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DoCoMo, KT in early stake talks - sources

Mon June 27, 2005 2:10 PM GMT+05:30
By Yukari Iwatani Kane and Kim Miyoung

http://www.reuters.co.in/locales/c_newsArticle.jsp;:42bfeae5:39cbb04c653e53a4?type=technologyNews&am....

TOKYO/SEOUL (Reuters) - Japan's top mobile carrier, NTT DoCoMo Inc., is in talks to buy a stake in South Korea's second-ranked mobile operator KTF Co. Ltd., DoCoMo sources said on Monday.

The sources said the two companies were in contact, but talks were still preliminary and had not reached a specific stage.

KTF's parent firm denied there were any talks.

Analysts said a tie-up between the two firms could make sense given strong trade ties and active tourism between Japan and South Korea. DoCoMo was reported in the past to be in talks with both KTF and its larger rival, SK Telecom Co. Ltd..

"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.

The chief executives of DoCoMo and its parent, Nippon Telegraph and Telephone Corp., have recently said they would consider investing in an Asian operator looking to move to a high-speed third-generation (3G) network based on the same W-CDMA standard that it uses.

South Korea's top fixed-line and broadband operator KT Corp., which owns 48.7 percent of KTF, could use funds from DoCoMo to help purchase the remainder of KTF. KTF has yet to start a W-CDMA service even though it has a licence for it.

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.

DoCoMo is also seeking new avenues of growth amid tough competition in the Japan market. Things could get tougher as new mobile entrants start services and a government rule next year makes it easier for users to switch operators.


20 PCT STAKE

Online news provider MoneyToday (www.moneytoday.co.kr) said KT was talking to DoCoMo about selling a 20 percent stake worth $896 million in KTF, quoting unnamed industry sources.

"The report that KT plans to sell a KTF stake to DoCoMo is groundless," KT said in a filing to the Korea Exchange, without further elaboration.

A DoCoMo spokesman declined to comment.

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.

DoCoMo has been haunted by investment mistakes in the past decade, in which it spent nearly 1.9 trillion yen to buy small stakes in operators around the world to promote the use of its i-mode mobile Internet technology and ensure the adoption of W-CDMA.

The investments in firms such as AT&T Wireless Services Inc., Dutch operator KPN Mobile N.V. and Hutchison 3G UK Holdings Ltd. (3UK) began to sour almost immediately as the tech bubble burst.

KT said last year it was considering acquiring its mobile unit KTF, which has a market value of $4.5 billion, as the merger would fit with a trend of integration between fixed-line and wireless carriers.

KT carries 94 percent of the local call market and half of the broadband market in South Korea, while KTF controls 32 percent of the mobile market.

Shares in KTF closed down 3.3 percent at 23,800 won and KT eased 1.2 percent to 42,200 won. DoCoMo was off 2.4 percent at 162,000 yen.

Separately, KT also told the Korea Exchange that rumours it may acquire local Internet portal Daum Communications Corp. were also groundless.