Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: OFAC's Longer List, TOPIX Free Float, PCCW, Jardines, Toa, Guoco, Sansan

Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

KDDI will announce industry-low pricing tomorrow with a new plan for 20GB/month data at ¥2,480/month, which is ¥500 cheaper (-17%) than plans announced by NTT DoCoMo and Softbank last month (and who will likely tweak their plans to match). For the industry overall, this clearly means modestly steeper erosion for mobile service revenue in FY21 and beyond but the good news is KDDI’s announcement should draw a line under regulatory-driven pricing pressure. It is worse news for newcomer Rakuten which has gone from a disruptive price leader in April last year to behind the curve nine months later. News this morning that a Rakuten Mobile network employee has been arrested for trade secret theft does not help.

KDDI will announce industry-low pricing tomorrow with a new plan for 20GB/month data at ¥2,480/month, which is ¥500 cheaper (-17%) than plans announced by NTT DoCoMo and Softbank last month (and who will likely tweak their plans to match). For the industry overall, this clearly means modestly steeper erosion for mobile service revenue in FY21 and beyond but the good news is KDDI’s announcement should draw a line under regulatory-driven pricing pressure. It is worse news for newcomer Rakuten which has gone from a disruptive price leader in April last year to behind the curve nine months later. News this morning that a Rakuten Mobile network employee has been arrested for trade secret theft does not help.

Japan Telecom Sector - KDDI Response to DoCoMo Pricing Increases the Pressure on Rakuten

Travis Lundy

On Friday after the close, the TSE belatedly released its annual TSE Free Float Weight adjustments for stocks with fiscal year ends in March. Normally this comes out in October, and is executed at the end of October, but for the 2020 Free Float Weight Rebalance, as per an announcement made by the TSE on 22 June 2020, special measures were taken in light of the covid-19 pandemic, and the rebalance was delayed by 3 months. 
There are no major surprises that I see. Some buybacks from the market have led to slightly lower FFW coefficients. Some secondary offerings have led to increases in FFW coefficients. As discussed in <a href="https://www.smartkarma.com/insights/japan-post-insurance-update-three-reasons-to-buy-any-overhang-slightly-higher" target="_blank" data-smartkarma-citation="insights:46862" rel="noopener">Japan Post Insurance Update - Three Reasons To Buy. Any Overhang Slightly Higher</a> on Friday, one of the big names to the buy side is indeed <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a>.
For more on the rebalance, read on.
[A spreadsheet of all names and impacts is attached at the bottom of the insight]

On Friday after the close, the TSE belatedly released its annual TSE Free Float Weight adjustments for stocks with fiscal year ends in March. Normally this comes out in October, and is executed at the end of October, but for the 2020 Free Float Weight Rebalance, as per an announcement made by the TSE on 22 June 2020, special measures were taken in light of the covid-19 pandemic, and the rebalance was delayed by 3 months. 
There are no major surprises that I see. Some buybacks from the market have led to slightly lower FFW coefficients. Some secondary offerings have led to increases in FFW coefficients. As discussed in Japan Post Insurance Update - Three Reasons To Buy. Any Overhang Slightly Higher on Friday, one of the big names to the buy side is indeed Japan Post Insurance (7181 JP).
For more on the rebalance, read on.
[A spreadsheet of all names and impacts is attached at the bottom of the insight]

The Delayed TOPIX FFW Rebalance: $32bn To Trade

Last Week in Event SPACE: OFAC's Humdinger, China Mobile, NTT, Car Inc, Pressance, Tianneng Power

NTT (Nippon Telegraph & Telephone) / Event-Driven

When <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone-corporation" target="_blank" data-smartkarma-citation="entities:623:1" rel="noopener">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a> announced its takeover of <a href="https://www.smartkarma.com/entities/ntt-docomo-inc" target="_blank" data-smartkarma-citation="entities:1089:1" rel="noopener">NTT Docomo Inc (9437 JP)</a>, the immediate market reaction was to sell. This was seen as a sign that NTT was going to "take responsibility" for giving money back to customers. I wasn't sure why. Spending ¥4trln to buyback ¥200bn of minority interest net income was the equivalent of an enormous buyback. And given that doing so did not reward the government, which still holds more than one-third of NTT, in any way, NTT had to continue to reward the government through returns to shareholders - i.e. dividends and buybacks. Some of that was going to be supported through higher EPS, allowing continued growth in dividends. However, the government counts on getting an additional few hundred billion yen through sales proceeds every few years to fund its special projects, so the buybacks needed to continue, and as discussed many times on Smartkarma in the past, that only happens if NTT buys back stock from the public first, creating room under the NTT Law to allow NTT to buy back shares from the government while still keeping the government over one-third (or over the complicated and not-exactly-one-third calculation minimum under the law). When shares fell, NTT in November made clear that it was a) going to change things around at the NTT Docomo subsidiary - the CEO was out even before the Tender Offer ended - and b) was going to continue providing returns to shareholders. It announced a buyback on 8 November which was going to have big impact.I discussed in <a href="https://www.smartkarma.com/insights/ntt-go-big-or-go-home" target="_blank" data-smartkarma-citation="insights:44964" rel="noopener">NTT - Go Big Or Go Home</a> then later in <a href="https://www.smartkarma.com/insights/ntt-still-going-big-not-going-home" target="_blank" data-smartkarma-citation="insights:46264" rel="noopener">NTT - Still Going Big, Not Going Home</a>.Yesterday, NTT announced the results of its repurchase for December. It was not subtle. NTT was 18% of volume in December. There may be more impact to come.

When NTT (Nippon Telegraph &amp; Telephone) (9432 JP) announced its takeover of NTT Docomo Inc (9437 JP), the immediate market reaction was to sell. This was seen as a sign that NTT was going to "take responsibility" for giving money back to customers. I wasn't sure why. Spending ¥4trln to buyback ¥200bn of minority interest net income was the equivalent of an enormous buyback. And given that doing so did not reward the government, which still holds more than one-third of NTT, in any way, NTT had to continue to reward the government through returns to shareholders - i.e. dividends and buybacks. Some of that was going to be supported through higher EPS, allowing continued growth in dividends. However, the government counts on getting an additional few hundred billion yen through sales proceeds every few years to fund its special projects, so the buybacks needed to continue, and as discussed many times on Smartkarma in the past, that only happens if NTT buys back stock from the public first, creating room under the NTT Law to allow NTT to buy back shares from the government while still keeping the government over one-third (or over the complicated and not-exactly-one-third calculation minimum under the law). When shares fell, NTT in November made clear that it was a) going to change things around at the NTT Docomo subsidiary - the CEO was out even before the Tender Offer ended - and b) was going to continue providing returns to shareholders. It announced a buyback on 8 November which was going to have big impact.I discussed in NTT - Go Big Or Go Home then later in NTT - Still Going Big, Not Going Home.Yesterday, NTT announced the results of its repurchase for December. It was not subtle. NTT was 18% of volume in December. There may be more impact to come.

NTT's Big Beautiful Buyback Is Not The Only Reason to Own

Japan

Nippon Telegraph and Telephone Corporation provides a variety of telecommunication services, including telephone, telegraph, leased circuits, data communication, terminal equipment sales, and related services. The Company provides both local and long distance telephone services within Japan.

NTT (Nippon Telegraph & Telephone) (9432 JP)

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NTT (Nippon Telegraph & Telephone) (9432 JP)

Last Week in Event SPACE: OFAC's Longer List, TOPIX Free Float, PCCW, Jardines, Toa, Guoco, Sansan

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Japan Telecom Sector - KDDI Response to DoCoMo Pricing Increases the Pressure on Rakuten

New data pricing from KDDI undercuts NTT/Softbank, which is bad for FY21 sales but eases regulatory worries. It is definitely bad news for Rakuten...

Kirk Boodry

The Delayed TOPIX FFW Rebalance: $32bn To Trade

The Big Annual TOPIX FFW Rebalance of October 2020 was delayed until January. The results were not terribly surprising. Nevertheless, it is a big...

Travis Lundy

Last Week in Event SPACE: OFAC's Humdinger, China Mobile, NTT, Car Inc, Pressance, Tianneng Power

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

NTT's Big Beautiful Buyback Is Not The Only Reason to Own

NTT's Buyback is big and beautiful, but it is not the only reason to own. There are two other good reasons. But the buyback will still have impact...

Travis Lundy

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