AT&T Wireless, NTT DoCoMo Make Deal

Thursday, November 30th 2000, 12:00 am

By: News On 6

NEW YORK (AP) â€” AT&T Corp. is selling 16 percent of its wireless business for $9.8 billion to NTT DoCoMo, Japan's top mobile phone company, giving AT&T new funds and a savvy partner in the drive to deliver mobile Internet services.

The widely expected deal announced Thursday gives NTT DoCoMo access to the rapidly growing U.S. wireless phone market while providing AT&T cash to help reduce its massive debt.

AT&T also revealed Thursday that it has decided to upgrade its wireless network with the GSM cell phone technology used throughout Europe and Asia.

The move to the GSM standard is designed to accelerate the transition to next-generation wireless technologies, including DoCoMo's wildly successful ``i-mode'' platform for wireless Internet services.

The addition of GSM capabilities to AT&T's network would also enable AT&T and DoCoMo to provide more seamless wireless service for each other's customers as they travel from country to country.

For AT&T, the agreement comes at a crucial time. The company is trying to pay off some of its $62 billion debt as it prepares to break itself into three independent entities.

But one of those pieces, the wireless group, needs money to bid in the upcoming government auction of new wireless spectrum. That spectrum would be used to increase network capacity and introduce advanced services such as video and high-speed Web browsing.

Clearly, AT&T also hopes to share in the huge bounty that i-mode has brought to DoCoMo since its introduction only a year ago.

Nearly half of DoCoMo's 30 million mobile phone customers subscribe to the i-mode service, and some 50,000 people are signing up for the service every day, making Japan the global leader in wireless Internet use.

I-mode customers can talk, play games, read the news, and send and receive e-mail on their mobile phones. DoCoMo â€” shorthand for ``Do Communications Over the Mobile Network â€” also means ``anywhere'' in Japanese. The company is a subsidiary of NTT Corp., the world's second-largest telecoms firm.

Geoff Koontz, an analyst with Strategis Group in Washington, D.C., lauded the deal, saying AT&T stands to gain in part because it gets the iMode brand name and the technical ``know-how'' to implement the service domestically.

Despite the current lack of a demand for consumer wireless data in the United States, Koontz said AT&T is positioning itself to meet that demand when it arises.

As part of the new alliance, AT&T Wireless Group will create a new unit to develop multimedia applications for its current network and a new, high-speed wireless network for next-generation services. Both companies will share technical resources and support staffing of the new AT&T unit.

AT&T currently uses a variation of GSM called TDMA. Both are part of what is called ''2-G'', or second-generation wireless technology. But TDMA is considered less compatible with the switch to a transitional technology on the way to the more robust ''3-G'' or third-generation technologies expected to arrive in 2002. GSM provides a smoother path that requires less spectrum capacity.

Cingular Wireless, the national joint venture recently formed between BellSouth and SBC Communications, is also mulling a move to GSM technology, according to sources close to the company.

Under terms of the deal, DoCoMo is paying $20.50 per share for preferred AT&T stock that is convertible to AT&T Wireless shares once the wireless group is spun off as an independent company under the sweeping breakup plan announced by AT&T last month. DoCoMo also will purchase five-year warrants to acquire the equivalent of an additional 41.7 million AT&T Wireless shares at $35 apiece.

The stake in AT&T Wireless marks the first investment in the United States by NTT DoCoMo, which has been looking to extend the success of i-mode from Japan to other markets. Frederick Moran, head of telecom research at Jefferies & Co., said NTT DoCoMo's stake in AT&T Wireless is just a stepping stone for the Japanese company.

``I don't know if the NTT DoCoMo-AT&T Wireless agreement provides enough of an entry point in the United States.''

AT&T Wireless, the third largest mobile phone company in the country, is a wholly owned subsidiary of AT&T, but its financial performance is represented by a separate tracking stock. AT&T owns 85 percent of that stock, but will spin off that stake as part of the breakup plan.

Shares of AT&T rose 43.8 cents to $19.31, while shares of AT&T Wireless rose 50 cents to $18.38. Shares of NTT DoCoMo rose 3.28 percent to 2,830,000 yen ($25,495).

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On the Net:

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