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Tuesday, 24 April, 2001, 05:36 GMT 06:36 UK
DoCoMo delays 3G launch
Mobile phone user in Japan
DoCoMo's i-Mode shows that users are prepared to pay for more advanced services
Japan's NTT DoCoMo - the wireless arm of Nippon Telegraph & Telephone - has put back the commercial launch of its third-generation (3G) mobile phone network to October.

The company had previously expected to start offering the much-heralded new services in Tokyo by the end of May in what would have been the world's first commercial 3G operation.

A DoCoMo spokesman said further tests were needed to ensure the technologically sophisticated system worked properly.

The new launch date would be 1 October although an "introductory" service would be available from the end of May, DoCoMo said.

Global delay?

Analysts said the delay wouldn't be damaging to DoCoMo's profits - the company had only bargained on 150,000 3G subscribers for the first year - but would add to the unease of telecoms investors around the world about prospects for 3G.

DoCoMo had been expected to lead the way in 3G, both in terms of technology and in showing which new services appealed to consumers.

"There's a possibility this could delay the start of global 3G services," said Motoharu Sone, an analyst at Tsubasa Securities in Tokyo.

Cagey

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.

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.

NTT DoCoMo - which has about 60% of the Japanese wireless market - already offers a number of mobile phone services beyond the standard voice services.

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.

AT&T acquisition

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.

Criticism

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.

The government has said it wants NTT to reduce its more than 60% stake in DoCoMo to less than 50%.


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