Vodafone in talks on Japan sale to Softbank

Vodafone, the UK-based mobile phone group, on Friday said it was in talks with SoftBank, the Japanese technology group, about the sale of a controlling stake in its troubled mobile business in Japan.

Vodafone owns 97.7 per cent of the Japanese operation, which lies a distant third in the market behind NTT DoCoMo and KDDI.

The company did not make clear whether it was considering selling its entire stake in the business, which analysts estimate is worth at least £5bn ($8.8bn).

“Vodafone confirms it is in discussions regarding a potential sale of a controlling interest in Vodafone Japan to SoftBank,” the group said in a statement.

One source indicated an agreement could come before the end of the month. A Vodafone spokesman said “nothing was imminent”.

Vodafone’s shares jumped 10½p, or 9 per cent, to close at 122½p as investors welcomed a possible exit from the highly competitive Japanese market.

Sources indicated Softbank made the approach after talks with Vodafone about a possible wholesale deal in which the Japanese group would piggyback on Vodafone’s network to offer its own mobile services. Softbank is one of three new competitors poised to enter the Japanese mobile market this year.

Vodafone has come under pressure from investors to clarify its strategy in Japan, where the investment needed to turn the business round is set to hit group margins, and the US, where it has a non-controlling stake in Verizon Wireless.

The decision to listen to an approach for the Japanese business signals a U-turn by Arun Sarin, Vodafone’s chief executive, who has defended staunchly the group’s commitment to Japan.

Shareholder pressure on the group to recognise that its global strategy is failing, combined with three profit warnings in the past four months, appears to have forced his hand.

The company faces intense competition in Europe, where growth is slowing. Earlier this week, Vodafone’s latest profits warning was accompanied by a goodwill writedown of £23bn.

“A disposal would signal a retrenchment in strategy by Vodafone and indicates to a degree a flexibility by management to listen to its shareholders,” Fanos Hira, telecoms analyst at Bear Stearns, said.