KDDI, Tokyo Electric to Combine Fiber-Optic Networks

By Kyodo News International, Tokyo

Apr. 3–TOKYO — KDDI Corp. and Tokyo Electric Power Co. have reached a basic agreement to integrate their fiber-optic communication networks in spring next year, informed sources said Monday.

KDDI is currently the sixth-largest player in the business in terms of number of subscribers, and Tokyo Electric is the fifth.

Their combined services will become the fourth largest, with subscribers totaling about 390,000.

Japan’s subscribers to fiber-optic communication services totaled 4.63 million as of the end of 2005, according to data of the telecommunications ministry. The KDDI-Tokyo Electric service will follow that of Nippon Telegraph and Telephone East Corp., Nippon Telegraph and Telephone West Corp. and Usen Corp.

KDDI operates its fiber-optic services under the brand name of Hikari-Plus, while Tokyo Electric offers its services under the name of TEPCO Hikari.

As the first step toward the merger, the companies are likely to market their fiber-optic broadband services under one brand name as early as June and increase the number of subscribers, the sources said.

In the meantime, KDDI will shortly begin assessing the value of Tokyo Electric’s services as the merger is likely to take place with KDDI purchasing all or part of Tokyo Electric’s networks, the sources said. The merger costs are estimated to be several tens of billions of yen.

They said KDDI will seek business tie-ups in the field with other players as well.

KDDI has been successful in its “au” mobile phone business but has been struggling in fixed-line services including those of fiber-optics broadband.

To turnaround the position, KDDI acquired Tokyo Electric’s fixed-line service providing affiliate, Poweredcom Inc., in January and has since held talks on cooperation in the fiber-optics services field with the nation’s biggest power supplier, they added.

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