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There is a horrible moment in most British football managers’ careers when results turn against them, pressure builds & previously supportive fans lose the faith. It’s at this point decisions start to get questioned & a time worn chant often rings out around the terraces:

‘You don’t know what you’re doing! You don’t know what you’re doing!’

Brutal in its simplicity it cuts right to the heart of the matter. The question today: does it apply to KDDI?

It follows an article in the Nikkei indicating Japan’s #2 ranked mobile carrier is preparing to take a stake of just under 50% in, Japan’s #5 ranked online brokerage, & is ready to invest up to Y100bn. That is up to Y100bn for a stake of less than 50% in a business that on Weds 23rd Jan 2019 had a market cap of Y129bn.

Why? The Nikkei suggests KDDI is ‘hurrying to develop financial services as its next pillar of earnings’ in response to a flagging core telecommunications business, the move following the establishment of a JV internet bank in 2008 & acquisition of a 25% stake in LIFENET INSURANCE (7157). Ergo bank + life insurer + brokerage = financial services one-stop-shop: genius!

The deal has a whiff of flailing around in search of a strategy that might help redefine a mobile business under increasing pressure. But it appears to ignore incumbent financial service operator strength (eg SBI) & the fact others have been there / are doing that (Rakuten springs to mind).

How long before shareholders lose the faith?