NTT of Japan to make largest global issue of $ 13.5 bn

NTT of Japan to make largest global issue of $ 13.5 bn
REUTERS

July 17: The race to lead manage one of the world's largest share issues begins in earnest this week when Japan's government sends out invitations to dozens of brokers for assisting in NTT Corp's $13.5 billion public share sale.

Japan's sixth sale of shares in telecom giants Nippon Telegraph and Telephone Corp (NTT), a former state monopoly, is a key source of the government's budgeted revenue for fiscal 2000/01 (April-March). A Ministry of Finance (MoF) official said on Monday invitations will be sent to about 70 domestic and foreign brokerages on July 18-19, and the process of selecting managers would begin soon.

Brokerage houses are due to submit applications by July 28, the ministry said, adding that details such how many shares would be sold and when would be decided after lead managers are selected, depending on market conditions.

Late last year, the ministry said it would sell a maximum of one million shares in NTT in the fiscal year starting from April. At the current price of NTT shares, the value of the offer would be around $13.5 billion.

The ministry last year projected revenues of 1.41 trillion yen from a possible sale of NTT shares after payment of commissions to brokers. The estimate is based on the average closing price of 1.799 million yen per NTT share in the period from November 11 to December 10, a MoF official said.

On Monday, NTT's shares closed at 1.46 million yen. In November last year, the ministry sold a total of 952,000 of its shares in NTT. It now holds about 8.4 million shares, for a 53 per cent stake in the company.

Shares in NTT ended the session down two per cent on Monday, partly reflecting expectations that Japan and the United States would not meet a self-imposed Monday deadline to resolve differences over interconnection rates charged by NTT.

The business daily Nihon Keizai Shimbun reported that the talks could go up to cabinet level, because neither side has been able to budge from their stated positions.

Meanwhile, Japan and the United States met for talks, racing to try to meet a self-imposed Monday deadline to resolve differences over telecom rates amid reports US demands for more concessions will push talks to a higher level.

A Japanese government source said meetings between the negotiators entered an eighth day with US Deputy US Trade Representative Richard Fisher and Deputy Foreign Minister Yoshiji Nogami due to meet later in the day.

Business daily Nihon Keizai Shimbun said the talks over "last mile" interconnection rates charged by giant Nippon Telegraph and Telephone Corp (NTT) could move another level higher because neither side has been able to budge from their stated positions on the issue.

Both sides are anxious to resolve the issue before US President Bill Clinton and Prime Minister Yoshiro Mori meet on Thursday on the eve of the Group of Eight (G8) summit on Japan's southernmost island of Okinawa.

An agreement to open up the world's second biggest telecommunications market would clear the decks for a smooth meeting between the two leaders. It would also prevent embarrassment for Mori at the summit, which he has billed as the information technology summit.

Washington says the rates charged by the former Japanese state monopoly are too high, making it hard for US and domestic firms to compete. Japan counters that slashing the rates would jeopardise profits and jobs at NTT, and has resisted US pressure for a 22.5 per cent cut over two years, offering a three-year time frame instead.

Jiji news reported at the weekend that Fisher said the United States could not accept Japan's proposal for a three-year cut and he urged Japan to make further concessions. Fisher's boss, US Trade Representative Charlene Barshefskyis due to arrive in Japan on Tuesday, and has already said that a three-year time-frame is unacceptable.

Divisions on the Japanese side may contribute to any delay. Japan's various ministries involved in talks had been hinting at even more conciliatory measures, but consensus-building has been slow, given the mix of politicians, diplomats, telecoms bureaucrats, and industry players involved.

Analysts say a compromise could be reached that will lower NTT's rates by around 30 percent over a shorter time period, possibly around two years. Mori himself may want a deal, especially as he has cited information technology and the Internet as one way to help recession-weary Japan to pull out of its economic slump.