NTT Communications Extends Tender Offer for Verio Amidst Regulatory Concerns

Strategic Insights -

NTT Communications, the long-distance and international arm of NTT, Japan's dominant telecommunications carrier, has extended its $5.5bn tender offer for Verio, the US website manager, due to regulatory concerns. The takeover bid was originally set to expire on June 30, but the group has pushed back the deadline to July 14 as the US government deepens its investigation into the deal.

The investigation is being carried out by the Committee for Foreign Investment in the United States, an inter-agency body chaired by the US Treasury, which includes representatives of the main departments of state and the White House. The committee is examining the national security implications of the takeover, with potential implications for government agencies that have collaborated with Verio in the past.

Key Takeaways:

  • NTT Communications has extended its $5.5bn tender offer for Verio, citing regulatory concerns amidst a US government investigation.
  • The investigation is being carried out by the Committee for Foreign Investment in the United States, which has concerns over national security implications.
  • The committee receives notices of foreign acquisitions of US companies and can investigate the national security implications of a takeover, under the Exon-Florio provision.
  • Following the investigation, the president may bar investments deemed to jeopardise national security.
  • The move highlights the intense political dispute surrounding NTT, which controls more than 90% of the Japanese telecommunications market and is owned 59% by the government.
  • The US government has asked Japan to cut interconnection rates by 41%, but Tokyo's response has been limited to a 22.5% reduction over four years.
  • US congressmen have asked President Clinton to block the deal unless NTT agrees to lower interconnection rates to allow foreign companies better access to the Japanese market.
  • The Exon-Florio provision permits the president to waive the imposed closing condition and proceed with the consummation of the offer prior to the completion of the Exon-Florio investigation process.

Statistics:

  • $5.5bn: The value of NTT Communications' tender offer for Verio.
  • 90%: The percentage of the Japanese telecommunications market controlled by NTT.
  • 59%: The percentage of NTT owned by the government.
  • 41%: The reduction in interconnection rates demanded by the US government.
  • 22.5%: The reduction in interconnection rates offered by Tokyo.
  • 4 years: The timeframe for the reduction in interconnection rates offered by Tokyo.

Sources:

  • "NTT Communications Extends Verio Bid on Regulatory Concerns," The Financial Times.
  • "Committee on Foreign Investment in the United States."
  • "Exon-Florio Provision."