In a move that could escalate into a fully-fledged trade war, Mr Blair is understood to have complained to the Japanese government about moves by NTT, the state-owned telecom giant, to force C&W out of the Japanese market. The United States' Trade Representative, Charlene Barshefsky, is also thought to have joined the debate. C&W is currently trying to take control of IDC, a long-distance telecom operator which was set up by a consortium of companies, including C&W, in 1987. However, NTT has trumped its offer and is now threatening to invoke new provisions in Japanese company law which can be used to force minority shareholders to sell their shares.
C&W, which has a 17.7 per cent stake in IDC, has tabled an offer for IDC which values the company at Y62.4bn (pounds 328m). But NTT is thought to be trying to snatch control of IDC by making a higher offer. The decision on the deal rests with IDC's main shareholders, including the car group Toyotaand Itochu, the trading company, both of which have 17.7 per cent shareholdings. Airtouch, the US mobile phone operator which recently merged with Vodafone has a 10 per cent stake.
"Corporate Japan is genuinely determined that Japan will get control of IDC," one analyst said yesterday. "C&W are really annoyed." C&W is hoping to invoke pre-emption rights, which it claims were negotiated at the time of the deal, allowing it to match any offer made for shares in IDC by an outside bidder. Meanwhile, C&W has indicated it has no intention of selling its stake. However, a new provision which is due to be added to Japan's commercial code later this year would allow NTT to force C&W to sell its stake if the Japanese group managed to take a controlling stake in IDC.
Under the new rule, which is designed to speed the restructuring of Japanese industry, a majority shareholder can force a minority shareholder to sellprovided the bidder has the approval of its own shareholders. Because NTT is controlled by the state, the Japanese government would effectively have to approve the move.
"We have received assurances from the Japanese government that the the ownership of IDC will be treated as a purely commercial matter," a C&W spokesman said. "As the government is a majority shareholder in NTT it would be very strange if it allowed this to go ahead." Rod Olsen, a former C&W director who helped negotiate the setting up of IDC and still sits on its board, is understood to have flown out to Japan this week to attempt to resolve the deadlock. Gaining control of IDC would give C&W a much- needed Japanese leg to its business. The venture also has a fast-growing Internet division which would combine with the US internet business C&W bought from MCI WorldCom last year. "Getting access to Japanese internet volumes in the future will be very helpful," an analyst said.
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