Moody's cuts DoCoMo outlook on 3G fears
By Mariko Sanchanta in Tokyo
Published: January 7 2003 9:33 | Last Updated: January 7 2003 9:33
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Moody's, the credit rating agency, on Tuesday cut its ratings outlook for NTT DoCoMo, Japan's dominant mobile phone operator, because of concerns over company's fledgling third-generation phone service.
Moody’s cut its outlook on DoCoMo’s senior long-term debt to "negative" from "stable", citing concern over the future of the Foma 3G service.
DoCoMo "may face greater challenges in securing for Foma the solid market position it has achieved for its 2G services," said Moody's.
"This, in turn, means that the company's ability to generate stable and exceptionally rich cash flow may also be increasingly challenged over the intermediate term."
DoCoMo launched the world's first 3G wideband CDMA service in October with much fanfare. But the debut of Foma has been lacklustre at best, gaining only 149,000 subscribers by the end of November.
While Foma offers faster transmission speed and superior voice quality, the service still has technical problems and limitations that make it far less reliable than less advanced phones.
The battery life of Foma handsets is extremely short and coverage is limited. Even in Tokyo there are many places where connection is impossible and access is frequently interrupted. The 150g video phone is also considered too heavy.
Moody's also cited DoCoMo's overseas investment losses of ¥1,400bn ($11.7bn) over the past two years. The company has written off 75 per cent of its original ¥1,800bn investment in AT&T Wireless, KPN Mobile and Hutchison 3G UK. DoCoMo invested in the companies in a bid to expend its W-CDMA network worldwide, but such moves have since been delayed due to soft demand.
DoCoMo hopes that with the support of corporate users, and as the network is rolled out nationally to cover 97 per cent of the Japanese population by 2004, subscriber numbers will rise to 6m.
DoCoMo's shares closed up 1.8 per cent to ¥233,000, ahead of the Moody's downgrade, which came after the close of Tokyo trading. |
