AT&T, NTT DoCoMo Enter $9.8 Billion Wireless Venture

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.

“This alliance allows AT&T Wireless to realize its vision of creating a
high-performing mobile Internet more quickly than we anticipated,” said John
D. Zeglis, chairman and CEO of AT&T Wireless. “Together, AT&T Wireless and
NTT DoCoMo will take wireless communications to a new place, bringing our
customers leading edge wireless data applications and an exceptional service

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

  • 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

  • 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

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

ar earnings.
This excludes any non-cash charges that AT&T may be required to incur with
respect to the warrants but does include interest expense savings AT&T is
expected to realize by reducing its debt.

NTT DoCoMo’s investment will be in the form of preferred stock, with each
share equivalent to 500 shares of AT&T Wireless tracking stock. Otherwise,
the preferred stock will have essentially the same economic interest as the
AT&T Wireless tracking stock. As a result of this transaction, AT&T will
retain a 69.8 percent economic interest in AT&T Wireless’ operating results,
and approximately 14.2 percent of the economic interest in AT&T Wireless’
operating results will continue to be represented by the existing AT&T
Wireless tracking stock publicly traded on the New York Stock Exchange.

AT&T also said it is proceeding with plans to offer AT&T shareowners an
opportunity to exchange their AT&T common shares for AT&T Wireless tracking
stock early in 2001. Later next year, AT&T also intends to complete the
spin-off of AT&T Wireless by exchanging AT&T Wireless common stock for the
tracking stock and distributing a special dividend of AT&T Wireless common
stock to AT&T shareowners.

AT&T Wireless plans to accelerate the introduction of wireless data
services by overlaying a Global System for Mobile Communications
(GSM)/General Packet Radio Service (GPRS) platform to its existing
nationwide network.

The company will also deploy a high-speed 3G technology known as Enhanced
Data rates for Global Evolution (EDGE) beginning near the end of 2001 and
extending to most of its markets by the end of 2002.

“With this new technology, people will be able to do things with their
wireless devices they never could before,” said Zeglis. “We see a future
taking shape where our customers will have access in their pocket to all the
information and all the people of the world, from wherever our customers
happen to be in the world.”

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