Vodafone Group Plc, the world's biggest mobile-phone provider, may sell control of its Japanese unit to Softbank Corp as profitability declines. Vodafone shares on Friday jumped 8.5 percent, the biggest gain in more than three years.
Vodafone announced the discussions in a Regulatory News Service statement on Friday. The unit may be worth as much as ¥9 billion (US$15.8 billion), according to Darren Ward, an analyst at Williams de Broe. A purchase by Tokyo-based Softbank would bolster the Internet company's efforts to enter the mobile market, which is dominated by NTT DoCoMo Inc. and KDDI Corp.
The sale would mark a retreat from the strategy of former Vodafone chief executive officer Christopher Gent, who spent more than US$300 billion on acquisitions. His successor, Arun Sarin, this week cut Vodafone's sales forecast and said the company will write down the value of assets Gent bought by as much as ¥28 billion.
Vodafone KK, based in Tokyo, is the smallest of Japan's three mobile-phone companies. Sarin in November forecast a "significant" decline in profit margins in Japan for the year ending March 2007. The division's operating profit fell 55 percent in the fiscal first half ended September and its profit margin before interest, tax, depreciation and amortization dropped 6 percentage points to 22 percent.
"It's a very difficult business to value" because earnings are falling, Ward said.