Link text

Last February, Willcom, Japan’s #4 mobile operator filed for bankruptcy, not being able to repay its massive amount of debts.

And massive they were. JPY 206bn. The largest bankruptcy in Japanese telecommunication industry, as I pointed out back then.

From that date on, SoftBank was named as one of the companies that would strategically help the failing operator to get out of its slump, by helping it repay JPY 41bn, or, according to current -volatile- exchange rates, more than USD 500m.

Well, it now wants to gob the whole company. 100%. Let’s ask ourselves why.

4m More Subscribers

4 million users is not something SoftBank was willing to let completely go, as it battles KDDI to reach the number 2 spot in Japan -the latter having 32 million subscribers, while the former clocks at 27m.

Willcom famously uses an older wireless technology, PHS, which impaired its growth after an initial advantage due to lower costs.

Coincidentally, SoftBank started investing in PHS after being embroiled with Willcom this year. Nikkei reported last April that it would start rolling out a “next-generation” PHS networked, based on Chinese technology and as early as Q3 2010.

It’s called XGP. A technology not without interest.

XGP Technology Explained

XGP is theoretically capable of data speeds up to 100Mbps, with the burden of installing lots of micro cells on the network (a requirement PHS also had). Apparently, quality of the signal in a dense network would allow you to travel as fast as 300 km/h while maintaining both up- and down-link. Sweet, I wonder when the Yamanote line will travel that fast.

Field tests by Willcom gave XPG reason to be hopeful. Unlike KDDI’s WiMax, it fared better indoors and offered better speeds -and latency- than the competition.

Still, we’re talking about field tests that date a bit from a now-bankrupt company. A technology China Telecom, one of its bigger backers seems to have abandoned. A technology which could have battled with WiMax, but one that only a handful of handset makers -Kyocera comes to mind- and cell manufacturers are still developing for.


I’ve got this gut feeling that PHS/XGP was never exactly what SoftBank was interested in. Read on.

The Battle for Data Spectrum

The battle is all about Willcom’s 2.5GHz license. A big fat 30Mhz chunk of the 2.5Ghz spectrum.

You see, SoftBank is in dire need of extra broadband spectrum in the war it’s figthing against heavyweight DoCoMo, KDDI -who holds the other 2.5GHz license under the UQ Communication joint-venture- and that little company which disrupts the data market, namely emobile. All that in the days leading to the LTE -call it 4G if you wish- roll-outs.

Let’s call what I’m going to write science-fiction, but read on.

You’ve got a mobile carrier which invests in saving a competitor via a separate company, a competitor that happens to own some mobile broadband spectrum, the carrier then decides to deploy a cell network it never cared for but one that was used by that specific competitor, then announces it wants to buy the failing competitor 100%.

Isn’t that called a plan?

The Opponents

SoftBank has a series of hurdles to cope with before it can acquire the license. Tokyo’s District Court has to weigh in first. Then, the Ministry of Internal Affairs and Communication. And the competition who will shout foul.

The licenses were auctioned by the government with the specific requirement that telcos shouldn’t hold them outright and that they couldn’t have any commanding equity rights in any company that would get them -hence that UQ Communications company I mentioned above.

SoftBank had 33.3% in the business entity set up to save Willcom, a perfect conduit to gain access to the license. But, you know what, the license is tied to XGP. Not satisfactory enough. The other parties might not have agreed with SoftBank on that one.

The carrier might now be betting -or was betting all along, again as part of the plan- that it will get anti-trust approval, especially now that it has invested in PHS technology, then navigate the Japanese political representatives and bureaucracies to render the 2.5GHz license protocol-neutral, forget XPG and finally set up its own network, WiMax or else.

Sweetening the judges by investing in a competitor tech? That sounds like a plan.

All that while it’s trying to get Willcom lenders to waive part of the massive debt.

Lots of simultaneous fights for SoftBank. But it knows what it feels like. Its long history of legal battles in trying to get into the 800Mhz spectrum is proof enough. This time though, the outcome is the mobile data holy grail.

The hero wants to save the Willcom castle, rescue its inhabitants with their old technology and marry the princess. A princess called 2.5GHz.

Truly epic.

Runs on WP Engine