Softbank Corp. is negotiating with U.S. investment fund Ripplewood Holdings LLC to turn Japan Telecom Co. into its subsidiary, sources close to the talks said Tuesday.
Softbank, a major Internet business investor, is expected to finalize the deal this month, they said.
Earlier Tuesday, the Nihon Keizai Shimbun reported that Softbank is considering purchasing a majority stake in Japan's third-largest fixed-line phone company from the U.S. investment firm in a deal expected to be worth more than 100 billion yen.
Other options include a purchase via a holding company and a business integration, the paper said.
In a statement responding to the newspaper report, Softbank said the company is "studying the reported deal" but added, "nothing specific has been decided at this moment."
Ripplewood acquired Japan Telecom from Vodafone Group PLC of Britain for about 260 billion yen last November. But the telecom firm's business has not been revitalized, apparently prompting the U.S. investment fund to look for a business partner.
By acquiring Japan Telecom, Softbank aims to expand the customer base for its asymmetrical digital subscriber line service to include corporations, sources said. Softbank's ADSL service has around 4 million subscribers, mostly individuals.
Japan Telecom's customers include major Japanese firms such as the Japan Railway group, Nissan Motor Co. and All Nippon Airways Co.
Japan Telecom sought a merger with KDDI Corp.'s fixed-phone business last fall, but the proposal was rejected by KDDI.
Japan Telecom chalked up 340.1 billion yen in revenue from the fixed-line phone business in the business year that ended in March 2003, the most recent figure available. Net profit for the year totaled 15.8 billion yen.
As demand for fixed-line services continues to decline, Japan Telecom is finding it increasingly difficult to compete against industry leader Nippon Telegraph and Telephone Corp. on its own, industry analysts say.