DoCoMo writes off $4.7bn overseas
Hutchison is very cross
A massive slide in the value of mobile carriers has forced NTT DoCoMo Inc to write JPY 573bn ($4.7bn) off the value of three of its major overseas investments. The move comes at a bad time for the Tokyo, Japan-based carrier as the costly consequences of its expansion into world markets comes at a time when it is being hammered in its home base by poor reception for its 3G service.
The biggest write-off is JPY 339bn ($2.8bn) on its 16% interest in AT&T Wireless. It paid $9.8bn for its stake in December 2000 as part of an alliance under which the two companies would share content and technology and sell each other's services in both Japan and the US.
In Europe, DoCoMo is writing off JPY 126bn ($1bn) on its 20% stake in Hutchison 3G, which this month is starting a low-profile launch of the first 3G services in the UK. The move is hardly a surprise as in August Dutch incumbent KPN NV wrote $1.2bn euros ($1.1bn) off the value of its 15% stake in the company for which it paid 1.5bn euros ($1.4bn). It planned to sell its holding for a knock-down price.
The move brought an angry response from the majority shareholder, Hong Kong conglomerate Hutchison Whampoa Ltd, which said it "disagreed with the rationale behind DoCoMo's accounting decision." It claimed that after a detailed impairment test of its 3G assets, it found there was no requirement to write down its investments in 3G licenses and services.
But Hutchison is now the subject of increasing critical appraisal in the investment community because of the degree of its exposure to 3G at a time when sentiment has turned against the technology and operators in Europe are delaying their roll-outs. Hutchison has just had to scrap a 1.5bn euro ($1.48bn) bond issue, citing a deterioration in bond market, though a reluctance by investors to back 3G ventures is thought to be a major factor.
DoCoMo's final write-off is for JPY 108bn ($893.2m) for its investment in KPN Mobile NV as part of an alliance that was designed to spread its i-mode service in Europe. As the largest mobile operator in terms of revenue, DoCoMo decided to take on a global role by investing in companies overseas, but has ended up with a huge financial headache as a result.