No. 20 — May 19, 2000


Weekly Review


For years, foreign observers viewed Japan's communications market as huge but isolated. The postwar domination of domestic communications services by Nippon Telegraph and Telephone Corp. — first as a monopoly and now as a 59 percent government-owned company — historically was a disincentive for foreign firms to enter the market. Since Tokyo has deregulated many aspects of the common carrier business, however, both Japanese and nondomestic firms increasingly are willing to go head to head with the giant. Last year, Great Britain's Cable & Wireless Plc, for example, won control of a competing Japanese carrier after a costly bidding war against NTT (see JEI Report No. 24B, June 25, 1999).

Now, 10 months after it was reorganized, NTT and its affiliates are taking the fight to the home field of their foreign rivals. NTT Communications Corp., which provides domestic long-distance and international voice and data services, announced May 8 that it had agreed to buy Verio Inc., one of the biggest independent American Internet services providers, for $5.5 billion. As Japanese purchases of U.S. companies go, the pending acquisition is second only to Japan Tobacco Inc.'s $7.8 billion purchase last year of RJR Nabisco Holdings Corp.'s non-U.S. cigarette operations. NTT Communications, which has owned approximately 10 percent of Verio since May 1998, will integrate the Englewood, Colorado firm's services and technology with the menu of global network and Internet Protocol-based services it offers in the Asian Pacific region.

NTT DoCoMo, Inc., Japan's leading provider of wireless communications and 67 percent owned by NTT, followed up May 9 by announcing that it would establish a foothold in the European communications market by buying 15 percent of the mobile phone subsidiary of KPN Royal Dutch Telecom NV. The Dutch company is bidding for a slice of the British wireless market and might need to tap NTT DoCoMo's deep pockets.

If KPN's bid is successful, its wireless network will stretch from Britain to the Ukraine, a reach that explains its allure to the Japanese firm. KPN is equally interested in gaining access to NTT DoCoMo's advanced iMode wireless Internet technology and next-generation wireless know-how. Analysts agree that this deal is a win-win situation and clearly announces NTT DoCoMo's determination to be a global player in the wireless market.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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