Gov't-backed body to sponsor Willcom, no direct investment eyed+

TOKYO, March 12 Kyodo -
A government-backed corporate turnaround body said Friday it has decided to
sponsor the rehabilitation process of mobile phone carrier Willcom Inc., which
filed for bankruptcy protection last month, but stopped short of providing any
direct investment.
Under the rescue scheme, Willcom will work with three parties -- the
state-backed Enterprise Turnaround Initiative Corp. of Japan, Softbank Corp.
and investment fund Advantage Partners LLP -- to revitalize its personal
handy-phone service business and will compile a rehabilitation plan by July 20.
The ETIC said it will provide a credit line of up to 12 billion yen, together
with other financial institutions, to maintain Willcom's existing PHS services.
Advantage Partners will invest 300 million yen in the company, while also
teaming up with Softbank and other possible sponsors to handle Willcom's high
speed, next-generation PHS services under a new company.
Jun Watanabe, managing director for ETIC, said it is important to continue the
PHS services -- a stripped-down version of mobile phone services with
relatively low charges and weaker electromagnetic interference.
''PHS services are used in hospitals and nursing care facilities because of
less concern of possible electromagnetic interference with sensitive medical
devices, and this is used by 60,000 medical workers at 5,000 facilities,''
Watanabe said in a press briefing.
As of February, Willcom had roughly 4.26 million subscribers, with around 4.17
million of them subscribing to PHS services. The subscription figure compares
with those of industry leaders NTT Docomo Inc. and KDDI Corp. which are in the
tens of millions.
As part of the rescue package, Willcom said it will spin off its high-speed,
next generation PHS service known as Willcom Core XGP into a new company, which
will get 8 billion yen in capital from Softbank and Advantage Partners as well
as 3 billion yen from other investors.
It is the second case following Japan Airlines Corp. for ETIC, which is
financed by the government and private financial institutions, to aid the
restructuring of a struggling firm.
Though not as closely watched as in the case of JAL, ETIC's aid for yet another
large firm has been questioned since the entity was designed to help small and
midsized firms.
But ETIC officials justified the move by saying they supported Willcom because
of its importance in social infrastructure, adding their decision to neither
invest in nor buy debts for Willcom speaks of how they want the private sector
to be more heavily involved.
ETIC initially was expected to decide on its support for Willcom in late
February, but a decision was delayed due to differences about the rescue
scheme.
The Tokyo-based firm, with about 1,300 employees, filed for court protection on
Feb. 18 with liabilities topping 200 billion yen.
Willcom, the nation's largest PHS provider, sank deep into the red as its
customers drifted to rivals such as NTT Docomo and Softbank, which offer faster
mobile phone services. Its subsequent attempt to invest in Willcom Core XGP and
attract more customers eventually led to incurring heavy debts.
Willcom's creditors are likely to be asked to waive about 114.5 billion yen in
debt, according to ETIC's statement.
Under the rehabilitation plan, the company will aim to book an operating profit
of 12.3 billion yen in the financial year through March 2013, and outstanding
shares will be retired.
Willcom is currently owned 60 percent by U.S. private equity firm Carlyle
Group, while Kyocera Corp. owns a 30 percent stake and KDDI holds the remaining
10 percent stake.
==Kyodo
2010-03-12 23:06:54