Yoshiyasu Shida and Edmund Klamann
TOKYO: Sony Corp's Internet services subsidiary said on Tuesday it is still
talking with Fujitsu Ltd. about possible cooperation in Net services, dismissing
suggestions that a possible acquisition deal had been ruled out.
"Our two companies are still continuing discussions, although nothing
has been decided," Senji Yamamoto, president of Sony Communication Network
Corp, said in an interview.
Questions have emerged about the fate of the talks since they first came to
light in late December, when a media report said Sony was in talks to acquire
Nifty Corp, a wholly owned Fujitsu subsidiary and Japan's largest Internet
service provider (ISP).
While both companies acknowledged they were talking about cooperating in
Internet services, they have refused to comment on the content of the
discussions, including whether a Nifty acquisition was on the table. Yamamoto
stuck to that sealed-lips stance in Tuesday's interview, although he reiterated
Sony's goal of making its So-net Internet service, Japan's sixth-largest, into
the market leader.
"If you want to boost your numbers (of subscribers), M&A and
consolidation would be the fastest way," he added. "But there are
issues of timing." In February, Fujitsu President Naoyuki Akikusa, speaking
through an interpreter, told reporters in Australia his company had no plans to
sell Nifty.
But the company has since declined to say one way or the other whether it is
considering a sale of Nifty, simply reiterating its statement last December that
it was discussing possible cooperation with Sony.
Fujitsu, which is expected to post heavy losses for the last financial year
due to the IT slump, has said it wants to focus more heavily on the relatively
stable business of supplying enterprises with computer software and services,
fuelling speculation it may part with its consumer-oriented Nifty service.
Not yet, so-net?
Sony's Yamamoto also echoed a widely held view among Japanese ISPs that
consolidation in the industry was likely. "There's no denying that there
are too many ISPs," he said. But it was unclear, he added, when a shake-out
would occur.
"Consolidation will be a matter of timing," he said. "It's
hard to say whether it will happen this year." He added that, while a
number of small ISPs may survive, it was likely there would ultimately be no
more than three or four major providers in Japan.
"When we reach a point where the big players have at least 10 million
subscribers each, presuming the Internet will be reaching 30 to 40 million
households, there will be at most three or four of them left," he said. The
December news report of acquisition talks spurred a surge in the price of
So-net's tracking stock, which is linked to the unit's performance but, unlike
ordinary shares, leaves the parent company with full control.
The value of the tracking stock more than doubled after the report, peaking
at 2,500 yen, but has since retraced. It ended Tuesday trade at 1,799 yen, up
2.8 percent and outperforming a 2.1 percent drop in the benchmark Nikkei
average.
Japan's ISPs are also struggling with declining revenues from Internet access
fees, especially after Softbank Corp and a subsidiary, Yahoo Japan Corp,
launched a cut-rate ADSL (asymmetric digital subscriber line) service last
September. So-net's latest earnings estimates for the year ended on March 31
called for a net loss of 1.6 billion yen ($12.16 million), more than triple the
previous year's 499 million yen loss, on revenues of 34.5 billion yen, down 0.5
percent.
The company currently earns more than four-fifths of its revenues from
Internet access fees but eventually aims to cut that to a half, while boosting
the share from higher-margin operations such as fee-based content services.