C&W's protests fail in Japan

A RUMBLING dispute about foreign access to Japan's telecoms market escalated yesterday after the board of IDC, the long-distance telecoms operator, recommended a controversial takeover bid from Nippon Telegraph and Telephone, the state-owned telecoms giant.

The bid, thought to value IDC at 63bn yen (pounds 330m), was approved at a marathon board meeting yesterday despite opposition from Cable & Wireless, the UK group that owns 17.7 per cent of IDC, and protests by British politicians.

It emerged yesterday that Stephen Byers, the Trade and Industry Secretary, wrote to Japan's post and telecommunications ministry in March raising questions about NTT's bid. The Prime Minister, Tony Blair, is also understood to have intervened in the battle on C&W's behalf.

"We have pointed out that a successful bid from NTT would raise regulatory and competition issues," a spokeswoman for the Department of Trade and Industry said yesterday. The Japanese government has a controlling shareholding in NTT but is also responsible for regulating Japanese telecoms.

C&W believes IDC's recommendation of NTT's bid flouts an agreement dating from 1986, when IDC was set up, allowing IDC shareholders to match any bid made for the company. C&W holds 17.7 per cent of IDC, whose other large shareholders include Toyota, the car giant, and the Itochu trading group. C&W is understood to have tabled an offer for the shares in IDC it does not own that values the company at 62.4bn yen.

According to sources in Japan the IDC board meeting, which lasted for four hours, approached the decision about the two bids "as a foregone conclusion". When the decision came to a vote, all the Japanese board directors - who include representatives of Toyota and Itochu - voted for the NTT bid.

Rod Olsen, a former C&W director, and directors nominated by AirTouch, the US mobile phone group that owns 10 per cent of IDC, abstained, saying they had not been given enough information. Three other directors nominated by C&W abstained because of their involvement with C&W's offer.

A spokesman for C&W said the company was "disappointed" by the vote. However, he added: "We shall continue to protect our interest and ensure that our rights as a founder shareholder under the basic agreement should be honoured."

C&W is understood to be especially concerned about a new provision, due to be added to Japan's commercial code in the summer, which would allow majority shareholders to force minority holders to sell their shares. If IDC's other shareholders sell their shares to NTT the company could use the provision to force C&W - and potentially AirTouch - to sell out. However, any such move would require the approval of the Japanese government as NTT's majority shareholder.

NTT is keen to buy IDC in order to establish itself in the international telecoms market after regulations preventing it from offering international calls are formally lifted on 1 July. However, C&W would like to own the business in order to offer a complete international service to multinational companies. IDC also has a fast-growing business carrying Internet traffic, which would fit with the Internet business C&W bought from MCI Worldcom last year.