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London protests NTT bid
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April 15, 1999: 11:32 a.m. ET
Japanese telecom group rejects C&W offer; move threatens UK-Japan rift
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LONDON (CNNfn) - A trade row is brewing between Britain and Japan, after the U.K. trade minister urged the Japanese government to block a takeover bid by dominant domestic telecom carrier NTT for rival IDC. IDC executives Thursday recommended the offer ahead of a rival bid from the U.K.'s Cable & Wireless.
The Secretary for Trade and Industry, Stephen Byers, wrote to his Japanese counterpart responsible for post and telecommunications in early March pointing out that a takeover of IDC by NTT would raise competition concerns.
The IDC board's decision frustrated Cable & Wireless (CW.), whose offer for IDC, believed to be in the region of 62.4 billion yen ($515 million), was trumped by NTT last week. C&W holds a 17.7 percent stake in long-distance carrier IDC.
"We are disappointed at the IDC board's decision to recommend in favor of NTT's proposal," C&W told CNNfn.com. But he vowed C&W would "protect its investment and insist that our rights as a founder shareholder are honored."
This protection included successfully lobbying the U.K. government to support its bid. Byers warned in the letter that "a successful bid by NTT would raise issues of competition and regulatory policy for the Japanese authorities," according to a spokeswoman at the Department of Trade and Industry.
NTT is the former state-run telephone monopoly and still dominates the Japanese market.
Failure to resolve the issue could well escalate the dispute to a full-blown trade war.
The DTI said that it was prepared to pursue the issue further, but the spokeswoman said any escalation was not yet on the agenda. "We are following up with our counterparts in Japan and are keeping our dialogue open," she said, but added: "We are nowhere near the stage where we would contemplate reference to the World Trade Organization."
C&W is one of four main shareholders that set up IDC in 1987. The company claims it has the right to match any offer by an outside bidder and points out that the ultimate decision lies with the other shareholders. These include Japanese companies, Itochu and Toyota, which both hold the same size stake as C&W, and U.S. telecom company AirTouch (ATI) with a 10 percent stake.
Neither C&W nor NTT has disclosed the size of its bid. AirTouch is in the process of being taken over by the U.K.'s Vodafone (VOD).
-- by staff writer Mark Odell
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