DoCoMo: New 3G Plans for USA?
DoCoMo: New 3G Plans for USA?

DoCoMo: New 3G Plans for USA?

DoCoMo: New 3G Plans for USA?

Despite the fact that NTT DoCoMo has to shed its 16-percent stake in AT&T Wireless Services Inc. (and probably a few tears given the drop in value), this does not mean AT&T Wireless gets off the hook from its obligations to launch W-CDMA 3G in four US markets by the end 2004. So what’s a badly burned DoCoMo, which has been forced to write down something like 1.5 trillion of the 1.9 trillion yen it spent on minority shareholdings in Western and Asian carriers, to do? The answer seems to be hopping into bed with Cingular to keep the 3G dream alive, or at least stop it degenerating into a nightmare.

As we mentioned last week, the rumours of DoCoMo bidding to purchase AT&T Wireless proved to be a lot of nonsense. After nearly 2 trillion yen in investments and very little to show for it, even Japan’s docile institutional shareholders would have wanted President Keiji Tachikawa’s head on a plate for even so much as trying—and he never gave any indication that he was even interested in throwing a bunch of cash into the ring.

Before we get too down on DoCoMo, however, it looks as if in one sense they were lucky to get shot at a deal with yet another bunch of good ‘ol U.S. corporate cowboys. According to a report by the Seattle Post-Intelligencer, AT&T execs gorged themselves at the trough a-la-Enron with the directors awarding each of the carrier’s 12 officers stock worth about $13.5 million. This, despite that fact that AT&T Wireless’ service has been widely criticized for poor quality (the carrier has one of the industry’s highest churn rates, according to media reports) and the company’s share price has “under performed” for the past two years, rendering nearly all the rank-and-file employees’ stock options worthless. Further, in 2003, the company cut 13 percent of its staff, at a cost of more than $150 million.

The most offensive element in all this, according to the Seattle Post-Intelligencer, was the cash out by CEO John Zeglis, who was rewarded with $2.8 million for his less-than-stellar leadership.

As it is, NTT DoCoMo could earn about 400 billion yen from the sale. While that’s hardly small beer, it’s really chump change when you think about the $6.1 billion Big D originally paid over 2001 and 2002 for its stake. DoCoMo, which originally paid $23.50 per share, has since written down about 900 billion yen.

But the commitment to giving U.S. customers a taste of 3G appears to still be on, according to statements made to media by AT&T and the price of failure is high by anyone?s standards, at around $6.1 billion.

The indications are that DoCoMo hasn’t given up on W-CDMA in the U.S. and is now working out an alliance with Cingular, who snapped up the poorly performing and rated AT&T for a bargain $41 billion. We bet Vodafone are laughing all the way to the bank! With DoCoMo’s finger in the pie, AT&T Wireless originally agreed to launch W-CDMA services in 13 of the top 50 U.S. wireless markets by June 2004. After the meltdown in 2001, AT&T went softball, agreeing to launch W-CDMA in 4 areas by December 2004. But for once, DoCoMo appears to have played it smart, since the original contract appears to contain a clause that if AT&T (and now, Cingular/AT&T) don’t roll-out the networks, they’ll have to pony up the original $6.1 billion, regardless of Cingular’s deal.

Let’s hope that in all the paperwork and wheeling and dealing this affair has caused, Cingular is able to focus on the customer, an entity in the equation that AT&T seems to have lost sight of.

And just as importantly (fingers crossed) that W-CDMA is rolled out in the U.S. in a way that doesn’t make a mess out of all the potential to give customers the benefits of 3G.

— Paul Kallender