(Corrects operating profit amount in 12th paragraph of story originally published March 17.)

March 17 (Bloomberg) -- Softbank Corp., Japan's second- largest Internet access provider, will buy Vodafone Group Plc's Japanese mobile-phone unit for 1.8 trillion yen ($15.4 billion) to gain 15 million customers.

Softbank will pay about 1.4 trillion yen in cash and Vodafone, the world's biggest mobile-phone company, will finance the remaining 400 billion yen. Vodafone will use the proceeds to return 6 billion pounds ($10.5 billion) to shareholders, the Newbury, England-based company said in a statement today.

The acquisition gives Softbank's billionaire founder Masayoshi Son a network with 17 percent of Japan's 8.5 trillion-yen mobile phone market, where it competes against NTT DoCoMo Inc. and KDDI Corp. Vodafone Chief Executive Officer Arun Sarin agreed to sell the unit after failing to increase profitability.

``Softbank will be able to get a subscriber base immediately,'' said Koji Uchida, who helps manage $47 billion at Mitsubishi UFJ Asset Management Co. in Tokyo. ``There is potential for Vodafone's business to be revitalized, but it won't be easy and will be costly.''

Shares of Softbank rose 4 percent to 3,140 yen on the Tokyo Stock Exchange. Vodafone shares declined 1 penny to 129 pence in London, valuing the company at 77.9 billion pounds.

`Reduced Prospects'

Vodafone's sales growth is slowing after Sarin's predecessor, Christopher Gent, spent $300 billion on acquisitions. The company reiterated today that it expects mobile revenue will grow 5 percent to 6.5 percent in fiscal 2007, compared with the 6 percent to 9 percent forecast for the fiscal year ending March 31.

Vodafone is selling the unit because of its position as the third-largest of Japan's three mobile companies, and ``the reduced prospects for superior long-term returns and a good offer from Softbank,'' Sarin, 51, said on a conference call.

The company also said it expects asset writedowns for the current fiscal year will be at the upper end of the 23 billion pound to 28 billion pound range announced Feb. 27. The amount includes writedowns on the value of the Japanese unit, which Gent acquired in parts during his six years as chief executive. Gent, 57, resigned March 12 from the honorary position of Vodafone's president for life.

Softbank approached Vodafone to buy the Japanese unit while negotiating to lease the U.K. company's network, Sarin said.

New Brand

Softbank will introduce a new brand for the service, Son, 48, told reporters in Tokyo. ``I see this as a smaller risk than building the business from zero,'' Son said. ``I don't intend to stay No. 3 in five to 10 years' time.''

The Vodafone K.K. Japan unit lags behind its two rivals in network coverage and subscriber growth. Profits have been shrinking as the company invests in infrastructure and offers discounts to attract customers.

The Japanese unit's operating profit fell 55 percent to 191 million pounds in the six months to Sept. 30, and its profit margin before interest, tax, depreciation and amortization dropped 6 percentage points to 22 percent.

Vodafone K.K. reported Ebitda of 804 million pounds in the six months ended Sept. 30, according to company reports.

``Selling the Japanese unit is a good move by Vodafone and the direct result of a lot of investor pressure to perform better,'' said Pieter Wind, who oversees about $12 billion as head of securities at ING Private Banking in Amsterdam, including Vodafone shares.

Preferred Stock

Vodafone will accept 300 billion yen of payment in the form of zero-coupon preferred shares in the Softbank holding company that buys the unit. It will also lend 100 billion yen to Softbank repayable in September 2013, charging annual interest of 5 percent. Vodafone said the fair value of the preferred stock and subordinated loan is a combined 1.1 billion pounds.

Softbank has until April 4 to prove it can raise the cash for the deal and will pay a 60 billion yen breakup fee should it fail. The company said it will borrow between 1.1 trillion yen and 1.2 trillion yen in what would be Asia's largest leveraged financing.

Softbank will contribute 200 billion yen of cash to the transaction and its Yahoo! Japan Corp. unit will buy 120 billion yen of preferred shares in the holding company.

Vodafone K.K. also attracted a bid from Cerberus Partners LP, a U.S. buyout firm that has invested $8 billion in Japan, and Providence Equity Partners Inc., a buyout firm specializing in telecommunications companies, people familiar with that offer said earlier this week.

`Expression of Interest'

Sarin said the company had one other ``expression of interest,'' declining to identify the party or parties. Softbank is offering ``full value'' for the unit and ``certainty.''

Standard & Poor's said on March 6 it may cut Softbank's credit rating because buying Vodafone may impose a substantial financial burden on the company. S&P put Softbank's BB- long- term corporate credit and senior unsecured debt ratings under review.

Son, now Japan's eighth-richest man, started Softbank in 1981 as a software retailer and has expanded into investment funds, electronic commerce, online auctions and professional baseball through acquisitions.

One of the founding investors of Yahoo! Inc., Son in 2004 spent more than $3 billion, including debt, to buy Japan Telecom Co. and the Japan unit of Cable & Wireless Plc. Softbank was one of three companies granted wireless licenses last year as Japan opens the industry to competition for the first time in 12 years.

Softbank hired Deutsche Bank AG, Goldman Sachs Group Inc. and Mizuho Financial Group Inc. to work on the transaction. UBS AG advised Vodafone.

To contact the reporters on this story: Aiko Wakao in Tokyo at awakao@bloomberg.net

Last Updated: March 17, 2006 21:27 EST