DDI Corp., KDD Corp. and IDO Corp. have agreed to form a three-way merger in October in an effort to create a comprehensive telecom carrier that can compete with the dominant NTT group, top officials of the three carriers announced Thursday. The merger will combine the corporate resources of the three telecom carriers and allow the new firm to offer seamless services ranging from regular phone services to mobile services as well as domestic and international services. The proposed merger scheduled for Oct. 1 will create the country's second largest telecom group, rivaling the group led by Nippon Telegraph and Telephone Corp. "We strongly felt the necessity to create a company that can truly compete against NTT, as we see NTT steadily increasing its presence in the market after the carrier was reorganized under a holding company," Yusai Okuyama, president of DDI Corp., told a press conference. "Out of the sense of crisis that NTT's monopolistic market control might infringe on the interests of users, we have reached the framework agreement," Okuyama said. DDI Corp. started as a long-distance carrier affiliated with Kyocera Corp., while IDO Corp. is a mobile phone operator and KDD Corp. is the country's largest international telecom carrier. Under the framework agreement, DDI Corp. is a surviving company and Okuyama will assume the post of president of the new company. Under the deal, one share in DDI Corp. is to be issued per 92.1 shares of KDD Corp., while one share in DDI Corp. is to be allocated to 2.9 shares in IDO Corp. The three carriers will work on details of the merger, including board members and the capital of the new company, the officials said. The agreement on the three-way merger came beyond different corporate culture between the carriers as well as their shareholders, namely Kyocera Corp., DDI's leading shareholder, and Toyota Motor Corp., a major shareholder of KDD Corp. and IDO Corp., the officials said. "Each company has different corporate culture, which I take as one of major issues that the new company will face. But we decided to work together for the same purpose by dismissing small differences. I'm not much worried about that," said Kazuo Inamori, honorary chairman of Kyocera Corp. Under the simple calculation based on shares at the end of last March, Kyocera Corp. will become a leading shareholder of the new firm with a 15.8-percent stake and Toyota Motor will follow Kyocera with a 10.3-percent stake. However, the carriers agreed to increase Toyota's stake in the new firm through a third-party allocation of new shares, Okuyama said. Inamori and Shoichiro Toyoda, honorary chairman of Toyota Motor, which is a main shareholder of both KDD Corp. and IDO Corp., will become honorary chairmen of the new DDI Corp. Although the merger aims to compete the NTT group, the scale of the three carriers is still far behind that of NTT, the dominant telecom group. The three carriers project that the combined consolidated sales of the three firms totals 3.55 trillion yen in the business year that will end March 2002. In contrast, the NTT group posted 9.7 trillion yen in consolidated sales for the business year that ended last March. Okuyama cited the mobile phone services as the field where the merger can produce the synergy effect, though he declined to comment on how the carriers will combine the existing mobile phone services. DDI's Cellular group and IDO Corp. already connected their cellular phone networks based on code division multiple access (CDMA) technology earlier this year and are jointly preparing to obtain licenses for the next generation mobile phone services.
