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Carlyle Group loses $330 million on bankruptcy of Japanese telecom Willcom

By Thomas Heath
Washington Post Staff Writer
Friday, February 19, 2010

The Carlyle Group suffered a $330 million loss Thursday when a Japanese mobile phone company in which it had a big interest filed for bankruptcy protection, the second time in a little more than a year that Carlyle has taken a hit in the highly volatile telecommunications field.

Carlyle, a District-based private equity firm, bought 60 percent of Willcom from Japanese telecom company KDDI in 2004 and grew its subscriber base from about 3 million to 4.6 million in 2007.

Willcom was unable to hold on to users of its personal handy phones -- wireless devices that can work as cordless phones at home or mobile phones on the street -- as customers fled to larger competitors such as SoftBank, NTT DoCoMo and KDDI. The larger companies offered better-quality services and greater range, as well as lower rates, according to a Carlyle spokesman.

"Fierce price and technology competition coupled with the global credit crisis hurt this once-promising investment," said Carlyle spokesman Chris Ullman. "Even with this loss, this fund [Carlyle Japan Partners] will still double our investors' money."

Carlyle wrote off its $425 million investment in Hawaiian Telcom Communications in late 2008 after the telephone firm collapsed and filed for bankruptcy protection.

"Despite Willcom and Hawaiian Telcom, we have had a number of grand slams in this sector," Ullman said. "It's indicative of how challenging the telecom market can be."

Ullman said Carlyle in recent years made five times its money on its investments in Dutch cable-TV company Casema BV and satellite company PanAmSat.

Carlyle has put much emphasis on investing in Asia, especially in China and Japan. Co-founder David Rubenstein has said Asia is a rich source of future returns, and the firm recently bought a restaurant chain and an auto technology company in Japan.

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