVH were founded with investments by Fidelity Investments and associated companies, Colt in London in 1992, and KVH in 1999 in Tokyo, as telecommunications service providers for the financial industry and other industrial customers. While KVH remained 100% owned by Fidelity and associated companies, Colt was listed on the London Stock Exchange in 1996.

Initially founded as telecommunications companies, both Colt and KVH have developed into “information delivery platforms” based on networking infrastructure, data centers, optical fibre networks and associated management and information services.

On November 12, 2014, Colt announced the plan to acquire KVH for YEN 18.595 billion (€ 130.3 million = US$ 160 million) in cash from KVH’s owner Fidelity Investments.

Since KVH is 100% owned by Fidelity Investments, and Colt have also been founded by Fidelity which is still a shareholder, the acquisition needs to be approved by independent Directors and by independent shareholders of Colt.

A General Meeting of Colt’s shareholder has been announced for December 16, 2014 at 10:00am in Luxembourg where the approval of shareholders of Colt will be sought.

Colt – the “information delivery platform”

Colt was founded by James P Hynes (Jim Hynes) with investments from Fidelity Investments and related companies in 1992 in London, and went public with an IPO on London Stock Exchange in 1996.

Colt operates 20 data centers and substantial optical fiber networks, and has more than 5000 employees.

Colt’s annual revenues are € 1,575.8 million (= US$ 2 billion) in 2013.

Colt market capitalization currently is UKL 1.19 billion (= US$ 1.9 billion).

KVH – “Asia’s information delivery platform”

KVH was founded by Fidelity Investments and related companies on April 2, 1999 in Tokyo.

KVH operates 9 Data Centers, owns optical fiber networks in Japan and to major financial centers in the world, and has about 590 employees.

KVH annual revenues are approx. € 133.6 million (= US$ 170 million) in FY2013, i.e. Colt is about 10 times bigger in terms of market cap and sales than KVH.

KVH owns optical fibre, ethernet, data center data infrastructure in Tokyo, Osaka and other parts of Asia.
KVH owns optical fibre, ethernet, data center data infrastructure in Tokyo, Osaka and other parts of Asia. This photograph shows KVH owned cable infrastructure in the center of Tokyo

The planned acquisition values KVH at YEN 18.595 billion (€ 130.3 million = US$ 160 million), i.e. COLT is about 12 times bigger than KVH in terms of market capitalization/value.

Implications of acquisition of KVH by Colt – view as a Japan (and Asia) market entry by Colt

From the point of view of Colt, the acquisition of KVH – which has always been a sister company via the common investor Fidelity Investments, and common founder Jim Hynes – is a relatively low risk market entry into Japan and several other major Asian markets, and promises to have a very high chance of success for all parties.

We need to keep in mind, that essentially all other large scale market entries into Japan by infrastructure based telecommunication operators have failed: Vodafone, Cable & Wireless, WorldCom’s market entries into Japan’s telecom markets have all failed, and to our knowledge KVH is the only remaining internationally owned telecom infrastructure company in Japan today.

You can read a detailed discussion about why Vodafone failed in Japan in our blog here “Vodafone Japan could have been a business worth US$ 50 billion today. Why did Vodafone Japan fail and sell to SoftBank?”.

Essentially, both Vodafone and Cable & Wireless failed in Japan’s telecom markets, because they did not have the multitude of skills and know-how needed to manage a telecommunications business in Japan in a competitive manner. Colt with the acquisition of KVH acquires this know-how, and KVH at the same time has been an internationally managed company from the outset, so that Colt avoids the risks of acquiring a 100% Japanese companies such as Vodafone had done by acquiring Japan Telecom, with all the cultural issues that this entails.

At the same time, we also need to keep the scale in mind. While KVH has a market capitalization (i.e. the purchase price) of US$ 160 million, it can be argued that Vodafone-Japan could be expected to have a capitalization of around US$ 60 billion today had it been successful – i.e. about 375 times larger than KVH.

Japan’s largest telecommunication operator NTT currently has a market capitalization of US$ 62 billion, i.e. about 390 times larger than KVH, while SoftBank’s market capitalization is about 500 times larger than KVH’s.

Thus, if we see Colt’s acquisition of KVH as a market entry into Japan by a European telecom operator, then this is on an approx. 300-400 times smaller scale than Vodafone’s failed market entry into Japan, and with far better circumstances, and a far higher chance of success, and in our view with very carefully controlled risks.

Without doubt, a merger of KVH with Colt was on the minds of Fidelity Investments and Jim Hynes, when they founded both KVH and Colt in the 1990s.

Japan telecommunications industry market report

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Categories
EU investments in Japan mobile

Nokia to buy Panasonic’s mobile phone base station division

Nokia to acquire Panasonic System Networks

by Gerhard Fasol

Nokia to expand market share in Japan, Panasonic to focus on core business

Panasonic, after years of weak financial performance, is focusing on core business. Nikkei reports that Panasonic is planning to sell the base station division, Panasonic System Networks, to Nokia.

Nokia expands No. 1 position in Japan

Our analysis of Japan’s mobile phone base station market shows, that Nokia became No. 1 in Japan’s base station market with the acquisition of Motorola’s base station division. Acquisition of Panasonic System Networks will expand Nokia’s NSN to expand market leadership in Japan’s mobile phone base station market.

Panasonic System Networks

Panasonic System Network’s market share is estimated at around 10% of Japan’s mobile phone base station market, while international sales are essentially non-existent. Thus Panasonic System Network’s global market share is negligible, giving Panasonic little possibility for the scale necessary to operate a stable profitable longterm base station business.

Japan’s mobile phone handset makers and base station makers have for many years focused on serving Japan’s internal market only, and in particular have focused on Japan’s No. 1 mobile phone operators NTT Docomo. This gave Japan’s mobile phone base station makers a temporary home advantage, however with the value shift from hardware to software, they lack scale, and are subsequently uncompetitive globally. More about Japan’s Galapagos effect here.

The context: EU investments in Japan

While Japanese investments in Europe are booming, recently European investments in Japan have been stagnating after Vodafone’s withdrawal from Japan, and there are very few new European investments in Japan. Could it be that Nokia’s investment in Japan starts a new trend of renewed European investments in Japan?

Japan telecommunications industry market report

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Categories
IT Japanese investments in EU M&A

Arkadin’s [enjoy sharing] 91.2% AXA stake to be sold to NTT Communications

Arkadin International SAS valued at approx. US$ 463 million

Collaboration-as-a-Service (CaaS)

On August 5, 2013, NTT Communications (NTT Com) announced that it will acquire 91.2% of the shares of the French conference and collaboration specialist Arkadin International SAS from current investors AXA Private Equity (now: Ardian Investment) and other investors.

The valuation is estimated at approximately US$ 463 million.

After the sale of 91.2% to NTT Communications, ownership will be as follows:

  • 91.2% NTT Communications
  • 8.8% management

Arkadin International SAS [enjoy sharing] – Collaboration-as-a-Service (CaaS)

Arkadin International SAS is one of the world’s largest providers of audio, web, video conferencing and unified communications services.

The company was founded in 2001 by Olivier de Puymorin, and today serves about 37,000 customers in 32 countries.

NTT Communications Corporation (エヌ・ティ・ティ・コミュニケーションズ株式会社)

NTT Communications Corporation (エヌ・ティ・ティ・コミュニケーションズ株式会社) is a fully owned subsidiary of NTT Corporation, Japan’s incumbent telecommunications group.

NTT Communications offers a wide range of data services, data centers, global communications services both in Japan and globally. Main data are:

  • 8000 employees
  • revenues: 981 billion yen (US$ 8 billion)

For a comprehensive analysis of Japan’s telecom industry sector see our Report on Japan’s telecommunications industry.

Copyright·©2013-2015 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
internet IT

More FTTH broadband in Japan than in all of EU + Norway + Switzerland + Iceland

Japan alone currently has about 30% more FTTH optical fiber broadband subscriptions than all EU countries + Switzerland + Norway + Iceland added together.

How much broadband (ADSL, xDSL and FTTH) is installed in Japan? Find the answer and detailed statistics and market shares in our report on Japan’s telecom industry.

Similarly, Japan was far in advance of other countries in laying the foundations for the mobile internet, with the introduction of the DoPa (DoCoMo Packet) packet switched network on March 28, 1997, several years before packet switched networks were introduced in EU and elsewhere. However, Japan’s electronics and telecoms industries largely failed to capture global value from this pioneering work. Essentially only Softbank with the SPRINT acquisition now has hope to capture such global value.

A very interesting point is that in EU there are many discussions and uncertainties how broadband fiber investments can be profitable. Japan has solved this problem: FTTH business in Japan is profitable. We see arbitraging opportunities in capturing value from Japan’s know-how, similar to Softbank’s “time shift” investments, arbitraging the time shift of internet roll-out in US vs Japan vs China, as explained in our Softbank-report.

about 30% more FTTH subscriptions in Japan than in all of EU + Switzerland + Norway + Iceland
about 30% more FTTH subscriptions in Japan than in all of EU + Switzerland + Norway + Iceland

Japan has 30% more FTTH fiber broadband subscriptions than EU + Switzerland + Norway + Iceland…

Several years ago the EU engaged our company Eurotechnology Japan KK to benchmark EU vs Japan in fixed and wireless broadband. Our summary was that broadband connections are the lifeblood of our information society, and that Japan was far ahead of EU in providing and using both fixed and wireless broadband, and broad band fiber connections were much faster and cheaper in Japan than in EU. Although both have progressed since our benchmarking work for the EU, Japan is still very far ahead of EU in terms of fast fiber broadband penetration.

However, provision of broadband fiber connections is only one side of the coin. The other side of the coin is capturing value and creating wealth for the society. The really important point is, whether Japan’s electronics, telecoms, content and service industries can capture global value from the advanced deployment of broadband infrastructure. As we discussed in detail in the “Post-Galapagos working group”, Japan is being held back by the “Galapagos effect” – and the trick will be to make the necessary changes to break out from this trap.
Read detailed analysis in our Japan-Telecommunications-Industry Report

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
FDI Japanese investments in EU M&A mobile

Buongiorno SpA acquired by NTT Docomo for € 209 million (US$ 260 million)

NTT Docomo acquired Italian mobile content, apps and service provider in a public tender offer

Buongiorno SpA becomes fully owned subsidiary of NTT Docomo

NTT Docomo acquired mobile content provider Buongiorno SpA in August 2012 following a public tender offer via Docomo’s German subsidiary DOCOMO Deutschland GmbH. The shares were delisted from the Italian Stock Exchange on August 22, 2012.

Buongiorno SpA

Buongiorno Chairman Mauro Del Rio in 1995 sent email messages with the subject line “Buongiorno” (= good morning) to 11 friends with daily jokes, in 1998 Mauro Del Rio’s newsletters went to 25,000 people, creating the base for the company.

As of December 31, 2006, Buongiorno SpA had consolidated investments of € 157.2 million, and consolidated revenues of € 191.8 million, and consolidated net income of € 12.6 million, and approx. 659 employees.

Buongiorno SpA has grown through a series of acquisitions:

  • MyAlert in 2001
  • merger with Vitaminic in July 2003
  • Gsmbox in 2004
  • Freever (founded by Jerome Trainel, Philippe Tissot, and Pierre Duhau-Laurent) in 2005
  • Tutch NL in 2005
  • Dioranews in 2005
  • Inventa in 2006
  • Rocket Mobile in 2007
  • HotSMS
  • FlyTXT
  • iTouch in 2007
  • eDong Asia
  • Glamoo
  • Dada.net in 2011
  • carve out B2B business into Lumata Group

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Categories
mobile

NOKIA quits Japan – for now…

NOKIA’s Japan subsidiary was founded on April 3, 1989 – almost 20 years ago. On November 27, 2008 NOKIA announced to terminate selling mobile phones to Japan’s mobile operators, effectively withdrawing from Japan (except for purchasing, R&D and VERTU).

NOKIA’s sales figures in Japan were a well kept secret until last week when several Japanese newspapers wrote that NOKIA sold 200,000 phones during FY 2007: thus NOKIA’s market share was 0.39% – after 20 years of market entry efforts.

Considering the disastrous collapse of mobile phone handset sales in Japan, NOKIA’s move to quit sales in Japan actually makes a lot of sense. Nothing prevents NOKIA from re-entering Japan again in the future.

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
mobile

Nokia & Sony Ericsson Results Likely to Disappoint (CNBC TV interview)

More in our J-ELECTRIC report: http://www.eurotechnology.com/store/j_electric/

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
mobile

"Help – my mobile phone does not work!" – Why Japan’s mobile phone sector is so different from Europe’s

Presentation at the Lunch meeting of the Finnish Chamber of Commerce in Japan (FCCJ) on March 16, 2007 at the Westin Hotel, Tokyo.

Find the summary and photos of the meeting here

Download the presentation here

From the Announcement:

In his presentation, Dr. Fasol will explain the essentials of Japan’s mobile phone market, why and how it is so different to Europe’s. He will also talk about some of the reasons why it is so difficult for European companies to succeed and uncover opportunities and the keys to success for European companies in this important market.

More in our report about Japan’s telecom sector.

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
EU-Japan business IT market entry

Trends in high technology in Japan (EU mission on foreign direct investment in Japan)

The EU-Japan Center for Industrial Cooperation held a 5-day intensive course in Japan for executives from EU firms between Monday 19th February – Friday 23rd February, 2007 on foreign direct investment in Japan.

On Monday 19th February Gerhard Fasol gave a talk “Trends in high technology in Japan”, covering the following points:

Categories
mobile

Ericsson Strategy & Technology Summit Tokyo

Eurotechnology’s CEO was invited to attend Ericsson’s Strategy & Technology Summit in Tokyo on November 15, 2006.

Ericsson’s CEO, Carl-Henric Svanberg, Ericsson CSO – Chief of Strategy, Japan-CEO Rory Buckley and other Ericsson top management presented Ericsson’s strategy and vision. About 100 investors and investment bank analysts were invited to attend.

I was given the opportunity to share the lunch table with CEO Carl-Henric Svanberg and had a fascinating discussion (some of his comments flowed into our company’s project report to the European Union on benchmarking Japan’s vs EU’s fixed and mobile telecommunications and broadband sectors).

With some of the largest and most advanced mobile investments, Japan’s mobile market is one of the most important markets globally for Ericsson. Recently Ericsson won major contracts from SoftBank and eMobile.

Ericsson CEO  Carl-Henric Svanberg speaking at the Ericsson summit in Tokyo
Ericsson CEO Carl-Henric Svanberg speaking at the Ericsson Technology Summit in Tokyo

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
internet IT mobile

Finland-Japan Ubiquitous Society Conference

October 27, 2006 the Finland-Japan Ubiquitous Society Conference was held in Tokyo.

Tero Ojanpera, Exec VP and CTO of NOKIA, gave an overview of NOKIA’s vision of communications, other speakers and panelists included Juho Lipsanen, Finland CEO of TeliaSonera, KDDI Chairman Murakami.

The day before I briefed and had a long discussion with the top management team of TeliaSonera-Finland.

Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference
Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference

Panel discussion with TeliaSonera CEO Juho Lipsanen and KDDI-Chairman Murakami.

Finland Japan Ubiquitous society meeting
Finland Japan Ubiquitous society meeting

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
internet IT mobile

Briefing TeliaSonera top management team: “What is the telecom company of the future?”

The day before the Finland-Japan Ubiquitous Society Conference in Tokyo, I briefed the top-management (CEO, CTO and other top managers) of TeliaSonera, on October 26, 2006.

The next day, October 27, 2006, the Finland-Japan Ubiquitous Society Conference was held. Tero Ojanpera, Exec VP and CTO of NOKIA, gave an overview of NOKIA’s vision of communications, other speakers and panelists included Juho Lipsanen, Finland CEO of TeliaSonera, KDDI Chairman Murakami.

Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference
Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference

Panel discussion with TeliaSonera CEO Juho Lipsanen and KDDI-Chairman Murakami.

Finland Japan Ubiquitous society meeting
Finland Japan Ubiquitous society meeting

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
EU IT M&A mobile

Briefing EU Technology Attaches to Japan about Japan’s telecom sector – unspoken question: Why did Vodafone fail in Japan?

by Gerhard Fasol

Following Vodafone’s decision to end business in Japan and the announcement of the sale of Vodafone-Japan to SoftBank, this author has been asked to brief the Technology Attaches of the 25 EU Embassies in Tokyo on Japan’s mobile phone and telecom sector.

The EU Technology Attaches were particularly interested in the impact on Europe by the termination of by far the biggest ever European investment in Japan. Clearly it is also important to determine, what other European companies can learn from Vodafone’s experience.

More details in our blog post:
Why did Vodafone fail in Japan and sell to SoftBank?

Eurotechnology Japan KK has been awarded a contract by the European Union to benchmark Japan’s telecom sector vs EU and make recommendations.

Japan telecommunications industry market report

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

Categories
M&A mobile

Vodafone brand disappears from Japan: Vodafone -> SoftBank rebranding

Vodafone sells Japan operations to Softbank

by Gerhard Fasol

Vodafone brand is replaced by the Softbank brand

“SoftBank” replaces “Vodafone” brand in Japan following Vodafone’s decision to sell all Japan operations to the Softbank Group (after Vodafone had previously split off and sold fixed-line and other operations to Softbank in earlier transactions).

Photographs below show the world famous Vodafone board on Tokyo-Shibuya’s Hachiko-square being replaced by the SoftBank advertisement from June 14, 2006.

SoftBank acquired Vodafone-Japan and rebranded to SoftBank mobile on June 14, 2006
SoftBank acquired Vodafone-Japan and rebranded to SoftBank mobile on June 14, 2006
Rebranding advertisement boards along Tokyo's Yamanote ring line
Rebranding advertisement boards along Tokyo’s Yamanote ring line. Noteworthy are the cheese, cow, car tire and ice cream bar shaped mobile phone covers, which Vodafone offered because it was short of new phone models, and which did not help to improve Vodafone’s brand in Japan

Japan telecommunications industry market report

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

Categories
mobile

Implementing Vodafone’s departure from Japan: SoftBank starts rebranding Vodafone in Japan

Vodafone sold Japan operations to SoftBank

by Gerhard Fasol

The Vodafone brand is replaced by the SoftBank brand all over Japan

Saturday June 10, 2006 was the first time we saw SoftBank replacing the Vodafone brand in Japan – bringing a formal end to Europe’s largest ever investment in Japan.

Vodafone’s withdrawal from Japan is a turning point in more ways than one and has wider implications for Europe (read below).

Vodafone’s withdrawal also shows, that the values of cross-cultural management skills are often underestimated.

SoftBank’s brand strategy

Rebranding from Vodafone to SoftBank after SoftBank acquired Vodafone Japan
Rebranding from Vodafone to SoftBank after SoftBank acquired Vodafone Japan

Upper image shows the world-famous Vodafone board on Shibuya’s hachiko square, which has appeared in many movies and TV shows. It will soon be replaced.

Lower image shows one of the first SoftBank advertisements in Tokyo’s busiest commuter railstation Shinjuku showing Sharp’s mobile-TV handset.

The photo demonstrates SoftBank’s brand strategy of partnering with world-famous brands, such as with Apple’s iPod and Sharp’s AQUOS display brand.

Implications for Europe of Vodafone’s withdrawal from Japan

As a European myself, I am looking at the wider implications for Europe of Vodafone’s withdrawal from Japan – and our company was recently awarded a contract by the European Union Government on exactly these issues – as well as others.

Vodafone’s investment was by far the largest European investment in Japan. What is maybe less well known is that Vodafone was dispatching a relatively large stream of managers between several
continents (Europe, Australia etc) and Japan. Several times when visiting the KDDI Designing Center for example I could meet young German Vodafone managers who had just arrived for a management position at Vodafone-Japan, and who were studying the mobile phone handsets in KDDI’s showroom. These expatriates all left within a few weeks of SoftBank taking control of the company.

As a result of these interactions, Vodafone could bring J-Phone’s J-Sky mobile internet service to Europe, which was adapted for European conditions and rebranded “Vodafone Live!”. There would be no “Vodafone Live!” in Europe without Vodafone’s acquisition of J-Phone (including JSky). Vodafone also brought SHARP and Toshiba mobile handsets to Europe.

Apart from the immediate impact on Vodafone as a Corporation, we expect also a more general longterm impact from the strong reduction of Europe-Japan technology exchanges due to Vodafone’s withdrawal from Japan.

Vodafone’s withdrawal from Japan also shows how difficult it is for European telecom firms to succeed in Japan – and for Japanese firms in the telecom sector to succeed in Europe. Our company knows this first-hand from our work for NTT-Communications, and some other Japanese companies. – Read our presentation to Japanese industry associations here (in Japanese language).

It also shows how easy it is to underestimate the importance of cross-cultural management skills and the associated perils

While large US corporations, including INTEL, General Motors, and Motorola have been forced by confrontation with Japan’s competition to completely reshape themselves, this has not yet happened to any large European corporation because of the larger perceived separation between EU and Japan.

Comparing Europe and Japan in telecoms….

Japan telecommunications industry market report

Copyright 1997-2013 Eurotechnology Japan KK All Rights Reserved

Categories
broadband EU internet IT mobile

EU Government contract awarded: benchmarking broadband/FTTH in EU vs Japan

As a consequence of our CEO’s briefing entitled “Why Japan is several years ahead of Europe in telecommunications and what Europe can do to catch up” on March 23, 2006 for the Technology Attaches of the Embassies of the 25 European Union countries here in Tokyo our company has been awarded a project contract by the Government of the European Union to examine EU vs Japan benchmarking issues in telecommunications and related key technology areas.

Read an updated report of Japan’s broadband market, ADSL and FTTH here: Eurotechnology Japan Report on Japan’s telecom sector.

Copyright·©1997-2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
broadband internet IT mobile

Why Japan is several years ahead of EU in telecoms and broadband?

and what can Europe do to catch up?

Presentation to EU Technology Attaches at the Embassy of the European Union in Tokyo by Gerhard Fasol

by Gerhard Fasol

Today (March 23, 2006) I was invited to brief the Technology Attaches of the Embassies of the 25 European Union countries here in Tokyo about Japan’s telecommunications sector (both fixed net and wireless) in a one hour presentation + discussion. I had offered several alternative topics and the conference of EU Technology Attaches selected the most provocative title I had offered: “Why Japan is several years ahead of Europe in telecommunications and what Europe can do to catch up”

Vodafone KK’s Chairman and former NTT-DoCoMo Vice-President Tsuda, who had worked 34 years at NTT and DoCoMo (and who resigned from his Vodafone-Japan CEO position a few weeks after being head-hunted), said in a recent interview with Bloomberg that “Japan is way ahead in 3G”. – therefore, although this title is clearly provocative, it’s clearly worthwhile examining this question. With the sale of Vodafone KK to SoftBank last week, the timing of this briefing was particularly interesting. My presentation discussed the following questions:

  • Is Japan ahead of Europe in Telecommunications and fixed as well as wireless broadband?
  • Why?
  • What is the impact?
  • Is this important?
  • What Europe can do to catch up

EU awards project contract to Eurotechnology Japan KK to document the status of fixed and wireless broad band communications in EU vs Japan

As a consequence of this presentation the EU awards project contract to Eurotechnology Japan KK to document the status of fixed and wireless broad band communications in EU vs Japan, and to prepare recommendations for the EU to learn from Japan, and accelerate progress in Europe.

Japan telecommunications industry market report

Copyright 1997-2013 Eurotechnology Japan KK All Rights Reserved

Categories
M&A market entry mobile

EU investments in Japan: Why did Vodafone fail in Japan?

Vodafone made the largest ever European investment in Japan

by Gerhard Fasol

Why did Vodafone fail so dramatically in Japan?

Quick answer

Vodafone failed in Japan not for one single reason but for hundreds of reasons, which can be grouped into two groups

  1. Soft factors:
    • Japan knowledge at HQ, and knowledge at HQ about the specifics of Japan’s telecom sector (or lack thereof).
    • choice of management structure (there were attempts to correct the management structure, however too little and too late).
    • attitude displayed both privately e.g. within the Japanese industry sector and publicly via marketing messages and advertising
    • choice of executives and lower ranking managers and their knowledge and experience in Japan’s telecom sector (or lack thereof)
    • lack of sufficient know-how and experience to manage a large Japanese company, and particular the chain of retail stores
    • and many more
  2. Hard factors:
    • far too low budgets for infrastructure investment resulting in much lower coverage and network quality compared to competitors NTT-DoCoMo and KDDI/au and TuKa, Willcom and others. As a consequence of far too low investment budgets, Vodafone failed three times to introduce 3G services in Japan. (3G services were not successfully introduced until after the acquisition by Softbank, and after conversion of Vodafone KK to Softbank-Mobile).
    • mobile phone handsets were inferior to the handsets offered by competitors NTT-DoCoMo and KDDI, and TuKa
    • and many more
vodafone brand disappears from Japan
vodafone brand disappears from Japan

Long answer

Find a long answer in this blog post below, in our other blog posts, and in some detail including statistics and financial data in our Softbank Report.

On Friday March 17, 2006, Vodafone and Softbank announced that Vodafone sells Vodafone KK (the totality of all Vodafone operations in Japan) to Softbank.

It has been reported that on Monday March 20, 2006, Softbank started to move all Vodafone KK staff, furniture and equipment from Vodafone KK’s former headquarters in the top floors of the Atago-Greenhills-Mori-Tower to Softbank headquarters in Shiodome (near Shinbashi). Also Softbank started to arrange that essentially all foreign expatriate managers left Vodafone KK – some stayed in Japan working for other IT companies, some returned to European Vodafone divisions, and some pursue telecom careers in USA, India, Bangladesh, or elsewhere.

By total coincidence, I had dinner a high-level manager of Vodafone KK, of European nationality, at the indian restaurant Moti’s in Tokyo-Roppongi on exactly the same day, the Friday March 17, 2006 a few hours after the sale of Vodafone KK to Softbank was announced. I asked him: “Which of the following is true:”

  1. Vodafone never did any market research in Japan?
  2. Vodafone did market research in Japan, but the quality was low?
  3. Vodafone did market research in Japan, but nobody read it?

This Vodafone KK manager’s answer at the indian dinner was (3): market research was done about Japan’s mobile phone market, but the market research was not sufficiently taken into account in the business and strategy planning.

Fact is, that Vodafone KK took many major strategy and market decisions in Japan, which were not related to the realities of Japan’s market. Here one example. When “rebranding” (=changing the company / product / services names) from J-Phone to Vodafone, this “rebranding” campaign was centered on global roaming, i.e. Vodafone enabled Japanese customers to use Japanese J-Phone/Vodafone mobile phones in a very large number of countries outside Japan as well as inside Japan. This was at a time, when Japan’s mainstream mobile 2G phone system which both DoCoMo and J-Phone used was PDC, while much of the rest of the world, especially Europe used GSM. However, what Vodafone overlooked was, that at that time DoCoMo had about 30,000 roaming customers, out of approx. 50 million subscribers, i.e. only about 0.06% of Japanese mobile phone users used international roaming at that time. Thus Vodafone KK in Japan focused their main nation-wide poster and TV and other media campaign on about 0.06% of the Japanese market – less than a niche. (The reason we know how many roaming customers DoCoMo had at that time, is because one of Vodafone KK’s competitors in Japan engaged our company Eurotechnology Japan KK to analyze Japan’s roaming market, and help our client to develop strategy to better compete with Vodafone KK’s roaming products, which were aggressively marketed, and the core of Vodafone KK’s marketing focus).

Another example was Vodafone KK’s strategic focus on Japan’s prepaid market. In 2006 there were about 2.6 million prepaid mobile phone customers in Japan, i.e. about 2.7% of the market, while DoCoMo had about 45,200 prepaid subscribers, i.e. about 0.09% of DoCoMo’s subscribers were prepaid customers. Since the prepaid market in Europe (especially Italy where about 1/2 of the market is prepaid) is extremely important and highly profitable, Vodafone decided on the strategy to focus strongly on the development and growth of Japan’s prepaid market. Almost at the same time however, a national campaign started in Japan linking unregistered and illegally traded prepaid mobile phones to crime, and a law was proposed in Japan’s parliament to outlaw any type of prepaid mobile phones. Thus Vodafone KK found itself on the one hand promoting and investing to develop prepaid mobile phone services in Japan, developing, purchasing (as was the business model in Japan at that time) and bringing to market special prepaid handsets, and organizing national media campaigns promoting Vodafone prepaid mobile phones, while at the same time on the other hand facing the possibility that Japan’s parliament would outlaw these same prepaid mobile phones, and a broad press and TV national discussion on how prepaid mobile phones are linked to crime. The end result was, that instead of outlawing prepaid mobile phones, it was decided to introduce far stricter registration requirements and ID requirements for mobile phones and especially for prepaid mobile phones, and the unauthorized/unregistered sale or transfer of prepaid mobile phones in Japan was made a crime. The end effect for Vodafone of course was a commercial failure of Vodafone’s prepaid mobile phone campaign, in addition to a general decrease of ARPU (average revenue per user).

As a consequence of these and other factors, Vodafone KK’s market share continuously decreased, subscribers moved from Vodafone KK to DoCoMo and KDDI/au, and the financial performance of Vodafone KK deteriorated, in the end convincing Vodafone that the best option was to sell Vodafone’s Japan operations and terminate business activities in Japan.

You can find further details and statistics, financial performance and market share data during this period in our Softbank report.

Japan telecommunications industry market report

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

Categories
M&A market entry mobile

Vodafone in Japan? Why did Vodafone change its mind about Japan?

Negotiations between SoftBank and Vodafone about sale of Vodafone Japan confirmed

by Gerhard Fasol

Bloomberg: Vodafone-Japan CEO Tsuda seeks growth in Japan, not sale

About one year ago, in an interview with Bloomberg (“Vodafone KK’s Tsuda seeks growth in Japan, not sale“), I mentioned that a sale of Vodafone’s Japan operations to Softbank might be the way Vodafone will go in Japan. This seems to be happening now and negotiations to this effect were confirmed by both Softbank and Vodafone over the weekend.

The potential deal

Although a deal has not been closed yet, it is widely reported that a sale of Vodafone’s Japan operations to Softbank is very likely to be closed within a few weeks. What could this deal look like?

As reported by Bloomberg Vodafone KK’s capitalization at the point of delisting from the Tokyo Stock Exchange was around YEN 1.4 Trillion (= about US$ 12 Billion). Bloomberg mentions estimations by London based analysts who value Vodafone KK in the range US$ 14 to 16 Billion. Of course, if a deal is actually concluded, it might be a complex deal with several components, not just a simple cash price, and any cash value will not be determined by analysts in London, but on the negotiating table between Softbank and Vodafone, and the final deal could be more complex than a simple sale against cash payment.

In any case, this deal – if it happens – promises to become one of the largest M&A transactions ever in Japan sofar in terms of cash value. Vodafone is reported to prefer a cash deal, and Softbank has been reported to consider a leveraged buy-out (LBO) where Softbank will take debt against the to-be-acquired company.

It has also been reported that Softbank seems to be planning to change the name of the resulting company, so the “Vodafone” brand is not likely to survive in Japan.

What is Softbank likely to do with Vodafone’s Japan operations

An acquisition of Vodafone’s Japan operations will be the completion of Softbank‘s march to build a full-scale telecommunications group on a par with NTT and KDDI through a series of acquisitions plus internal growth.

Softbank in this new shape will become a much more serious competitor for NTT and KDDI, which both have succeeded to transform themselves from former monopolies into some of the world’s most advanced telecom operators.

In a sense Softbank is already where DoCoMo and KDDI are working very hard to get to: DoCoMo and KDDI are working hard to build content and transaction businesses (such as shopping, financial services, auctions and music), because pure traffic revenue (ARPU) is driven down by relentless competition.

Softbank is strongly linked to YAHOO-Japan, and YAHOO-Japan demonstrated it’s strength by driving eBay out of Japan – so Softbank is already where DoCoMo and KDDI want to go. All Softbank still needed was a wireless network, and with a Vodafone acquisition, Softbank will have a wireless network much faster than expected.

A Vodafone/Softbank deal will not be a good development for eAccess/eMobile, and eAccess/eMobile is reported to have submitted documents to Japan’s regulatory authorities regarding Softbank’s wireless license. It will be interesting how the regulating government ministry will decide on the regulatory aspects of any Softbank/Vodafone deal. In the past few years Japan’s government has been singularly focused on creating the conditions to make Japan the most advanced IT market in the world, so I think we can
be confident to expect a wise decision – wise for Japan, not necessarily beneficial for particular mobile operators.

What made Vodafone change it’s mind about Japan?

As reported by Bloomberg, one year ago Vodafone had the clear intention to remain in Japan for the next 10, 20, 30 years. What made Vodafone change it’s mind?

As widely reported, Vodafone was loosing market share in Japan’s mobile phone market over the last several years.

With number portability being introduced in Japan from autumn 2006, and with three new operators entering the market during 2006-2007, the competitive environment will become much more severe than it is now, decreasing pure network profitability, while at the same time massive network investments are necessary.

Analysis of Vodafone-Japan’s subscriber numbers shows that early warning signs appeared already in 2002 – 2002 would have been the time for Vodafone to take decisive action to turn the business around in Japan.

See also: my comments in Der Standard (German language) “Aus fuer Vodafone in Japan”

UPI also quotes us: “Globe Talk: Vodafone’s sayonara problems”

Japan telecommunications industry market report

Copyright 1997-2013 Eurotechnology Japan KK All Rights Reserved

Categories
mobile

SANYO – NOKIA CDMA2000 JV (Interview for CNBC)

Was interviewed today about the announced JV between SANYO and Nokia for CDMA2000 phone handsets (I added some corrections here):

[Q1] How will SANYO benefit from this, since they are the ones who have the technology, what do they hope to gain from working with Nokia? Or is this merely a way to reduce costs for the company, since it’s struggling to remain profitable?

It is clear to me that NOKIA will benefit, since NOKIA needs 3G know-how from Japan because all markets where NOKIA is dominating are behind compared to Japan in 3G development, and also NOKIA needs a lot of other advanced technology from SANYO.

Of course who benefits depends both on the contract conditions and the relative strengths of the parties.

It’s clear that financially NOKIA is the much stronger of the two. NOKIA is financially very strong, while SANYO is in a very weak position, so it’s a very clever move for NOKIA.

[Q2] Is it already too late for Nokia to make such a move in the CDMA 2000 market, with strong players like Samsung, LG and Motorola already entrenched in the market?

I don’t think it’s too late – both Motorola and NOKIA demonstrated rebounds recently with new design initiatives such as Motorola’s RAZR and NOKIA did a successsful turn-round by introducing clam-shell phones a trend which NOKIA had missed by not being linked sufficiently into Japan before.

To succeed you need to make spectactular phones which match consumer needs, and you need the financial and manufacturing power as well as the brand. The combination of SANYO‘s technology with NOKIA’s financial strength and brand, as well as NOKIA’s efficient supply chain are a good basis.

[Q3] When would you expect to see the benefits of such a move to emerge?

I think one should not underestimate the cultural risks. NOKIA and SANYO have extremely different corporate cultures, and we have seen many cases where corporate cultures lead to great difficulties.

I think the key will be to manage the difference in corporate cultures of two very proud companies. Locating the JV in the USA might help.

SONY-Ericsson has demonstrated that such a JV can be successful. In the case of SONY-Ericsson it has taken several years for the JV to succeed. If one takes SONY-Ericsson as a measure, then it might take a couple of years (3-4 years) for this JV to succeed. If it’s faster than that it will be a positive surprise.

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
mobile

SonyEricsson design team presentation & discussion at the Embassy of Sweden in Tokyo

The SonyEricsson mobile phone design team gave a very impressive presentation of their work at the Swedish Embassy yesterday.

Here is Art Director Mr Kawagoi, who created the famous SonyEricsson logo, explaining the messages contained in his creation:

SONY-Ericsson Design Director explaining his thoughts behind creating the SONY-Ericsson logo
SONY-Ericsson Design Director explaining his thoughts behind creating the SONY-Ericsson logo

Here Swedish Managers of the SonyEricsson Creative Design Center from Lund/Sweden:

SONY-Ericsson presentation at the Embassy of Sweden in Tokyo
SONY-Ericsson presentation at the Embassy of Sweden in Tokyo

My conclusion: expect a lot more great designs out of SonyEricsson. Also, there is every indication it’s a very successful Japan-Swedish cooperation.

[images in this post are taken with a DoCoMo/Sharp SH900i 3G/FOMA camera-phone in 2Megapixel setting, and sent through the air via DoCoMo’s FOMA network. Images are reproduced here in much less than the original 1224 x 1632 pixel size, which would not fit on most PC screens.]

Copyright·©1997-2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
broadband internet IT market entry

Cable and Wireless-Japan acquired by Softbank???!!

Today’s top article in Nikkei is about Cable and Wireless-Japan: the article reports that Cable and Wireless is in discussion with Softbank and a private equity firm to sell their Japan operations. Apparently this news article is not confirmed, and it already mentions a purchase prize on the order of US$ 100 million. This article appeared in the top position in Nikkei – but there are several things a bit mysterious about it.

I did not follow Cable and Wireless recently in Japan, but it seems that C&W made a loss of YEN 61.6 OKU on sales of YEN 713 OKU, i.e. almost 10% loss.

Spent all morning discussing with one of the innovation managers of a big European telco. Interesting. Spent afternoon with a US bio-tech company which which is thinking of asking us to build their business in Japan, and in the evening listened to a talk by Tadashi Onodera, the CEO of KDDI. Expected him to talk mainly about mobile – but he did not. His focus was a national VOIP network they are building, attacking the fixed line income of NTT. Got hold of him after his talk and discussed with him for about 10 minutes.

UPDATE: on October 26, 2004, Softbank announced the acquisition of Cable & Wireless IDC. Total cost of the acquistion is announced as YEN 12.3 billion (= US$ 110 million)

Copyright·©1997-2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
M&A mobile

The Economist about 3G and Vodafone in Japan

An article in The Economist about Vodafone is partly based on our analysis:

“Vodafone- Not so big in Japan” (The Economist, Sept 30th, 2004)

Japan telecommunications industry market report

Copyright 1997-2013 Eurotechnology Japan KK All Rights Reserved