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Top Stories
1. DoCoMo looks north to Korea KTF
2. DoCoMo goes fishing into US arm of Slovenia mobile developer
3. LG supplies global i-mode partners
1. DoCoMo looks north to Korea KTF
The biggest DoCoMo and perhaps i-mode story of the week is the rumour that DoCoMo is negotiating to buy a stake of Korean mobile carrier KTF - something denied by both sides. As of the end of May 2005, KTF’s accumulated customer base came to 12.11 million people, according to their Factsheet for June.
Online news provider MoneyToday said KT was talking to DoCoMo about selling a 20% stake worth $896 million in KTF, quoting unnamed industry sources.
DoCoMo was reported in the past to be in talks with both KTF and its larger rival, SK Telecom.
"A deal with SK Telecom would make more sense to DoCoMo as they use the same radio frequency band, but KT appears more interested in the DoCoMo deal to restructure the group with outside help," said Chin Chang-whan, an analyst at CJ Investment & Securities, from Reuters.
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Reuters also reported that KT is seeking new earnings drivers "as it struggles with dwindling voice traffic, fierce price competition with smaller rivals and slower growth in high-speed Internet services".
One DoCoMo source said the Japanese carrier has been saving cash and looking for a good investment. DoCoMo had cash and cash equivalents of about 770 billion yen ($7.05 billion) as of March 31.
DoCoMo sources said the company would probably prefer a sizeable stake if the two companies were to strike a deal. One said DoCoMo would probably seek a scheme under which it would receive a specific return, such as a percentage of sales.
KT’s sales growth rates have been almost at a standstill over the past several years from 11.7 trillion won in 2002 to 11.6 trillion won in 2003 and 11.9 trillion won last year.
Analysts say that the point is not whether KT would sell part of its 49.7% stake in KTF but whether mergers between the two companies will happen.
"The bottom line is that KT’s new chief executive Nam has a shot at leading the amalgamation between KT and KTF during his three-year stint with KT," Woori’s Jung said.
DoCoMo may play a part in that merger between KT and KTF, although at face value this would only make things more difficult in terms of organisational structure and politically, since Information-Communication Minister Chin Dae-je said the ministry is willing to mull over buying back shares of KT, which was fully privatized in 2002, at a luncheon meeting with foreign reporters on June 22.
2. DoCoMo goes fishing into US arm of Slovenia mobile developer
DoCoMo signed a joint venture and share subscription agreement with Ultra, a Slovenia-based mobile applications and technology company.
It's an interesting deal because it targets only the US-arm and what DoCoMo called the "fleet and workforce management tools". If you check the parent Ultra's website this means tracking and reporting on bus and other public transport fleets.
The US vehicle to hold this business is Telargo, but as far as I could find the Telargo website has only one page which is the announcement itself, plus an "info" contact. Telargo is wholly-owned by Ultra.
Under the agreement, DoCoMo will acquire a 49% equity stake in Telargo for US$28.6m (approximately 3.1 bn yen) - DoCoMo press release.
Telargo's service is based on a mobile asset management platform and plans to offer its service worldwide starting from Fall 2005.
"With this global partnership, we are expanding our mobile asset management business, already operating under the TalkTrack brand in Slovenia and several other countries. ULTRA and NTT DoCoMo will exploit the synergy from merging our knowledge and experience in mobile asset management with NTT DoCoMo’s highly successful and world renowned mobile telecommunications business", said Gregor Breznik, Ultra’s President & CEO.
This investment is a part of DoCoMo's strategy to expand location-based fleet management services and follows its investment in a Thai fleet management service company, Mappoint Asia.
Ljubljana Public Transport Company (LPP) seems to be the only current user of the Telargo system, announcing "the coming into service of the TalkTrack public transport management and arrival forecasting system", in March 2005.
Installed on all 270 busses the TalkTrack system will provide for an improved quality of service and optimize the operation of LPP, the largest municipal public transport company in Slovenia. The benefits for the passengers will include real-time bus arrivals forecasting through internet, SMS and WAP.
"The implementation of the TalkTrack system is an important step for the company, passengers and for the city of Ljubljana as it represents a technological novelty in Europe and enables a necessary transition from experience-based methods of managing public transport to a modern, computerized and information-rich fleet management system. We are particulary proud to offer to our passangers the buss arrivals forecasting service and save some of their precious time", stated CEO of Ljubljna Public Transport Company, Darja Krstic.
The Telagro stake purchase comes on the heels of DoCoMo's establishment of a California-based subsidiary called DoCoMo Capital. The venture capital firm opened for business on July 1.
DoCoMo has said the goal of the investment arm is to "shorten development time, lower research and development costs and expand DoCoMo's opportunities in the mobile services and technologies sector".
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3. LG supplies global i-mode partners
DoCoMo announced on June 28 the first joint procurement tie-up for i-mode handsets. Initially, the eight operators that currently provide the i-mode service outside Japan will procure LG Electronics' L342i handset, which have started to reach the markets since the end of last month.
The eight operators involved in the joint procurement are E-Plus Mobilfunk (Germany), KPN Mobile. (the Netherlands), Far EasTone Telecommunications (Taiwan), BASE (Belgium), Bouygues Telecom (France), Wind Telecomunicazioni (Italy), COSMOTE Mobile Telecommunications (Greece), Telstra (Australia).
DoCoMo confirmed that the four other new operators which have signed i-mode licence agreements since November 2004 — Cellcom (Israel), Mobile TeleSystems OJSC (Russia), O2 (UK), and StarHub (Singapore) — will also participate in upcoming joint procurement activities.
4. Japanese content providers acquisitive
Japanese content providers have been actively expanding with the announcement by Cybrid that it will acquire acquire 85% of Montreal based Airborne Entertainment in a deal valued at approximately US$90 million.
"Airborne Entertainment has been extremely successful in creating and launching compelling mobile products based on some of the world's biggest brands as well as its own innovative original content", said Tatsuya Kato, Co-President of CYBIRD.
Founded in 1999 by Bornstein and Nulman, Airborne Entertainment has been primarily funded by venture capital and strategic investors and it closed a $6 million Series A round in December 2001 with Telesystem Ltd., Bell Mobility Investments, strategic investors and Airborne's prior shareholders. In July 2004, Insight Venture Partners led a US $22 million Series B round and was joined by existing investors. Prior to the closing of Series, Airborne raised $3 million in a bridge financing with Fund 321 Limited Partnership, managed by Wellington Financial LP.
Cybrid currently runs 105 official mobile content sites for DoCoMo, au and Vodafone, and its subscribers exceed 3.6 million (as of March 31, 2005). However, for all its local success it is gnerally accepted by observers that Cybird's international strategy and execution so far has been poor, and generally unrewarding for the company.
On the other hand Index Group, who has fared better with its overseas strategy, keeps expanding and recently announced another deal in China by adding WAM to the Group.
WAM is the largest Chinese mobile contents provider that is able to deliver mobile media contents throughout China. WAM holds exclusive alliances with approximately 40 major Chinese media corporations, including domestic newspaper, radio, television and government-run media agencies.
WAM’s principal business focuses on the expansion of SMS (Short Message Service) within the Chinese market, which experienced growth from US$2.1 billion in 2003 to US$3.3 billion in 2004.
In March of this year, Index also made one of the largest Chinese mobile contents providers, Shenzhen Skyinfo Telecom Technology a wholly-owned subsidiary.
WAM China becoming a subsidiary gives the Index Group two prominent bases of operation in China, and "places Index into the mainstream of China’s WAP and SMS (Short Message Service) mobile business". WAM China has already formed partnerships with approximately 40 companies that include Chinese newspapers, television networks, radio broadcasters, government reviewed portals, etc., which the Index Group may work together with to expand international services.
WAM had shareholders' equity of about US$5m, total assets of $8m, net profit of around $4m, and sales of $9.3m. Index agreed to pay US$65m (*maximum amount prior to final settlement, a reduction in price remains possible) to WAM's holding company - Sino Asia Management Ltd registered in the British Virgin Islands.
This represents a P/E of less than 16:1 which seems a good deal considering (a) the growth potential, and (b) the ability of Index to leverage its existing business network outside China to extend WAM's assets and business network.
Index's share price has moved up strongly on the Japanese second-board in recent trading, recognising these moves and other successes.
5. Hutchison 3G bottoms user satisfaction
Although we recently sung the praises of Hutchison 3 UK and its 3G success, as reported by CEO Bob Fuller, a user satisfaction report gave 3 UK bottom rankings. In an analysis by Mike Trotman he warned "it's simple to see that 3 is in trouble as far as consumer perception is concerned". "The survey says, in many cases, that as soon as 3's customers get a chance to leave the network, they will be off."
- see Part 1 where we covered the market entry strategy, "the killer app is the mix", video, and content immediacy, and in Part 2 we touched on television to mobile, self-generated content and six-minutes a day.
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