Rakuten vs SoftBank + Yahoo vs Amazon (Bloomberg and BusinessWeek interviews)

Hiroshi Mikitani Rakuten

Rakuten vs Softbank

Yahoo reduces e-commerce fees to compete harder with Rakuten’s online mall

Bloomberg interview and BusinessWeek interview about Yahoo KK’s aggressive reduction of ecommerce fees, a move increasing competition with Amazon.com and Rakuten.

How do you see Yahoo KK’s latest move to reduce or eliminate merchant’s fees? Do you see this as an attack by SoftBank/Yahoo on Rakuten?

SoftBank and Rakuten are clearly two very different companies – they don’t compete on the same ground. SoftBank is a telecom company with a Government spectrum license – a quasi-monopoly on a certain wavelength spectrum. Rakuten has no such monopoly, but is an internet based ecommerce company.

How do you see the future of Rakuten now?

Rakuten is clearly squeezed between SoftBank/Yahoo on one side and Amazon.com on the other side.

Amazon.com’s Jeff Bezos, SoftBank/Yahoo-KK’s Masayoshi Son and Rakuten’s Hiroshi Mikitani are clearly some of the most brilliant minds on this planet earth, so any battle between these three is phenomenal.

You ask about Hiroshi Mikitani/Rakuten – he clearly has his job cut out to compete with Masayoshi Son and Jeff Bezos – that’s not easy at all.

In particular, Amazon.com has a lot of strengths in areas, where Rakuten does not compete, e.g. AWS – Amazon Web Services, which is a very important cloud services company.

In terms of globalization, I also see challenges ahead for Rakuten. Even though Rakuten has recently decided to train staff in English conversation, its not a trivial job for an essentially Japanese company to globalize.

How do you see globalization of Rakuten and Softbank?

SoftBank clearly has taken a big step in acquiring Sprint in USA. SoftBank’s very big challenge is now to make Sprint a very big success and this will take some time.
Rakuten also has a huge challenge to globalize, and it will be interesting to see if Rakuten can become a global company

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Yahoo Japan (ヤフー株式会社) – Yahoo! Complication

Yahoo Japan (Yahoo! KK) is a public, traded on the Tokyo Stock Exchange. 41.87% of shares are held by the SoftBank Group, 34.74% by Yahoo Inc

There are two YAHOO!s – YAHOO! Inc and YAHOO! KK. (ヤフー株式会社)

Yahoo! KK, ヤフー株式会社 is a Japanese corporation listed on the Tokyo Stock Exchange

Yahoo! KK (ヤフー株式会社) is not a full/100% subsidiary of Yahoo Inc, but Yahoo! KK is a publicly traded company, listed on the Tokyo Stock Exchange.

Ownership of Yahoo! KK (ヤフー株式会社)

  • 35.45% by SoftBank
  • 6.42% by SoftBank subsidiary SBBM
  • 34.74% by Yahoo Inc.
  • 23.39% other shareholders via Tokyo Stock Exchange
  • 100% Total

Thus effectively:

  • SoftBank (SoftBank + SBBM) holds 41.87% of Yahoo! KK (ヤフー株式会社) shares
  • Yahoo Inc. holds 34.74% of shares

History background of Yahoo Japan

Masayoshi Son was one of the first and major investors in Yahoo Inc., and obtained the rights to build Yahoo Japan with part investment and license to trade marks and technology from Yahoo Inc.

Masayoshi Son and his SoftBank Group founded Yahoo Japan on January 31, 1996, and built Yahoo Japan into one of Japan’s most successful media and internet companies.

Yahoo KK started trading on the Tokyo Stock Exchange (Code 4689) with the IPO on October 28, 2003.

Market cap and size of Yahoo Inc vs Yahoo Japan

Yahoo Inc and Yahoo KK (ヤフー株式会社) are traded totally independently on different Stock Exchanges. Therefore share price and market capitalization are not directly related.

There are days when Yahoo KK (ヤフー株式会社) has higher market capitalization than Yahoo Inc minus the holding of Yahoo KK shares.

Yahoo Inc and Yahoo KK (=Yahoo Japan) market cap before and after Microsofts' bid
Yahoo Inc and Yahoo KK (=Yahoo Japan) market cap before and after Microsofts’ bid
Yahoo Inc vs Yahoo KK (Yahoo Japan) revenues and income
Yahoo Inc vs Yahoo KK (Yahoo Japan) revenues and income

Learn more about SoftBank

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YAHOO and Google’s mobile strategies

Yahoo and Google mobile strategies: Google starts mobile operations in Japan by partnering with KDDI, Yahoo KK joins with SoftBank to acquire Vodafone Japan

Japan is a couple of years ahead of Europe and US in mobile communications by most measures

What are GOOGLE and YAHOO doing in Japan’s mobile sector?

GOOGLE started mobile operations in Japan by partnering with KDDI (Japan’s No. 2 mobile operator with about 25 million mobile subscribers) to develop mobile search.

YAHOO-Japan made a large step forward when SoftBank acquired Vodafone’s Japan operations in March this year

On March 17, 2006, SoftBank and Yahoo KK (Yahoo Japan) acquired Vodafone-Japan.

SoftBank’s latest mobile phones include a “Y” = YAHOO button:

SoftBank's Yahoo button
SoftBank’s Yahoo button

Yesterday, August 26, 2006, SoftBank opened it’s new flagship store in Tokyo-Roppongi including a YAHOO-Spot:

SoftBank opens Yahoo-spots within the SoftBank stores
SoftBank opens Yahoo-spots within the SoftBank stores

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SoftBank transforms former Vodafone Roppongi flagship store

SoftBank rebrands Roppongi store from Vodafone to Softbank

Speed is one factor for SoftBank’s success

Following the acquisition of Vodafone-Japan, SoftBank quickly turns round the company

Today, August 26, 2006, SoftBank (read our report on SoftBank here) opened the remodeled and rebranded Roppongi flagship store. The SoftBank Roppongi store is designed in light colors using a color scheme including mainly white, silver and grey, replacing Vodafone’s red. While Vodafone focussed on cost-cutting in Japan, SoftBank is now investing heavily, creating new stores and hiring store managers and assistants to revive and expand the chain of SoftBank stores.

“Flagship” stores are a concept which Vodafone introduced into Japan’s mobile industry – before Vodafone’s entrance to Japan, DoCoMo, J-Phone and KDDI/AU did not have specific flagship stores. Vodafone opened a flagship store in Shibuya, and shortly afterwards KDDI opened the KDDI Designing Studio in response. Because Vodafone’s initial Shibuya flagship store is in the middle of Shibuya’s entertainment district, the Roppongi-store, which was newly acquired by Vodafone, took a flagship role.

Vodafone recently decided to terminate business in Japan, and sold all Japan operations to SoftBank – Vodafone’s investment in Japan was the largest investment ever by any European company in Japan, about 7 times larger than Renault’s initial investment in Nissan…

This picture shows the flagship store in the new SoftBank dress, which opened on August 26, 2006

SoftBank's Roppongi store
SoftBank’s Roppongi store

This picture shows the flagship Roppongi store before (left hand picture) and after (right hand picture) the brand change from Vodafone to SoftBank. The SoftBank branded store opened on August 26, 2006:

Vodafone's former Roppongi flagship store rebranded as SoftBank store
Vodafone’s former Roppongi flagship store rebranded as SoftBank store after SoftBank acquired Vodafone-Japan

An elegant color scheme based on silver/white/grey replaces Vodafone’s red:

Vodafone's x-Roppongi flagship store rebranded as SoftBank store after SoftBank acquired Vodafone Japan
Vodafone’s x-Roppongi flagship store rebranded as SoftBank store after SoftBank acquired Vodafone Japan

SoftBank’s white/grey/silver color scheme replaces Vodafone’s previous bright red dress – the “YAHOO-Cafe” (there is no coffee…) represents SoftBank’s strong cooperation with YAHOO-Japan – SoftBank is largest shareholder of YAHOO-Japan:

SoftBank Roppongi store
SoftBank Roppongi store
SoftBank Roppongi store
SoftBank Roppongi store

SoftBank’s 705SH mobile phone by SHARP includes a YAHOO-Button for direct access to YAHOO-Japan mobile content and services.

Yahoo! button on SoftBank phones
Yahoo! button on SoftBank phones

SoftBank’s flagship store includes a YAHOO spot – at the moment the YAHOO-spot is an empty place holder. The YAHOO-Spot is labelled YAHOO-Cafe – but there is no coffee…

Yahoo! Cafe inside the SoftBank store
Yahoo! Cafe inside the SoftBank store

SoftBank’s phones are presented on surfboards:

SoftBank mobile phone display
SoftBank mobile phone display

Understand Softbank: our report: “SoftBank today and 300 year vision”

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iPhone for Japan? iTunes/iPod phones?

More Chaku-Uta mobile music downloads by KDDI in Japan than by Apple's iTunes globally

There is a lot of discussions about whether Steve jobs is going to announce an iPhone or iPod-Phone at the Apple Computer Developer’s Conference in SF – according to the headline report on Saturday May 13th, 2006 in Nihon Keizai Shinbun ( the world’s largest business daily ) it’s already known since May this year that Apple and SoftBank are developing such a joint mobile phone with iPod and iTunes functions.

On March 17 SoftBank announced the full acquisition of Vodafone’s Japan subsidiary – the former J-Phone –  jointly with YAHOO-Japan as a co-investor – so with about 15 million mobile subscribers in the world’s most advanced mobile market (Japan), SoftBank/Apple will have the firepower to make such a phone a success, provided it’s tuned to Japanese consumers’ needs and dreams – my guess is that it probably will be.

By pure coincidence, the Apple/SoftBank headlines appeared one or two days after DoCoMo and Microsoft announced a music cooperation.

Apple/SoftBank iPod mobile phones coupled to iTunes could have quite a lot of impact on Japan’s music industry: about 20% of Japan’s music sales are to mobile phones. Of all music downloads in Japan about 6% are fixed line internet downloads, and 94% are music downloads to mobile phones: internet music downloads are almost neglibile in comparison to mobile phone music downloads.

Therefore even if iTunes has a huge market share in the fixed line internet world, iTunes  cannot have much impact in Japan overall if limited to fixed line  internet downloads. iTunes downloads to mobile phones will change the business models of Japan’s music industry – at the moment music downloads to mobile phones cost a lot more than iTunes downloads. An iPod/iTunes music store could reshape the mobile music market in Japan.

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Softbank acquires Vodafone Japan with co-investment from Yahoo KK

Softbank acquires Vodafone Japan with co-investment from Yahoo KK

The Deal seals Vodafone’s exit from Japan

Softbank acquires Vodafone Japan in an approx. US$ 15 billion deal

SoftBank and Yahoo-Japan acquired 97.7% of outstanding shares of Vodafone Japan (Vodafone KK) in Japan’s largest M&A transaction (the remaining 2.3% are owned by other investors). In a Leveraged Buy-Out (LBO) a consortium of banks extended US$ 9.5 to 10.4 Billion in loans.

Citibank was the lead in this transaction on SoftBank side, but because of the size of this transaction, essentially all major players in Japan’s financial industry were involved – including our company, which advised one of the loan risk assurance companies on aspects of the risks of this transaction.

Softbank acquires Vodafone Japan - outline of the transaction
SoftBank acquires Vodafone KK (= Vodafone Japan) – outline of the transaction

SoftBank’s aim: grow to 26 million mobile subscribers and become No. 2 in Japan

SoftBank announced the plan to return to J-Phone’s growth curve and to aim for 26 million subscribers, which would place the resulting mobile operator on place 2 in Japan.

 After acquisition of J-Phone by Vodafone, growth stopped.
After acquisition of J-Phone by Vodafone, growth stopped.

Japan’s new telecom landscape

Three major players emerge after a sequence of consolidation and restructuring: NTT, KDDI and Softbank/YAHOO. The following figure outlines Japan’s telecom sector in 2006:

Outline of Japan's telecom sector in 2006 and M&A transactions
Outline of Japan’s telecom sector in 2006 and M&A transactions

For more information:
download our JCOMM-Report on Japan’s telecom’s industry

You can find a sequence of similar diagrams explaining the evolution of Japan’s telecom sector in our report on Japan’s telecom sector.

Understand Softbank: our report: “SoftBank today and 300 year vision”

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