Vodafone near £1.3bn Japanese deal

MOBILE telecoms giant Vodafone looks set to sell its Japanese fixed line business to US investment fund Ripplewood Holdings in a deal potentially worth £1.3bn.

A spokesman for Japan Telecom said talks between the two sides had now reached a final stage. 'We expect an agreement within the next few weeks, and we hope that this would come to a conclusion in July,' he added.

Officials from Vodafone and Ripplewood were not immediately available. Local reports, however, suggested Vodafone could retain a minority stake in the fixed-line unit. Vodafone spent more than £3bn building up a controlling stake in Japan Telecom, after buying out BT Group's interest in 2001.

Vodafone opened talks on the fixed-line unit with Ripplewood earlier this year. Vodafone previously has said fixed-line telecoms is not a core business.

A sale would leave Vodafone to concentrate on the remaining JPhone business, the country's third-largest mobile phone operator.

Local reports suggested Ripplewood would set up a 262bn yen (£1.36bn) fund to buy the shares in the fixed-line unit. Ripplewood would contribute 60bn yen to the fund, while Vodafone may subscribe up to 50bn yen, maintaining an indirect minority interest in the fixed-line business.

It was reported that Japan Telecom president William Morrow would remain after the sale was concluded. Ripplewood has been making waves in Japan in recent years, ploughing millions of dollars into the country.

But some Japanese commentators and executives fear the opaque US fund is buying up some of the country's choicest assets on the cheap. In 2000 the fund became the first foreign investor to take over a Japanese bank, when it bought the failed Long-Term Credit Bank of Japan, which was then relaunched and rebranded as Shinsei Bank.

Ripplewood has also invested in the music industry, buying the former Nippon Columbia, now Columbia Music Entertainment.

It is expected that should Ripplewood secure control of Japan Telecom it would use the business as a platform to pursue consolidation in the telecoms sector.

J-Phone, meanwhile, claims 14 million customers in the country's vast but fiercely-competitive mobile market. Its services include third-generation mobile services, which combine mobile telephony with high-speed internet access.