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Written by: Staff

TOKYO, Mar 16 (Reuters) U.S. private equity firms Cerberus Capital Management and Providence Equity Partners are planning a $15 billion rival bid for Vodafone Group Plc's Japanese unit, sources familiar with the deal said.

A bid could throw a wrench into Vodafone's talks with Softbank Corp. on the unit.

The all-cash private equity offer for Japan's third-largest mobile operator is expected to be submitted to Vodafone's board imminently, one of the sources said.

Vodafone declined to comment.

Vodafone, the world's biggest mobile operator by revenue, is already in advanced talks with Softbank, an Internet communications conglomerate, to sell its struggling Japanese unit in what is expected to be one of Japan's largest acquisition deals ever.

''Any rival bidder would find it difficult to break up the talks between Vodafone and Softbank because time is definitely a factor for Vodafone. Vodafone and Softbank are already a long way down the road on this deal,'' one investment banker in Tokyo said, although he added that ''money always talks''.

Several sources said Cerberus and Providence were talking to several banks to arrange financing for the deal and Cerberus is trying to borrow about 1 trillion to 1.5 trillion yen ($8.5 billion to $13 billion).

While Softbank has time on its side, Cerberus has greater credibility in financial markets.

Sources close to the Vodafone-Softbank talks have said a deal between the two companies would be valued between 1.7 trillion and 2 trillion yen ($14 billion to $17 billion).

Vodafone's Japan unit has assets that are worth about 1.3 trillion yen ($11 billion) and annual revenues of about $13 billion, based on its latest reported six-month results.

The unit had about 15.1 million customers, or a 16.6 per cent market share, at the end of February, compared with rivals NTT DoCoMo Inc., which had 50.7 million customers, and KDDI Corp., which had 25 million customers.

The $14 billion to $17 billion price tag for Vodafone's Japan business would value the unit at $927 to $1,126 per customer.

Investors are currently paying $1,414 per customer for DoCoMo and $904 for KDDI, the fastest-growing mobile operator.

BIGGEST LEVERAGED BUYOUT IN JAPAN Softbank shares closed down 1.3 per cent at 3,020 yen on the Tokyo Stock Exchange, slightly underperforming the market's communications index, which fell 1 per cent.

Vodafone shares were 1.8 per cent higher at 129-1/4 pence, the top gainer on the DJ Stoxx European telecoms index. The stock has gained some 15 per cent since news first emerged that Vodafone was in talks to sell its Japanese unit.

''It's great that another bidder has emerged for anyone worried that Softbank was the only bidder in town ... We should see valuations end up slightly higher as a result,'' said Dresdner Kleinwort Wasserstein analyst Robert Grindle.

''From an industry standpoint I don't think it really matters who wins, although it's probably more understandable for Softbank to buy it,'' said Tetsuro Tsusaka, a Tokyo-based analyst for Deutsche Securities.

Softbank, Japan's largest broadband Internet provider, has been setting its sights on Japan's $78 billion mobile market for years as it aims to become a pre-eminent communications company, providing broadband, mobile and Internet services and content.

It was awarded a mobile licence in autumn to start a new service, but the acquisition of Vodafone KK would accelerate its efforts to become a major player in Japan's mobile market.

A deal between Vodafone and Softbank is expected take the form of a leveraged buyout, in which Softbank would borrow funds by putting the mobile operations up as collateral. The deal will be largely cash, although Vodafone could take on some newly issued preferred shares with no voting rights.

Such a deal would be the biggest leveraged buyout in Japan's history. The next-biggest similar buyout was U.S. investment fund Ripplewood Holdings' $2.2 billion acquisition of Vodafone Japan's fixed-line assets in August 2003, according to data supplier Dealogic.

Vodafone's mobile business in Japan has been struggling to recover from a tumultuous few years in which sales of its third-generation (3G) phones fell flat, its leadership changed twice within a year, and it lost customers at a rate that once set a monthly record high for the industry.

The underperforming Japanese unit has weighed on the group's shares for some time.

Sources said UBS is advising Vodafone on the deal. Goldman Sachs, Mizuho and Deutsche Bank have been reported to be working for Softbank.

Vodafone's disclosure that it was in talks to sell its Japan business has brought pressure from investors to consider the possible sale of some of its other overseas holdings such as its 45 per cent stake in U.S. joint venture Verizon Wireless.


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