NTT DoCoMo has bought a 16% stake in AT&T Wireless.
NTT DoCoMo confirmed last night that it will pay $9.8 billion for a 16% stake in AT&T Wireless. DoCoMo has been taking minority stakes in many international mobile operators recently, buying 20% of Taiwan’s KG Telecom, 15% of the Netherlands’ KPN Mobile and 20% of the UK’s Hutchison 3G.
DoCoMo’s expansion program is aimed at promoting its wCDMA standard for 3G mobile phone services. Taking strategic stakes in as many markets as possible will help ensure it is widely used, whilst its partners will benefit from its technological expertise in rolling out their 3G networks. But AT&T is a different beast from its existing partners. Companies such as KPN and KG use the GSM 2G mobile communications standard. This is unsuited to providing broadband services, and there is also little spare capacity within the frequencies GSM uses, making a move to wCDMA the best upgrade strategy for operators.
But AT&T uses the TDMA standard, which is more suited to data transmission, and also has plenty of spare capacity. And because it has to wait until 2002 for the allocation of 3G spectrum, but needs to develop a wireless offering now, it is investing a lot of money in 2.5G EDGE technology. While it would be in DoCoMo’s interests for it to go to wCDMA, with EDGE offering data rates of up to 384KB per second, AT&T may decide this network can support a very effective wireless data offering. Moving to wCDMA may be unnecessary.
However, it’s still a good move for AT&T to take NTT’s money. The investment will reduce the group’s $55 billion debt, and hopefully shore up its flagging share price. A more expensive network building strategy in two years time is a comparatively small sacrifice to make. It’s also still a good deal for DoCoMo, since it needs to ensure a partnership with a US mobile operator, and the number of nationwide players is limited. The only company to operate a national GSM network, VoiceStream, is already being bought by Deutsche Telekom, and is therefore out of play.
AT&T and DoCoMo aren’t the most perfectly matched couple in the telecoms world. But each needs a partner, and each is the best the other can get at this stage.
