Willcom Files for Bankruptcy Protection in Japan (Update3)
February 18, 2010, 04:31 AM EST(Adds president’s comment in fourth paragraph.)
By Yoshinori Eki and Pavel Alpeyev
Feb. 18 (Bloomberg) -- Willcom Inc., the Japanese wireless carrier controlled by the Carlyle Group, filed for bankruptcy protection with the Tokyo District Court with liabilities of 206 billion yen ($2.2 billion).
Japan’s state-backed Enterprise Turnaround Initiative Corp., or ETIC, is considering support for the firm, Tokyo-based Willcom said in a faxed statement today. The company is also in talks with Softbank Corp. and investment fund Advantage Partners LLP on possible support, it said.
The wireless carrier in September said it was unable to agree on a revival plan with all creditors after failing to reschedule debt payments. Willcom, whose service is based on the older personal handy-phone or PHS technology, is under pressure to upgrade its network after losing subscribers to NTT DoCoMo Inc., KDDI Corp. and Softbank, which offer faster speeds for data transmission.
“Customer departures and the inability to attract new subscribers have drained the company of the funds needed for investment,” Willcom President Yukio Kubota said in a briefing in Tokyo today. The company’s capital will be written off entirely, he said.
The bankruptcy is the biggest in Japan’s telecommunications industry, researcher Teikoku Databank Ltd. said in a statement today. Heisei Denden Co. was the previous biggest failure in October 2005 with liabilities of 120 billion yen.
Willcom will be split into two, the Nikkei newspaper said last month. The carrier will also receive a credit line of about 10 billion yen from ETIC, the newspaper reported today.
No ETIC Stake
ETIC won’t take a stake in Willcom, whose efforts to revive its business will be supported by Softbank and investment fund Advantage Partners, the newspaper said.
Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., Willcom’s biggest creditors, were each owed 17.6 billion yen as of March 31 2009, according to financial statements on the phone company’s Web site.
The bankruptcy filing also means the company defaulted on 35 billion yen of bonds sold in June 2005. The bonds had a coupon of 2.35 percent and were to mature on June 27, 2012, according to data compiled by Bloomberg.
Carlyle, the world’s second-largest private-equity firm, and Kyocera Corp. bought a combined 90 percent of Willcom from KDDI Corp. for 220 billion yen in 2004. Washington, D.C.-based Carlyle owns 60 percent of closely held Willcom, while Kyocera has 30 percent and KDDI holds 10 percent.
Out of Pocket
Kyocera may not be able to collect 15.4 billion yen of receivables owed by Willcom, the Kyoto-based maker of solar cells and electronic devices said in a statement today.
Willcom, which has about 4.4 million subscribers, said today its bankruptcy proceedings will not interfere with its services.
Subscribers to Willcom’s service declined 6 percent from the peak in July 2007, according to the company’s Web site. By comparison, Softbank added 1.7 million users in 2009 and DoCoMo, Japan’s largest wireless operator, increased its number of subscribers by 1.3 million, according to the carriers.
DoCoMo, which stopped adding new customers to its PHS offering in April 2005, wrote off 61 billion yen worth of assets to end the service in January 2008.
China Telecom Corp., the country’s biggest fixed-line operator, said last March it stopped all investment in PHS services after demand fell. Revenue from the PHS division dropped 23 percent to 16.4 billion yuan ($2.4 billion) in 2008, according to the Beijing-based carrier, which said it will now focus on mobile-phone services.
--With assistance by Mark Lee in Hong Kong. Editors: Jonathan Annells, Brian Fowler.
To contact the reporter on this story: Pavel Alpeyev in Tokyo at +81-3-3201-2137 or palpeyev@bloomberg.net; Yoshinori Eki in Tokyo at +81-3-3201-3422 or yeki@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at +81-3-3201-3882 or ycho2@bloomberg.net.
