Two recently disclosed digital infrastructure transactions have shaken the foundations of Japan’s tower market, which is approximately 97% owned by MNOs NTT DOCOMO, KDDI, Softbank, and Rakuten Mobile.
Japan’s sole towerco JTOWER last month accepted an offer from digital infrastructure investor DigitalBridge to acquire the company. The deal is now passed on to its shareholders before it is green lighted – the tender offer acceptance deadline is Thursday 10th October.
Digital infrastructure asset investors have recently been taking a keen eye on Japan, and it is apparent why. Japan is one of the world’s most advanced mobile markets in terms of 5G rollout.
Japan, a nation of nearly 126mn people with a landmass of just 378,000sq km, also has one of the fewest number of subscribers per tower in the world (TowerXchange estimates that there are 942 SIMs per tower against an approximate average of 2,452 SIMs per tower in APAC, excluding China).
Plus, efforts have been made by the Japanese government to reduce mobile fees and with published guidelines around infrastructure sharing.
Japan, which has 220,515 towers as estimated by TowerXchange, also requires 5G densification, opening up opportunities for rooftop and macro, as well as microcell, DAS, IBS and small cell development.
Rakuten mobile assets sell-off
Just a few days earlier, Japanese MNO Rakuten Group and Macquarie Asset Management signed a sale and leaseback transaction covering a portion of Rakuten's mobile assets in Japan. Speaking to those involved in the Japanese digital infrastructure market, TowerXchange understands that it is effectively an asset loan agreement. It is believed that Rakuten will continue to manage its estimated footprint of 5,280 towers, with the ownership of the towers reverting at the end of the financing term.
On 8 August, Macquarie announced that Rakuten Mobile was raising between JPY 150 bn to 300 bb (around US$1-2bn) in funds from the sale and leaseback of a portion of its mobile network assets from a consortium of global leading infrastructure investors, led by Macquarie Asset Management, but also including British Columbia Investment Management Corporation, via the Macquarie Asia-Pacific Infrastructure Fund 3.
Infra sharing model to take off?
DigitalBridge’s acquisition of JTOWER is likely to propel the shared infrastructure operating model that JTOWER has long sought to implement in the country. JTOWER, who owns approximately 7,700 towers (as of Q3 2024), has a varied ownership structure, with NTT-DOCOMO owning 21.6% and KDDI 2.5%. Following the takeover, the Company will maintain its relationship with existing capital and business alliance partners Nippon Telegraph and Telephone Corporation, NTT DOCOMO, INC., and KDDI CORPORATION.
Speaking to industry insiders, it is believed that JTOWER’s shared infrastructure philosophy as a key driver of the transaction. “DigitalBridge must have seen something in the market that has given them the appetite to make what is the largest premium ever paid for a Japanese listed company,” said one source.
“So either it reflects that the Japanese market didn’t accurately value JTOWER or DigitalBridge saw an opportunity other investor did not. Or possibly both.”
It might now just be a question of time, and not if, as to how Japan’s MNOs aim to rebalance its tower portfolio, and to see infrastructure sharing truly thrive.
