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One of the world's most successful wireless technologies is moving even closer to North American shores. With the recent completion of its $9.8 billion investment in AT&T Wireless Group, Japan's NTT DoCoMo Inc. is accelerating plans to import its red-hot, "i-mode" mobile data technology to a U.S. market still largely unpenetrated by wireless multimedia services.
AT&T Wireless Chairman and chief executive officer John Zeglis says the alliance brings "an exciting new generation of mobile multimedia services to AT&T Wireless customers much more quickly than we anticipated even six months ago," when his company and Japan's largest wireless phone service began talking about a linkup.
So, how does the powerful pair plan to execute that strategy? There's no question that DoCoMo can sell i-mode in Japan, where it has more than 18 million subscribers for the service. But in the United States data via wireless phone remains small business, with AT&T's 300,000 PocketNet data phone subscribers accounting for less than one-half of 1 percent of total U.S. subscribership.
For starters, AT&T will plow $6.3 billion of DoCoMo's $9.8 billion investment-which in total amounted to a 16 percent stake in AT&T Wireless-into upgrades of its wireless infrastructure and the rollout of new technology. The remaining $3.5 billion will reduce the parent company's debt.
AT&T Wireless is setting up a new unit to develop multimedia applications for its current network and new third-generation (3G) high-speed wireless audio, video and data services.
Redmond, Wash.-based AT&T Wireless expects to be one of the first companies in North America to deploy a network based on UMTS (universal mobile telecommunications system), a telecommunications standard also known as W-CDMA, (wideband code division multiple access.) DoCoMo, which controls more than half the wireless market in Japan, is launching W-CDMA services there by mid-year. AT&T Wireless expects to begin deploying 3G technology in 2002.
In the meantime, AT&T has begun overlaying its existing wireless platforms based on TDMA (time division multiple access) and CDPD (cellular digital packet data) technologies with a GSM/GPRS (global system for mobile communications/general packet radio service) platform. That will let AT&T offer so-called 2.5G technology via handsets from vendors that are supplying GSM/GPRS sets in Europe and elsewhere.
In the United States, DoCoMo and AT&T will incorporate the Japanese company's popular i-mode technology that lets users access applications based on Internet-standard HTML coding. Phones also will be able to use the Wireless Application Protocol Next Generation protocols. WAP has been used in Europe's GSM phone systems and by U.S. operators offering wireless phone Internet access. But unlike DoCoMo's always-on i-mode technology, WAP users must dial-up a connection each time they want to see something on the Web. They're also limited to the roughly 10,000 Web sites written for WAP-enabled devices.
AT&T Wireless also is deploying a high-speed 3G technology known as EDGE (enhanced data rates for global evolution) late this year. AT&T expects to be offering the high-speed 3G technology in more than 70 of the top 100 U.S. markets in 2003 and 2004.
The North American GPRS deployment will be even later than in Europe, where software glitches and other technical problems are delaying the availability of handsets that had been expected to be rolled out this year.
For example, Telecom Italia Mobile, which runs Europe's largest mobile network, now expects that a mass-market launch of GPRS won't be ready until mid-2002.
In January, DoCoMo and KPN Mobile NV, the Dutch wireless company, announced plans for a joint venture to offer mobile Internet services across Europe, in association with Telecom Italia Mobile. The three companies will use i-mode technology to launch an HTML-based wireless Internet offering in Europe later this year, targeting TIM and KPN Mobile's 30 million subscribers in Belgium, Germany, Italy and the Netherlands.
AT&T Wireless will use a new core network infrastructure being developed by Nortel Networks to support its wireless Internet services. Lucent Technologies is the equipment provider for the GSM/GPRS base stations. The Lucent base stations deploy GSM and GPRS at both 850 MHz and 1900 MHz spectrum and support UMTS at 1900 MHz.
Besides the technology aspects of the deal, DoCoMo is getting a seat on the board of AT&T Corp. until Ma Bell spins off the wireless unit to shareholders later this year, when DoCoMo's board seat will shift to AT&T Wireless.
Under the agreement announced in November, DoCoMo has acquired AT&T preferred tracking shares equivalent to 406 million AT&T Wireless shares. The parent AT&T sold DoCoMo 178 million of its own shares in the wireless group for $20.50 each, reducing its stake to about 70 percent from 85 percent. DoCoMo also bought 228 million newly issued AT&T Wireless Group shares at $27.00 each.
Additionally, DoCoMo received five year-warrants to buy an additional 41.7 million shares of the wireless company at $35 each. Since its IPO last April at $29.50 per share, AT&T Wireless generally has traded below the initial offering price, although the first month of this year has seen it rally from lows below $18 to the high $20s.
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