BT sets sights on Japan with pounds 1.2bn investment

BRITISH TELECOM yesterday vowed to challenge NTT, Japan's state- controlled telecoms giant, in its home market as it unveiled details of its pounds 1.2bn investment in Japan Telecom with the US long-distance carrier AT&T.

BT and AT&T have bought 30 per cent of Japan Telecom and promised to boost investment in the company, Japan's third-largest operator. BT's regional director for Japan, Richard Slogrove, said this was the time to "really lay into NTT" in Japan's telecoms market, which at $100bn ranks second only to the United States.

Chris Godsmark, telecoms analyst at Investec Henderson Crosthwaite, welcomed the deal. He predicted BT would use Japan Telecom's national fibre-optic network along the railway lines of its largest shareholder, Japan Railway Co, to link its city networks in Tokyo and Osaka. Mr Godsmark said: "This further enriches BT's position in Japan and will enable BT to connect its city centre ring rollout."

Under the terms of the deal, AT&T and BT's Japanese operations will be absorbed by Japan Telecom. BT will end up with a 20 per cent interest, while AT&T will gain 10 per cent, although each will hold 15 per cent of the shares, giving them equal voting rights. Both will appoint executive directors to Japan Telecom's board.

BT will also take a significant stake in Japan Telecom's mobile joint venture with AirTouch and Nissan Motor, which is applying for a third- generation licence to provide high-speed Internet and other wireless data links in Japan.

Industry speculation is rife that BT and AT&T are pushing to raise their stake to 33.4 per cent - enough for a veto on management decisions - as Japan Telecom's investment needs rise and profits shrink to 5bn yen (pounds 26m) this year. Japan Telecom made 8.1bn yen net profit in the year 31 March on revenues of 392bn yen.

The deal, the first joint investment by the two telecoms giants since they launched their $10bn Global One venture last July, also marks the first major inroad into Japan's domestic market. Japan boasts one of the largest concentrations of lucrative multinational clients in the world.