WASHINGTON-The Federal Communications Commission requested additional information on NTT DoCoMo Inc.’s proposed $72 million acquisition of two wireless firms in Guam, a relatively small transaction being challenged by a telecom carrier on competitive and national security grounds. The wireless deal also is under review by U.S. homeland security and law enforcement officials.
NTT DoCoMo, Japan’s wireless powerhouse, announced plans to buy Guam Cellular & Paging Inc. and Guam Wireless Telephone Co. L.L.C. in March.
The island deal has drawn stiff opposition from TeleGuam Holdings L.L.C., the monopoly local wireline carrier that provides wireless service through its Pulse Mobile L.L.C. unit. TeleGuam said the proposed transaction invites antitrust problems, would create a new precedent for foreign ownership and potentially undermine national security. TeleGuam said the deal would give the newly created wireless carrier a cumulative 55 megahertz of commercial wireless spectrum and a 55-percent to 65-percent market share. As such, TeleGuam recommended that any approval of the NTT DoCoMo purchase should come with conditions and safeguards.
In a joint filing, NTT DoCoMo, Guam Cellular and Guam Wireless told the FCC TeleGuam’s concerns are exaggerated and that it is TeleGuam that is trying to stifle competition in an incorporated U.S. territory that’s home to one of this country’s most strategic military base installations in the Pacific.
“The proposed transaction will provide for the infusion of significant economic and management resources and wireless expertise from DoCoMo, a leader in the wireless market,” the three firms stated.
“DoCoMo’s investment will enhance the capabilities of Guam Cellular post-transaction to compete against multiple other Guam wireless carriers that are expanding their networks and services and that have access to significant financial resources. Existing wireless voice and data services will be improved significantly and consumers will have increased product choices, including GPRS data services and advanced third-generation wireless broadband Internet services. TeleGuam does not even attempt to contest these benefits.”
NTT DoCoMo, Guam Cellular and Guam Cellular said there would be six wireless carriers in the market after the deal is completed.
TeleGuam responded by saying the proposed $72 million wireless deal “is indistinguishable from large transactions, where potential competitive harms in isolated markets can be mitigated by a lack of harms in a majority of other affected markets.”
The transaction would create a new DoCoMo Guam holding company that would be owned indirectly by DoCoMo. The telecom act limits foreign ownership in U.S. wireless carriers to 25 percent. The FCC, however, can waive the foreign-ownership cap-all the way up to 100 percent-if it deems a particular investment would not be inconsistent with the public interest. FCC foreign-ownership rules also accord favored status to foreign investors from World Trade Organization member countries. Japan is a WTO member.
According to FCC filings, Nippon Telephone and Telegraph Corp., a Japanese publicly trade company, held a 61.96-percent equity and voting ownership interest in DoCoMo as of December 2005. The Japanese government, through the Ministry of Finance, holds a 38.37-percent equity and voting ownership interest in NTT. The FCC said Guam Cellular and Guam Wireless stated in license transfer applications that no other entity holds more than 5 percent either directly or indirectly in DoCoMo, and that at least 75 percent of DoCoMo’s shares and NTT’s shares are held by investors from WTO countries including Japan, the United States and the United Kingdom.
The commission now wants further substantiation of information included in applications to transfer wireless licenses to NTT DoCoMo.
Meantime, the Department of Justice, Federal Bureau of Investigation and Department of Homeland Security asked the FCC in June to defer action on the proposed NTT DoCoMo Guam deal until they have completed their own review of the matter.
It is unclear whether the U.S. Committee on Foreign Investment, the U.S. Treasury-led interagency group that scrutinizes overseas acquisitions of American firms, is examining the NTT DoCoMo’s proposed purchase of U.S. wireless assets.
Incoming Treasury Secretary Henry Paulson served on a U.S. advisory board to NTT DoCoMo from 2000 to 2002 in his former role as chairman of Goldman Sachs Group Inc.
