KG Telecom first to nab I-mode license

By CNN's Kristie Lu Stout

TAIPEI, Taiwan (CNN) -- Taiwan's KG Telecom has signed a licensing deal with NTT DoCoMo to be the world's first telco to import the I-mode service.

The Japanese mobile giant increased its stake in KG Telecom (KGT) to 20 percent this week, and agreed to license its I-Mode mobile data service for the Taiwanese telco to start its own "I-mode-like" service by mid-2002.

Analysts view the licensing deal as a win-win situation. The tie-up will bring next-generation wireless knowhow to KGT, and introduce an additional revenue stream to NTT DoCoMo.

"This is the first time that we have actually had a licensing deal about I-Mode," NTT DoCoMo spokesperson Yuki Isono told CNN.

I-Mode, in KGT style

Under the agreement, NTT DoCoMo would license its technology and provide technical expertise to introduce the I-mode service over KGT's GPRS infrastructure, a GSM-based packet telecommunications network for next-generation communications.

The Japanese operator would also provide consulting for a business plan feasibility study, server and terminal development, marketing, content development, and customer service.

In return for the technology license and services, NTT DoCoMo would receive fees from KG Telecom.

The "I-mode-like" service would be introduced to users via dual browser handsets that can support content written in both the Internet-ready HTML and WAP-ready WML languages.

"If we want to implement an I-Mode service, we have to build on top of a packet system," KGT spokesperson Cathy Chiu told CNN.

"Only this way can we attract content providers to the wireless Internet world. And this is important, or users won't spend time on their small-screen phones."

In terms of subscriber numbers, KGT is the number-three mobile operator in Taiwan with 3.8 million users.

Analysts say KGT only stands to benefit from its alliance with NTT DoCoMo.

"I don't think anyone could argue there is any downside with the DoCoMo relationship," said one Taipei-based telecom analyst. "This is quite exciting, especially in a market where WAP has really floundered."

DoCoMo's Asia strategy

DoCoMo confirmed that its move into the Taiwan market is part of an overall Asian expansion plan.

"We have been seeking a possible investment chance in many parts of the world and Taiwan is part of our Asian strategy," said DoCoMo's Isono.

"It has a population of 22 million, and a relatively high mobile penetration rate of 60 percent, so we think this is an attractive market for DoCoMo."

Last month, the telco lifted its stake in Hong Kong Hutchison Telephone to 25.4 percent from 19 percent.

But it's not the only operator with regional mobile ambitions.

Japan Telecom announced an alliance with China Telecom, and Japan's second largest telco KDDI forged a pact with China's number-two mobile operator China Unicom.

But DoCoMo said it does not feel any pressure from its Japanese competitors to move more aggressively into the Greater China region.

"The KDDI and Japan Telecom deals do not affect our strategies in China," said DoCoMo's Isono.

Industry watchers are less excited about DoCoMo's stake in KGT, choosing instead to focus on the potential windfall generated from I-mode license royalties.

"Investors are not concerned about minor stakes overseas," said Merrill Lynch Japan telecom analyst Kiyohisa Ota.

"DoCoMo has to take its value-added offerings overseas and make royalties. This way, DoCoMo doesn't have to pay incremental money outside Japan and at the same time can raise royalty flow outside Japan."

Shares in DoCoMo gained 20000 yen to reach 2,040,000 yen in Thursday afternoon trading.