DoCoMo to Go Global with AT&T, Taiwan Stakes

NEW YORK/TOKYO - NTT DoCoMo, the top telecom company in the world by market value, will take its successful mobile Internet services to the U.S. market by buying 20 percent of AT&T Wireless Group, sources said.

An alliance worth up to $9.0 billion could be announced as early as next week, sources in New York said late on Tuesday.

That would give DoCoMo, a subsidiary of Nippon Telegraph and Telephone Corp, its long-sought foothold in the world's biggest telecommunications market, and give the newly established AT&T Wireless a chance to become a major mobile service provider.

Japanese media reported that DoCoMo would also cement a smaller deal with a wireless carrier in Taiwan within the month.

Officials of AT&T Wireless and NTT DoCoMo, both subsidiaries of former monopolies in the world's two biggest telecoms markets, declined to comment. They have been in talks for months, and expectations of an agreement have mounted in recent weeks.

A DoCoMo official declined to comment on the talks, but said: "We have been looking to the United States, along with Asia, as a very attractive market."

DoCoMo's shares fell 4.5 percent on Wednesday to 2.77 million yen, hurt by the strong likelihood that Japan's dominant mobile phone service provider would have to issue additional equity to pay for such an acquisition.

"Deals like this would give DoCoMo a boost if the market was strong. But it's apparently ill-timed as everyone is so concerned about weak demand in the stock market,'' said Hidenori Kawasaki, equities trading general manager at Kokusai Securities.

High Hopes DoCoMo has been scouring the globe for partners this year in its quest to leverage its success with the 'i-mode' Internet-enabled cell phones, which boasts 14 million users browsing the Web on business card-sized screens.

It has cemented alliances in Europe and Asia to eventually offer third-generation, or 3G, mobile services, which offer video and CD-quality sound over connections more than five times faster than current services.

DoCoMo has a "wealth of experience in wireless data, which is the next frontier for wireless -- the next growth opportunity," said ABN Amro analyst Kevin Roe.

Already 12-18 months ahead of the rest of its global competitors, DoCoMo will launch 3G services in Japan next May, but has yet to establish itself in the United States and Asia.

DoCoMo is in a 10.3 billion yen alliance with America Online's Japanese unit to beef up its content and e-mail services, and has been in talks with Cingular, a wireless joint venture between U.S. local telephone companies BellSouth and SBC Communications, sources said.

Equity, Countries To buy a 20 percent stake in AT&T Wireless, the wireless telephone arm of AT&T Corporation, DoCoMo will have to raise at least 1.5 trillion yen by next March to finance the deals and pay for other operation costs, Mark Berman, a senior telecom analyst at Credit Suisse First Boston, said.

"My guess is: one trillion yen by an equity offering and 500 billion yen from bank loans," Berman said.

Although DoCoMo already has a shelf registration for one trillion yen in new equity, the estimate for its funding needs also must factor in further expansion plans, such as for Asia.

DoCoMo is set to ink a deal with unlisted Taiwan mobile carrier KG Telecom, the Nihon Keizai Shimbun reported.

In what analysts see as the next step in its Asia strategy, DoCoMo will pay about 60 billion yen ($545.2 million) for a 20 percent stake in the company, Taiwan's third-largest mobile carrier, the Japanese business daily reported.

U.S. Advantage Analysts said the deal with AT&T should give DoCoMo an advantage when venturing into the world's biggest mobile market.

"AT&T's brand name is obviously very big in the U.S.," said Kirk Boodry, a senior telecom analyst at Dresdner Kleinwort.

Boodry said although digital migration from analog in the U.S. mobile phone market has been slow, DoCoMo should have an opportunity to leverage its technologies such as packet-systems that maximize the use of radio channels and allow many users to access the network at the same time.

The Yomiuri Shimbun daily said the alliance with AT&T Wireless would be launched next May in Japan and extend to comprehensive cooperation on global 3G mobile phone services.

Analysts said AT&T Wireless may be more attractive than Cingular as a partner for DoCoMo since it already has a publicly traded stock, making it easier to put a price tag on.

Cingular also has a more complicated management and ownership structure, since it is controlled by two companies.

AT&T Wireless currently is a tracking stock of AT&T, but it will become an independent company under AT&T's plan to split into four separately traded businesses.

(Additional reporting by Eriko Amaha in Tokyo)