Billionaire Cannibals Erase $4 Billion in Son-Mikitani Fight

Billionaire Masayoshi Son, Japan’s second-richest person, mounted an attack on the next wealthiest, Hiroshi Mikitani, wiping out a combined $4.3 billion in their companies’ market values.

Son, chairman of Yahoo Japan Corp., eliminated fees that the Internet search and shopping business charges for online stores. The move is a direct challenge to Mikitani’s Rakuten Inc., the country’s largest Internet shopping mall.

The rivalry pits Rakuten’s model of charging businesses fees to operate shops in its online mall against Son’s portal and retail site, which got more than half of revenue last fiscal year from advertising. Investors bet the earnings of both companies will suffer, sending Rakuten plunging 12 percent in Tokyo trading yesterday. Yahoo Japan slumped 6.5 percent.

“In a fight between Son and Mikitani, I would place bets on Masayoshi Son,” said Gerhard Fasol, president of Tokyo-based technology consulting firm, Eurotechnology Japan.

Son’s wealth trails only that of Fast Retailing Co. founder Tadashi Yanai in Japan, while 48-year-old Mikitani’s fortune is the country’s third-biggest.

“We are not planning to change our fee structure at all,” Jeremy Tonkin, a spokesman at Tokyo-based Rakuten, said by phone. “Rakuten operates from a position of strength in the e-commerce market.”

Double Squeeze

Rakuten competes against Son’s Yahoo Japan at home and Inc. globally, Fasol of Eurotechnology Japan said.

Mikitani sees the Seattle-based e-commerce company, led by Chief Executive Officer Jeff Bezos, as its rival and even has a T-shirt with Japanese characters reading: “Beat Amazon.”

“Rakuten gets squeezed on both sides,” Fasol said in an interview yesterday. “Son and Jeff Bezos are the brightest businessmen on the planet. They know how to operate with rock-bottom margins.”

Rakuten has about 29 percent of Japan’s 4 trillion yen ($41 billion) e-commerce market and charges vendors about 10 percent of sales, according to estimates by Nicholas Tanner, an analyst at BGC Partners in Singapore. That compares with Yahoo Japan’s 6 percent market share, which is declining, Tanner wrote in a note to clients.

“An unproductive price war has just begun,” Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo, said in a telephone interview yesterday. Akino spoke in Japanese, using a metaphorical term for unproductive that also connotes baldness.

Son, whose pate is mostly unburdened by hair, responded by writing on “I’m not bald, I still have a little.”

Application Torrent

The 56-year-old billionaire’s price cut attracted new customers, Tokyo-based Yahoo Japan said in a statement today.

Yahoo Japan, which hosts about 20,000 businesses on its shopping site, received 10,000 applications from shops in one day, it said in the statement. The company also said it gained 16,000 applications from individuals seeking to open stores.

“Yahoo’s attempts to increase vendors in the past through lower fees have not helped its business,” Tanner wrote. The online portal had already reduced what it charged vendors to between 1.7 percent and 6 percent, he wrote.

Yahoo Japan fell 3.7 percent in Tokyo trading today. That took its two-day drop to 10 percent, the largest since the March 2011 earthquake in Japan. Rakuten dropped 1 percent for a two-day slump of 13 percent.

Billionaire Fight

Mikitani, who earned an MBA degree at Harvard Business School in 1993, amassed his fortune by helping businesses sell products online through his Rakuten Ichiba mall. Like Son, who owns the SoftBank Hawks, a professional baseball team, Mikitani has title to the Rakuten Eagles, which have clinched first place in Japan’s Pacific League this year.

Mikitani’s fortune dropped to $7.1 billion at the close of trading yesterday, from $8 billion the day before, according to the Bloomberg Billionaires Index. Mikitani holds shares directly in his name, through his consulting company Crimson Group Inc. and through his wife Haruko Mikitani.

Son’s net worth declined to $14 billion from $14.3 billion. He holds an almost 22 percent stake in SoftBank Corp. in his name and has pledged 69.5 million shares as a collateral against loans he has with 17 financial institutions. Shares held as collateral have been excluded from his net worth calculation.

Price Competition

Son’s salvo against Rakuten comes after SoftBank, Japan’s third-largest mobile-phone carrier and 42.6 percent owner of Yahoo Japan, completed its acquisition of U.S. wireless provider Sprint Corp.

After taking over Japan’s No. 3 mobile-phone carrier from Vodafone Group Plc in 2006, Son eroded the market share of his bigger competitors by cutting prices for wireless services and vowing to remain the lowest-cost major provider.

Son’s move to eliminate fees for online shops at Yahoo Japan severs one of the business’s three revenue sources, which include advertising and digital content sales, said Yuki Nakayasu, a Tokyo-based analyst at Credit Suisse Group AG.

“I must say, it’s a bold change,” Nakayasu said by phone. “It’s definitely a plus for users and a plus for shops, while in terms of earnings for operators, it’s going to be a minus.”

Tonkin of Rakuten said business-to-consumer online shopping totals about 4 trillion yen in annual transactions in Japan, with fashion and apparel accounting for the biggest share.

“We are going to keep investing in our business for the long term,” Tonkin said. “Our business is actually accelerating.”

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