The mobile subsidiary of Japanese e-commerce giant Rakuten Group is planning to raise new funding in a sale-leaseback deal that will see Macquarie’s Asia fund and Canadian pension manager British Columbia Investment Management investing in its mobile network assets through a consortium.
Tokyo-based Rakuten Mobile, which offers 4G and 5G Internet service, is looking for around 150-300 billion yen ($1-2 billion) from the deal and will continue to manage and operate the telecommunication assets over the decades-long lease period, according to an announcement. SMBC Nikko Securities is the arranger.
The fundraising effort is part of Rakuten Group’s broader strategy to balance investments with mid-to-long-term financial soundness as it tries to improve its balance sheet by reducing total interest-bearing debt and managing debt maturities, the statement read.
Rakuten Mobile’s profitability has been improving thanks to a steady increase in its subscriber base and a reduction in capex, the company said, adding that the parent group’s free cash flow in its Internet services business and dividends received from its fintech segment continue to grow as it aims to ensure self-funding for its mobile arm through internal cash flows by the end of this year.
“Rakuten Mobile is already well on its way to profitability, and with our new initiative, we will continue to build on this momentum as we aim to reach profitability even faster and become the top mobile carrier in Japan,” said Rakuten Group chairman and CEO Mickey Mikitani.
Macquarie’s asset management unit is facilitating the investment in Rakuten Mobile through the Macquarie Asia-Pacific Infrastructure Fund 3, which closed at over $4.2 billion in 2022.
Buyout investors have been gung ho since the Tokyo Stock Exchange announced that it would enhance focus on price-to-book ratios, overall capital efficiency, and updates to the M&A code that would create opportunities for take-private bids and welcome foreign investors. A sign of more supply availability for private capital investors could translate into a flurry of overall M&A activities this year.
“We believe Japan’s commitment to revitalise its digital economy and accelerate the pace of digital transformation presents significant opportunities to investors in the digital infrastructure sector,” said Verena Lim, Macquarie Group’s CEO for Asia.
Sale-leaseback transactions for infrastructure projects of listed firms have been gaining popularity across the Asia-Pacific region over the past decade. The mechanism allows owners to raise cash by offloading hard assets, known to be capex-heavy, to improve their financial position and continue to stay in the same locations.
In July, DealStreetAsia reported that Indonesia’s second-largest telcom company Indosat Ooredoo Hutchison is looking to sell its fibre and submarine cable assets in a sale-leaseback arrangement that could fetch up to $2 billion.
Last year, local tycoon Manuel Pangilinan-led PLDT raised 2.8 billion pesos ($47 million) from the sale of telco towers to Frontier Tower Associates Philippines, a parent company of KKR-backed Pinnacle, that followed with a leaseback agreement as part of the group’s effort to become asset-light.
