New CEO Kaoru Kato to shift investment strategy from acquiring minority overseas stakes to content.
Looking to avoid becoming a “dumb pipe” for data and voice communication, NTT DoCoMo Inc. will shift its investment strategy from acquiring expensive minority stakes in overseas carriers to focus on deals abroad and at home for mobile content and applications to run on smartphones, its new chief executive said.
In an interview Thursday, Kaoru Kato, who took over as CEO of Japan’s largest mobile carrier in June, said the company is looking to expand beyond the traditional role of a telecommunications company by expanding into delivering services and content to phones in markets where it doesn’t run a mobile network.
It is a departure from DoCoMo’s investment strategy for much of the last two decades. During the late 1990s and early 2000s, it spent nearly 2 trillion yen ($25 billion) acquiring minority stakes in a handful of overseas carriers to promote the use of its i-mode mobile Internet technology. But many of those investments ended in disaster, with painful write-downs.
More recently, in 2009 it invested Y250 billion in a 26% stake in Tata Teleservices Ltd. But India’s sixth-largest carrier has continued losing money, and NTT DoCoMo expects it to continue to do so for several years.
“We’ve passed that stage (of investing in overseas carriers),” said Mr. Kato, who has worked at DoCoMo or its parent company, Nippon Telegraph and Telephone Corp.(NTT), for most of his 35-year career.”It’s an era of services and content on smartphones. With that as a base, we think aggregation and distribution services will be necessary.”
In May, NTT DoCoMo launched a tender offer to acquire at least two-thirds of Buongiorno S.p.A, a mobile content and apps provider based in Italy, for up to 224 million euros, or $270 million. In March, it acquired a 75% stake of a Japanese home food delivery service for about Y5 billion, or $62 million.
Mr. Kato sees the investments as a way to protect against becoming a “dumb pipe”–a network that simply transfers bytes of data from mobile devices to the Internet. It is a concern that has emerged for mobile carriers in the age of the smartphone.