AT&T;, BT Agree to Purchase 30% Stake in Japan Telecom

AT&T; Corp. and British Telecommunications agreed Sunday to buy 30% of Japan Telecom Co. for $1.85 billion in cash and other assets, the largest international investment in Japan’s phone industry.

AT&T;, America’s biggest long-distance carrier, and BT, Britain’s No. 1 phone company, will each acquire a 15% stake in Japan Telecom, the three companies said.

Japan Telecom will absorb the two Western companies’ Japanese affiliates, while the two firms will each send a senior director to the board of Japan Telecom as part of their move to integrate the three companies’ data businesses.

BT will also line up as the core member of Japan Telecom’s next-generation mobile-phone venture, owned jointly with the world’s largest mobile-phone operator AirTouch Communication.

The deal is the first large investment by foreign majors in Japan’s deregulating telecommunications industry.

It will give the two Western operators a significant foothold in the Japanese market, the world’s second-largest and an important missing link as they try to offer seamless data services that covers the global market.

The deal comes amid a heated takeover battle between Japan’s former state monopoly Nippon Telegraph & Telephone Corp. and Britain’s Cable & Wireless over International Digital Corp., a small international service provider. The battle is expected to drag on for months.

Sunday’s move is also expected to spur a wave of consolidation in Japan’s crowded telecommunications sector, now dominated by NTT.

“The alliance will reinforce our position as a No. 1 challenger to the Japanese market,” BT’s Chief Executive Peter Bonfield told a news conference, stressing that BT’s investment in Japan Telecom is by far its largest in Asia.

AT&T; President John Zeglis said: “Japan is a must-do market for us . . . and Japan Telecom is well positioned to finish [our] end-to-end seamless products.”

Japan Telecom will become an “important partner” for the AT&T-BT; venture’s Asian strategy, said Koichi Sakata, Japan Telecom chairman.

The investment in Japan Telecom follows AT&T;’s $62.5-billion bid Thursday for U.S. cable-television provider MediaOne Group Inc. Some AT&T; investors are concerned that the company, which just bought No. 2 cable provider Tele-Communications Inc. for $59.4 billion, is making too many acquisitions too quickly.

For BT, the investment ends a long search for a partner in Japan’s $108-billion phone market. It follows a string of investments BT has made during the last year in Asia, where cash-strapped governments have only recently begun to allow access to foreign telecommunications companies.

BT, which has picked up minority stakes in South Korea, Hong Kong, Singapore and Malaysia, said it was unlikely to launch a string of deals with AT&T; because its U.S. partner was focused on becoming a full-facilities carrier at home.