Jupiter Telecommunications Co., Ltd.
Sumitomo Corporation
KDDI Corporation
June 10, 2010
Jupiter Telecommunications Co., Ltd. (hereafter, "J:COM" ; Chiyoda Ward, Tokyo; CEO Tomoyuki Moriizumi), Sumitomo Corporation (hereafter, "Sumitomo" ; Chuo Ward, Tokyo; CEO Susumu Kato), and KDDI Corporation (hereafter "KDDI" ; Chiyoda Ward, Tokyo; President and Chairman Tadashi Onodera) have concluded a memorandum today concerning the formation of an alliance between the three companies. They also resolved to examine the details of measures for forging the alliance. Details are provided below.
1. Background and Purpose of the Consideration of the AllianceSumitomo has been a shareholder in J:COM since its establishment, and J:COM has received various forms of business assistance from Sumitomo. Additionally, since the latter half of April 2010 and following the completion of a tender offer for J:COM shares by Sumitomo, J:COM and KDDI, which became a major shareholder in J:COM on February 19, 2010, set up four working groups covering the telecom business and product collaboration, media business, CATV business, and technology and infrastructure, and the two companies have been conducting preliminary discussions for achieving business synergies. As a result of these discussions, J:COM and KDDI came to the conclusion that cooperation between their two companies in certain areas may lead to the achievement of synergies. J:COM, Sumitomo, and KDDI have agreed to examine the details of various measures to be put forward.
Furthermore, in connection with the Alliance, the three companies have acknowledged that Sumitomo and KDDI intend to fully cooperate for the purpose of increasing the corporate value of J:COM and that Sumitomo will continue to further strengthen its longstanding relationship with J:COM through, among other means, enhancing coordination with Sumitomo's extensive business network of media-, retail-, and network-related businesses.
2. Details of the Alliance<Telecom business and product collaboration>
(1) Fixed line telephone business
J:COM will consider introducing new telephony services that are equivalent to the "Cable-plus phone" service (the "New Telephony Services") for which "Cable-plus phone" service will be provided, as a whole sale, to J:COM. Specifically, J:COM will consider transferring J:COM PHONE users who are currently connected to the Company's legacy system, which employs telephone switchboards, to the New Telephony Services and offering these New Telephony Services to newly acquired subscribers. J:COM and KDDI anticipate that this collaboration will bring advantages for customers of both J:COM and KDDI, including preferential rates for calls between J:COM subscribers using the New Telephony Services and KDDI subscribers using mobile or fixed line telephone services (known as "au Collective Talk"), and lead to increased customer satisfaction levels, growth in new subscribers, and lower churn rates for contract cancellations. Details and the schedule for this collaboration will be determined through further discussions with KDDI.
(2) Mobile phone business
J:COM will consider adding the au mobile phone service to the range of high-quality services that J:COM provides, which include multi-channel digital broadcasting, high-speed Internet, and fixed line telephony services. Encouraging J:COM customers to use "au Collective Talk" upon the introduction of the New Telephony Services described above will enable the creation of services that appeal to both J:COM and au customers and that will potentially raise customer satisfaction levels, attract new subscribers, and decelerate contract churn rates. In addition, J:COM will investigate ways of enhancing subscriber convenience and offering subscribers discounts by integrating the billing of services.
Before commencing new services, J:COM and KDDI will consider conducting cross-sales promotions starting this summer in the Kansai region, leveraging each company's products through their media and assets.
(3) High speed wireless data communications business
For this business, J:COM will begin detailed discussions on a service tie-up with UQ Communications Inc. ("UQ"), an affiliate of KDDI. With demand for high-speed wireless services anticipated to grow in the near future, J:COM believes that a tie-up with UQ will have major advantages for its business. J:COM will initially consider the provision of a high-speed wireless telecommunications service as an optional service for subscribers to its high-speed internet access service, known as J:COM NET.
<Media business>
(1) VOD service collaboration
J:COM will investigate the centralization of content procurement for video-on-demand ("VOD") services with a focus on a tie-up between the respective VOD services of the J:COM Group and the KDDI Group. Centralization is expected to increase bargaining power for the procurement of content, substantially reducing costs. In the future, J:COM and KDDI will also consider integrating the two companies' VOD systems as a means of reducing overall operating costs.
(2) Advertising business collaboration
Collaboration between J:COM's and KDDI's advertising and marketing teams is aimed at acquiring cross-media advertising clients who use both J:COM and au, thereby expanding the advertising business of both companies.
(3) Mutual distribution of content
J:COM and KDDI will consider mutual distribution of video content owned by J:COM and KDDI as well as their respective group companies through their respective media as a means to enhance the content businesses of both companies.
<CATV business>
(1) Capital and business tie-up between J:COM and Japan Cablenet Limited ("JCN")
J:COM will investigate means of quickly attaining business synergies between the cable television businesses of both J:COM and JCN, a subsidiary of KDDI, including through the formation of capital ties between the two companies.
<Technology and infrastructure>
(1) Integration of telephone network with KDDI
J:COM will consider the further integration of its domestic and international telecommunications connection formats with KDDI as a means to reduce operating costs for its telephony services. In addition, both companies will examine further cost-cutting measures for non-telephone networks in which J:COM does not own lines, including the use of KDDI network infrastructures.
(2) Development of next-generation set-top boxes
J:COM and KDDI recognize that to further enhance their services, they must upgrade their set-top boxes and develop technologically-advanced service platforms that are able to support the upgrade. J:COM, which has extensive experience and technical expertise in the field of Radio Frequency [1], and KDDI, which has excellent technical expertise in the fields of video transmission and IP, will consider promoting cooperation to develop next-generation set-top boxes. Focusing on service flexibility in the future, both companies have set their sights on the production of a pilot model for set-top boxes through adopting open and cutting-edge technology, such as Android™ [2].
3. Schedule of ActivitiesJ:COM, Sumitomo, and KDDI plan to jointly determine the specific details and schedule of the concrete measures to be undertaken under the alliance. This information will be announced immediately after it has been settled.
