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Wednesday, 27 September, 2000, 11:26 GMT 12:26 UK
AOL seals Japan telecoms deal

Japanese mobile telecoms giant NTT DoCoMo has taken a 43.2% stake in the Japanese subsidiary of internet service provider America Online.

The sale is part of an alliance which should allow two of the world's largest internet service providers to build their business in Japan and worldwide.

Under the terms of the deal, AOL is to yield control of its subsidiary to NTT DoCoMo for $100m, as it reduces its 50% stake to 40.3%.

We hope to converge our fixed and mobile internet services and spread them on a global scale

NTT DoCoMo's Keiji Tachikawa

The far-reaching alliance should not only help AOL boost its presence in Japan, but will also expand the global reach of I-Mode, NTT DoCoMo's phenomenally successful mobile internet access service.

AOL has had difficulty establishing its presence in the Japanese market.

This deal should enable it to increase its subscriber reach there, as NTT DoCoMo will market AOL as its preferred internet service provider. DoCoMo also plans to introduce AOL mail and AOL instant messenger on I-Mode.

I-Mode success

The two companies also plan to bring about a global convergence of their PC-based and mobile internet services.

This should build on the success of I-Mode, the NTT DoCoMo internet access service.

DoCoMo's I-Mode internet access service has twelve million subscribers, compared with AOL's 440,000 subscribers. The service is also gaining about 40,000 to 50,000 subscribers a day.

The success of I-Mode has been "extraordinary", AOL president Bob Pittman said.

"We are just as focused [as NTT DoCoMo] on developing next-generation convergence technologies that will make the internet experience even more convenient, easy to use and central to people's everyday lives," he said.

NTT DoCoMo president Keiji Tachikawa said: "We hope to converge our fixed and mobile internet services and spread them on a global scale."

"We believe this alliance will play an important role in our global expansion of I-Mode and mobile multimedia, and for the promotion of our [next generation] technology to the rest of the world," Mr Tachikawa said.

The original joint venture partners Mitsui and publisher Nihon Keizai Shimbun will own a joint 17.4% stake in AOL Japan. The former currently owns 40% of AOL Japan while Nihon Keizai holds a 10% stake in the company.

NTT looks to the US

For NTT DoCoMo, the logic of linking up with AOL is clear, as it will help it establish a US presence.

"The significance [for DoCoMo] is that they get a link up with the largest fixed line internet subscriber company," Kirk Boodry, telecoms analyst at Dresdner Kleinwort Benson said on Tuesday. "For DoCoMo, this kind of agreement makes them more attractive for any US carrier that they would want to form a strategic agreement with."

Globally, AOL has 24 million subscribers.

As part of the deal, the two companies are to set up an internet portal for wireless carriers.

Their plan is to develop technologies and services worldwide to meet the growing demand for internet access through wireless devices.

The alliance will also have an investment arm and the two companies plan to direct their funds into companies involved in fixed line and mobile convergence.

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See also:

09 May 00 | Business
NTT, KPN in mobile deal
24 May 00 | Business
Mobile internet boosts NTT
26 Jan 00 | Business
The AOL - Time Warner merger
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