Three Japanese Carriers Sign Merger Deal

TOKYO (04/05/2000) - Three Japanese telecommunications carriers today signed a merger deal with hopes that their new company will be large enough to take on industry mammoth Nippon Telegraph and Telephone Corp. (NTT).

Executives from the three firms, DDI Corp., KDD Corp. and IDO Corp., announced the signing of the deal at a Tokyo news conference this afternoon making good on their declared intention to merge, announced in December last year. [See "Japan's DDI, KDD, IDO Announce Merger Plans," Dec. 16, 1999.]The companies will merge on October 1 this year and the new company will bear the name DDI Corp.

DDI is a major long distance and cellular carrier affiliated with Kyocera Corp., while IDO provides cellular services in the Tokyo and central Japan regions and has Toyota Motor Corp. as its major shareholder. Both DDI and IDO already work closely together in the cellular business, where they have complementary service areas, so that customers of each provider can enjoy nationwide coverage through roaming deals. KDD is Japan's largest international telephone carrier and also includes Toyota as a shareholder.

Deregulation in the local telecommunications industry, which saw the market opened to new entrants and the previous division between domestic long distance and international carriers removed, has prompted other carriers to merge in order to compete better, although the three way merger announced today is one of the largest.

While dominant carrier NTT has seen some of its market share eroded in the long distance market since deregulation, it still effectively has a monopoly on the local loop, and was allowed to launch international services. In the cellular marketplace, its NTT DoCoMo Inc. affiliate has been increasing its market share month on month, a gain which some attribute to the success of its i-mode interactive information service, launched a year ago.

The decision by the Ministry of Posts and Telecommunications (MPT) to license three carriers to operate third generation (3G) mobile communications networks in each of several regions across the county is also driving the mergers. The Japanese carriers have all shown themselves keen to secure licenses, but the limited number of these requires them to cooperate.

DDI and IDO, because of their already close links, were expected to merge and jointly apply for a license. But if KDD Corp. had stood alone, then with NTT DoCoMo and Japan Telecom Co. Ltd. also applying, there would have been a battle for licenses. By merging with the two existing carriers, KDD not only gets cellular industry know-how but also virtually assures that each of the three main carriers will be awarded nationwide 3G licenses, industry observers say.

Running up to the merger, Toyota Motor Co. will take a stake in DDI that will make it the second largest shareholder in the new company with a 13.3 percent stake. The largest will be Kyocera with a 15.3 percent stake.

Introducing the new management team that will be in place after October 1, DDI president Yusai Okuyama said at the news conference that Jiro Ushio, currently chairman of electronics maker Ushio Inc., will be chairman. Kazuo Inamori, honorary chairman of DDI and Kyocera and Shoichiro Toyota, honorary chairman of Toyota Motor, will both be appointed honorary chairmen of the new DDI.

The position of vice chairman will be filled by KDD president Tadashi Nishimoto with two additional board members from DDI and KDD and a single member from IDO.

DDI Corp. in Tokyo can be reached at +81-3-3221-9526 or http://www.ddi.co.jp , KDD Corp. in Tokyo can be reached at +81-3-3347-6935 or http://www.kdd.co.jp , and IDO Corp., in Tokyo, can be reached at +81-3-3263-2136 or http://www.ido.co.jp.

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