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DoCoMo links with AT&T
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November 30, 2000: 5:19 p.m. ET
Japanese cellular provider pays $9.8B for 16 percent stake in AT&T Wireless
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NEW YORK (CNNfn) - NTT DoCoMo, Japan's leading wireless telephone provider, agreed Thursday to pay $9.8 billion to acquire a 16 percent stake in AT&T Wireless, gaining a long-sought foothold in the U.S. wireless market.
The long-rumored alliance gives AT&T Wireless (AWE: Research, Estimates), the No. 3 U.S. wireless company, access to DoCoMo's considerable experience in wireless data services and is expected to accelerate the company's ability to provide high-speed access to the Internet via cellular phones.
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 John Zeglis, CEO of AT&T Wireless, chats with CNNfn about alliance with DoCoMo. |
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DoCoMo, a separately listed unit of NTT Corp., is expected to roll out its new wireless Internet technology, "i-mode," on a widespread basis next Spring that will provide Web access at speeds 10 times faster than what is commonly available today, analysts said.
"We've been telling [our customers] that we were going to take them to a new place called the mobile Internet and with this strategic alliance, our partner DoCoMo is going to bring the world's finest mobile Internet technology into AT&T Wireless," said John Zeglis, AT&T Wireless' chief executive officer.
The agreement also provides AT&T Wireless, a subsidiary of U.S. telecom titan AT&T Corp., with a considerable chunk of cash. Zeglis said AT&T Wireless will use its proceeds -- an estimated $6.2 billion -- to pay back a debt owed to AT&T and to fuel future expansion. AT&T is expected to use its $3.6 billion cut to pay down part of its massive debt load.
DoCoMo is the world's second-largest mobile-phone operator by subscriber numbers and at ¥26.5 trillion ($239 billion) is the most valuable company listed on the Tokyo exchange.
Terms of the agreement, which had been expected for weeks, call for AT&T Wireless to license from NTT DoCoMo the Japanese firm's revolutionary i-mode cellular-phone technology platform. I-mode has gained enormous popularity and 14 million subscribers in Japan as the first step in harnessing Internet technology via a mobile handset.
 AT&T Wireless will start deploying the third-generation equipment in 2002. The gear is expected to go into service starting in 2003.
The companies will also become partners in the U.S. and Japan for handling the wireless needs of multinational companies and traffic on each other's network. Additionally, both companies expect to benefit from a buying consortium for network equipment and handsets.
With AT&T Wireless in the process of being spun off by AT&T Corp (T: Research, Estimates), DoCoMo will receive a seat on AT&T's board until the spin-off of the mobile unit in mid-2001. At that stage the partners will mutually agree on the board composition at AT&T Wireless. DoCoMo's purchase of Wireless shares will cut AT&T's stake in the business to 69 percent.
The disposal of its cellular arm is part of AT&T's previously announced plan to split itself into four parts, as it seeks ways to resuscitate its flagging stock price.
DoCoMo has been looking to leverage its leading-edge technology and domestic hegemony to break into new regions of the globe. A major stake in the third-ranked U.S. wireless carrier gives it a presence in North America, while the firm has also unveiled deals in Europe.
The agreement did little to excite investors, however. AT&T Wireless gained just 12 cents to close at $18 Thursday amid a broad market sell off.
Zeglis said the dramatic decline in his company's stock in recent months -- the company is trading at nearly half its 52-week high set shortly after the company's record $10.6 billion initial public offering in April -- was due more to industry woes than any fundamental market concerns about his company.
"It's been a tough period for the telecom overall and the wireless sector has been particularly hard hit," he said. "We at AT&T Wireless are putting big numbers on the board quarter after quarter. In the long run, we are a growth company. We'll get our value as the growth is recognized and as the sector recovers."
AT&T closed Thursday up 63 cents at $19.63.
-- from staff and wire reports 
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