Broadcast 2nd October 2000

	Listen to an interview with Kate Lye

Three Japanese telecom groups have merged to try and undo the virtual stranglehold that the former Government monopoly group NTT has over the market.

KDDI is a combination of the telecom companies IDO, DDI and the overseas carrier, KDD Corporation. The new group has already signalled it's intention to steal some of NTT's vast market share.

NTT controls around 95 per cent of all local calls in Japan but also dominates the mobile telephone sector, through it's NTT DoCoMo subsidiary.

It is this that KDDI wants to challenge. The company believes it's key sales point will be the introduction of the world's fastest data communications service which would allow access to good quality video images.

So, will it be able to take on NTT? Our reporter Rodney Smith spoke to Kate Lye, telecoms expert at Warburgs in Tokyo:



"In terms of the merger I think they are a very much strengthened competitor but I do not think anyone can bounce NTT at this point. The sheer scale of NTT and it's grip on the local loop is something that is pretty well impenetrable."

So what was the purpose of this three way merger?

"I think they are basically capitalising on the synergies that they have in their business'. The three companies are going to be much better performers together rather than separately, particularly in the cellular business where they get to benefit from the economies of scale of being a 20 per cent player."

Rodney Smith asked if there were going to be any benefits for them on a global scale?

"I think certainly with a company that now has a strong wireline business, a strong international business and a strong cellular business, there is definitely more appeal to this company than there was in the individual parts. Therefore we could easily see some sort of foreign alliance possibly into the parent company or into the cellular business somewhere down the track."

We could see some sort of foreign alliance somewhere down the track. Kate Lye

So were there any bets on who it might be with at this stage?

"I do not have any particular companies that I know it is going to be, but I would say it would be someone looking for very strong exposure in the cellular business so, it will possibly be someone who has got CDMA 1 or CDMA 2000 interests rather than a wide band CDMA player.

"I think the main appeal is going to continue to be the cellular business so it is likely to be a company that is particularly focussed on cellular."

How would this change the communications and telecoms landscape in Japan?

"This is yet another example of consolidation where all the smaller players are fighting to be bigger players. In the cellular business with the strengthened players we have now got three groups competing in the market, but otherwise not a huge difference."

In the cellular business we have now got three groups competing in the market but otherwise not a huge difference. Kate Lye