DoCoMo to Buy Stakes in 2 Phone Companies, Papers Say
Tokyo, Nov. 22 (Bloomberg) -- NTT DoCoMo Inc., Japan's No. 1 mobile phone company, agreed to buy stakes in wireless companies in the U.S. and Taiwan, paying as much as $9.6 billion to help extend its lead in providing Web-linked mobile phones able to download pictures, news and entertainment, newspapers reported.
DoCoMo will announce an agreement next week to buy a stake of about 20 percent stake in AT&T Wireless Group for about 1 trillion yen ($9.07 billion), the Financial Times said. It also agreed to pay about 60 billion yen for a similar stake in closely held cellular phone company KG Telecommunications Co., the Nihon Keizai Shimbun reported. Neither paper cited sources.
A spokesman for AT&T Wireless declined to comment while officials of parent AT&T Corp. would not confirm the report. NTT DoCoMo views North America ``as an interesting and attractive market,'' spokesman Norio Hasegawa said, declining to comment directly on the newspaper reports.
DoCoMo, a pioneer in providing mobile Internet access, wants to enter the U.S. to promote its technology for high-speed wireless Web access and other new services. A stake in AT&T Wireless would satisfy its goal of gaining access to the U.S. market, an effort that failed earlier this year when DoCoMo lost out to Germany's Deutsche Telekom AG for a stake in VoiceStream Wireless Corp. DoCoMo already has alliances in Europe and Asia.
The U.S. market is too large to miss,'' said Hironori Tanaka, an analyst at Morgan Stanley Dean Witter Japan Ltd. `` ``DoCoMo has two purposes for its U.S. expansion. One is to promote (its cellular phone technology) and the other is to offer mobile Internet services.''
DoCoMo's shares fell as much as 2.4 percent to 2.83 million yen. The shares have fallen 27 percent this year so far, compared with a 42 percent drop in the TOPIX Communication Index. AT&T Wireless shares yesterday rose 25 cents to $19.88.
Tracking Stock
DoCoMo, which is gaining about 80 percent of Japan's new cellular phone subscription, had 33 million wireless-phone customers in October, including more than 14 million subscribers to its i-mode mobile Internet service.
AT&T Wireless is the third-largest U.S. mobile phone company, with 13 million customers in September. AT&T Wireless is an AT&T tracking stock, designed to reflect the performance of the unit. AT&T plans to sell its remaining stake in AT&T Wireless by the middle of next year.
A 1 trillion yen investment by DoCoMo for a 10 percent to 15 percent stake would imply a value for AT&T Wireless shares of between $23 and $36 a share, according to an equity research report produced by Prudential Securities following the Nikkei report this morning.
AT&T Wireless's current market value is $46 billion. The company is listed as a tracking stock on the New York Stock Exchange.
W-CDMA
DoCoMo, an offspring of Nippon Telegraph & Telephone Corp., in May plans to introduce so-called third-generation high-speed mobile phone services in Japan, becoming one of the first phone companies in the world to offer the services. DoCoMo is promoting a technology called wideband code division multiple access, or W- CDMA, as a global standard for the new phone services.
AT&T now uses a digital cellular phone technology called TDMA, or time division multiple access, which is compatible with DoCoMo's W-CDMA, analysts said.
DoCoMo's expansion beyond Japan has heavily relied on minority stakes in wireless phone companies to reduce the Japanese company's risk abroad. DoCoMo has already bought minority stakes in foreign operators including Hutchison Telephone Co., Hong Kong's largest mobile phone company, KPN Mobile NV of the Netherlands and Hutchison 3G UK Holdings Ltd., which will provide the new high-speed services in the U.K.
``The outcome from the investment in AT&T will be much bigger than those investments DoCoMo made in Europe,'' said Yasumasa Goda, a senior analyst at Merrill Lynch Japan Inc. ``DoCoMo's entry to the U.S. may mean other U.S. carriers will introduce W- CDMA faster and the spread of W-CDMA will lighten DoCoMo's investment burden.''
Standards
While European carriers are likely to introduce W-CDMA even without DoCoMo's presence in Europe, U.S. carriers may stick to other technologies such as a standard called EDGE, or enhanced data rates for global evolution.
AT&T Wireless is planning to participate in an auction to be held next month for wireless radio spectrum, a resale of frequencies previously held by bankrupt NextWave Telecom Inc., which U.S. analysts expect will raise more than $10 billion.
AT&T's commitment to W-CDMA through a partnership with DoCoMo would be a tradeoff, giving the U.S. company cash for the upcoming spectrum auction, Goda said.
By having AT&T Wireless adopt W-CDMA technology, other potential users of the technology, including VoiceStream, may introduce the technology earlier than planned.
DoCoMo earlier this month said group net income rose to 217.5 billion yen, or 22,714.74 yen a share, in the six months to Sept. 30, from 178 billion yen, or 18,592.54 yen a share, a year earlier, as revenue from its mobile Internet service surged 20- fold.
Nov/21/2000 23:30 ET
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