Online Extra: Q&A with DoCoMo's Keiji Tachikawa

The CEO on the Japanese rollout of his company's 3G high-speed wireless service: Understand how complicated this is

Don't be fooled by his scholarly demeanor. The soft-spoken, white-haired Keiji Tachikawa, president and chief executive of NTT DoCoMo, is one of Japan Inc.'s most capable executives. Over the past three years, he has taken the mobile-phone operator public and put it on the fast-growth track -- despite the economic downturn. He helped launch i-mode, the wildly popular mobile Internet access service that has attracted 28 million users since its debut in early 1999.

Now, he's gearing up for his next big act -- the rollout of the world's first commercial third-generation, or "3G," high-speed wireless service, due to commence in the Tokyo area in October. Tachikawa spoke with Tokyo Correspondent Irene M. Kunii about the challenges he faces on the eve of the launch. Edited excerpts follow:

Q: NTT DoCoMo's share price has fallen rapidly [from $21,200 in June to $13,000 in late September], even though the company has delivered strong earnings. How do you account for this?

A: I think NTT DoCoMo's share price is too low. The share price should reflect a company's performance, which in our case has been very good. However, the stock market is now reacting to the economy as a whole. If the global economic situation improves, then our share price will rise. So this is a phenomenon that we can't control.

Q: Do you think investor jitters over 3G's future in Europe may be a factor?

A: We will be raising our earnings through the introduction of FOMA [DoCoMo's 3G voice and data service]. Investors expect us to introduce new services, and this is the one that will definitely help us grow in the future.

The coverage area will be limited initially [for the first two to three months] to Tokyo, and then we'll build the network out area by area. For that reason, we're not expecting to sell many handsets -- only about 150,000 by the end of next March. But we will be rolling out the service rapidly: We plan to provide coverage nationwide in three years' time. The type of dense network we're building would normally take five years. We're doing it quickly because it makes better financial sense.

Q: There have been numerous reports about glitches in your 3G handsets during tests. Are you disappointed in the products available at launch time?

A: Of course I wanted perfect handsets, but there's no such thing as 100% perfect technology in the initial period. Look at our Java i-mode phones. The handset manufacturers struggled to overcome the problems that result from using so much sophisticated software -- the equivalent of what you'd find in a personal computer -- in a tiny package. To squeeze everything in, they have to cut corners, and that's when problems occur. So in the case of 3G phones, they had to change chipsets and make other modifications.

Also, remember that we're not working with an extension of existing cellular technology like the Europeans, who are moving from the GSM to GPRS platform. Our 3G standard is wideband CDMA, which is a new technology. People need to understand how complicated this is.

Q: You've said DoCoMo will be targeting corporate users who can afford to pay the initial high costs. Please explain your plans in more detail.

A: We have a corporate marketing group that will offer customized services for our clients. I can't say much now because much of what we'll be doing will be confidential. For the time being, corporate users will really be the only ones interested in using high-speed data and video transmission.

It's not possible yet to offer a wide range of video-clip services, such as TV news broadcasts, because of copyright infringement. Until media companies tie up with mobile content providers, we're not going to see the emergence of any interesting video services for 3G users. It's the same for music.

Q: Considering the obstacles, will 3G ever become a viable business?

A: 3G is very important. If we just want to do voice, then the 2G (second-generation) cellular-phone system suffices. But as you can see from the growing volume of mobile data transmission in Japan, we need the high speed and capacity that 3G offers. There will be a large market for 3G in the future, and our investors expect us to develop new data services for this market.

We see 3G as a technology for the next decade. We're aiming for 6 million subscribers by March, 2004. From that point on, we expect many 2G users to migrate to the more sophisticated service, which we'll price competitively. After 10 years, we'll then begin shifting to 4G.

Q: What is the fate of next-generation services in Europe, where auctions for spectrum licenses damaged the financial standing of some carriers?

A: It's only the carriers in Britain and Germany that were affected by those auctions. I think in the future, 3G will take off in Europe. When they see that Japan has made a success of it, it will help.

Q: Will you be writing down your investment in KPN Mobile or any other operator in which you've purchased stakes over the past year?

A: We'll be looking at the share price [of KPN Mobile] on Sept. 28. If it has declined by more than 50%, we'll ask independent appraisers to determine if there is any possibility it will recover. If not, then we'll follow Japanese rules that require us to write down such an investment. But right now, nothing has been decided.

KPN Mobile has incurred heavy debts because of the spectrum licenses it purchased, but I don't think its performance has been that bad.... There's bound to be a shakeout in Europe because there are too many operators. We think KPN can survive by providing services that stand out, like our i-mode and 3G platform.

Q: Are you concerned by state of the world economy in the aftermath of the attacks in the U.S.?

A: A downturn in U.S. consumer demand will affect the global economy. It's that old adage: When America catches a cold, the rest of the world comes down with pneumonia. With the American President threatening retaliation, it doesn't look good for consumer demand. It's certain to decline, and that will affect demand in Japan as well. Then we could see a fall in the sales of mobile phones.

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