NTT DoCoMo Inc., Japan's largest mobile phone company, will buy a 16 percent stake in AT&T Wireless (NYSE: AWE) for $9.8 billion in cash, in a move to promote its mobile Internet service in the U.S.
Under the deal, DoCoMo will pay $6.2 billion to AT&T Wireless and $3.6 billion to parent AT&T Corp. (NYSE: T) The Japanese company will buy preferred tracking stocks in AT&T, convertible into AT&T Wireless shares, and will also buy warrants. DoCoMo will pay for the deal in early January.
Shares of AT&T Corp. closed up 31 cents to 19 in yesterday's session. AT&T Wireless closed down 0.94 to 17.88.
AT&T Wireless will create a wholly owned subsidiary to develop multi-media applications for its current network as well as create a high-speed wireless network built accommodate "third generation" (3G) services such as streaming audio and video. Both DoCoMo and AT&T will share technical resources and support staffing of the new unit.
The purchase follows DoCoMo's strategy of buying minority stakes in companies to promote its technology. The deal commits AT&T Wireless to use the Japanese company's standard "i-mode" technology for the new services.
In addition to the network upgrades, AT&T Wireless is expected to use the cash to pay down some of the debt of its parent company, which reached $62 billion in September, and to buy wireless licenses in spectrum auctions in the U.S.
Separately, DoCoMo also announced it will buy a 20 percent stake in Taiwan's third-largest mobile carrier KG Telecom for 59.8 billion yen. According to DoCoMo, both deals would initially be financed by bank loans but it would later consider bonds or share issues to finance them.
Reuters contributed to this report.