On the heels of unprecedented success in Japan, NTT DoCoMo sets its wireless ambitions on the U.S.

In Japanese, dokomo means "anywhere," and true to its name, Japan's mobile telecom giant NTT DoCoMo is ramping up global coverage and expanding its services into different countries. DoCoMo has enjoyed phenomenal success as both a carrier and a content aggregator in Japan. And it has already begun expanding into other markets. Is the telecommunications titan's next stop America?

One person who thinks so is John Mondoloni, vice president of Morgen, Evan & Co., a private investment banking firm focusing on Japan-North America business. He cites a recent DoCoMo ad in the Wall Street Journal touting its i-mode wireless data service. "Apparently they're planning to build their network infrastructure and provide the same kind of services that they're providing in Japan." That would mean the appearance of DoCoMo as a new player in both the U.S. mobile carrier market and the mobile content-distribution market. While a DoCoMo spokesman would not comment on any plans to come to the U.S., he did allow that "it is true DoCoMo sees the U.S. as a very attractive market."

DoCoMo has already begun adding English-language content to its i-mode service in Japan, and Mondoloni thinks the company is eyeing 2002 as a good year to come to the U.S., after the completion of its worldwide network. "This is probably their main strategy: to be able to provide this content to wireless phones in the U.S.," he says.

DoCoMo has already begun extending its carrier operations around the world. It partly owns phone companies in Hong Kong, the Philippines, Brazil, and the Netherlands, and in August it announced roaming services in South Korea through an agreement with Korea's SK Telecom. The company's Web site identifies its long-range ambition as "global mobility support" -- the ability to use the same device anywhere in the world -- although other carriers are working toward this goal, too. South Africa-based Vodacom, for example, boasts "almost-global" coverage with 80 roaming partners, and U.K.-based Vodafone has lined up access to 101 networks in 61 countries.

Joe Laszlo, an analyst at Jupiter Communications, notes that the stakes are high, since business travelers who'd want a global service are a sophisticated, high-income demographic. "If you can [capture] that group and make them very loyal to you, it's certainly an appealing group for a carrier to have." Which means that, for DoCoMo, a U.S. toehold would be an essential move in building out its worldwide network.

But Laszlo also sees another potential motive for DoCoMo's probable move into the U.S.: "It's just as plausible that because most other markets aren't nearly as highly penetrated as the Japanese market, there's still a lot more growth potential in, say, the U.S. cellular market -- and a lot of other markets worldwide." Dataquest analyst Abha Garg stresses that DoCoMo is still more focused on Europe than the U.S. But investment banker Mondoloni thinks the company has simply spotted the strong growth in U.S. wireless subscribers over the last two years. "I think the North American market is catching up very, very quickly now."

The Content Card
But DoCoMo's network buildout moves would do more than let users call from anywhere in the world or give the company new markets as a carrier. They would also lay the foundation for an important second revenue stream: the content plays yet to come. Overseas expansion brings economies of scale, Laszlo notes, but would also give a phone company such as DoCoMo "a bigger audience that they can bring to content providers as data services become more important." Garg also sees potential in data services: "With increased price competition, you're not deriving as much revenue from just voice services, so they want to add in more data services to increase their revenue."

DoCoMo's own statistics seem to bear out the need for this strategy. Subscribers to the i-mode wireless data and messaging service increased by nearly 5 million subscribers between March and August to 10 million, while DoCoMo's cell phone subscribers increased by just 3.6 million, to 33 million. In fact, i-mode is the world's fastest-growing wireless content service: Six months after i-mode launched in February 1999, it had already reached 1 million customers. Ten weeks later, it passed the 2 million mark. By February 2000, it was growing at a rate of 1 million subscribers per month, and by September it had surpassed 12 million subscribers.

While there are several factors contributing to i-mode's phenomenal growth -- effective marketing and pricing as well as low PC penetration in Japan, which has left a large opening for alternative data services -- Garg says i-mode offers another lesson: "It's compelling content, and people are willing to pay for that." Subscribers can shop, read news, get movie listings, or check the balances on their credit cards, bank accounts, life insurance, and stock portfolios, as well as transfer funds. There's also railroad and flight information, travel reservations for more than 3,000 hotels, information on rental apartments, plus games and karaoke. A rumored deal with America Online could also let DoCoMo tap Time Warner's vast resources of content for future offerings. It has already announced plans for new consumer-oriented services, including music distribution and location information. On the technology front, it's already agreed to use AOL's Instant Messenger and AOL Mail on i-mode.

Pushing for W-CDMA
Part of DoCoMo's interest may also be rooted in the ongoing standard-conflicts that loom in the wireless space. The company hopes to establish W-CDMA, the wideband version of the Code-Division Multiplex Access standard for mobile transmission, as the global standard for third-generation (3G) systems. This network technology promises to allow large-volume data and full-motion video over the mobile network with a quality comparable to an ISDN connection. Europe and Japan have already signed onto W-CDMA as the 3G transmission standard; U.S. carriers are considering several technologies. (DoCoMo's target date for W-CDMA implementation in Europe and Japan is May 2001.)

To establish W-CDMA, foreign partnerships can only help. DoCoMo has already begun field tests in China, South Korea, and the U.K., and it has signed an agreement for joint W-CDMA operations with Indonesia's largest telecommunications company, PT Telekom. DoCoMo is also exchanging W-CDMA technology with Philippine carrier Smart Communications and the Telephone Organization of Thailand and has lined up cooperating agreements with Telecom Italia Mobile and Finland's Sonera. It has also established subsidiaries in Brazil, France, and the U.S. to promote this technology as the standard for 3G. Analysts note persistent reports that DoCoMo wants to ally with a U.S. carrier, which would give it a U.S. outlet for W-CDMA.

Investment banker Laszlo believes concern over standards could be a factor in DoCoMo's expansion plans. "From a more strategic perspective, I certainly think one possible motivator would be to try to have a larger say in where global networks evolve as far as 3G strategies go. I wouldn't see a huge short-term payoff for them; but if they have an influence over which 3G standard SBC and BellSouth jointly settle on [as their merger takes hold], that might be a benefit worth taking a 10 to 20 percent stake in the [merged] company for."

Of course, alliances and strategies are one thing; results are another. "If anything comes out of this, that's when it becomes important," says Garg.