Shares of Softbank Corp, in talks to buy Vodafone Group Plc's Japanese mobile unit, slumped to their lowest in more than three months on speculation the company will overpay and will face higher borrowing costs.
The stock fell 8.5 percent to ¥3,140 (US$27) as of the 3pm close on the Tokyo Stock Exchange, after sliding as much as 11 percent, the biggest drop since Jan. 18. Standard & Poor's said yesterday it may cut Softbank's credit rating because of the purchase, which the Nihon Keizai newspaper reported may cost as much as US$17 billion.
15 million subscribers
Softbank, Japan's No. 2 high-speed Internet service provider, said on Friday it is in talks to buy Vodafone K.K. Softbank wants to tap Vodafone's 15 million subscribers in Japan. The company will boost its debt with the purchase and a credit-rating cut would raise borrowing costs.
"The downgrade adds to concerns about whether Softbank has the financial capacity" to execute the purchase, said Satoshi Yuuzaki, an analyst at Takagi Securities Co.
The company may spend between ¥1.7 trillion and ¥2 trillion for as much as 98 percent of Vodafone K.K., the Nihon Keizai newspaper said on Saturday.
"Softbank probably has no problem gathering funds between ¥1.1 trillion and ¥1.4 trillion from borrowing," said Toru Hosoi, a Tokyo-based analyst at Nikko Citigroup Ltd. "But opinion is split on the acquisition price that's in newspaper reports."
World's largest
Vodafone, the world's largest mobile phone company, paid as much as ¥2 trillion to buy the unit in Japan, its biggest market by sales. Vodafone Japan has 15 million subscribers, the smallest of the three operators. NTT DoCoMo Inc has 50.5 million and KDDI Corp has 24.1 million.
Softbank may increase the company's borrowings to ¥2.2 trillion by year-end including assumed debt from Vodafone, from ¥810 billion now, said Makoto Murayama, an analyst at Nomura Securities Co.
Softbank's BB- long-term credit rating, three steps below investment grade, may be cut because the acquisition may be a "financial burden," S&P said in a report yesterday. The Nihon Keizai newspaper reported on Sunday that Softbank may pay as ¥2 trillion yen (US$17 billion) for 98 percent of Vodafone Japan.
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