NTT DoCoMo to take stake in Hutchison

NTT Mobile Communications Network (NTT DoCoMo) today signed an agreement with Hutchison Whampoa. to take an equity stake in Hutchison Telephone.

The deal gives Japan's largest cellular operator a 19 per cent stake in the Hong Kong market leader and marks the first of several anticipated stakes NTT DoCoMo will take in regional cellular carriers.

The Hong Kong company is jointly owned by Hutchison Whampoa and Motorola, the former company holding a majority 70 per cent share with Motorola holding the remaining 30 per cent. After the deal, in which NTT DoCoMo will pay $US410 million for its stake, Hutchison Whampoa will hold 55.9 per cent and Motorola 25.1 per cent.

"The purpose for equity participation is not for financial gain only," said Shiro Tsuda, executive vice president of NTT DoCoMo. "The focus is third-generation systems."

The Japanese company is a leading force behind the development of W-CDMA (Wideband Code Division Multiple Access) and will become the first cellular carrier in the world to begin service of a third-generation network when its new W-CDMA system goes live in Tokyo in early 2000. Third-generation mobile services will be capable of data transmission at speeds much greater than those of today's cellular networks and W-CDMA will boast a maximum data speed of 384K bits per second.

But W-CDMA is not the only standard battling for position as the world's dominate third-generation system.

Hutchison Telephone, Tsuda said, was very interested in deploying a third-generation system. "We would like to influence them to introduce (a third-generation service) at the earliest time." Through the equity stake, Tsuda hopes NTT DoCoMo can push Hutchison's decision over which format to adopt in W-CDMA's favour.

Should the carrier go with CDMA, it would boost the format - something that is vital for NTT DoCoMo if it is to avoid a repeat of the current situation where Japan has a cellular standard, PDC, used nowhere else in the world. "By expanding W-CDMA worldwide, the areas where our customers can use the same terminals expands," said Tsuda.

Hutchison Telephone currently operates both GSM and CDMA-based second generation networks but has the majority of its customers on the GSM-based system - a technology more closely related to W-CDMA, despite the name. With 1.2 million customers in Hong Kong, the company claims a market share of around 36 percent, said Tsuda, and a position as the leading cellular operator.

Regarding future expansion, Tsuda said NTT DoCoMo was not confining itself to Asia. In addition to a minor stake the company holds in a Brazilian cellular operator, the company was not limiting its possibilities to Asia although the region remained a high priority for expansion. he said. The investment in Hutchison was not seen however as a door to the mainland China market.

Asked to comment on the company's plans for a New York share listing, Tsuda said the company continues to study the issue. For it to list, NTT DoCoMo and its regional operators around Japan would have to adopt SEC accounting standards - something that is delaying a listing.