Vodafone to buy J-Phone stake

September 20, 2001 Posted: 1043 GMT

LONDON (CNN) -- Vodafone, the world's biggest wireless operator, has agreed to pay 1.8 billion pounds ($2.7 billion) in cash to take control of Japan Telecom.

Newbury, England-based Vodafone has been eager to increase its stake in J-Phone, the Japanese company's cell-phone unit, as it rolls out keenly awaited email, Web and video services and takes on NTT DoCoMo.

The Japanese market represents a vital test bed for high speed (third generation) mobile-phone services. 3G services begin next month in Japan more than one year ahead of availability in Europe.

The anticipated roll-out of 3G services will be closely watched by European companies, which bet 120 billion ($111 billion) on acquiring third generation wireless licenses. However, the Japanese launch has been delayed as NTT DoCoMo and its technology partners have been bogged down in solving software glitches.

Vodafone will pay ¥450,000 a share for a 21.7 percent stake in Japan Telecom, increasing its holding to 66.7 percent from 45 percent. That offer represents a 29 percent premium on Wednesday's closing price. At the same time the deal boosts its holding in J-Phone to 69.7 percent from 60 percent.

"This deal will further strengthen Vodafone's position in Japan and give us greater exposure to 3G," Vodafone's chief executive Chris Gent said.

East Japan Railway will reduce its stake in Japan Telecom to 5 percent from 15 percent. Vodafone, which has 73.5 million customers worldwide, will add another 10.5 million customers through the latest deal.

Vodafone said the deal would marginally dilute its earnings per share in 2003 -- before goodwill and exceptionals -- but they would remain neutral in 2004.

The company has seen its stock price come under pressure recently as it paid for acquisitions by offering shares. Vodafone's share price edged up 0.2 percent to 141.5 pence, while the FTSE 100 benchmark index in London dipped 2.2 percent in midday trade.

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