NTT to reacquire DoCoMo for hefty $38B

The NTT Group will resume full control of wireless affiliate NTT DoCoMo, the latest consolidation of the Japanese group aimed at improving efficiency and preparing for 5G and next-gen technologies.

NTT will pay 4.3 trillion yen (US$38 billion), a 41% premium, to bring DoCoMo back in-house, the largest such deal in Japan.

News of the offer sparked a 16% spike in NTT DoCoMo's share price and a 2.9% drop in NTT's stock on the Tokyo exchange Tuesday.

Following a board meeting this afternoon NTT DoCoMo directors announced they had accepted the offer.

NTT said in its first approach to DoCoMo in early August it had offered a premium of just 22.5% and had increased it several times until today's acceptance.

The driver for the deal is widely seen to be the call by new Prime Minister Yoshihide Suga for operators to drop their prices. As cabinet secretary two years ago he called for a 40% cut in charges.

A government survey earlier this year found Tokyo had some of the highest mobile prices of major world cities, with 1GB of mobile data costing as much $3.90.

However, Marc Einstein, chief telecommunications and digital services analyst at ITR Corp Japan, said he believed Suga's comments, along with the impact of COVID-19, had brought DoCoMo's valuation to a level where NTT decided to buy.

"NTT has long wanted to consolidate the operations across its subsidiaries to create a leaner organization and I think this is what is happening. This started a few years ago when NTT started consolidating group companies so I see this as an extension of this," he told Light Reading.

NTT, which is 35% government-owned, spun off DoCoMo in 1992 and still owns a 66% stake.

DoCoMo went public in 1998 and during the dotcom bubble its market cap briefly bloomed to around $400 billion, making it one of the most valuable companies in the world. With its WAP-based iMode service and customized 2G phones, NTT DoCoMo was the first operator to bring the Internet to the mobile device in 1999.

It is still Japan's biggest mobile operator, with 80 million customers and 44% market share but, in a saturated market, wireless earnings have been lagging. Its modest Q2 profit was driven by its digital and payment services, while mobile revenue declined 5%.

In a presentation, DoCoMo said that as a wholly owned subsidiary it hoped to improve its service range and competitiveness and to reduce costs.

It said the move would also increase its access to R&D resources in the race to 6G and next-generation optical.

"As 5G is expanding and society is drastically transitioning to a remote style, NTT DoCoMo Inc. needs to expand its business domains beyond mobile centric," it said.

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— Robert Clark, contributing editor, special to Light Reading