KDDI Corp., the nation’s No. 2 mobile carrier, officially announced Monday that it has agreed to sell its PHS business to the Carlyle Group, a U.S. private equity fund, for 220 billion yen.
The personal handy-phone system is one of the wireless communications systems that has been developed in Japan. Building the necessary infrastructure for PHS operations is cheaper than building the required infrastructure for regular cell phone systems.
KDDI will now concentrate its resources on its mainstay au mobile services as part of an offensive targeting industry titan NTT DoCoMo Inc.
Carlyle will acquire a 60 percent stake in DDI Pocket Inc., KDDI’s PHS operating subsidiary, while Kyocera Corp., a Kyoto-based high-tech firm, will hold a stake of 30 percent. KDDI will retain a 10 percent stake.
Kyocera was already DDI Pocket’s second-largest shareholder, with a 13.25 percent stake.
Tamotsu Adachi, the fund’s representative in Japan, said it does not plan a quick exit from DDI Pocket, noting that its data communications business has more room to grow.
Carlyle is headed by Louis Gerstner, a former chairman of IBM.
“In our worldwide investment activities, the telecommunications sector accounts for 30 percent,” Adachi told a news conference in Tokyo.
“We have been paying closer attention to PHS’s growth potential in the world’s second-largest market.”
The acquisition will take the form of a leveraged buyout, with 75 percent of the acquisition funds to be financed by financial institutions in Japan and overseas. In an LBO, a buyer borrows acquisition money using the assets and cash flow of the targeted business as collateral.
Launched in 1995, PHS accelerated the spread of mobile phones in Japan by offering relatively affordable services compared with regular cell phones.
But its small coverage areas and other weaknesses have pushed it into a corner of the rapidly growing market.
But DDI Pocket, exploiting PHS’s strength in data communications, has attracted corporate customers by offering fixed-rate services via card-shaped devices compatible with personal computers.