Softbank picks up Internet access venture

Softbank's Masayoshi Son (left) announced ADSL plans with Yahoo Japan MD Masahiro Inoue this week

By staff and wire reports

TOKYO, Japan -- Japanese Internet investor Softbank Corp said Thursday it had taken over struggling high-speed Internet access venture Tokyo Metallic Communications Corp.

This is seen as a key stepping stone in Softbank's ambition to become the dominant broadband access provider in Japan.

Softbank said it had acquired over two-thirds of the shares of Tokyo Metallic, a pioneer in Japan's fledgling ADSL (asymmetric digital subscriber line) services.

The deal would allow the Softbank group to quickly gain Tokyo Metallic's ADSL networks, which can reach up to 500,000 subscribers in Tokyo and other regional cities.

Softbank announced on Tuesday that it and subsidiary Yahoo Japan, Japan's dominant Internet portal, will launch cut rate ADSL services in Japan in August and aims to acquire one million subscribers by December.

Price war with NTT

The service will be priced at around half the rate of current industry leader, Nippon Telegraph and Telephone Corp.

Softbank founder Masayoshi Son told CNN after that deal was announced that he saw broadband Internet access as a core focus of the group's future business.

"This is something that I've wanted to do for years," he said.

Son said that going to broadband Internet was like "moving from black & white to color television".

"Once you experience broadband, you'll never go back," he said.

Neither Softbank nor Tokyo Metallic disclosed details of the share acquisition deal on Thursday, but the Nihon Keizai Shimbun business daily reported that Softbank will complete the buy-out by the end of this month for about 4.5 billion yen ($36.34 million).

Boost for Yahoo Japan shares

"We have decided to reconstruct our business under the umbrella of the Softbank group," Tokyo Metallic's president, Iwao Tojo, said in a statement.

The news boosted shares in Softbank by 4.85 percent to 4,120 yen and those of Yahoo Japan by 7.57 percent to 4.12 million yen in afternoon trade.

"It's not a bad deal," said Motoharu Sone, analyst at Tsubasa Securities. "The buy-out will allow Softbank to quickly gain the necessary DSL network." He added, however, the prospect for profitability at Softbank's venture was still unclear, given the low service rates.

Japan has lagged the United States, South Korea and other countries in establishing high-speed Internet access services, which critics have blamed on NTT's dominant industry position and lack of competition.

ADSL subscribers in Japan total about 178,000, with NTT holding more than half the market.

Tokyo Metallic has already installed ADSL equipment on 500,000 phones in Tokyo and other regional cities, although it has so far acquired only 25,000 subscribers, compared to NTT's 95,000.

Reuters contributed to this report.