C&W embarks on Japanese expansion with £1bn investment in national network

Cable & Wireless, the telecoms company, yesterday announced a £1bn investment in Japan to create a national optical fibre network that will take it into the country's domestic business communications market for the first time.

Cable & Wireless, the telecoms company, yesterday announced a £1bn investment in Japan to create a national optical fibre network that will take it into the country's domestic business communications market for the first time.

The Japanese telecoms market is only just starting to deregulate, so C&W will come up against the dominant position of the former state monopoly Nippon Telegraph and Telephone (NTT).

The move, the single biggest investment by a UK company in the Japanese telecoms industry, will build on C&W's acquisition last year of control of International Digital Communications, a Japanese operator which carries international business traffic to and from Japan.

Graham Wallace, chief executive of C&W, said: "We are in a unique position, among foreign operators, in Japan. IDC is the key. The economics works for us because we're not starting from scratch."

Mr Wallace added that, as Japan is a densely populated country, with a business community very concentrated in Tokyo and Osaka, constructing a national network was relatively inexpensive.

C&W was a founding shareholder in IDC, with a 18 per cent stake. It gained complete control of it last year, after a hotly contested takeover battle.

C&W will invest the money over five years. Over that period, it aims to grow its Japanese revenues from £300m a year to £1bn. Japan is the world's second-biggest market for telecoms services.

C&W will offer internet and data services to corporate customers in Japan and has targeted 5 per cent of that market by 2005, which would make it the number two player in the sector.

Mr Wallace said: "We would be crazy to go up against NTT across the board, but in the focused market that we are targeting, I'm confident."

C&W shares closed down 16p to 964p yesterday. Analysts said there was some concern about the size of the Japanese investment and its relatively long pay-back time.

It compares, for instance, with the £2.2bn that C&W had previously earmarked, to cover 1999-2002, for investment in the US, UK and international links.

Mr Wallace said that his company was much better placed in Japan than its international rivals AT&T and British Telecoms, which each have a 15 per cent stake in Japan Telecom.

"Japan Telecom is not focused and they can't dictate, as we can with IDC, its network architecture," he said.

C&W said that although Japan was ahead of Europe and the US in mobile technology, in fixed-line services, the West was more advanced. C&W now plans to bring these more sophisticated fixed-line products and services to the Japanese domestic business market.