Nippon Telegraph and Telephone, Japan’s dominant telephone group, looks set to increase its stake in the Philippines’ largest phone operator, signalling determination to boost profits by investing in high-growth Asian markets.
NTT DoCoMo, NTT’s mobile arm and biggest subsidiary by revenue, on Tuesday announced a “goal” to build NTT’s stake in Philippine Long Distance Telephone from just above 15 per cent to at least 20 per cent – worth about $2bn.
A 20 per cent stake would allow DoCoMo to put its earnings from the much more profitable Philippine company on its own profit and loss account, by making PLDT an affiliate under the US accounting rules used by DoCoMo. DoCoMo said this was an important reason for building its share.
The announcement comes less than a week after DoCoMo’s president Masao Nakamura told the Financial Times that he planned to expand abroad to counter the saturation of Japan’s mobile market. Mr Nakamura told the FT: “Overseas revenues will drive our growth in the future.”
PLDT is twice as profitable as DoCoMo, based on its ebidta margin: earnings before interest, tax, depreciation and amortisation as a proportion of revenue. This was 64 per cent in the year to December. DoCoMo’s was 33 per cent in the year to March.
DoCoMo already has an 8.65 per cent share in PLDT, and sister company NTT Communications, the technology services provider, holds 6.7 per cent. DoCoMo said for technical reasons the profits from the combined 20 per cent stake would be reported by DoCoMo, rather than its parent company NTT.
The plans to boost the stake in PLDT underline a shift in DoCoMo’s overseas strategy. The company took big stakes in foreign groups such as AT&T Wireless at the height of the technology bubble. But the subsequent collapse forced it to sell its stakes for a Y1,100bn loss in 2001. The company then concentrated on alliances with mobile operators across the world to increase the number of customers using i-mode, its internet service. But last week Mr Nakamura said: “Our focus is Asia.”
