Softbank scoops up Japan Telecom for $3bn

Raises stakes in Japanese broadband war

Softbank has turned up the heat in Japan's cutthroat broadband market by paying a total of $3bn for Japan Telecom.

The deal will bring in the former Vodafone subsidiary's 1.67 million internet subscribers and about 150,000 business users. When added to Softbank's 4 million-plus broadband subscribers under the Yahoo! BB brand, it will give the company a commanding lead in the Japanese battle for broadband market share.

At the end of last year, Japan had 13.6 million broadband users, according to government statistics. All of the broadband providers are still haemorrhaging cash as they battle for supremacy in the potentially lucrative market. Earlier this month, AOL bailed out of the Japanese market.

In Japan, ADSL broadband is provided at speeds starting at 2Mbps and up to 100Mbps on fibre.

Earlier this month Softbank turned in its third consecutive year of losses, bringing the three year total to $2.65bn. The company has raised about $5.5bn in the last year through sales, financial reconstruction and a share issue.

Under the terms of the complex deal, Softbank paid $1.28bn to Ripplewood Holdings, which paid about $2bn to Vodafone for Japan Telecom about nine months ago. Softbank also takes on $1.47bn worth of debt and buys $290m worth of preferred shares.

Goldman Sachs, which advised on the deal, is to join three other investors to take the remaining $260m worth of equity in Japan Telecom. New York-based investment house Ripplewood is to use the money to pay off the $1.79bn it borrowed to buy Japan Telecom and then take a small stake in Softbank.

Softbank is controlled by the once-legendary Masayoshi Son. At the height of the dot-com boom, Son was second only to Bill Gates as the richest man in the world, thanks in part to the significant stake he took in Yahoo! when it was a start-up.