The great bidding war is over: Toyota Motor Corp. and Itochu Corp. have each decided to sell their 17.7 percent stake in International Digital Communications Inc. to Britain's Cable and Wireless PLC. With a winning bid of 110,577 yen per share, C&W has bested the favorite, Nippon Telegraph and Telephone Corp., for control of IDC. The outcome is a landmark for the country's telecommunications industry, and it has symbolic importance for the entire economy. Cable and Wireless' win could herald the emergence of a new business environment in Japan.
The Cable and Wireless bid values IDC at 69 billion yen, which seems awfully steep for a company with a net profit last year of 2.08 billion yen on sales of 75.2 billion yen. NTT is thought to have conceded because there was no economic justification for trying to top the British company's offer. But Cable and Wireless values IDC for considerably more than the assets on the books; the purchase gives the British company the opportunity to extend its network, and in the new world of global telecommunications, nothing is more important. Although it has had a strong presence in Hong Kong for some time, Cable and Wireless has not been able to compete with other large carriers in the rest of the region. The IDC purchase should change that.
The deal will also have a profound effect on the Japanese telecommunications market. The most immediate impact will be felt by NTT, which must come up with a new strategy. It had planned to buy IDC so that it would have an international arm ready to go when it reorganizes later this year. Previously, the company had said that it was not interested in wide-ranging tieups with other companies; that attitude is likely to change when the dust settles. One possible candidate is AT&T, with which NTT has already forged a link -- its first with a large foreign competitor.