November 12, 2009
KDDI CORPORATION, a Japanese corporation having its principle office in Tokyo, Japan, and whose President and Chairman is Mr. Tadashi Onodera (Hereinafter referred to as "KDDI"), has entered into agreement with Bangladeshi ISP bracNet, a Bangladeshi corporation having its principle office in Dhaka, Bangladesh, and whose CEO is Mr. Mohammad Abdur Rab (Hereinafter referred to as "bracNet"), and its primary shareholders gNet DEFTA Development Holding, LLC, an investment fund having its principle office in Delaware, United States, and whose chairman is Mr. George Hara, and which is established by Defta Partners, an American corporation having its principle office in California, United States, and whose Chairmen and CEO is Mr. George Hara (Hereinafter referred to as "DEFTA Partners"), and NGO BRAC, a Bangladeshi NGO having its principle office in Dhaka, Bangladesh, and whose Founder and Chairperson is Mr. Fazle Hasan Abed — by concluding a share subscription agreement and shareholders' agreement to acquire shares of bracNet on November 12th, 2009.
This investment marks the beginning of a strategic partnership between KDDI and DEFTA Partners to cooperate in the promotion of new business in developing countries.
In response to bracNet's request for third party investment, KDDI will invest in and acquire 50% of bracNet's shares. bracNet was originally established as a joint venture between DEFTA Partners and BRAC in 2005 with DEFTA owning 60% of the company. Under DEFTA's management, bracNet's business grew significantly and reached EBITDA profitability in the 4th quarter of 2008. After reaching this milestone, bracNet joined in partnership with KDDI, a global communications company and experienced player in the industry worldwide.
Bangladesh has a population of 160 million, making it the 7th most populous country in the world. Although internet connectivity is expected to become highly marketable due to demand, internet penetration remains low at 2%. Hence, swift improvements of such services are highly anticipated by the populace. bracNet was a forerunner in its deployment of infrastructure that efficiently combines Fixed WiMAX and Optical Fiber, and is currently providing stable high speed internet connectivity services to its customers across Bangladesh. This investment will enable bracNet to increase the number of their fixed-WiMAX base stations and expand their internet broadband coverage over Bangladesh.
KDDI and DEFTA Partners will cooperate in business activities that involve pursuing the development of new markets and performing social assistance activities through investments, establishment of business models, and the provision of technological and business know-how related to communications infrastructure and service providers in developing countries.
Currently, approximately 4 billion people or 70% of the global population lives within developing countries and earns an annual income of less than USD 3,000 (JPY 300,000). It is estimated that the potential of this untapped market has a value of approximately USD 5 trillion (JPY 450 trillion). Recent efforts by companies in several other industries to proactively promote the development and growth of new markets by approaching people in these markets as business customers rather than recipients of charitable work through product and service offerings that take into consideration the purchasing power of, and market trends among people within developing countries garnered worldwide attention.
It is said that such activities underlined by public interest capitalism have not only realized measurable improvements in the standard of living, but have also facilitated an increase in the productivity and earnings among people within developing countries. Additionally, such improvements will facilitate the further expansion of the market and the creation of new business opportunities that will in turn lead to solutions concerning pressing global issues such as poverty reduction.
KDDI's provision of services in developing countries will form new markets by deploying local communications infrastructure, and promoting high quality and low cost internet broadband. We anticipate internet use within developing countries to perform functions that are grounded in the daily lives of people such as in the areas of e-learning and telemedicine, in ways that will help to close the digital divide and substitute transport infrastructure. Ultimately, we expect the creation of synergies in which the aforementioned benefits will not only improve the local standard of living, but also facilitate regional development and reduce poverty through the further expansion of markets.
Since its establishment in 1984, DEFTA Partners has sought-out, supported, trained, and funded numerous technology ventures with a focus on the United States, Europe, and Israel. Beginning with its 2005 investment in bracNet, DEFTA Partners has realized the world's first joint venture with an NGO that is based upon a business model that allocates 40% of profits to educational and healthcare initiatives for the public interest. Moreover, the company has received attention in recent years for its work to leverage cutting-edge technology of the post-computer era to help realize e-learning and telemedicine activities to improve the standard of living for those who live in developing countries. In the near future, DEFTA Partners plans to expand its activities in developing countries, in Africa and Latin America, in addition to Asia.
The synergies generated between KDDI's technological prowess and vast business experience in the ICT Sector and DEFTA Partners' experience working in Asia, Africa, and Latin America, as well as, developing international networks and alliances will enable the creation of truly effective and sustainable internet broadband environments and social infrastructure across the developing world.
As KDDI and DEFTA Partners deepen their relationship as strategic business partners in the development of markets and the provision of service, we would also like to proactively cooperate in future mid-to-long term business in developing nations.