TOKYO-Tokyo Telemessages Inc. (TTM), a paging company suffering from huge debts due to a sharp drop in customers because of strong competition from mobile phone operators, went bankrupt at the end of May. The beeper operator has debts of around 25 billion yen (US$206 million).
“The firm suffered a sharper drop in pager contracts than anticipated because of the proliferation of PHS and cellular phones,” Kazuya Yoshida, president of TTM, said at a press conference 25 May.
TTM was founded in 1986 in the wake of Japan’s telecom liberalization. Since then, it has provided beeper services in the Tokyo metropolitan area. Major investors of the firm are Japan Telecom (JT), Mitsui & Co. and Tokyo Electric Power Co. (TEPCO).
Riding on a big pager boom, especially among young female high-school and middle-school kids called “Bell tomo” (tomo literally means friends in Japanese), the subscribers of TTM reached 1.35 million by the end of December 1995. To meet the rapid expansion in demand, TTM invested a total of 66 billion yen (US$544 million). for four years from fiscal 1993, which worsened the financial status of the firm.
However, the boom ended when young users quickly shifted to PHS and cellular phones. TTM subscribers rapidly shrank, and the company had only 360,000 users as of the end of April 1999. The firm became unable to bear the costs for capital investments.
TTM’s financial crisis has been widely talked about in the market since last fall. Major shareholders, such as JT, TEPCO and Mitsui, made a full effort to rehabilitate TTM. They reportedly offered a rehabilitation plan for financial institutions, suggesting the debts of TTM be taken over by major shareholders and asking financial institutions to abandon claims of debts in return for a drastic self-restructuring plan of TTM, including significant layoffs and large reduction in its investment in facilities and equipment.
However, these major shareholders and financial institutions failed to reach an agreement over the plan. Finally on 25 May, TTM sought protection under the Corporate Rehabilitation Law against the creditors’ claims after giving up the effort to rebuild its business on its own.
Just after the telecommunications market was liberalized in 1985, many large corporations in other fields of businesses rushed to enter the market. Since the telecom industry works for the public benefit, these firms felt safe from bankruptcy.
That was true until TTM filed for bankruptcy.
In the past, for example, when NTT Personal Communications Network Group, a PHS carrier group of the NTT Group, suffered a huge debt, NTT Mobile Communications Network Group (NTT DoCoMo) took over NTT Personal’s PHS business in a rescue arrangement.
When Astel Tokyo Corp., another ailing PHS carrier, suffered from huge debt, it was purchased by Tokyo Telecommunication Network Co. Inc. (TTNet).
However, this time major shareholders failed to rescue TTM.
All of the other beeper carriers in Japan, except NTT DoCoMo, have similar financial problems. The number of beeper subscribers, including the 31 New Common Carriers (NCCs) and NTT DoCoMo, totaled 3.76 million at the end of March 1999, about one-third of its heyday in 1996. The figure is continuing to shrink.
All of these NCCs are specialized in the beeper business so that this sharp drop in subscribers has hit their businesses seriously. It wouldn’t be a surprise if a second and third bankruptcy are announced very soon.
