Analysts: AOL-NTT DoCoMo Wireless Deal Makes Sense

FRAMINGHAM (08/04/2000) - A deal is reportedly in the works between America Online Inc. and NTT DoCoMo Inc. in Japan to jointly develop wireless Internet services in Japan.

Neither company would confirm a deal, but wireless analysts expect it to be formally announced in the next three weeks and said it makes good sense for both parties.

"I wouldn't doubt it's going to happen, and it's a win-win for both companies," said Jack Gold, an analyst at Meta Group Inc. in Stamford, Conn. A deal would give AOL, based in Dulles, Va., "status and the right to say, 'We're one of the biggest wireless content providers in the world,' " he said.

A deal "seems logical," said Alan Reiter, an analyst at Wireless Internet and Mobile Computing in Chevy Chase, Md. "DoCoMo wants more content, and they are expanding, and AOL wants to get its content on other devices" than the wired Internet.

DoCoMo is Japan's largest mobile communications company, with 30 million subscribers. It introduced a wireless Internet service in February 1999 called i-mode, which has mushroomed to 8 million subscribers as of June 30, NTT DoCoMo officials said.

Japanese users pay for i-mode services based on the number of bits they receive rather than the flat-rate monthly fee common in the U.S. However, the service provides news and information, such as public transportation schedules that are popular with users, Reiter said. Users can also receive a Pokemon cartoon character heard on their cellular phone each day, analysts said.

NTT DoCoMo's i-mode has been popular in Japan partly because it is marketed as an information service and not something users would compare with Internet information over the wired Internet, Reiter said. In the U.S., such comparisons would abound and probably lessen the marketing allure, Reiter said.

The Asian Wall Street Journal reported Tuesday that an accord would be finalized in three weeks between the two companies for each to invest US$100 million in AOL Japan. The newspaper quoted an unnamed source familiar with the deal.

Reiter said AOL is like other Internet service and content providers that are desperate to get onto wireless networks. DoCoMo is adding 1 million i-mode Internet subscribers per month, which means it could get close to surpassing the AOL subscriber base of 23 million members in a year, analysts noted.

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