NAGOYA -- Yahoo Japan will enter the wireless communications business by acquiring a unit under major shareholder SoftBank for 324 billion yen ($3.15 billion) in June, the Internet service provider said Thursday.
SoftBank, which holds a 42.2% stake in Yahoo Japan, is moving to merge its personal handyphone system (PHS) subsidiary Willcom and mobile service unit eAccess on June 1. Yahoo Japan plans to purchase 99.68% of all shares in the combined entity the following day, gaining 33.29% of voting rights. It will tap its cash reserves to pay for the deal.
The newly acquired unit, likely to be named Y!mobile, will use its own service network as well as that of fellow group carrier SoftBank Mobile.
Yahoo Japan seeks to increase users of its paid Internet service Yahoo! Premium by reaping synergies from offering both Internet and wireless services. It will promote its Internet services by putting unique features on smartphones and tablets, and by pre-installing an app developed in-house, for example.
Yahoo Japan will also consider using 1,000 retail stores under Willcom and eAccess as pick-up locations for online purchases. The goal is to double the current 10 million subscriptions under the two units.
Yahoo Japan President Manabu Miyasaka said his company approached SoftBank for the deal in order to offer "more attractive services."
For SoftBank, now that rival carrier NTT DoCoMo offers Apple's iPhone, competition has intensified and the company is less likely to see its earnings continue to grow sharply. SoftBank offers only a limited selection of handsets that operate on Android operating systems. So Yahoo's new service could bolster that area, helping to expand the wireless carrier's customer base.
SoftBank will pocket a sizable sum through the deal. Following the acquisition, Yahoo Japan will provide a 170 billion yen loan to Y!mobile, which in turn will use the money to repay 130 billion yen it has borrowed from SoftBank. Together with proceeds from share sales, SoftBank will pick up a total of more than 450 billion yen.
SoftBank acquired U.S. No. 3 mobile carrier Sprint last year, and is also moving to purchase T-Mobile US for an estimated price of over 2 trillion yen. Its interest-bearing debt, which stood at 8.84 trillion yen at the end of September, could grow to 12 trillion yen.