DoCoMo Shares Reveal Fickle, Rather Than Fragile, Mobile Market

February 21, 2001

Just four months after NTT DoCoMo bought a 42.3% stake in AOL Japan, DoCoMo issued new shares on February 5. Amid a far from healthy market environment the response has been suprisingly strong, signaling the high expectations investors have in DoCoMo as the leader in mobile internet services and demonstrating the faith institutional investors, especially from Europe, have in such services.

Given recent mobile internet doom and gloom stories, particularly in relation to the high prices paid for 3G licenses in Europe and the predicted time lapse until they will be available, is such faith in a fragile market misplaced? WirelessDevNet investigates...

The mobile internet market is, to say the least, fragile. Only recently, France Telecom's mobile operator Orange had to scale back its fund-raising expectations after a disappointing initial public offering (raising less than half its original target). So when NTT DoCoMo issued more shares this Monday many waited with baited breath for the market's response.

And what a response!

Fragile environment or not, it seems that DoCoMo can still pull its punch with institutional investors, especially in Europe where a larger than expected interest was shown in the issue, with the 70,000 allotted shares oversubscribed sixfold. US institutions showed less enthusiasm, although the allotted 70,000 shares were still almost three times oversubscribed. Japanese institutional investors, however, proved the weakest link, with some of the 40,000 allotted shares grasped back and redistributed to the hungrier international market. In spite of this, the Japanese retail investors came through strongly, resulting in the 220,000 Japanese allotted shares being almost twice oversubscribed.

Europe's strong level of demand came in spite of widespread concerns about the prospects for advanced 3G services, which DoCoMo will be the first in the world to launch, supposedly in Japan this May. European carriers have seen their share prices battered by concerns that they have overpaid for third generation services with widespread predictions that it will be consumers who are ultimately made to pay for the high license fees. Regardless, Europe is expected to follow closely on Japan's heels in launching 3G services, and DoCoMo, having invested in KPN Mobile and Hutchinson 3G, is likely to be among the forerunners in offering such services. DoCoMo has not had to shoulder high costs for licenses and is expected to start offering an i-mode like service in Europe with its partners later this year.

This may be the catalyst for the European institutional investors' faith, along with the launch of DoCoMo's new Java-enabled handsets last month, offering more sophisticated services appealing especially to avid games players, which, in the first day of its launch, saw 70,000 subscribers.

With the dust finally beginning to settle on the US regulatory approval of the AOL/Time Warner merger, there are indications of how the newly merged organizations will bring content rich services to bear. AOL Japan's recent rebranding as DoCoMo AOL is a further signal of the two companies' intentions to launch in Japan a further series of applications developed by DoCoMo, AOL Japan and US parent AOL Time Warner for both the fixed and mobile platforms. The launch of these applications is predicted to coincide with DoCoMos's rollout of its 3G network in Japan this May.

So all in all there are plenty of sound reasons for the level of interest shown in the DoCoMo share issue. The market, it would seem, is fickle rather than fragile.

Nicki Hayes is a freelance writer and corporate communications consultant specialising in business to business internet issues. She has contributed editorial to a number of publications including Unstrung.com, Guardian Online, Financial Times, Banking & Financial Training, eAI Journal and Secure Computing. Nicki is also the European correspondent for The Wireless Developer Network. Nicki is based in Dublin, Ireland and also has a base in Cambridge, UK. Through her consultancy, Hayes-Singh Associates, she has access to a number of technical writers and PR consultants throughout Ireland and the UK.