WASHINGTON-Could a small wireless deal in an age of blockbuster mobile-phone mergers be a threat to national security?
The Federal Communications Commissions will make the call as it considers Japan’s NTT DoCoMo Inc.’s proposed $72 million purchase of Guam Cellular & Paging Inc. and Guam Wireless Telephone Co. L.L.C.
TeleGuam Holdings L.L.C., which provides local and long-distance service as well as wireless service though its Pulse Mobile L.L.C. subsidiary in Guam, claims the proposed transaction poses competitive problems, creates a new precedent on foreign ownership and could undermine national security.
“There are considerable risks to having the largest wireless provider on Guam controlled by any foreign-owned [entity], even by one from an ally such as Japan. … In light of the key military installations on Guam and their strategic importance, denial of their application is appropriate to protect national security interests,” TeleGuam stated. Guam is an incorporated territory of the United States.
Guam Cellular and Guam Wireless are expected to respond to TeleGuam at the FCC this week.
NTT DoCoMo said it plans to improve the quality of Guam Wireless’ GSM network, adding GPRS capability to launch packet roaming services. DoCoMo also said it would introduce a W-CDMA network for third-generation wireless services utilizing frequencies of Guam Cellular-a CDMA carrier-in the future.
The deal, announced in March, proposes to create a new DoCoMo Guam holding company that indirectly would be owned by DoCoMo.
The telecom act limits foreign ownership in U.S. wireless carriers to 25 percent. However, the FCC can waive the foreign-ownership cap-all the way up to 100 percent-if telecom regulators deem a particular investment would not be inconsistent with the public interest. FCC foreign-ownership rules also accord favored status to foreign investors from World Trade Organization member countries. Japan is a WTO member.
On June 8, the Department of Justice, Federal Bureau of Investigation and Department of Homeland Security asked the FCC to defer action on the proposed NTT DoCoMo Guam deal until they have completed their own review of the matter.
According to FCC filings, Nippon Telephone and Telegraph Corp., a Japanese publicly trade company, held a 61.96-percent equity and voting ownership interest in DoCoMo as of December 2005. The Japanese government, through the Ministry of Finance, holds a 38.37-percent equity and voting ownership interest in NTT. The FCC said Guam Cellular and Guam Wireless stated in license transfer applications that no other entity holds more than 5 percent direct or indirect stake in DoCoMo, and that at least 75 percent of DoCoMo’s shares and NTT’s shares are held by investors from WTO countries including Japan, the United States and the United Kingdom.
TeleGuam said approval of the purchase would make NTT DoCoMo the leader in the Guam market, having a cumulative 55 megahertz of commercial wireless spectrum and a market share between 55 percent and 65 percent.
“The proposed transaction would mark the first time a dominant wireless provider in a U.S. market would have such significant foreign ownership,” TeleGuam said.
Deals that would lead to foreign ownership of U.S. assets-even those involving U.S. allies-have become flash points in the homeland security regime created in the aftermath of the Sept. 11, 2001, terrorist attacks.
Foreign ownership skittishness reached its apogee in the now-defunct Dubai Ports deal, a political conflagration for the Bush White House that prompted some lawmakers to call to reform the U.S. Committee on Foreign Investment, the U.S. Treasury-led interagency group that scrutinizes overseas acquisitions of American firms.
One of those lawmakers-House Armed Services Committee Chairman Duncan Hunter (R-Calif.)-is sponsoring a bill to require majority U.S. ownership of critical infrastructure deemed essential to national security and a five-year divestiture of foreign-owned critical infrastructure. The bill, which shows little sign of moving, would have implications for T-Mobile USA Inc. The No. 4 wireless operator in the United States is owned by German telecom giant Deutsche Telekom AG. The Hunter bill also would have meaning for French Alcatel SA’s pending $14 billion takeover of Lucent Technologies Inc. and the Guam wireless deal.
DoCoMo, which has promised to inject $6.5 million into the newly created Guam wireless company, said the acquisitions will enable it to better serve many Japanese travelers who visit Guam and the Northern Mariana Islands.
As a backup position, TeleGuam said any approval of the DoCoMo wireless purchases should come with conditions and safeguards. One would require top Japanese wireless provider NTT DoCoMo, which does not allow roaming into Japan, to make available to Guam carriers its dual-mode handset at reasonable rates and at reasonable and non-discriminatory terms and conditions. TeleGuam also said NTT DoCoMo should be required to license to other Guam carriers any new technologies the Japanese company brings to the island.
In addition, TeleGuam recommended DoCoMo wireless carriers in Guam be barred from entering into government contracts to provide telecom services in the United States.
