TOKYO-NTT DoCoMo Inc. announced it signed a memorandum of understanding with KPN Telecom, acquiring 15 percent of the voting rights in a newly formed holding company called KPN Mobile N.V. for about $4.5 billion. The announcement follows KPN’s failed merger talks with Spain’s Telefonica earlier this month.
KPN Mobile N.V. owns KPN Mobile, KPN Telecom’s wireless subsidiary, as well as stakes in five additional wireless carriers in Europe and Indonesia. KPN owns the remaining 85 percent of the new company.
“Through the investment in KPN Mobile, NTT DoCoMo intends to become involved in Europe’s mobile communications business,” said NTT DoCoMo, Japan’s leading wireless carrier.
The Japanese company said after a definitive agreement is reached on the equity subscription, NTT DoCoMo will have the right to nominate at least one representative to KPN Mobile’s supervisory board. In addition, NTT DoCoMo will provide technical support to assist in the introduction of International Mobile Telecommunication-2000 services. NTT DoCoMo’s iMode wireless Internet service has about 6 million users, the largest wireless data subscriber base in the world.
Following the MoU, Moody’s Investors Service confirmed its Aa1 rating of NTT DoCoMo with a stable outlook. Moody’s also said it expects the company to be making additional strategic investments while preserving a sound financial profile and maintaining a dominant market position in Japan.
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Press reports quoted analysts who said the deal was a poor second choice to a merger with Telefonica. However, the alliance paves the way for the new company to bid for U.K. operator Orange plc, which must be spun off from the combined Vodafone AirTouch plc/Mannesmann AG later this year.
Telefonica and KPN Telecom ended their merger talks based on Spanish government and shareholder objections. The merger would have been the first between two former European telecom monopolies and would have created a company with a market value of about $125 billion.
The Spanish government has a “golden share” in Telefonica and veto rights. Spain objected to a merger because the Dutch government had not clarified its plans to sell its 43.5-percent stake in KPN. The Spanish government wanted an immediate sale of the Dutch government’s stake.
Another sticking point was KPN’s partnerships with Qwest Communications and BellSouth Corp., which has an option to convert its 22.5-percent stake in Germany’s E-Plus into shares of either KPN or KPN Mobile.