Softbank to Buy Vodafone K.K.?

The Japanese government was supposed to auction off two bands for new wireless services sometime soon. I think the use of the bands was going to be less restricted than in the past, but the assumption was that they would be used for 3G services in the short run, and maybe something more exciting in the long run.

Softbank is one of Japan's most entrepreneurial companies. It had announced its intention to bid on one of the licenses. Apparently, they have decided that the Japanese market for basic wireless voice services is saturated, and that the only way to build a decent use base is to buy one. So, they are negotiating to buy "a controlling stake" in Vodafone K.K., the Japanese arm of the Vodafone group, for one trillion yen (almost ten billion dollars).

Vodafone K.K. is profitable, but not growing. Vodafone bought Japan Telecom, which owned J-Phone, in 2001, and in 2003 renamed it Vodafone K.K. and sold off the wireline part of the business. For their 3G service, they use standard W-CDMA and the same handsets as in much of the rest of the world, reasoning that the efficiencies gained in development, management, etc. would be worthwhile, and that people the world over wanted the same kind of 3G experience. But, they've been unable to convince most of their Japanese customers to switch from their 2G network to 3G. In the beginning, they had coverage problems and got bad press; surely that's corrected by now. But their handsets are still viewed as clunky, bulky, short on features, and not appropriate for Japan (as a former Nokian, it pains me to say that, since Nokia supplies many of their handsets).

So what does this mean? Is Vodafone giving up on its vision of a single worldwide network and single worldwide wireless experience? I'm not sure. What will Softbank do with the network? Well, as adventurous as they are, my guess is that they will have creative, very Japanese services running quickly, though better handsets have a long development cycle. I would also bet that Softbank will find a way to deploy a faster network within a few years, too.

In other words, this will probably be good both in the short and long run for Japanese customers. Whether it will be good for Japanese handset and wireless equipment makers depends on Softbank's ability to work in the world standards market, both as a customer and standards-maker, which will affect handset costs inside Japan and competitiveness of Japanese companies outside Japan.

For those of us who want a single worldwide phone number and cheap international roaming service, it's probably a push; I used to think that was a big deal, but I now believe we are more likely to get that through something like Skype over WLAN than directly from our 3G phone provider.