has been much like the stereotypical brilliant but shy kid in your high school science class. He leapt past his peers with straight-A grades and cool science projects, but never attended the Friday night parties. Now, NTT DoCoMo is coming out of its shell.
For several years now, mobile-phone operators fraternized around the world -- with mergers and joint ventures, acquisitions and strategic investments -- while NTT DoCoMo stayed home in Japan to work on its technology. In so doing, the world's biggest cellular telecom carrier developed its hot I-Mode service and emerged as the leader in wireless data transmission.
But NTT DoCoMo has recognized it must shed its home-body reputation to gain a long-term market advantage in a business that banks on global presence as much as on savvy service, especially since many competitors will eventually catch up on the technical front. And while many this week are focused on NTT DoCoMo's U.S. ambitions, observers say the company still needs to make some moves in Europe -- in France and the U.K., in particular -- to solidify its global position.
"DoCoMo missed out early on, but it's not the end of the game," says
Markus Hansen, vice president of international equities, about the company's international strategy. "Technology is its leverage. It has first-mover advantage in wireless Internet activity." SG Cowen hasn't performed underwriting for NTT DoCoMo or its parent company,
Nippon Telegraph & Telephone
Last month, NTT DoCoMo made its first international investment by purchasing a 15% stake in Dutch carrier
, a unit of
, for $4.5 billion. This week, the company is rumored to be interested in buying a 15% to 20% stake in U.S. operator
and a 10% to 20% stake in South Korea's
. In response to the rumors, NTT DoCoMo says it hasn't made any decisions about new deals with foreign telecom carriers, but says it would consider raising funds to finance future international investments.
At the very least, NTT DoCoMo needs a presence in Germany, France, the U.S. and the U.K. to be considered a global player, Hansen says, adding that Italy is also an important market. Right now, France stands out as NTT DoCoMo's most glaring hole. It could be filled, however, with an investment in
, France's smallest but fastest-growing operator. The country really has only three competing mobile telcos --
and Bouygues. Bouygues has 4 million subscribers and a 16% market share. "It's a small player, but it's such a captured market," Hansen says.
France is scheduled to release details regarding its universal mobile telecom service (UMTS) licenses next week, he says, adding that the government may grant three licenses to its domestic operators and auction off a fourth to a new entrant. These licenses are being granted or auctioned off throughout Europe and the U.S., and are considered the key to having a competitive advantage in each market. They permit operators to build, own and operate a so-called third-generation network -- one that's capable of transmitting voice, video and data and providing Internet access on wireless devices.
"DoCoMo wasn't viewed as a European player until two or three weeks ago. It caught everyone a bit off guard," Hansen says, adding that it would make sense for the company to reveal its strategy for France on the heels of the government's announcement next week.
Even if the licenses are auctioned off, France Telecom has the financial wherewithal to go it alone. Bouygues, meanwhile, is well positioned to be granted a domestic UMTS license and is in need of cash, Hansen explains. Vivendi has close ties with
through its Internet portal business,
, making any kind of partnership with NTT DoCoMo unlikely.
In the U.K., NTT DoCoMo could make inroads through its stake in
. The Hong Kong investment firm teamed up earlier this month with
Telesystem International Wireless
of Canada to win a UMTS license there. The Canadian carrier can roam on existing U.K. networks until it builds out its own under the UMTS license, but it doesn't currently have any customers. Therefore, it may be eager to tap NTT DoCoMo's I-mode service -- which enables users to send email, trade stocks and check sports scores on their mobile phones -- as a way to garner a new subscriber base, Hansen explains.
NTT DoCoMo would be covered in the U.S. if rumors of a VoiceStream deal prove true, and the company has access to Germany through its investment in KPN, which owns German wireless carrier
. Opportunities in the Italian market are less clear-cut, Hansen says, pointing to
, the second- and third-ranking local carriers, respectively, as potential partners. France Telecom has a stake in Wind, however, while
has one in Blue.
Telecom Italia Mobile
, Italy's leading local operator, is trying to develop its own technical standards for third-generation transmissions, but a European telecom banker notes that parent company
is in serious need of money to help pay off loans for its
acquisition last year. "Telecom Italia is a very strong company, but it needs cash," he says, adding that it may be particularly open to a deal with NTT DoCoMo because the Japanese concern isn't pushing for corporate governance rights.
"Everyone wants to work with DoCoMo," the telecom banker explains, because the company is rich in cash, technically superior and satisfied with minority positions. "But it's a superficial approach," he warns. "Currently, it looks like a successful strategy, but in a couple of years, the company will be faced with a lot of conflicts as consolidation continues."
NTT DoCoMo may regret pairing with a variety of smaller operators that are likely to be consolidated, the banker says. This may become especially evident once competitors catch up technologically and no longer view NTT DoCoMo as a must-have partner.