CNET también está disponible en español.

Ir a español

Don't show this again

HolidayBuyer's Guide
Mobile

DoCoMo may announce stake in AT&T Wireless this week

The Japanese company is in talks to acquire as much as 20 percent of the wireless unit, according to reports, in a deal that could be announced this week.

Japanese wireless carrier NTT DoCoMo is in talks to acquire as much as 20 percent of AT&T Wireless, according to reports, in a deal that could be announced this week and could have a significant impact on the U.S. wireless industry.

NTT DoCoMo, the wireless unit of Nippon Telephone & Telegraph, is considering buying a 16 percent to 20 percent stake in AT&T Wireless, according to various media, including Reuters and The Wall Street Journal. Earlier reports, which have surfaced for months, pegged DoCoMo's interest at a smaller 12 percent stake.

A deal could be valued at as much as $9 billion, according to reports.

AT&T Wireless representatives declined to comment Monday on what they described as "rumor and speculation."

An alliance between DoCoMo, known best for its popular mobile Internet access service i-mode, and AT&T Wireless, one of the nation's largest wireless carriers, with nearly 15 million subscribers, would offer significant benefits for both companies.

AT&T could gain valuable mobile Internet experience from one of that sector's leaders and could solidify part of the ownership structure of AT&T Wireless ahead of its plan to spin off the company as an independent entity. AT&T Wireless trades as a tracking stock of Ma Bell's "T" shares. AT&T is going through a complex restructuring plan to streamline its operations and clarify its businesses in an effort to boost profits and the stock price.

According to reports, a deal with NTT DoCoMo also would provide AT&T and AT&T Wireless with much-needed cash, necessary for paying down huge debts and building its networks.

For its part, NTT DoCoMo would gain a valuable foothold in the desirable U.S. market. Although there are high-growth areas for communications services around the globe, particularly in Europe, Asia and Latin America, the United States remains a desirable market for any aspiring international carrier.

However, foreign ownership caps could affect any potential deal between NTT DoCoMo and AT&T or another U.S.-based wireless carrier.

Advantage in next-generation services?
DoCoMo is known for the runaway popularity of its i-mode wireless Internet service in Japan, but for some time now the company has been developing so-called third generation, or 3G, technology that includes high-speed Internet access. That service, which will offer connection speeds as much as 200 times faster than i-mode, is set to debut in Japan in May.

Third-generation services, which could include video and audio streaming, are considered the future of the wireless industry; they are an area in which the United States is lagging, much to the chagrin of the Clinton administration. DoCoMo, along with its May release in Japan, also has partnerships to provide 3G services across Asia and Europe, including Hong Kong, the Netherlands and the United Kingdom.

AT&T Wireless could get a head start on its domestic competitors by adopting DoCoMo's 3G expertise. America Online reached that conclusion in September when it formed an alliance with DoCoMo that includes the latter buying a 42.3 percent stake in AOL's Japan unit for $96 million. AOL said it planned to use DoCoMo's 3G expertise in developing content for that platform.

Regulatory scrutiny expected
DoCoMo is majority owned by the Japanese telecom giant NTT, which is in turn majority owned by the Japanese government. Therefore, any purchase by DoCoMo is likely to be scrutinized by the Federal see related story: D.C. skeptical about foreign buyers Communications Commission, the Justice Department and the Committee on Foreign Investment in the United States.

Federal law places limits on the investments of foreign government-owned corporations in U.S. communications companies, although a World Treaty Organization agreement to which the United States is a signatory would appear to negate some of those restrictions. In general, stakes purchased by foreign government-owned companies have won approval when the stake was 25 percent or less, and the 12 percent to 20 percent stake DoCoMo is said to be seeking would be below that.

Such a foreign government-owned investment is not unprecedented. France Telecom and Deutsche Telekom, both of which are majority owned by their governments, once held separate 25 percent stakes in Sprint. And Deutsche Telekom is relying on the 1997 WTO agreement to win approval of its purchase of U.S.-based VoiceStream Wireless.