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Aol Goes Courting In Japan

News: Analysis & Commentary: Wireless Internet

AOL Goes Courting in Japan

It's one of many seeking a tie-up with NTT DoCoMo

The new headquarters of NTT DoCoMo in central Tokyo is becoming a mecca for the world's Internet players. Senior execs at mobile and info tech giants such as Nokia Corp. and Sun Microsystems Inc. go to the granite skyscraper to pay homage to Japan's largest wireless operator--and maybe even hook up with the pioneer in mobile Internet and next-generation cellular services. "Visitors from overseas want deeper relations with us, including equity tie-ups," says Kiyoyuki Tsujimura, managing director of DoCoMo's global business department. "We have many opportunities."

And the latest one just might be with America Online Inc., the world's largest Net service provider with more than 23 million subscribers worldwide. Tokyo is abuzz about a possible deal between AOL and DoCoMo, whose i-mode wireless Net phone service is a raging success in Japan. The speculation is that AOL content could be available on i-mode phones if a deal is reached, possibly in August. AOL won't comment. DoCoMo's Tsujimura won't either. But he certainly sounds interested: "If an Internet provider has important, key content, then we'll think of making an alliance."

That would make sense for AOL. It sees wireless gadgets overtaking the PC as the most popular way to access the Net in the coming years. AOL has a relatively small presence on Japanese PCs, but Japan is an enormous market with an estimated 77 million wireless cybersurfers by 2005. By tying up with DoCoMo, AOL could reach the burgeoning wireless Net crowd and challenge the dominant position of rival portal Yahoo! Japan. DoCoMo is Japan's leading wireless Net provider: It boasts nearly 10 million subscribers and is a direct conduit to 15,000 specially formatted Web sites where users can read breaking news, see stock prices, and check the weather without dialing up.

DoCoMo could also offer AOL tech advice in converting its PC-based Web sites to the tiny screens used by mobile phones. And it could help AOL facilitate e-mail, instant messages, and data exchanges between computer screens and handsets, according to the Nihon Keizai Shimbun, a leading financial daily. With plans by DoCoMo to expand in Europe, a link-up could support AOL's entry into Europe's burgeoning mobile Net market as well.BIGGER GAME. The benefits for DoCoMo are less apparent. AOL has developed unique services that could be transplanted to the wireless Net, such as instant messaging, which could be used as a locator device in the future. It could enable delivery of AOL's international content to i-mode users, but that's unlikely to generate much in the way of profit. "The earnings impact is minimal," says Kate Lye, telecom analyst for Warburg, Dillon Read in Tokyo.

But DoCoMo is playing a bigger game that goes way beyond Japan. AOL could be a good means of boosting its international standing. Last year, DoCoMo formed an alliance with Microsoft Corp. to develop mobile access services for corporate users, starting in Japan and later moving to the U.S. It has partnered with Sun Microsystems Inc. to develop Net-capable handsets incorporating Sun's Java software. DoCoMo also has embarked on a global buying spree, purchasing a 19% stake in Hong Kong cellular operator Hutchison Telecom, and offering $4.5 billion for 15% of KPN Mobile, the wireless unit of the Dutch national phone company. In July, DoCoMo invested in Hutchison 3G UK Holdings, which aims to develop next-generation cellular services in Europe.

DoCoMo needs world-class allies to execute its plans. It wants its technology, an upgraded version of i-mode packaged with a third generation cellular standard called W-CDMA, to become the global standard. By buying minor stakes in foreign cellular operators, it hopes to steer its partners to W-CDMA. "We consider our [version of the] 3G standard to be very good, one that can be adopted worldwide," says DoCoMo President Keiji Tachikawa. "So we're going to use our influence to spread it around the world." With AOL on board, the DoCoMo way could spread fast.By Irene M. Kunii in Tokyo

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