Vodafone Group PLC confirmed Monday that its wholly owned subsidiary is negotiating with East Japan Railway Co. over a possible takeover bid for Japan Telecom Co.
The negotiations "may or may not lead to" a public tender offer to acquire an additional stake of up to 21.7 percent in Japan Telecom, according to the U.K.-based Vodafone Group.
The group currently holds a 45 percent stake in the nation's third-largest telecom carrier. JR East, the second-largest shareholder in Japan Telecom, currently holds a 15.2 percent stake in the firm.
If realized, the takeover would give Vodafone a full controlling stake in Japan Telecom as other shareholders would be deprived of veto power with regard to important management decisions, such as the dismissal of board members.
The subsidiary in question, Vodafone International Holdings B.V., is now "in consultation with" Japan Telecom to gain the support of the firm's board for the bid, Vodafone said.
Industry observers believe the British cellular operator could separate or sell off Japan Telecom's relatively inefficient fixed phone business if it takes full control of operations.
Vodafone's strategic focus appears to be on the J-Phone group, Japan Telecom's cellular unit, which boasts advanced color-display handsets that have been successful in Japan's mobile market.
The domestic market, now dominated by Vodafone's main rival, NTT DoCoMo Inc., is expected to be a test case for next-generation mobile phones and other advanced mobile technologies.
Japan Telecom also said Monday that the company has been notified by JR East of the ongoing negotiations but said that no final decision has yet been reached between the two shareholders.