Willcom, Japan's PHS operator, went bankrupt with ¥206 billion in debt

Willcom began as DDI-Pocket in 1995, a subsidiary of KDDI that operated a Personal Handy-phone System (PHS) network — a low-cost mobile phone standard developed in Japan. Unlike cellular networks, PHS used smaller, lower-power base stations that made it cheaper to build out and cheaper for consumers. By 2006, Willcom had passed 4 million subscribers and was Japan's largest PHS operator, offering flat-rate voice calls and data transmission that cellular carriers could not match at the time.

In 2004, The Carlyle Group acquired a majority stake in DDI-Pocket from KDDI and renamed the company Willcom in February 2005. The spin-off was intended to give the PHS operator independent management and a focused strategy. But the timing was unlucky: just as Willcom became independent, Japanese cellular carriers were rolling out faster 3G data networks and the first smartphones were arriving. PHS's cost advantage was steadily erased as cellular prices dropped and data speeds widened.

Willcom lost subscribers year after year to NTT Docomo, KDDI's own au service, and SoftBank Mobile. The shrinking subscriber base meant less revenue, which meant less investment in the network, which accelerated the decline. By 2010, the company could not reschedule its ¥206 billion (US$2.2 billion) in debt. It filed for bankruptcy protection with the Tokyo District Court on February 18, 2010. The company's capital was written off entirely.

In December 2010, SoftBank purchased 100% of Willcom's shares. The company was merged with eAccess on June 1, 2014 to form Ymobile, which was later absorbed into SoftBank. The Willcom brand disappeared, but the Y!mobile brand lived on as SoftBank's low-cost carrier. The case is a textbook example of a technology that was cheaper but older, and lost to a faster rival even though the market loved the price.