From Nikkei Net:
Issued: August 16 ,1999
Son follows zaibatsu model in building Softbank into Internet conglomerate
Telecom Company Is Centerpiece Of Plan
BY YOSHINOBU SOMEYA and KAZUNARI YOKOTA
Staff writers
Softbank Chairman Masayoshi Son sees the new telecommunications system he plans to build as being a step ahead of the cable system in the U.S.
The immediate ambitions of Masayoshi Son's Softbank Corp. are becoming clearer. By putting together a joint venture in September with Bill Gates' Microsoft Corp. and Tokyo Electric Power Co., Softbank plans to form a telecommunications company it hopes will be at the forefront of an expanding electronic-commerce business in Japan, one that will offer to computer users Internet connections and services at fixed lower rates and at faster speed than currently available through Nippon Telegraph and Telephone Corp.
Since the beginning of this year, the software company has formed Internet-based sales companies handling cars, books, toys and other items. Now, it intends to build its own communication network, an infrastructure indispensable to the full-swing operation of these e-commerce businesses.
The company aims to set up a "road" to underpin its electronic business and a "trucking service" to distribute products along that road, analysts said.
Behind the company's decision to form a telecommunications company is Japan's expensive phone rates, based on Japan's system of charging telecommunications fees on the length of a telephone connection. Softbank considers the charges by time of connection the biggest bottle neck to increased Internet business. Softbank Chairman and Chief Executive Officer Son has insisted that phone rates in Japan are too expensive. "The Japanese Internet industry will lag five or 10 years behind the U.S. if the rates remained at the current level," he said.
The company has lobbied the Ministry of Posts and Telecommunications and other authorities to gain approval for the launch of communications services since it added telecom business to its statutes in June.
The new company, announced last week with capital of 6 billion yen ($52.2 million), plans to provide flat-rate communications services for households. Softbank, Tokyo Electric Power and Microsoft will each take a 31% share, and Yahoo Japan will take a 5% share, the companies announced. The owner of the remaining 2% was not disclosed.
The company is to start trial services on Oct. 1 and full-scale services in the Tokyo metropolitan region from next summer. It hopes to sign up several million subscribers in the first three years. It also plans to offer free services, including electronic-mail addresses and space for home pages for students and teachers at all schools in the Tokyo region for 10 years.
Using Tokyo Electric's fiber-optic network, the telecom company plans to install radio stations on electric poles owned by Tokyo Electric Power or on the roof of buildings to connect dedicated terminals for homes. A small terminal unit to be sold for around 20,000 yen to 30,000 yen for home use will become the last gate to be connected to personal computers. For companies or new buildings, the company plans to be able to offer direct connections from Tokyo Electric Power's fiber-optic network.
Because it will bypass NTT phone lines, the wireless communications network will enable the Softbank unit to provide low-cost service and fixed rates.
Softbank is considering a monthly rate of between slightly less than 2,000 yen and 5,000 yen, a Softbank official said. A rate of 5,000 yen is less than half the flat rate that NTT's two local telephone units plan to charge in the Tokyo and Osaka areas on a test basis possibly later this year using its Integrated Services Digital Network system. The Softbank transmission speed would be in the range of 1 megabit per second, more than 20 times faster than NTT's ISDN service.
After starting operations in the Tokyo area in the middle of next year, the telecom subsidiary expects to expand service throughout Japan in cooperation with local power companies.
"Our plan is overwhelmingly better in cost performance than NTT," Son said. "This will change the use of the Internet. With low and flat rates and high speeds, transferring movie images will be a typical activity on the Internet. Once we go into that world, we will never go back."
Son added: "Japan was always trailing the U.S. in Internet development. But this new system is the next generation (after) the cable network that is popular in the U.S." Son suggested the possibility of starting a similar network service in other countries after the network is set up in Japan.
Hiroyuki Ono, senior analyst at the Financial Research Center of Nomura Securities Co., said: "The greatest impact will be the offer of free Internet service to students. More than 1 million students every year may become new consumers of the electronic-trading that Softbank offers." Ono said this new business may have a serious impact on NTT.
Softbank has been focusing resources on Internet businesses since the start of this year by creating e-trading companies and selling its shares of companies involved with business outside of the Internet. Observers remained uncertain about the company's ultimate goal, however, until Son unveiled the plan to enter the communications business.
After buying into Yahoo! Inc., a U.S. Internet search company, in 1996, Softbank formed a joint venture to provide an e-commerce service over the Internet with Yahoo! as a portal. In June last year, it set up E*Trade Group Inc. to start Internet-based stock trading. Earlier this year, the company created CarPoint Japan KK for online sales of cars and established mail-order companies to sell books and toys over the Net.
Son, who says he aims to "establish an Internet conglomerate," compares his strategy with the development of the Japanese zaibatsu conglomerates early in the 20th century. "To control nearly all commercial and industrial sectors, zaibatsu first put under their sway the traffic of people and goods through dominance of the shipping segment, then extended influence to the financial industry," he said. He intends to "gain predominance in every promising Internet business area," making the most of the Yahoo! portal site.
The creation of the telecom unit reflects the company's tactics to expand the source of revenue by operating a communications network on its own and to help boost Internet business by offering a lower telecom charge. Softbank showed its interest in network infrastructure when it announced in June a tie-up with the National Association of Securities Dealers in the U.S. to set up the Nasdaq Japan securities market late in 2000.
Softbank formed in July a venture fund with assets in excess of 200 billion yen that targets Internet start-ups. As part of the project, it created venture capital companies in the U.K. and France in partnership with Rupert Murdoch's News Corp. and Vivendi SA, a French media enterprise.
Copyright 1999 Nihon Keizai Shimbun, Inc., all rights reserved.
Saturday, August 14, 1999
Market Capitalization Of IT, Financial Stocks Rises Sharply
TOKYO (Nikkei)--The market capitalization of stocks in the information technology, telecommunications and financial sectors has shown rapid gains since the start of the year.
Stocks in these sectors account for more than half of the 20 firms with the largest rises in market capitalization this year on the first section of the Tokyo Stock Exchange.
Of the 180 firms that had market capitalizations exceeding 300 billion yen as of the end of 1998, Softbank Corp. (9984) posted the sharpest gain of 345% to 3.13 trillion yen as of Friday. It shot up to 17th from 87th in terms of total market capitalization. The sharp gain reflects the favorable market rating of the company's active foray into the Internet business, market observers say.
In the information and telecom sectors, Japan Telecom Co. (9434), Fujitsu Ltd. (6702) and NTT Mobile Communications Network (DoCoMo) Inc. (9437) have also done well in terms of growth in market capitalization. Japan Telecom placed seventh with an increase of 152%, Fujitsu came ninth with a 126% jump and NTT DoCoMo ranked 17th with an 86% gain.
Bank issues, which saw active selling in the second half of last year, have also seen marked growth in market capitalization following public fund infusions to replenish their capital.
Brokerages also did well in the rankings after the stock market rally boosted their trading commission income. Nikko Securities Co. (8603) ranked third with a 177% jump and Daiwa Securities Group Inc. (8601) is in fifth with a 161% increase.
Meanwhile, the market capitalization of all shares listed on the TSE first section is up about 36% so far this year at just over 377.49 trillion yen.
(The Nihon Keizai Shimbun Sunday edition) |
