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DoCoMo passing on Dutch stake
TOKYO, Japan -- Japan's largest cell phone company, NTT DoCoMo, is prepared to reject a chance to invest more money in its Dutch telecom partner, KPN Mobile. DoCoMo has an option to buy around 2.5 billion euros ($2.5 billion) in new shares in KPN Mobile, to maintain its 15 percent stake in the company. But it is ready to make a formal announcement next week that it will not exercise that right. The Dutch cell-phone company's parent, KPN Telecom, said in November it will launch a debt-equity swap for 14 billion euros ($14 billion) in obligations that will greatly increase the number of shares in the company. The swap is expected to see DoCoMo's stake drop to below 3 percent. But after seeing its initial investment become worthless, DoCoMo has decided not to pump in more cash. Disastrous international forayDoCoMo bought a 407 billion yen ($3.3 billion) stake in KPN Mobile in 2000, using the stake to push its i-mode and "third generation," or 3G, services in Europe. DoCoMo also invested heavily in other cell phone companies such as Hutchison 3G UK Holdings and AT&T Wireless. But the strategy backfired when the telecom sector imploded, and DoCoMo has taken a series of huge writedowns to reflect its subsequent slump. In October, it took a 108 billion yen ($865 million) loss on its KPN Mobile stake to write its value down to zero. That contributed to a 573 billion yen ($4.6 billion) hit to its earnings. (Full story) DoCoMo said last month that its profits fell 95 percent for the first six months of the business year, thanks mostly to the writedown it took in October. (Full story) Investing in 3G networksKPN Mobile launched the Internet-ready i-mode service in April in Belgium, Germany and the Netherlands, using DoCoMo technology, and it has attracted around 140,000 subscribers. KPN's parent said on Wednesday it will spend 1.4 billion euros ($1.4 billion) to develop its 3G networks in those three countries by the end of 2005. But DoCoMo's decision leaves its future cooperation with KPN in question. "At the current stage, we should wait and see rather than pour more money in," a DoCoMo executive told the Nihon Keizai Shimbun. DoCoMo shares are down 0.83 percent at 240,000 yen on Friday morning, with the Nikkei index down 0.36 percent after a fall on Wall Street.
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