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Cable Technology Feature Article

February 16, 2010

Fight for Japan's Largest Cable TV Spills Into Open

By David Sims, TMCnet Contributing Editor

Japanese business usually doesn’t operate like this. One would think we were in America here.

What The Wall Street Journal called “an unusually public and testy competition” has broken out for control of Japan’s largest cable TV operator “between a trading company and the country’s second-largest telecom carrier.”

Trading company Sumitomo said “it will launch a tender offer of up to 122.18 billion yen, or $1.36 billion, to lift its holdings in Jupiter Telecommunications (JCom) to 40 percent from 27 percent,” the Journal said.

“Sumitomo is currently JCom’s second-largest shareholder and holds its shares through a joint venture with Liberty Global (News - Alert), which will be dissolved on Thursday,” the Financial Times reported.

Three weeks ago KDDI (News - Alert), Japan’s second-biggest telecom carrier, announced it would spend $4 billion for a 38 percent stake in JCom from the American firm Liberty, an unexpected move in a country where unexpected moves in the tightly-connected web of relationships generally unhappen.

“It seems that there were all sorts of discussions completely outside of our knowledge. Then, to make an announcement like that, we were honestly stunned,” Yoshio Osawa, who heads Sumitomo’s media division, told reporters. “Currently our relationship with KDDI is a blank sheet.”

Last month Liberty Global agreed to sell its 37.8 per cent stake in JCom to KDDI. “Under the terms of that deal it would have made it hard for Sumitomo to assert any control over JCom. Sumitomo’s tender offer, if taken up, would make it the largest shareholder in Jcom,” the FT explained.

This would be the largest Japanese telecom deal in four years, as KDDI wants to “bundle Internet, phone and TV services to better compete with former state monopoly Nippon Telegraph & Telephone (News - Alert),” the Journal said, adding that KDDI “agreed to put part of its stake in a trust to keep its control of Jupiter below one third to address concerns by regulators about the legality of its transaction,” as well as giving up the power to veto management decisions.

David Sims is a contributing editor for TMCnet. To read more of David’s articles, please visit his columnist page. He also blogs for TMCnet here.

Edited by Kelly McGuire