BONN, Germany-Vodafone Group plc shares surged more than 9 percent on the London Stock Exchange Friday when the company confirmed reports that it is in talks to sell its Japanese operations to broadband Internet provider Softbank.
“Vodafone has been struggling with its Japanese unit for some time and attempts to turn it around have so far met with limited, if any, success,” said Robin Hearn, principal analyst at Ovum. “With this week’s updated guidance featuring write-downs and lower growth prospects, [Vodafone Chief Executive Officer] Arun Sarin has come under even more pressure to do something about either, or both, of the company’s positions in Japan and the U.S.”
Vodafone’s stock has slipped more than 20 percent in value since November. Vodafone Japan has been in the midst of a recovery plan to beef up its 3G network, as well as its range of handsets and pricing plans, but the results have been mixed. According to Vodafone’s most recent financial filings, the operator added 123,000 proportionate net customers in Japan, the highest number since the first quarter of 2004. Its churn rate was down from 19.1 percent in the third quarter of 2005, reaching 17.6 percent. Blended average revenue per user was down 3.7 percent, which pushed service revenue down 4.5 percent.
Hearn added that Softbank has been eagerly awaiting a chance to enter the Japanese mobile market.
“Of course, it also needs to do rather more with it than Vodafone had been able to,” Hearn commented. “Vodafone meanwhile would shed a unit that it just doesn’t seem able to fix, and … it might also buy Vodafone’s management just a little respite after a very rough ride over the past few months.”
Vodafone also owns 45 percent of Verizon Wireless and has been rumored to be seeking an exit from the venture. Vodafone lost out to Cingular Wireless L.L.C. in early 2004 in an attempt to acquire AT&T Wireless Services Inc.,which would have provided Vodafone with control of a GSM-based U.S. operator.
