NTT DoCoMo is considering buying a stake in AT+T’s wireless division.
The Japanese mobile giant has been taking minority stakes in many international mobile operators recently. Its stated policy is to take stakes of 10-20% in companies; it already owns 15% of the Netherlands’ KPN Mobile and 20% of the UK’s Hutchison 3G. It looks like AT+T’s mobile arm could become another such partner.
However, there are two issues that could make the deal less positive than it first appears. The first is simply time. AT+T only announced its decision to float its wireless arm last week. Whilst the company has issued a tracking stock for this division, its transformation into common stock is some way off. Buying stock that cannot be traded is not something DoCoMo has been keen to do; its investments have all been in publicly quoted companies. So the deal is likely to have to wait until AT+T Wireless completes its metamorphosis.
Perhaps more importantly, there are some unknown technological aspects to the decision. One of the main reasons behind DoCoMo’s expansion has been to promote its wCDMA standard; Hutchison and KPN will both build 3G wCDMA networks. But there is a strong possibility that AT+T Wireless may not follow this strategy. The company is investing a lot of money in 2.5G EDGE technology, because it is having to wait for the allocation of 3G spectrum in 2002 but it needs to develop a wireless offering now. It may decide that it is more cost-effective to continue to follow an EDGE strategy rather than to implement UMTS when the spectrum auctions come around.
In Europe, where the 2G GSM standard is unsuited to providing broadband services, a move upwards to wCDMA is the best strategy for operators. There is also little spare capacity within the frequencies GSM uses. But TDMA networks are much more suited to be evolved to broadband services, and AT+T still has a lot of spare capacity within its existing frequencies – in addition to which, the US Government will auction further 2G capacity starting next month.
So it is quite possible that AT+T will choose to stick with its existing technology, building EDGE networks and further developing the standard. If this is the case, the only benefits DoCoMo would gain from taking a stake will be financial – and this would be a poor use of its resources. A better strategy for DoCoMo in the US would be to take a share in a network that uses GSM frequencies and hence is more likely to evolve to wCDMA.
