Hikari Tsushin - Company History

Hikari Tsushin was founded in February 1988 by Yasumitsu Shigeta, a twenty-three-year-old who had dropped out of Nihon University and spent four years in part-time work. Japan’s 1985 privatisation of NTT had opened the telecom market, and a wave of new carriers — DDI, Japan Telecom, Teleway Japan — rushed in without sales networks of their own, leaving the whole industry dependent on outside agents to reach customers. Shigeta started in the gap between carrier and customer, selling home telephones door to door, and within six months signed an agency contract with DDI to resell long-distance service.

From 1990 the company widened into office equipment — copiers, business phones — carrying Sharp’s products. Sharp ranked below Ricoh, Canon and Fuji Xerox in office machines, so the small-business market Hikari Tsushin was opening held little competition, and the interests of a weaker direct-sales maker and a hungry agent aligned neatly. As its prospecting list the company used the roughly 5.3 million firms printed in NTT’s Town Pages business directory — public information, zero barrier to entry, yet no rival built an organisation to phone every listing in turn, book a visit and sell face to face. Hikari Tsushin took, almost alone, a market everyone could see and no one would touch.

The mobile phone turned this method into a phenomenon. When carriers shifted handsets from rental to outright sale in 1993–94, Hikari Tsushin opened its first HITSHOP mobile store in 1994 and, from 1998, switched the chain to franchising — franchisees bore the store costs while Hikari Tsushin collected the acquisition fees, letting it pile up outlets with almost no capital of its own. By August 1999 the chain reached 1,816 stores. Amid the internet bubble the market prized Hikari Tsushin as a “telecom-meets-IT” growth company, and after its 1999 listing on the Tokyo Stock Exchange First Section its market capitalisation briefly topped $26.4B (¥3tn). Behind the euphoria, though, the quality of franchise operations was already rotting — unseen by management and investors alike.

In 2000 the fraud hiding inside the franchise chain — a practice called nekase, “letting contracts sleep” — came to light. Stores that would lose their franchise for missing quotas had been booking contracts for customers who did not exist: the owner fronted the handset and call charges, reported the phantom line to headquarters to hit the quota, and cancelled it after six months to a year. The scheme had held the company’s reported results far above reality for years. When it surfaced, the stock that had carried Hikari Tsushin to the top of the bubble fell for twenty straight limit-down days and lost roughly 99% of its value in about eight months — an event later retold as a trigger of Japan’s dot-com crash.

The fraud forced a special loss of $635.8M (¥69bn). What saved Hikari Tsushin from collapse was neither management skill nor operating strength but another artefact of the same bubble: SoftBank shares it had bought in the boom. A gain of $742.5M (¥80bn) on selling them offset the loss, and the company eked out a thin net profit for the year to August 2000. A firm inflated by the internet bubble was, just barely, rescued by another of the bubble’s products. Shigeta then chose to steer back to the plain B2B door-to-door model of the founding years, spending three years withdrawing from the glamorous mobile-retail business that had made his name.

Rebuilding began with the balance sheet: interest-bearing debt of $2.1B (¥231bn) in April 2000 was cut to $320.9M (¥37bn) in three years through asset sales and store closures, while the target store count was pulled from 3,000 to 2,000, 500 unprofitable shops were shut, and 1,050 outlets went in four months — leaving the network at 40% of its peak. Concentrating on corporate sales again, the company rediscovered the deeper value of the copier — a stock-revenue business, where a single contract earns not only an upfront fee but a stream of per-copy charges over years, unlike the one-shot sale of a mobile phone. Its weapon was the Sharp copier: cheap machines from a maker holding under a tenth of the market and no match for Canon in distribution, sold door-to-door to the small firms and SOHO buyers who put price first. Office equipment reached 32% of sales in the half-year to September 2002, up from 16%, and that unglamorous grind carried Hikari Tsushin back to a net profit in the year to March 2004.

The rebuilt company treated its recovery as a template. Through the 2000s and 2010s, as office digitisation sapped copier demand, Hikari Tsushin kept the small-business sales platform intact and changed only the goods riding on it — entering home-delivery water servers in 2015, retail electricity when that market fully deregulated in 2017, and small-amount, short-term insurance for smartphones and other devices. What every new line shared was a customer base of small firms and sole proprietors and, crucially, a stock-revenue structure that keeps accruing after each contract is signed.

The essence was never a particular product but the channel itself. On top of a fixed asset — a direct-visit and telemarketing network into small businesses — the company loaded whatever could be sold, and often bought the maker outright by tender offer to bind product capability and its own selling power together in a single stroke. Device insurance in particular grew into a distinctive, low-competition niche. Buying growth this way was as much a way to buy time as to diversify: each acquisition fused an existing operator onto a selling machine that already worked, and one shrinking market could be covered by loading the next product onto the same network.

By 2018 the market value passed $9.1B (¥1tn) again — a “second trillion-yen company,” but built this time on the unglamorous accumulation of sales, not the bubble illusion of the HITSHOP years. Alongside the operating business Hikari Tsushin grew, year by year, into something like a portfolio manager: a “net investment” book of long-held stakes in listed companies that reached $5.4B (¥852bn) at cost and $9.3B (¥1.48tn) at market by the end of March 2026, with unrealised gains before tax of $3.9B (¥624bn). Holdings are picked on three tests — a stable business, strong finances, a cheap price — and measured by an earnings yield, its share of investees’ operating profit over the purchase price, which stood at 16.3%. The whole enterprise runs on two dials, stock profit and net investment, and the $884.5M (¥140bn) of attributable operating profit now exceeds the $701.6M (¥105bn) the operating business itself earned in the year to March 2025.

Two rules anchor the discipline Shigeta imposes. One is to hold cash equal to three years of interest-bearing debt at all times; the other is a hurdle rate — the company will not chase share for its own sake, and drops any business that falls below the yield it demands, spinning off the responsible subsidiary along with it. Dispersing operations across more than 150 small subsidiaries is part of the same philosophy, meant to maximise each unit’s sense of ownership. The record shows in the numbers Hikari Tsushin most cares about: dividends not cut for 23 straight years and raised for 15, repeated buybacks, and, in the year to March 2024, a record net profit of $806.6M (¥122bn). Where the HITSHOP peak had been a bubble mirage, this is the arithmetic of a sales machine that finally caught up with its own valuation.