AT&T, NTT DoCoMo Enter $9.8 Billion Wireless Venture
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NTT DoCoMo and AT&T have formed a long-term partnership to develop wireless multimedia applications. The alliance will enable users to access HTML applications and content on mobile wireless terminals and allow the two companies to promote common global standards.
As part of the deal, NTT DoCoMo will invest nearly $10 billion for AT&T preferred stock, equivalent to 406 million shares of AT&T Wireless tracking stock (a 16 percent economic interest). In addition, NTT DoCoMo will acquire five-year warrants to purchase the equivalent of an additional 41.7 million shares of AT&T Wireless tracking stock at $35 per share.
Meanwhile, AT&T Wireless will create a wholly owned subsidiary to develop multimedia applications for its current network and a new, high-speed wireless network built to global standards for next-generation services. Both companies will share technical resources and support staffing of the new unit.
Upon the spinoff of AT&T Wireless, the tracking stock held by NTT DoCoMo will convert to AT&T Wireless common stock. AT&T will reduce its retained interest in the AT&T Wireless Group by 178 million shares and will receive $20.50 per share from NTT DoCoMo. The balance of the 406 million shares will come from the issuance of 228 million new primary shares of AT&T Wireless tracking stock at $27 per share.
"Combining the strengths of these two industry leaders will speed a new generation of mobile data services to AT&T Wireless customers throughout North America. I can't think of a better gift for our customers as we prepare to spin AT&T Wireless as a separate company," said AT&T Chairman C. Michael Armstrong.
Terms of the deal include:
- AT&T Wireless will license from NTT DoCoMo its i-mode technology platform.
- The companies will become partners in the U.S. and Japan for handling the wireless needs of multinational companies and traffic on each other's network.
- NTT DoCoMo will obtain a seat on AT&T's Board of Directors until AT&T Wireless is spun off from AT&T as a separate public company later next year.
- When the new subsidiary comes to fruition, NTT DoCoMo will retain representation on the new public wireless company's board, and both companies will agree on certain key executives for the multi-media subsidiary.
Both companies expect to benefit from a buying consortium for network equipment and handsets.
Additionally, AT&T Wireless plans to be one of the first major companies in North America to deploy a network based upon the Universal Mobile Telecommunications System (UMTS) global standard, which is also knowns as wideband code division multiple access (WCDMA). By mid-2001 in Japan, NTT DoCoMo intends to be the first carrier in the world to offer advanced mobile multi-media services using WCDMA. AT&T Wireless plans to be the first national wireless carrier in the United States to introduce WCDMA services.
AT&T Wireless will use the approximately $6.2 billion it receives from the share sale to continue executing its strategy to expand its capacity, enlarge its footprint, create an advanced mobile Internet, and invest in other strategic growth initiatives, as well as strengthening its balance sheet. AT&T said it intends to use the remaining $3.6 billion it will receive for debt reduction.
Until the spinoff of the new subsidiary, AT&T will record a non-cash carrying cost on the preferred stock of just under 7 percent, which will result in a 3 to 4 cent negative impact to AT&T's 2001 full-ye