TOKYO (Reuters) - Kyocera Corp 6971.T is entering the final stage of talks to buy Sanyo Electric Co's 6764.T loss-making mobile phone business, sources close to the matter said, in a deal that would create the world's No.7 cell phone provider.
The business daily Nikkei said earlier Kyocera aims to buy Sanyo’s cell phone operations for about 50 billion yen ($435 million), sending their shares higher as investors welcomed signs of consolidation in Japan’s overcrowded handset market.
Sanyo and most other Japanese cell phone makers are in a tough position as they compete with much larger rivals such as Finland's Nokia NOK1V.HE and Motorola Inc MOT.N of the United States outside Japan, and face a maturing market at home.
The sale of the mobile phone unit would be the latest step by Sanyo, restructuring with the help of shareholder Goldman Sachs GS.N, to shed non-core or struggling businesses to focus on key operations such as rechargeable batteries.
Sanyo, which booked a net loss for the three business years through March, sold its stake in leasing firm Sanyo Electric Credit Co 8565.OS to General Electric Co GE.N this year and is seeking a buyer for its microchip unit.
Kyocera was the world’s 10th largest mobile phone maker in the second quarter of calendar 2007 in unit sales to end-users, according to research firm Gartner, while Sanyo was the 11th largest.
Specific market share for each firm for the second quarter was not immediately available, but Gartner said their combined operations would make them the world’s seventh-largest mobile phone maker.
In the January-March quarter Sanyo was the ninth largest cell phone provider with a 0.8 percent share, Gartner has said.
Mizuho Investors Securities analyst Masako Nagayasu said one potential benefit of the deal for Kyocera, which makes electronic components as well as cell phones, is that it would create larger demand for Kyocera’s cell phone parts such as ceramic capacitors.
Mobile phones typically use 200 to 300 capacitors each.
The potential purchase is also expected to boost Kyocera's presence in the United States, where Sanyo has Sprint Nextel Corp S.N as a major customer.
Both Kyocera and Sanyo said in separate statements that nothing has been decided.
A Kyocera spokeswoman declined to comment about whether the Kyoto-based company is in negotiations with Sanyo on a possible purchase of the mobile phone business.
Sales of Sanyo’s telephone gear business, which is mainly made up of mobile phones, came to 340.2 billion yen in the year ended March 31, representing 15 percent of its group sales.
The Osaka-based consumer electronics maker posted a 72 percent fall in operating profit for April-June, hit by sluggish sales of its mobile phones and higher raw materials prices.
Sanyo now expects to sell about 11 million units of mobile phones in the current business year to March 2008, down from its initial estimates of 12.5-12.6 million.
The sale of the mobile phone unit would not put an end to Sanyo’s exposure to the mobile phone market since its lithium-ion batteries are used in four of every 10 cell phones in the world.
Shares in Sanyo, which told Reuters in August its mobile phone business will likely turn profitable in the current quarter to the end of September, closed up 5.7 percent at 185 yen, while Kyocera rose 4.2 percent to 10,790 yen.
The Tokyo stock market's electrical machinery index .IELEC.T was up 1.81 percent.
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