Cable & Wireless yesterday unveiled plans to invest ¥150bn (£1bn) over five years and create 1,000 jobs in Japan by building a state of the art fibre optic network there.
Britain's second largest telephone company will create networks in Tokyo and Osaka offering high speed internet access to companies. It will then roll out the service to 80 other locations.
The biggest investment by a British company in Japan's telecoms industry will be used as a platform for further expansion into Asia. Chief executive Graham Wallace hopes to increase turnover from £300m to £1bn by 2005 and turn the local Cable & Wireless IDC subsidiary into a fully-fledged telecoms company offering voice and data services. It has already applied for a licence to provide long-distance phone calls.
City analysts fear it will be competing head-on with domestic heavyweights such as Nippon Telegraph and Telephone (NTT). In London, C&W's battered share price dropped a further 16p to 964p.
Mr Wallace said the company could secure up to 6% of the Japanese market for business telecoms. He had not given up hopes of joining up with a local partner.
"Today's announcement reinforces the importance of Japan as one of the three key markets for Cable & Wireless' global IP (internet protocol) and data strategy, together with the US and Europe."
Mr Wallace added that Japan was the second largest market in the world for telecoms services and would be a "strategic hub" for the rest of Asia. His group had a stronger position than AT&T and British Telecom because it had majority control of its business and a healthy balance sheet. AT&T and BT each own 15% stakes in Japan Telecom.
The Japanese international market was deregulated more than a decade ago, but it was only last year that the domestic network began to open up to outside players.
C&W cemented its reputation as a resourceful foreign competitor when it beat off fierce competition from NTT to win full control of international call operator IDC.
The C&W chief executive yesterday ruled out a flotation of Cable & Wireless IDC, the Japanese business where it controls 98% of the equity.
Mr Wallace said the chaos surrounding the Italian mobile phone auction last week reinforced his belief that subsidiaries should be kept under total control.
C&W dismissed suggestions that the sale of its 54% holding in Hong Kong Telecom to Richard Li was wrongheaded given the fall in the share price of Pacific Century CyberWorks. The company said it was assured of receiving £5bn in cash which would be used for expansion in Japan. It dismissed allegations that the rest of the proceeds, paid for in shares from Pacific Century, were only worth £2bn compared to £5bn at the time of completion in September.
A spokesman said C&W could sell some of the shares next February. By then the Pacific Century's price could be different.
