Vodafone Exits Japan
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Case Code: BSTR286 Case Length: 15 Pages Period: 1999-2006 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.300 Organization: Vodfaone Industry: Telecom and Broadband Countries: Japan Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
"Japan has been a peculiar place where things haven't worked Vodafone's way. The company was slow to realize that, gee whiz, Japan is really different from Europe."
- Makio Inui, Telecom Analyst, UBS Securities, Japan, in 2005.
"This (exit from Japan) makes sense. Vodafone had struggled with its Japanese unit for some time and attempts to turn it around had met with limited success. The marriage of a willing buyer and seller at a sensible price means that Vodafone can walk away as positively as it can have expected to."
- Robin Hearn, Principal Analyst, Ovum, in 2006.
"The board has arrived at the decision to withdraw our capital from the Japanese market based on several key criteria. It has become increasingly clear that the greatest operational benefits come from strong local and regional scale."
- Arun Sarin, CEO, Vodafone Group Plc., in 2006
Vodafone Bids Sayonara
In March 2006, one the world's leading mobile telecommunication companies, the UK-based Vodafone Group (Vodafone), announced the sale of its Japanese unit, Vodafone KK (Vodafone Japan), to SoftBank for £ 8.9 billion. Of the total amount, £ 6.8 billion was to be received in cash, £ 1.5 billion in preference shares in a subsidiary of SoftBank, and £ 0.5 billion in a subordinated loan repayable to Vodafone. As part of the deal, SoftBank agreed to assume £ 800 million in external debt and Vodafone Japan's other liabilities. At that time, Vodafone Japan was the third largest mobile operator in Japan, with more than 15 million subscribers.
Vodafone entered Japan in the late 1990s, when it acquired a 26 percent stake in J-Phone, one of Japan's leading mobile operators. Over the years, it increased its stake. With J-Phone being well established in the market, Vodafone found the going easy at the beginning. However, things began to look less rosy after the company made some mistakes, such as introducing handsets that were manufactured for the European markets in the Japanese market. The tech-savvy Japanese rejected these offerings. Vodafone also delayed the roll-out of 3G services in the market, and this resulted in a steady erosion in its customer base.
In contrast, competitors NTT DoCoMo and KDDI Corporation (KDDI) introduced cutting edge technology and handsets that appealed to Japanese customers. In early 2006, Vodafone announced its exit from the Japanese market. About the decision, Arun Sarin (Sarin), CEO, Vodafone, said, "In the case of Japan, we have been making progress on the turnaround in recent months. However, given the relative competitive position of the business, the reduced prospects for superior long term returns and a good offer from SoftBank, the board took the decision to sell." Vodafone's decision surprised many people, as at that time, Japan was the second largest mobile phone market in the world, and Vodafone among the top three players in the market...
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