DoCoMo has European headache but nets USD6.5 billion in US

28 Oct 2004

The Japanese mobile operator NTT DoCoMo is hoping to renegotiate a deal with one of its European i-mode partners in order to clear the way for another tie-up. DoCoMo’s first i-mode ally in Europe, the Dutch telco KPN, currently offers i-mode services in the Netherlands, Belgium and Germany, where it claimed a total of 1.45 million customers for the mobile internet service by mid-2004. However, DoCoMo is now hoping to sign a new i-mode deal with UK-based operator mmO2, which is present not only in the UK and Ireland but is also one of KPN’s rivals in the German market.

KPN sees its i-mode offering as one of its main competitive advantages, allowing it to differentiate its services from those of its rivals. It will not be keen to see another telco providing similar services in the fiercely contested German market, where its local subsidiary E-Plus is virtually neck and neck with mmO2 in the race for subscribers. But DoCoMo is eager to fill a hole in its European i-mode coverage by signing a UK partner, while mmO2 would like to introduce i-mode to bolster its mobile internet portfolio.

The introduction of new services and content via i-mode is giving Europe’s smaller mobile players such as KPN and Bouygues of France the opportunity to compete with the larger companies such as Vodafone, Orange and T-Mobile which have built up their own wireless internet services.

While NTT DoCoMo has one i-mode headache in Europe, it has been left with an altogether different problem in the US. Cingular Wireless’ USD41 billion acquisition of DoCoMo’s current US partner AT&T Wireless will leave the Japanese company without a foothold in the North American market. DoCoMo had paid a total of around USD10 billion to take a 16% stake in AT&T Wireless and is expected to recoup around USD6.5 billion from Cingular on completion of the takeover, which was given the green light by US authorities yesterday. DoCoMo has already revealed that it expects to see a JPY430 billion (USD4 billion) non-consolidated gain in its 2004/05 financial year which ends in March.

DoCoMo has not revealed whether or not it plans to re-enter the North American market with another tie-up. AT&T Wireless was a perfect US ally for DoCoMo as it offers 2G and 3G services which are compatible with those provided by the Japanese company in its domestic market.

PriMetrica's GlobalComms