NTT DoCoMo Inc. made a major step forward in its international strategy Thursday with the conclusion of a deal that will see it gain a 16 per cent stake in AT&T Wireless Systems Inc., the third largest wireless carrier in the U.S. At the same time, the company said it had also inked a deal to take a 20 per cent in Taiwan’s KG Telecommunications.
A deal in the United States has eluded the company, Japan’s largest cellular carrier, for some time after a series of talks with other potential partners broke down. NTT DoCoMo was keen to secure a deal with a U.S. carrier in order to round out a global business strategy that sees the company working with partners in North America, Europe and Asia on next generation cellular technology and wireless data services.
Under the terms of the deal signed Thursday morning, completion of which is eyed for January 2001, NTT DoCoMo will invest just over US$9.8 billion to obtain a 16 per cent stake in AT&T Wireless. The company is currently a subsidiary of AT&T Corp. although a spin off into a separate company is planned for mid 2001, after which DoCoMo will continue to hold a 16 per cent stake.
Much of the deal focuses on technology. AT&T Wireless is committing to adopting W-CDMA (Wideband Code Division Multiple Access) for its third generation mobile system. W-CDMA is the system favored by NTT DoCoMo and the company has been keen to push other carriers into adopting the system.
The W-CDMA network could be launched in limited areas in the U.S. in 2002 – a year later than DoCoMo’s planned launch in May 2001, said Jordan Roderick, president international, AT&T Wireless, at a Tokyo press conference announcing the deal.
AT&T Wireless subscribers are likely to see the first benefits as early as 2001 as DoCoMo appoints a chief technology officer to a new subsidiary company of AT&T Wireless. That company will initially include the current PocketNet business although it will grow to include other yet-to-be launched services. Both partners will together appoint a chief executive officer for the new subsidiary.
AT&T will also work towards producing new handsets that are compatible with both current WAP (Wireless Application Protocol) services and the Compact HTML (hypertext markup language) used by DoCoMo’s I-mode. At a press conference announcing the deal, NTT DoCoMo President Keiji Tachikawa said he hoped users could be logging onto I-mode services in New York by late next year.
For AT&T Wireless, the deal brings with it a substantial amount of money. Roderick said the cash is likely to be spent in two places: the upcoming next round of frequency auctions and in enabling the upgrade to W-CDMA technology. In addition, the U.S. carrier will also gain the substantial experience that DoCoMo has built up in operating I-mode — one of the world’s most successful wireless data services with over 15 million subscribers.
The deal is also likely to speed up the development of more advanced wireless data services for AT&T Wireless’ subscribers and see new services, such as cellular phones that support Java and adapters for use with games consoles like the PlayStation.
With KG Telecom, NTT DoCoMo said it has signed a deal, also expected to close in late January 2001, to take a 20 percent stake in the company for NT$17.1 billion (US$518.1 million).
Like the other deal, KG Telecom will migrate to the W-CDMA platform for next generation cellular services and the two companies will work together on wireless data services. KG will also form a subsidiary company to hold its wireless data operations although unlike the AT&T Wireless deal, DoCoMo will own a direct one-third stake in the new subsidiary.
After the deal is complete, NTT DoCoMo will be the second largest shareholder in KG Telecom following the Koos Group, which will have a 35.3 percent share. Teco Electronic and Machinery Group will hold a 6.6 percent share and other shareholders will make up the remainder.
In infrastructure terms, KG Telecom is already advanced having launched a packet-based GPRS (General Packet Radio Service) network on its GSM system in September. Packet-based networks, like the one DoCoMo operates for I-mode, allow carriers to charge only for the amount of data sent or received from a cellular phone and come with no time-based charges.
Both deals further DoCoMo’s international business plan – a plan that is focused on getting other carriers to adopt W-CDMA and spread its wireless data technology through taking stakes of between 15 per cent and 20 per cent in the companies. To date the Japanese carrier has taken a 19 per cent stake in Hong Kong’s Hutchison Telephone Co. Ltd., a 15 per cent stake in the Netherlands’ KPN Mobile NV and a 3.6 per cent stake in Brazil’s Telefonica Cellular.
It is also working with KPN Mobile and Hutchison Whampoa Ltd., parent of Hutchison Telephone, to secure third-generation mobile licenses in Europe and recently inked a deal with America Online Inc. under which it acquired a 42.3 per cent stake in AOL Japan.
For the future, Tachikawa said at the press conference that acquisitions in the U.S. and European markets are over for now although the company is still keen on striking more deals in Asia.
NTT DoCoMo, in Tokyo, can be contacted at http://www.nttdocomo.co.jp/.
