UPDATE 3-Japan's DoCoMo to invest in S. Korea's KTF
Thu Dec 15, 2005 04:11 AM ET
(Adds more details, analyst comment)
By Yukari Iwatani Kane and Rhee So-eui
TOKYO/SEOUL, Dec 15 (Reuters) - NTT DoCoMo Inc. (9437.T: Quote, Profile, Research) will buy a 10 percent stake in South Korea's KTF Co. Ltd. (032390.KS: Quote, Profile, Research) at a premium for about $560 million, giving Japan's top mobile operator a foothold in one of Asia's most advanced mobile markets.
The two companies said on Thursday KTF will sell DoCoMo an 8.8 percent stake in newly issued shares and 1.2 percent in treasury stocks for 564.9 billion won ($557.4 million). DoCoMo will receive one seat on KTF's board of directors.
The deal values KTF at a 12.2 percent premium based on its closing price on Wednesday.
The two companies said the alliance would allow them to offer roaming services, jointly seek new business opportunities and cost-savings and ensure KTF's deployment of a W-CDMA network.
"KTF expects over 1 trillion won worth of synergies from the alliance in the next seven years," said KTF Chief Executive Cho Young-chu in a news conference, adding that the two companies intended to also seek joint investment opportunities overseas.
The two countries have strong trade ties and tourism is active particularly from Japan to South Korea, helped by the popularity of South Korean movies and television programs in Japan.
NO CONTROL OVER RISKS
The news -- first reported by Reuters -- comes as DoCoMo is seeking new ways to expand its business amid tough competition in Japan. Things will be tougher next year as a new government rule makes it easier for users to switch operators. Three new mobile entrants are expected to start services in coming years.
Shares of KTF closed down 3 percent at 24,200 won before the news as investors anticipated that KTF would issue new shares, diluting the stock. Shares of DoCoMo, a unit of Nippon Telegraph and Telephone Corp. (9432.T: Quote, Profile, Research) , closed unchanged at 178,000 yen.
Analysts in Tokyo said the deal was fairly valued and relatively cheap, but many of them questioned DoCoMo's reasons for making the investment.
"I don't understand why they invested in KTF," said Tetsuro Tsusaka, a telecoms analyst for Deutsche Securities. "Investors are worried that this is yet another overseas investment DoCoMo is making in which it has no control over the risks."
The alliance with KTF is DoCoMo's first major investment in an overseas operator since it pulled out of interests in AT&T Wireless Services Inc., Dutch operator KPN Mobile N.V. and Hutchison 3G UK Holdings Ltd. (3UK) after incurring heavy losses.
DoCoMo spent nearly 1.9 trillion yen in the past decade to buy small stakes in operators around the world to promote the use of its i-mode mobile Internet technology and ensure the adoption of high-speed third-generation networks on the same W-CDMA standard that it uses.
"I'd like to see their business plan," said Kazuyo Katsuma, a telecoms analyst for J.P. Morgan. "Unless DoCoMo plans to take advantage of KTF's expertise in technologies like Wi-Fi, Wi-Max and satellite, it'll just be a repeat of its failures in Europe."
KTF INVESTORS POSITIVE
For KTF, cooperation with DoCoMo could boost its competitive position in the South Korean market, where operators are set to launch potentially lucrative new services next year, including high-speed wireless Internet services.
"I'm quite positive on the deal," said Lee Seung-mun, a fund manager at Midas Asset Management. "The pricing of the stake appears quite positive (for KTF)," he said.
KTF spent 1.3 trillion won ($1.3 billion) for a licence to offer W-CDMA services in December 2000, but it has yet to start a service, in part because it already offers a near-equivalent service based on an alternative technology developed by Qualcomm Inc. (QCOM.O: Quote, Profile, Research) .
"The deal could also pave the way for KTF to narrow the gap with its bigger rival SK Telecom and expand its market share by taking advantage of NTT DoComo's services," Kim Sung-hun, a telecoms analyst at Daewoo Securities.
DoCoMo said it has no plans to sell phones with its i-mode technology in South Korea, but it was looking ahead to the next-generation beyond W-CDMA.
"DoCoMo and KTF can jointly develop 4G technology and work together to make it an international standard," Toshinari Kunieda, managing director of NTT DoCoMo's global business department, told Reuters on the sidelines of a news conference.
Following the deal, the KTF stake held by South Korea's top fixed-line and broadband operator, KT Corp. (030200.KS: Quote, Profile, Research) , will fall to 44.4 percent from 48.7 percent currently.
KT carries about 95 percent of the local telephone market and half of the broadband market in South Korea, while KTF controls about 32 percent of the mobile market. ($1=120.03 Yen) ($1=1025.0 Won) (Additional reporting by Rafael Nam and Kim So-young in Seoul)
© Reuters 2005. All Rights Reserved. |
