DoCoMo in KPN Mobile tie
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May 9, 2000: 7:50 a.m. ET
Japanese cellular operator invests $4.5B in Dutch mobile leader
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LONDON (CNNfn) - NTT DoCoMo, Japan's largest mobile-phone operator, agreed on Tuesday to pay around 5 billion ($4.5 billion) for a 15 percent stake in the cellular arm of Dutch telecom market leader Royal KPN, paving the way for further expansion in Europe.
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VIDEO
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CNN's Diana Muriel takes a look at KPN and DoCoMo deal.
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DoCoMo has made no secret of its global ambitions, and analysts said the deal will provide a bridgehead to bring NTT's new-generation cellular technology into the European market and could form the basis for a joint bid with KPN for Orange, Britain's third-ranked cellular player.
KPN and DoCoMo, the world's second-largest cellular operator after Vodafone AirTouch, had previously been linked to separate bids for Orange, which is being sold by Vodafone later this year. However, neither referred to Orange in their statements Tuesday.
"The cutting-edge technology that DoCoMo will bring to the partnership will assist KPN Mobile in staying ahead in the introduction of innovative next-generation mobile services," said KPN Mobile CEO Diederik Karsten (right) in a statement.
DoCoMo already has 6 million users of its I-Mode Internet-enabled phones in Japan and together with KPN plans to develop third-generation services, which provide fast Web access.
The agreement with DoCoMo follows the collapse of KPN's merger talks with Spain's Telefónica last week amid disagreements over the Dutch government's involvement in a merged venture. The breakdown prompted speculation that KPN would seek other partners to help fund its expansion of new-generation wireless services and a possible bid for Orange.
KPN said it plans an initial public offering of KPN mobile shares when the DoCoMo deal is completed - scheduled for the end of June, subject to regulatory approval. The terms of DoCoMo's purchase of a 15 percent stake imply the whole of KPN Mobile is worth about 33 billion.
KPN shares slid almost 7 percent to 113.30 in midday trading in Amsterdam, as telecom stocks across Europe fell in the wake of the Nasdaq composite index's 4 percent decline in the U.S. Monday.
Expansion concerns dog NTT
The deal is DoCoMo's largest investment outside Japan. The new partners said they would create a joint task force to accelerate the introduction of data and Internet services in Europe.
Analysts said the KPN investment was a boost for the Japanese company's plan to promote its CDMA technology as the global industry standard for the next generation of mobile phones.
KPN Mobile, the largest player in the Dutch cellular market, has expanded by buying a stake in Germany's E-Plus, and already operates a joint venture with Orange in Belgium. KPN is also bidding for a third-generation mobile license in Germany.
NTT underlined its global ambitions on Monday when NTT Communications, the group's third arm, agreed to pay $5.5 billion for U.S. Website designer Verio and roll out a network of data centers to provide Web services for large companies.
However, rising concerns about DoCoMo's debt burden sent its shares 4.4 percent lower in Tokyo Tuesday. Parent Nippon Telegraph & Telephone lost 2.2 percent.
Credit rating agency Standard & Poor's placed DoCoMo and NTT on its "Creditwatch" list with a view to a possible downgrade, after
DoCoMo last year paid $410 million for a 19 percent stake in Hutchison Telephone, Hong Kong's largest cellular operator, which had previously sold its stake in Orange to Mannesmann
Vodafone (VOD) is selling Orange to meet demands from European regulators after its takeover of Germany's Mannesmann gave it a second U.K. mobile-phone network. France Telecom (PFTE) has been seen as the front-runner for Orange; its shares were 4 percent down.
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