NTT will discuss buying the remaining 34% of NTT Docomo Inc stock that it does not own at a board meeting on Tuesday, the firm said in a statement. That followed a report by the Nikkei newspaper, which based the value on a tender offer premium of 30% to the stock price.
The buyout talks come as new prime minister Yoshihide Suga calls on wireless carriers to lower prices, with the government hoping those savings will stimulate consumer spending elsewhere in the economy.
The former state monopoly still counts the government as its largest shareholder with a 34% stake.
On Tuesday, Chief Cabinet Secretary Katsunobu Kato reiterated the call for “visible progress on lowering mobile phone charges”.
NTT’s share price fell as much as 5.8% in Tokyo trade, while NTT Docomo was on track to end the day up 16%.
Mobile peers KDDI Corp and SoftBank Corp fell around 4%, with SoftBank touching record lows, as the telcos continue a slide which began when Suga’s predecessor Shinzo Abe announced his resignation on Aug. 28.
NTT spun off NTT Docomo in 1992 ahead of listing in 1998, as the government sought to stimulate competition in the telecoms sector. Buying it back would mark the end of a prominent “parent-child” listing that are frowned on in other economies but remain common in Japan.
At $38 billion, the potential tender offer would be Japan’s largest-ever and the year’s fifth-largest worldwide, Refinitiv data showed.
“Post acquisition, Docomo will no longer be answerable to shareholders. If the government instructs it to cut prices, it will oblige,” Jefferies analyst Atul Goyal wrote in a client note.
Government efforts to enhance competition include backing Rakuten Inc’s entry into the sector this year. The e-commerce firm’s low-cost plan model could suffer, however, should prices fall more broadly.
Meanwhile, government pricing pressure comes as carriers invest in building fifth-generation services widely seen as critical to ensuring Japan’s competitiveness.
The buyout “is driven more by the potential to develop 5G and IoT services than regulatory pressure,” said analyst Kirk Boodry at Redex Research, referring to the Internet of Things. The industry is seeking “new, less regulated revenue streams,” he said.
NTT Docomo is a popular stock among retail investors meaning its potential exit from the market will likely make a big impact, said analyst Ichiro Kurihara at Tachibana Securities.
NTT will fund the acquisition through loans from Japan’s three biggest banks, two people familiar with the matter told Reuters, declining to be identified as the matter was private. Mitsubishi UFJ Financial Group Inc will be the largest lender, the people said.
The banks declined to comment.
The total loan package including lending from others will total 4 trillion yen, Nikkei reported. NTT will later turn to longer-term loans and debt issuance, Nikkei said.
The telecoms firm had more than 1 trillion yen in cash and cash equivalents on its balance sheet at June-end.
NTT is due to hold a press conference at 0600 GMT.