BUSINESSWEEK ONLINE : AUGUST 28, 2000 ISSUE
INTERNATIONAL BUSINESS DoCoMo's Mission: World Domination--on the Cheap The wireless Web leader is lining up eager partners Since its inception in 1992, NTT DoCoMo has been hell-bent on one goal: to dominate Japan's cell-phone market. With nearly 60% of the local digital-cellular universe--or 32 million Japanese--DoCoMo handily accomplished that goal. Then, 18 months ago, it set out on a new mission: to lead Japan in the world's first instantly accessible mobile Internet service, called i-mode, which offers users an online connection without the need to dial up. DoCoMo has accomplished that, too. I-mode boasts 70% of Japan's local wireless Web market. On to goal three. DoCoMo wants to become a leader in both cellular and wireless Web services worldwide. But since it's coming late to an overcrowded game, DoCoMo is embarking on a low-key strategy that involves sprinkling small investments into several companies in Europe and Asia rather than making outright acquisitions. It's also scouring the U.S. for partners and expects to make its first alliance in the coming weeks. With little room left in Japan to grow, global outreach is the only option. ''DoCoMo is like a huge sumo wrestler overpowering the market,'' says Takeo Tsukada, senior adviser to IDO Corp., a rival Japanese mobile operator. ''There's nowhere left for it to go but overseas.'' DAZZLING. DoCoMo carries some major advantages. It has led development of a Third Generation, or 3G, cellular system that will pave the way for streaming video and other technologies. More important, DoCoMo has an edge in the mobile Internet. Its i-mode is the world's first mobile Net service to offer a constant online connection and enticing content. So dazzling are i-mode's prospects that DoCoMo doesn't have to go seeking potential partners. Companies such as America Online (AOL) and Yahoo! (YHOO) are lining up at the company's door. DoCoMo is joining the race for global market share at a turbulent time. The shift to next-generation cell-phone and mobile-Net services has triggered a race for dominance that has seen huge sums of money spent on cross-border consolidation. Britain's Vodafone AirTouch PLC (VOD) recently spent a breathtaking $180 billion to acquire Germany's Mannesmann (MNNSY) . Deutsche Telekom (DT) offered $42 billion for the small U.S. mobile carrier VoiceStream Wireless Corp. (VSTR) . DoCoMo, however, is shunning buyouts. Unwilling to pay today's inflated prices, it walked away from opportunities to purchase VoiceStream and Britain's Orange PLC (ORNGY) , another mobile-phone company recently acquired by France Telecom (FTE) for $37 billion. Sure, DoCoMo looks like a giant. Its market capitalization is $250 billion, which makes it Japan's most valuable company. But up to now it's been a midget when it comes to raising large sums. Only 15% of its shares are in circulation, with 67% held by parent Nippon Telegraph & Telephone Corp. (NTT) . and long-term investors. That will change soon when DoCoMo issues new equity, which analysts estimate could raise up to $70 billion. Even so, DoCoMo is not about to begin competing head-on for acquisitions. ''When Vodafone first started acquiring its mobile assets, they were far less expensive,'' says Kiyoyuki Tsujimura, 50, DoCoMo's global strategist. ''We are coming late and lack experience, so we can't pretend to be a Vodafone.'' CAUTIOUS. So DoCoMo's growth strategy is focused on buying minority stakes in smaller operators around the world who need technology and cash infusions. It's a cautious approach, but probably a sound one. And DoCoMo may well be planning to ''increase its stakes and take a controlling interest in the future,'' says Andrew Cole, a former DoCoMo consultant who heads Renaissance Strategy's wireless operations in the U.S. Since December, DoCoMo has purchased stakes ranging from 15% to 20% in Hutchison Telecom, Hong Kong's largest mobile-phone operator, KPN Mobile of the Netherlands, and Hutchison 3G UK Holdings, which owns one of Britain's prized licenses for 3G cellular services. DoCoMo expects to announce soon a tie-up with AOL to develop i-mode content. At the same time, it is eyeing partnerships with U.S. and Australian carriers such as BellSouth (BLS) , Sprint PCS Group (PCS) , and Cable & Wireless Optus (CWP) . But minority stakes aren't going to generate much in the way of profits, and DoCoMo views them as stepping stones into local markets. After tying up with carriers and helping them roll out wireless-Net service, DoCoMo then plans to launch mobile content and application ventures. ''We'll take 40% to 50% stakes in such ventures,'' says Tsujimura. DoCoMo could then reap profits from paid services such as news or city guides, or from local advertising. In Japan, i-mode subscribers can trade stocks, reserve karaoke rooms, and check headline news, paying for the data they transmit or download. Serving the system are more than 18,000 Web sites specially formatted for cell-phone screens. While the system has suffered occasional technological glitches, for the most part, i-mode is a runaway success. R&D ARMY. DoCoMo is betting that its technological edge will buy it a global foothold. Indeed, there's no other cell-phone company that can match it technologically. With its army of 900 engineers and $825 million in research and development funds, DoCoMo designs the world's smallest, most sophisticated handsets. That has enabled it to build a loyal following among world telecom equipment makers keen to produce innovative gadgets. ''NTT DoCoMo is one of the few operators in the world that can dictate [technological specifications] to handset manufacturers,'' notes Katrina Bond, a senior analyst covering the mobile sector for Britain's Analysys Ltd. ''So it has a great deal of potential to penetrate [the overseas] market.'' DoCoMo also plans to leverage its expertise in wideband CDMA, a 3G standard to be deployed in Japan and Europe. Next May, it will roll out the high-speed system in the Tokyo region, becoming the world's first operator to introduce 3G. So far, DoCoMo's tie-up with Hutchison Telecom in Hong Kong has yielded little beyond one popular i-mode car racing game, Miracle Grand Prix. But Hutchison has plans to develop more content with DoCoMo. Next, KPN Mobile is preparing to introduce an i-mode network and a host of content services developed in partnership with DoCoMo. ''The trick to a successful service is content,'' says Joop Drechsel, KPN's international director. ''I-mode gives us access to the richest content in the world.'' By jumping first onto the wireless Net, DoCoMo is running ahead of rivals. But to win the mobile race, DoCoMo will have to continue to spread its i-mode technology far and wide. So far, it's off to a blazing start. By Irene M. Kunii in Tokyo, with Marsha Johnston in Paris, William Echikson in Brussels, and bureau reports _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS DoCoMo's Mission: World Domination--on the Cheap TABLE: Global Game Plan INTERACT E-Mail to Business Week Online

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