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A Simple Guide to NTT's Acquisition of NTT Data Group and Future Strategy

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NTT's Acquisition of NTT Data G and Future Strategy Explained Simply

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Introduction

Hello everyone! 🐰 I'm back. Suddenly, what companies come to mind when you hear the term "large-scale M&A"?

On May 8, 2025, NTT, Japan's leading telecommunications company, announced that it would turn its listed subsidiary, NTT Data Group (hereafter NTT Data G), into a wholly owned subsidiary for approximately 2.37 trillion yen. This acquisition scale is the second largest in the history of the NTT Group, following the acquisition of NTT Docomo in 2020 (approximately 4 trillion yen).

Many of you might have thought, "Wait, isn't NTT already the parent company of NTT Data G? Why are they buying it?" In fact, NTT was the parent company holding about 58% of NTT Data G's shares, but the remaining 42% was owned by general shareholders. This time, they will acquire the remaining shares through a Takeover Bid (TOB) to make it a wholly owned subsidiary.

Actually, just the other day (May 9), I shared the news that the NTT Group would undergo a large-scale organizational restructuring and trade name change starting July 1. This announcement coming just a day later is likely no coincidence. Let's take a look at the details of NTT's acquisition of NTT Data G, its connection to the group restructuring I mentioned previously, and the future outlook for the NTT Group.

Background and Purpose of the Acquisition

Speeding Up Decision-Making by Eliminating Parent-Subsidiary Listings

Why is NTT making NTT Data G a wholly owned subsidiary? NTT President Akira Shimada stated that the reason was that "the capital structure had become complex, posing challenges for decision-making."

A parent-subsidiary listing refers to a situation where both the parent and subsidiary companies are listed on a stock exchange. In this state, the subsidiary's management must consider the interests of not only the parent company's shareholders but also the subsidiary's minority shareholders (shareholders other than the parent company), making decision-making complex.

In 2022, the NTT Group reorganized its overseas businesses, establishing a structure where NTT Data G would handle the group's overseas operations. However, looking at the actual investment structure, NTT held 45% and NTT Data G held 55% of the overseas business company NTT DATA Inc., while for the overseas data center business NTT Global Data Centers, NTT held 50%, NTT Urban Development 20%, and NTT Communications 10%, resulting in a complex situation.

President Shimada explained, "The decision to make it a wholly owned subsidiary was made to further increase the speed of decision-making (which was hindered by factors such as complex capital relationships)."

Explosive Increase in AI and Data Center Demand

Another major factor is the explosive increase in data center demand due to the rapid rise of AI and generative AI.

Since the U.S. company OpenAI launched its "ChatGPT" service to the public in late 2022, AI technology has advanced dramatically, and companies worldwide have accelerated their investments in AI. Data centers are essential for the development and operation of AI, and the demand for them is rising rapidly.

NTT Data G has established a position as the world's 3rd largest provider of data center services and 8th in IT services. To maintain and strengthen global competitiveness in this growth field, faster decision-making and aggressive investment are required.

Yutaka Sasaki, President of NTT Data G, explained the benefits of becoming a wholly owned subsidiary: "As our global business expands through system integration projects with Big Tech (Amazon Web Services, Microsoft, and Google Cloud) and partnerships with OpenAI, we needed a stronger financial foundation to leverage economies of scale."

Strengthening Competitiveness in the Global Market

In its Medium-Term Management Strategy announced in May 2023, the NTT Group identified "Strengthening DX and data utilization in society and industry" and "Expansion and sophistication of data centers" as key priorities. A major goal is to strengthen competitiveness in global markets, particularly in the North American market, within these fields.

Currently, global companies such as Accenture and IBM maintain strong competitiveness in the IT services market. For NTT Data G to break into the "world's top 5," an integrated group strategy is essential.

Details of the Acquisition

Overview of the TOB (Takeover Bid)

From May 9 to June 19, 2025, NTT will purchase shares of NTT Data G at 4,000 yen per share. This price includes a premium of approximately 34% over the closing price of 2,991.50 yen on May 7.

The target of the purchase is 592,810,968 shares, representing approximately 42% of NTT Data G's outstanding shares not currently held by NTT, with the total purchase amount reaching approximately 2.3712 trillion yen.

The funding will be secured through bridge loans (short-term financing) from five domestic financial institutions, with plans to sequentially switch to long-term funding after the procurement.

Timeline and Process of the Acquisition

According to President Shimada, full-scale consideration for this move to a wholly owned subsidiary began in September 2024. A formal proposal was made to NTT Data G in November of the same year, and a special committee was established by both companies in December to proceed with specific deliberations.

While explaining to outside directors and scrutinizing the impact on minority shareholders, the terms of the tender offer were finalized in April 2025, leading to this official announcement.

NTT Data G has also expressed its support for becoming a wholly owned subsidiary and has issued an opinion recommending that shareholders participate in the offer.

NTT Group's New Strategy

Connection to the Previous Group Reorganization

In my recent article, I mentioned that the NTT Group would undergo organizational restructuring and trade name changes starting July 1, and there is a clear connection with this acquisition.

In the previous reorganization, a shift toward a strategy centered on the Docomo brand was pursued, with NTT Communications changing its name to "NTT Docomo Business" and NTT Comware to "NTT Docomo Solutions."

On the other hand, this move to make NTT Data G a wholly owned subsidiary aims to strengthen digital service businesses centered on global operations. In other words, it can be said that the NTT Group has clarified a two-pillar strategy: "domestic business centered on the Docomo brand" and "overseas business centered on NTT Data G."

Overall view of NTT Group reorganization and acquisition

Strategy After Becoming a Wholly Owned Subsidiary

NTT and NTT Data G have laid out the following three pillars for development after the transition to a wholly owned subsidiary:

  1. Strengthening the portfolio of global solution businesses

    • Strengthening the North American market
    • Enhancing AI-utilizing services
    • Strengthening digital engineering
    • Expanding and advancing data centers to meet AI demand

  2. Strengthening collaboration of group resources/capabilities

    • Strengthening sales of integrated solutions for large enterprise customers
    • Strengthening sales to local governments and medium/small enterprise customers using NTT Data Group's software assets
    • Promoting the social implementation of AI by utilizing NTT Group's R&D achievements, such as the next-generation communication infrastructure "IOWN" and generative AI "tsuzumi"

  3. Accelerating decision-making and improving cost competitiveness, customer experience, and employee experience

    • Simplifying governance and streamlining overlapping functions
    • Achieving optimization of resource assets
    • Promoting group-wide digital transformation (DX) for internal common tasks in software development and corporate sales by maximizing the use of AI

Of particular note is the advancement of AI's social implementation by utilizing research and development assets such as "IOWN" (Innovative Optical and Wireless Network) and generative AI "tsuzumi" held by the NTT Group.

This is also consistent with NTT's goal of "transforming into a digital service company," which I mentioned in the previous article.

NTT Group's New Strategy and Growth Policy

Collaboration with other companies within the group

President Shimada has expressed his intention to strengthen collaboration among NTT Group companies and streamline overlapping operations after the move to a wholly owned subsidiary.

Specifically, the following collaborations are planned:

  • Optimization of sales for large corporate customers: NTT Communications (New: NTT Docomo Business)
  • AI technology field: NTT TechnoCross
  • Sophistication of Business Process Outsourcing (BPO) utilizing IT services: NTT Marketing Act ProCX and NTT Nexia
  • Research and Development: NTT Laboratories

President Shimada stated that these collaborations are not intended to be a large-scale organizational restructuring, but rather optimization through strengthening and streamlining.

Market Impact

Impact on NTT and NTT Data G Stock Prices

Following the announcement of the acquisition, NTT Data G shares saw buy orders at the daily upper limit of 3,492 yen, up 17% from the previous day, on the Tokyo market during the May 8 trading session.

On the other hand, there was also a positive reaction to the shares of NTT, the buyer. This is seen as a positive evaluation of the increase in corporate value due to the elimination of parent-subsidiary listings and the strengthening of global competitiveness through faster decision-making.

The Trend Toward Eliminating Parent-Subsidiary Listings

In recent years, the movement to eliminate parent-subsidiary listings has been accelerating among listed companies in Japan. In February 2025, the Tokyo Stock Exchange published "Investor Perspectives on Parent-Subsidiary Listings, etc.," which prompted further consideration, enhanced information disclosure, and dialogue with investors regarding parent-subsidiary listings, about which investors often express dissatisfaction from the perspective of minority shareholder protection.

In response, NEC announced the move to make NEC Networks & System Integration a wholly owned subsidiary, and Aeon signed a share exchange agreement in April to make Aeon Mall a wholly owned subsidiary. Such moves to eliminate parent-subsidiary listings are progressing among companies listed on the Tokyo Stock Exchange.

With this acquisition of NTT Data G, the NTT Group has now eliminated all parent-subsidiary listings where NTT directly invests without going through a subsidiary.

Impact on the IT Industry

NTT Data G is the largest domestic player in the IT services industry, surpassing Fujitsu and NEC, and is a major global company ranking in the top 10. Its move to become a wholly owned subsidiary is expected to have the following impacts:

  1. Accelerated restructuring of the domestic IT industry: To counter the NTT Group's moves, other major IT companies may accelerate their own restructuring or partnerships.

  2. Intensified global competition: The transition is expected to speed up NTT Data G's decision-making and strengthen its offensive in the global market.

  3. Intensified competition in the data center market: NTT Data G is the world's 3rd largest data center operator and will likely aim to expand its market share by further accelerating investment.

  4. Accelerated AI-related investment: The development and utilization of AI technology will progress across the entire NTT Group, which is expected to stimulate AI-related investment throughout the market.

SoftBank Group Chairman and CEO Masayoshi Son commented on the announcement, stating, "NTT Data's platform is very powerful. For companies competing in the global market, this will likely create good synergies."

NTT Group's industry position and acquisition effects

Future Outlook and Challenges

Organizational Management After Integration

The NTT Group will undergo a major transformation following this acquisition and the organizational restructuring starting in July. However, such large-scale reorganizations are always accompanied by challenges.

A particularly important point will be how to maintain consistency between the "Docomo-centered domestic strategy" and the "NTT Data G-centered overseas strategy." Brand strategy and resource allocation could also become complex.

Furthermore, integrating organizational cultures will be a challenge. The key to success lies in effectively coordinating organizations with different corporate cultures within the NTT Group.

Expansion of Data Center Investment

Simultaneously with becoming a wholly owned subsidiary, NTT Data G announced that it would sell six overseas locations, including those in the U.S., to a data center Real Estate Investment Trust (REIT) scheduled to be listed in Singapore. The total sale price is approximately 240 billion yen, and a gain on transfer of 155.4 billion yen is expected to be recorded in the fiscal year ending March 2026.

This move is viewed as a way to strengthen its financial position and secure funds for aggressive future data center investment. The NTT Group intends to further accelerate data center investment in line with the expansion of AI demand.

Prospects for Success in Global Competition

For NTT Data G to break into the "top 5" of the global IT services market, it must differentiate itself from its powerful competitors in Europe and North America.

The NTT Group's strength lies in its comprehensive capabilities, covering everything from telecommunications infrastructure to cloud, AI, and data centers. In particular, by combining advanced communication infrastructure technology such as "IOWN" with NTT Data G's IT services and Docomo's mobile technology, there is a possibility of providing unique solutions that other companies cannot offer.

In the upcoming AI era, such comprehensive technical expertise and proposal capabilities will be the source of competitiveness.

Resurrection of "Big NTT"

This move toward becoming a wholly owned subsidiary and the organizational restructuring is reminiscent of the resurrection of the powerful telecommunications group once known as "Big NTT." NTT had taken a decentralized approach, such as spinning off its long-distance business in the 1999 reorganization and lowering its ownership stake in NTT Docomo in 2004.

However, the current direction is toward group integration, as seen with the 2020 acquisition of NTT Docomo and now the move to make NTT Data G a wholly owned subsidiary.

This can be described as a strategic choice to win global competition in the AI era rather than a mere reversion to the past. President Shimada explained, "It is not a return to the Big NTT of the past, but an organizational optimization suited to the new era."

Summary

NTT's acquisition of NTT Data G as a wholly owned subsidiary is a major acquisition involving a massive investment of approximately 2.37 trillion yen. However, its purpose is not mere expansion of scale, but to respond to global competition in the AI era and to achieve strategic integration across the entire group.

To summarize the key points:

  1. Speeding up decision-making by eliminating parent-subsidiary listings: Resolves complex capital relationships and enables rapid management decisions.

  2. Strengthening AI and data center strategy: Accelerates data center investment to meet rapidly expanding AI demand.

  3. Strengthening global competitiveness: Aims to increase presence in global markets, particularly in the North American market.

  4. Clarification of group strategy: Establishes a two-pillar strategy with domestic business centered on Docomo and overseas business centered on NTT Data G.

  5. Utilization of R&D results: Provides differentiated solutions by utilizing R&D outcomes such as "IOWN" and "tsuzumi."

This acquisition, together with the organizational restructuring starting in July, can be called a crucial step in demonstrating the NTT Group's future strategy. We look forward to seeing the results that Japan's leading IT corporate group will achieve in the global market.

Stay tuned for the next one! 🐰

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