SOFTBANK, the Japanese internet conglomerate, is planning to establish an off-balance sheet company to handle its ambitious £8 billion purchase of Vodafone Japan and hopes to relist the mobile phone unit on the Tokyo Stock Exchange “within a year”, sources close to the company said.

The new company, likely to be set up with about £1 billion of SoftBank’s money, will become a vehicle for raising the massive funds required to finance the deal. Sources said that fundraising methods will probably include a leveraged buyout worth about £4 billion, heavy borrowings and the possible issuance of convertible bonds.

The strategy reflects the colossal strain that the deal will place on SoftBank. Investors are in no doubt that Masayoshi Son, its maverick president, will somehow find the money that he needs to realise the project, but that it could leave the company in poor financial shape. One option, analysts said, may be to sell more shares in Yahoo! Japan, Mr Son’s biggest market success story, or even source investment directly from hedge funds, as SoftBank did with its own flotation three years ago.

If SoftBank is successful in winning control of the Vodafone business, it is likely that it will rebrand the entire operation quickly. The expected flotation would be used to raise funds for the massive infrastructure investment that will be required to make the existing Vodafone network competitive with its Japanese rivals NTT DoCoMo and KDDI.

Even with the funding of the deal under control, analysts believe that Mr Son will have a tough time making the Vodafone business a success. Running the operation better than Vodafone has will not be straightforward, Nathan Ramler, telecoms analyst at Macquarie, said.

“Obviously Vodafone is no lightweight — these people are global professionals — and it struggled in Japan. SoftBank is brand new to the mobile world, and mobile networks are notoriously difficult to run,” he said.

Vodafone has suffered badly in Japan from the perception that its coverage is far patchier than that of NTT DoCoMo. Analysts are clear that Mr Son has an expensive few years of technical catching-up to do.

Most believe that SoftBank’s strategy will be to use the Vodafone operation to become Japan’s first all-purpose communications “bundler”. The company has a fixed-line telephony business, which, for historical reasons, has a measure of compatibility with the Vodafone mobile network. It has internet broadband through Yahoo! Japan and has made strides in an early form of internet video on demand. Selling these all together at fixed rates would be of considerable appeal, analysts said.

SoftBank was not immediately available for comment.

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