DoCoMo's position in Japan is secure if unexciting. It should be able to boost iMode mobile Internet uptake to increase revenues from its customers. However, its international strategy depends on foreign uptake of iMode, which is uncertain. If iMode doesn't take off abroad, NTT will be left with lots of capital tied up in minority stakes in low-profit telcos.
Japanese mobile phone operator NTT DoCoMo on Friday announced that it would issue around $6.8 billion of new shares. The company will issue the shares in four tranches, to Japanese institutions and retail investors, international and US investors. The share issue will go ahead despite current low market values for telecoms firms since DoCoMo needs the money to pay for its $9.8 billion investment in a 16% share of US mobile operator AT&T Wireless.
DoCoMo is Japan's dominant mobile operator by a long way. It is also one of the most technologically advanced operators, with 13 million people using its iMode mobile Internet service in Japan. It is also in a strong position to be one of the first operators to implement 3G wCDMA services, which it expects to start rolling out early this year, so it should be able to migrate more and more of its existing customers onto higher revenue mobile Internet and broadband services, especially given the high cost of fixed line Internet access in Japan. However, rival operators such as Japan Telecom are likely to continue to take market share.
Its international strategy is less certain. The company aims to take small stakes in a large number of international operators, such as AT&T as well as KPN of the Netherlands, Hutchison 3G in the UK and KG Telecom in Taiwan. It hopes then to persuade them to license iMode and also to take advantage of its 3G expertise, providing it with extra income. If this move goes well and iMode catches on internationally, this could bring substantial revenues.
However, this does mean DoCoMo has large amounts of capital invested in businesses that it doesn't control and which are unlikely to generate substantial revenues for many years. This strategy proved a disaster for BT, which now instead focuses on joint ventures and fully owned subsidiaries in a few core markets. Admittedly, DoCoMo's technological strength makes the strategy more sensible than it was for BT.
Nonetheless, the DoCoMo's potential for substantial revenue growth rather than merely exploiting its existing customer base depends very heavily on the international success of iMode, which is by no means a certainty.