Itochu Corporation has made a full-scale entry into the mobile telephone MVNO (^*1) and MVNE (^*2) sector by joining with Itochu Techno-Solutions Corporation (hereafter “CTC”) to form a capital/business alliance with Inphonix Inc. (hereafter “Inphonix”), a MVNE that provides support services for MVNOs.

This acquisition of Inphonix common stock from Cybozu, Inc. makes Itochu the largest Inphonix shareholder. At the same time, Itochu has also taken up new shares (preferred stock) to make Inphonix an equity method affiliate (with an investment share of 37.0%, including stock options that have already been issued, and a stake of about ¥350 million). CTC, Development Bank of Japan Inc. and Mitsubishi UFJ Capital Co., Ltd. also acquired shares at the same time.

Itochu will use this stock acquisition as an opportunity to provide Inphonix with multifaceted support (such as marketing, systems and distribution) via the companies in the Itochu Group. In so doing, Itochu will aim to creating a leading position in the mobile telephone MVNO sector, which is expected to grow as a horizontally separated business model as the mobile telecommunications industry is foreseen to move from vertical integration towards horizontal separation.

CTC has been expanding its support operations for MVNOs as an MVNE since November 2008, and will contribute to the alliance by providing back-end support at the systems level when Inphonix provides support for MVNOs, and by supporting MVNOs as they create and operate their own systems. CTC also has a rich track record in creating and operating systems for telecommunications carriers and, by combining this with Inphonix's knowledge and experience regarding MVNO operations, CTC will be able to establish a system that can provide MVNOs with comprehensive support for everything from system planning through to actually operating these systems as they expand their business. CTC and Inphonix also plan to cooperate in terms of sales and marketing, and to make joint submissions to clients. Inphonix expects to undertake around fifteen to twenty projects over the next three to five years, with an additional one to two million subscribers and sales projections in the range of forty to ninety billion yen.

1. MVNO: Mobile Virtual Network Operator
2. MVNE: Mobile Virtual Network Enabler. A company that supports MVNOs and provides them with supplementary functions that they require.

Inphonix http://www.inphonix.com

Inphonix is an MVNE whose strength is in business acceleration for mobile telephone MVNOs, where it is easier to add value than it is with the data cards that most MVNOs are currently focusing on. Inphonix has created a competitive and realistic business model in terms of its knowledge and experience of the MVNO business, the systems that it owns, the proposed MVNE projects that it is promoting and the positive relationships that it has developed with telecommunications carriers. Inphonix is currently engaged in supporting the planning processes for mobile telephone MVNOs for several dozen major companies, several of which are scheduled to go into service this year.The MVNE/MVNO businesses that Inphonix is promoting are mainly MVNOs that ordinary companies provide to their existing customers and members, and so Itochu is also hoping that some of the many companies that the Itochu Group does business with can be regarded as potential customers.

Select Mobile - an original service that Inphonix will launch in the future

In future, Inphonix will start a new service called Select Mobile, which acts as an agent for MVNO businesses. By using this service, companies that are considering becoming MVNOs can launch telecommunications businesses with less risk and less overheads, even without the special knowledge required by the telecommunications business, such as negotiations and contracts with telecommunications carriers. This service equips companies with all the functions that they need to become an MVNO in a short period of time, so that the number of subscribers required to break even can be lowered substantially compared to the break-even point if they launched an MVNO on their own. (Traditionally, the break-even point for mobile telephone MVNOs was considered to be several hundred thousand subscribers, but Inphonix's Select Mobile service makes it possible to break even with just tens of thousands of subscribers.)