NTT DoCoMo became the largest investor in AT&T Wireless Group last week when the previously announced strategic alliance between the two wireless giants officially commenced.
For its $9.8 billion investment, DoCoMo gained an approximate 16-percent interest in the country’s third-largest wireless operator. The deal is expected to provide DoCoMo with a U.S. partner for its i-mode wireless Internet service.
“This world-class alliance will bring an exciting new generation of mobile multimedia services to AT&T Wireless customers much more quickly than we anticipated even six months ago,” said John Zeglis, chairman and chief executive officer of AT&T Wireless. “Millions of AT&T Wireless customers will soon have the benefit of a high-performance mobile Internet built into the fabric of everyday life.”
For its nearly $10 billion investment, DoCoMo received 406 million shares of AT&T Wireless tracking stock, at an average price of $24 per share, and five-year warrants to purchase the equivalent of an additional 41.7 million shares of tracking stock at $35 per share. AT&T Wireless’ stock was trading around the $25 mark late last week, after slumping as low as $16 per share since the company first announced DoCoMo’s intentions last November.
As part of the deal, AT&T Corp. reduced its interest in AT&T Wireless by 178 million shares and received $20.50 per share from DoCoMo. The balance of the 406 million shares came from the issuance of 228 million new primary shares of AT&T Wireless tracking stock at $27 per share.
AT&T Corp. retained about 70- percent economic interest in AT&T Wireless’ operating results, with an approximate 14 percent of the interest continuing to be represented by the existing AT&T Wireless tracking stock.
In addition to its share purchase, DoCoMo obtained a seat on AT&T’s board of directors until AT&T Wireless is spun off from its parent company, expected later this year. DoCoMo will retain representation on the new public wireless company’s board at that time, with both companies selecting certain key executives for the multimedia subsidiary.
AT&T Wireless said it will use the approximately $6.2 billion it receives from the share sale to continue its strategy to expand capacity, enlarge its footprint, create advanced mobile Internet applications and invest in other strategic growth initiatives. AT&T Wireless also has about $3 billion tied up in the Federal Communications Commission’s auction of wireless spectrum.
AT&T Corp. said it will use the remaining $3.6 billion for debt reduction.
DoCoMo’s interest in spreading its i-mode service, which signed up more than 17 million subscribers in Japan in less than two years, around the world has led the company to pursue strategic investments in Dutch wireless operator KPN Telecom and a $100 million investment in AOL Time Warner Inc.’s Japanese unit.
DoCoMo has also been rumored to be interested in a 15-percent stake of South Korean wireless operator SK Telecom Co. The Wall Street Journal reported the deal could be worth as much as $5 billion and give DoCoMo a potential foothold in China, where SK Telecom is rumored to be in talks with China Unicom about a cooperative agreement on technological exchanges.
