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DoCoMo writes-off billions in 3G assets
Wednesday, October 02 2002
by John Cradden

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NTT DoCoMo has announced it is to write-off YEN573 billion (USD4.7 billion) from its 3G assets overseas to reflect the losses in the value of these investments.

The write-downs include a YEN339 billion (USD2.75 billion) devaluation on its stake in AT&T Wireless Services in the US and a YEN126 million (USD1 billion) write-down on its stake in British mobile venture Hutchison 3G UK. NTT also said it was writing-off the value of its 15 percent stake in Dutch carrier KPN Mobile by YEN108 billion (USD878 million).

Indeed, thanks to NTT DoCoMo's write-off of its KPN assets the business now has a negative equity value of approximately EUR10 billion (USD9.83 billion). This is because KPN itself wrote-off the value of that business by EUR20 billion in various moves over the last few months, and also took shareholder loans, creating the negative equity value situation of the mobile operator.

The news of NTT DoCoMo's write-offs has not come as a great surprise. Shares in the business have declined more than 40 percent since the start of the business year in April because of investor worries that it would write-off some of its overseas investment after a global slump in telecoms shares.

The top Japanese telecommunications firm, which pioneered i-mode Internet-enabled mobile phones and third-generation (3G) mobile services, has become the latest in a long line of wireless operators to write-off their 3G assets following the drop in share values.

In August, KPN Telecom itself wrote off the majority of its 3G investments in Germany, Belgium and Britain. The Dutch company 's USD8.79 billion write-off includes its 15 percent stake in "3" in the UK, Hutchison Whampoa's 3G company, which owns one of Ireland's 3G licences. Currently the Hong Kong giant owns 65 percent of the UK licence, along with NTT DoCoMo's 20 percent.

In July, Spain's Telefonica and Finland's Sonera together took a total write down of around EUR9.2 billion against many of their European 3G operations. The two companies' investment in Quam, a small German mobile phone operator, accounted for the bulk of the write off. In addition, Telefonica said it will halt 3G operations in Italy, Austria and Switzerland while Sonera is writing down its stake in Italy's IPSE.

This environment has led to further speculation that T-Mobile, Orange, mmO2 and Vodafone will be forced to follow suit and write-off their 3G investments.

The poor performance of DoCoMo's overseas investments had dragged down its net profits substantially. In May, the firm reported that full year net profits amounted to YEN862 million (EUR7.4 million), down from last year's net profits of YEN365.5 billion. Write-downs on the value of its stakes in its AT&T Wireless and KPN forced the company post a special YEN812 billion (US6.4 billion) loss for the last fiscal year.

Meanwhile DoCoMo's president warned late last month that the target figure for its own new 3G subscribers would be lowered. In August, DoCoMo had 133,500 users of its 3G service, less than one-tenth its full-year target of 1.38 million.

It was reported in the Japanese press that DoCoMo's 3G subscriber target for the business year to next March 2003 would be cut by 70 percent to 400,000, but the company has refused to confirm the numbers until November, when the results for its first half are due.

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