More explanation of NTT and AWE deal.
Thursday November 30 3:08 PM ET
DoCoMo Takes 16 Percent of AT&T Wireless
By Ian Simpson and Eriko Amaha
NEW YORK/TOKYO (Reuters) - Japan's NTT DoCoMo (news - web sites) Inc., the telecommunications powerhouse that links millions of Japanese mobile phone users to the Internet, on Thursday said it would buy 16 percent of AT&T Wireless Group Inc. (NYSE:AWE - news) for $9.8 billion.
The stake in AT&T Wireless, a unit of No. 1 U.S. long-distance phone company AT&T Corp. (NYSE:T - news), gives DoCoMo (9437.T) a long-sought foothold in the U.S. telecoms market, the world's biggest.
AT&T Wireless, the No. 3 U.S. wireless company, will get access to DoCoMo's cutting-edge ``i-mode'' Internet-ready phones as it upgrades its network.
The deal sets up AT&T Wireless to be the first U.S. company to use the leading global standard for tapping into the Internet over wireless phones.
``We will, through this alliance, revolutionize wireless communications in the United States yet again,'' AT&T Wireless Chairman and Chief Executive John Zeglis said in a telephone conference call.
The stake in AT&T Wireless is part of DoCoMo's quest to become the world's biggest mobile telecoms provider. The Japanese company is already the world's top telecoms firm by market value.
DoCoMo also said it was taking a stake in Taiwan's No. 3 mobile phone company.
AT&T Corp. will use its portion of the proceeds from the DoCoMo deal, $3.6 billion, to pay down part of its $62 billion mountain of debt. AT&T Wireless, scheduled to be spun off by AT&T in mid-2001, will use the remaining $6.2 billion for expansion.
The deal gives AT&T Wireless a sizable bankroll ahead of the scheduled auction of U.S. wireless spectrum next month.
Analysts were upbeat about the deal.
DoCoMo ``is a partner you want to have if you're a wireless company,'' said Patrick Comack, an analyst with Guzman & Co. in Miami. ``I think AT&T scored a coup here.''
AT&T's share price, which has dropped 68 percent this year because of shrinking long-distance revenues and a dim sales growth outlook, rallied on the news.
AT&T was up 1/4 at $19-1/4 on the New York Stock Exchange (news - web sites) as markets overall were sharply lower. AT&T Wireless stock, which tracks the unit's performance, was unchanged at $17-15/16.
In Tokyo, DoCoMo's shares closed up 3.28 percent at 2.83 million yen. Its parent company, Nippon Telegraph and Telephone Corp. (9432.T) (NYSE:NTT - news), was up $1-5/16 at $42-3/8 in New York trading.
The deal will help AT&T Wireless' plans to become the first big U.S. carrier to set up a network using a high-speed wireless standard called the Universal Mobile Telecommunications System (UMTS).
Other countries already have committed themselves to using the UMTS standard. The United States is years behind the rest of the world in developing wireless data services.
The UMTS standard gives wireless phone users always-on access to such Internet features as video and CD-quality sound. The so-called third-generation links are more than five times faster than current speeds.
UMTS is also known as wideband code division multiple access, or W-CDMA (news - web sites). DoCoMo plans to become the first carrier in the world to offer W-CDMA services with a launch in Japan in mid-2001.
DoCoMo -- the word ``docomo'' means ``anywhere'' in Japanese -- has had spectacular success with its Internet-access ``i-mode'' phones. Some 14 million users in Japan now surf the Web on business card-sized screens.
AT&T Wireless will start deploying the third-generation equipment in 2002. The gear is expected to go into service starting in 2003.
DoCoMo has already taken stakes in such companies as Dutch carrier KPN Mobile (KPN.AS) and Hong Kong's Hutchison Whampoa Ltd. (0013.HK).
In addition to the AT&T Wireless deal, DoCoMo said on Thursday that it would take a 20 percent stake in Taiwan's No. 3 mobile carrier, KG Telecom, for $517 million (59.8 billion yen).
KG Telecom Chairman Leslie Koo said it and DoCoMo may explore the mainland China market, a coveted target of telecom firms.
AT&T Wireless and DoCoMo may work together to bring wireless data services to countries besides the United States and Japan, AT&T Wireless chief Zeglis told Reuters.
AT&T Wireless said it had picked Lucent Technologies Inc. (NYSE:LU - news), Nokia Group (NOK.N.) (NOK1V.HE), Nortel Networks Corp. (Toronto:NT.TO - news) (NYSE:NT - news) and Ericsson (LMEb.ST) (NasdaqNM:ERICY - news) to supply equipment for its high-speed wireless Internet services.
Financial terms were not disclosed.
DoCoMo President Keiji Tachikawa told a news conference in Tokyo that the AT&T Wireless and KG Telecom deals would initially be financed by bank loans but that DoCoMo would later consider bond or share issues to finance them.
Tachikawa said DoCoMo has no plans to list on the New York Stock Exchange.
The rating agency Standard & Poor's on Tuesday cut the long-term rating of DoCoMo and parent NTT to AA from AA plus, reflecting pressure from expansion of international operations and new telecoms business.
But another leading rating agency, Moody's Investors Service, affirmed its DoCoMo rating on Thursday. ``While Moody's expects the company to continue to make additional strategic acquisitions, the pace and magnitude of these investments is expected to be moderate,'' it said.
DoCoMo has been in talks for months with AT&T Wireless as well as Cingular, a joint venture created by U.S. local telephone companies BellSouth Corp. (NYSE:BLS - news) and SBC Communications Inc. (NYSE:SBC - news) that was seen as another candidate for its U.S. partner.
AT&T Wireless has 15 million mobile phone subscribers, with a 12 percent market share and average revenue per user of some $68. |
