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Tuesday, 24 April, 2001, 09:12 GMT 10:12 UK
DoCoMo: Racing to 3G launch
Mobile phone user in Japan
DoCoMo's i-Mode shows that users are prepared to pay for more advanced services
NTT DoCoMo is the world's largest mobile phone company by market value. It has pioneered the interactive use of mobile phone through its i-Mode services. BBC News Online profiles the company.

The wait for third-generation (3G) mobile phones is almost over, at least for the residents of Tokyo.

NTT DoCoMo - the wireless arm of Nippon Telegraph & Telephone - is due to launch an introductory version of the much-heralded new service in Japan's capital by the end of May in what will be the world's first commercial 3G operation.

Concerns about the expense of 3G, both for providers and consumers, have been a significant factor behind the sharp falls in the market value of telecoms companies since last year.

At present, many providers are extremely cagey about their expectations for 3G while analyst forecasts for 3G use and revenues vary tremendously.

i-Mode innovation

Big doubts appear to remain as to whether the new services will be sufficiently attractive and competitively priced to prompt a mass upgrading by users from their existing 2 or 2.5G phones.

DoCoMo is better placed to know than European providers, most of whom remain more than a year away from launching 3G.

The Japanese company - which has about 60% of its domestic wireless market - already offers a number of mobile phone services beyond the standard voice services.

And, unlike the wireless application protocol (Wap) services available in Europe, they have proved popular.

The main driver of the innovation has been the i-Mode service, which allows its more than 22 million subscribers to receive e-mail, download data and access internet portals via their mobile phone.

Value not volume

With the i-Mode launch about two years ago, DoCoMo also shifted its view of the mobile phone business, deciding not only that data rather than voice was the way forward but also value not volume.

In practice, this meant that DoCoMo stepped back from the fierce competition to win new mobile customers and concentrated on extracting more revenue from its existing subscribers.

It was able to do this by offering new services that customers had to pay for but found they wanted and could not get elsewhere.

With the advent of its 3G network (commercial launch has been put back four months to 1 October) DoCoMo plans to expand i-Mode.

The company is reported to be planning to invest 50bn yen ($400m) overhauling it.

Under the 3G i-Mode, users will, among other things, be able to attach image and music files to i-Mode e-mail.

NTT has also recently won government approval to offer its fixed-line customers a similar service, to be known as the L-mode.

Three-year plan

In a revised three-year business plan published in April, DoCoMo's parent company said it wanted to cut costs across its business to counter the threat of increased global competition.

Accelerated restructuring of some of NTT's many subsidiaries including the regional carriers is envisaged.

The plan has reportedly received a mixed reception by the Japanese government which wants the former state monopoly to take more steps to encourage competition.

It also wants NTT to reduce its stake in DoCoMo to less than 50%.


Like many other mobile phone operators, DoCoMo has also built up large debts in the past few years, through acquisitions and the high cost of developing 3G.

Among the acquisitions are a 16% stake in AT&T Wireless - which some industry observers view as a prelude to taking full control of the US firm's wireless division - and investments in KPN Mobile of the Netherlands, the UK's Hutchison 3G, Hong Kong-based Hutchison Telephone and Taiwan.

To help finance this, DoCoMo in January carried out Japan's biggest sale of new shares by a listed company.

This year, the company has also taken out a 1,200bn yen loan from five Japanese banks and sold $180bn worth of five and 10-year bonds.


These developments have not passed without criticism.

Some analysts said DoCoMo was destroying shareholder value by buying AT&T Wireless shares at a 35% premium and then paying for them by issuing new shares - a move that diluted the holdings of its existing shareholders.

Other forms of finacing would have been quite possible, they said.

One suggestion was that DoCoMo's senior management had been keen on the equity financing because it would dilute the stake of NTT to a level where it no longer had the right to dissolve the board or replace directors.

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