PCCW makes first Japan broadband play

“This is the first in a series of steps to building a powerful business in Japan,” said Francis Yuen, deputy chairman of PCCW, at a Hong Kong news conference Thursday. “We believe it will accelerate the growth of the broadband business in Japan,” Yuen said, while noting the importance of Japan to the company.

The takeover bid, which already has the agreement of Jaleco’s board and main shareholders, will see PCCW pump 27 US$250.1 million into the ailing computer game maker for an 81 per cent stake. Once the deal is completed, probably in October, PCCW intends to take management control of the company and use it as a vehicle to spearhead its push into the Japanese and Korean broadband content markets, said Ken Kiyoshi, chairman of Pacific Century CyberWorks Japan Ltd.

Jaleco will take the PCCW Japan Ltd. name after the deal and give PCCW a listed Japanese company through which to conduct business here. That business is expected to focus on three areas: broadband content for consumers in Japan, the export of Japanese-made content to markets worldwide and a data center business. One of the first jobs of PCCW Japan will be to bring Network of the World (NOW), PCCW’s interactive content service, to Japanese consumers. The service was launched in London just over a month ago and is currently available online and via satellite in Asia.

Viewers in Japan might face some problems cutting through the static initially. Less than 200,000 people currently have access to the broadband infrastructure that the service needs for effective delivery, said Kin Yu of PCCW’s research department, but availability is expected to rapidly increase over the next two years.

Likewise, Todd Bonner, PCCW Japan CEO, said at a Tokyo news conference, “The broadband market in Japan is about the explode – it’s inevitable.” Forecasting 16 million broadband households in Japan by 2005, he added the company is happy to work with a number of broadband platform providers from cable and satellite to Internet and DSL (Digital Subscriber Line). PCCW holds a Type 1 operator license from Japan’s Ministry of Post and Telecommunications, giving it the opportunity to start up a future service.

PCCW also announced a deal with Sony PCL, a video production unit of Sony Corp., under which the two companies will produce original Japanese-language content for NOW in Japan. Some of the expertise gathered from its acquisition of Jaleco, a maker of computer games for arcades, will also be put to use in developing network and broadband games. Nevertheless, PCCW will also work with other companies in the same arena. Japanese content will first appear on NOW in the first half of next year, following Chinese content to be introduced by early 2001 from production facilities in Hong Kong and Taiwan. Another area in which PCCW Japan hopes to make an impact is on the distribution of Japanese content in overseas markets. Citing statistics that Japanese broadcasters make 90 per cent of their revenues in the domestic market, the company said it hopes to ink licensing deals for some of the nation’s favorite pop-culture icons and characters to distribute content overseas.

Korea could be one of the first markets to see the fruits of the company’s work in this area. With more than 1.5 million broadband users already and a huge demand for Japanese content, the country represents a very attractive business area for NOW, said Yu.

The final main area of business that PCCW Japan sees is in data center operations. The company will be establishing its own network of data centers to aid in distribution of NOW content, taking it closer to consumers rather than serving it all from a distant computer, and the data center service will take advantage of this network to offer other companies a place on the distribution system. In this business PCCW Japan will work, said Yu, in cooperation with engineers from Cable & Wireless HKT Ltd., Hong Kong’s dominant telecommunications carrier, which parent PCCW is in the final days of acquiring. In answer to questions following Thursday’s announcement, PCCW Deputy Chairman Francis Yuen said the Jaleco acquisition may not be PCCW’s last or biggest in Japan.

“We will continue to acquire different companies, and they may be major ones,” Yuen said.

PCCW Japan, in Tokyo, can be contacted at