Senior executives of any company normally have a limited range
of comment about their employer's investments in other
companies. If the partnership is doing well, the reaction is
enthusiasm and congratulation. If the business is doing badly,
stoic resilience is the best you'll usually get. At worst, you
might be offered a well crafted statement about all options
When it comes to the Japanese mobile giant NTT DoCoMo and
its investment in the poorly performing UK third-generation
venture 3, the official, on-the-record reaction is close to the
second of these three options: a shrug, a sigh, a shake of the
head, an expression of determination, an acceptance that things
aren't quite right but that something can be sorted out.
So it came as a shock to this editor — standing
there with pencil and notebook — to see, at a
reception for analysts and the media at DoCoMo's London office,
that leading figures in the company are little short of
contemptuous of 3 in the UK.
It wasn't something that could be gleaned from the actual
words they used. The executives, mainly from DoCoMo's European
operation but including one very senior board member from
Japan, were candid about the European market for third
generation phones and about DoCoMo's relationships with its
other European partners, including Bouygues in France,
Telefónica in Spain, and KPN in the Netherlands, Belgium
But ask them about 3, the UK-based operation in which Hong
Kong-based Hutchison Whampoa is a main shareholder, the instant
reaction was a round of smiling, chuckling and sniggering. And
this is clearly the sort of reaction that is accepted as the
company norm: yes, an individual executive would smile and
chuckle — or worse — when an individual
analyst or journalist, with a plate of sushi and a glass of
fizzy water or wine, asked him about 3, but it was really quite
extraordinary to see three or four senior, sober, dark-suited
company leaders standing in a semicircle and chuckling together
in front of an audience of several analysts and
Chucking as if they were enjoying a joke. The joke in this
case, it was clear throughout the evening, was 3.
Magic abroad in the air
Now, let's get the basis of this meeting straight. It took
place one evening in February in DoCoMo's European headquarters
on the fifth floor of Lansdowne House, an office block in
London's Berkeley Square — famous for the 1940 song by
Eric Maschwitz about the nightingale that sang there. It was
the week before the world's mobile phone industry was due to
gather in the south of France at Cannes for the 3GSM show.
DoCoMo had invited "the journalist and analyst community"
for a party — not a rip-roaring, pub-crawling,
staggering-home-on-the-last-train party, but a dignified early
evening event, with the invitation specifying business attire
and asking guests to bring business cards. There were a couple
of speeches, including one which briefly dealt with DoCoMo's US
investment in AT&T Wireless, then being faced with a
successful takeover bid by Cingular.
There was nothing to suggest that anything else during the
evening was purely for private consumption. Except for one
thing. One of the executives present is a senior figure in a
worldwide industry organization. It made sense to ask politely
about the organization and its plans.
Nothing controversial was said, but the following morning
DoCoMo Europe's PR director called to say that, as the
executive in question was not at the event that evening to
speak on behalf of that industry organization, would we please
not report his comments about it, even though those comments
had been completely uncontroversial. Other than that, said the
PR director, there was no problem in reporting the evening.
He'd seen the notebook.
The i-mode strategy
DoCoMo is famous for the success of its i-mode strategy in
Japan. There, more than 40 million people send and receive
emails, check web pages and play games on their i-mode phones.
Most of the content is provided by independent companies, which
earn their income through a well established revenue sharing
deal set up by DoCoMo.
The company has tried to replicate the success of i-mode in
other parts of the world, mainly through licensing deals with
operators in which DoCoMo has taken a stake. Outside Japan
DoCoMo "won't do anything by itself", explains Yuichiro Pat
Kuwahata, DoCoMo Europe's executive director for public
relations. Outside Japan, "the culture is different, the
methodology is different".
Hisashi Omote is deputy managing director of DoCoMo Europe
and as such is in charge of carrier relationships, with KPN
Mobile, which includes E-Plus in Germany and Base in Belgium;
Telefónica Móviles in Spain; Bouygues
Télécom in France; and 3 in the UK.
He's the person who has also sealed deals with two further
operators: Cosmote in Greece, which hopes to be offering
services in time for the Olympics, even if the transport
systems and the stadia are unfinished; and the Italian operator
Now Wind is an interesting choice. According to recent
figures, about half of the 3G customers for Hutchison Whampoa's
various 3-branded networks around the world are in Italy.
Hutchison is reporting just over 1 million 3G customers, with
its H3G business in Italy claiming 453,000. Yet DoCoMo is
working in Italy with a direct competitor.
DoCoMo is keen to point out the i-mode is not inherently a
3G technology. "We started i-mode with 2.5G," says Omote, "and
then we will move to 3G." That's the case in Japan —
where most of the 40 million are on 2.5G technology —
and with the systems run by KPN, Telefónica and
In the UK, 3 is unusual in that it has only a 3G licence. It
began operations in March 2003 — but has consistently
failed to meet its sales targets. It now says sales are
improving. A year after launch, it is thought to have 360,000
First mover advantage
Omote does not hide his dismay at 3's performance. "3 started
service a year ago and now all of its competitors are starting
in the market." In other words, it has lost its first mover
advantage. "There are technology and service issues and
strategy issues," he agrees. He hopes 3 is showing signs of
improvement, but is unwilling to say more because DoCoMo owns
20% of the company. That means "I attend some important
meetings", he says: "Because of my position I can't say." He
meets board members of 3 "at least once a week", he adds.
There's clearly disappointment — from a variety of
DoCoMo executives — that 3 hasn't chosen to use the
i-mode branding in its phones. It is as if the UK operation has
decided to ignore the considerable experience that DoCoMo has
gained: it is, after all, the world's outstanding operator of
mobile interactive data services.
Meanwhile, i-mode does work in the UK. Paul van Doorn,
executive director of DoCoMo Europe, happily demonstrates his
Dutch i-mode phone, roaming in London via another 2.5G
operator. He pushes the i-mode button, then one or two more,
and he shows tonight's UK television listings, displayed almost
instantly from a standard web page and automatically
reformatted for the phone display. There are other items on his
favourites list: "I always have my newspaper and weather
report," he says.
"I'm not a great technology lover, but this works. The
system is hiding all the technology." Meanwhile a colleague,
for comparison, navigates laboriously through the menus offered
by Vodafone Live!
The i-mode button is the key, adds van Doorn. "The lesson is
that it has to work out of the box. It must work with no user
settings." And the content must be accessible from the main
i-mode portal, and all pages must link back to the main menu.
"Our influence is that we specify the requirements," says van
He says that, despite what some people claim, Europe and
Japan are in fact similar in their liking for advanced mobile
services. "One of the persistent myths is that i-mode is purely
Japanese and it won't work in Europe. But it really works." He
holds up the phone again.
People in both Japan and Europe want ringtone, messaging and
downloads, he adds. The top ten in Japan "is the same as people
are doing here", but "people in Japan have a better platform",
he adds. "Europe is very early in the learning curve."
But some have questioned whether DoCoMo has really promoted
i-mode as enthusiastically as it did in Japan. Of course, the
company is not known to ordinary customers, but while i-mode is
a famous brand in Japan — it is, after all, in 40
million pockets or bags — it does not have the same
presence in Europe.
Most of its partners use the i-mode name for the data
services, though Telefónica is unusual in that it is not
using the i-mode logo on its handsets: the others, apart from
3, all have an i-mode button to allow customers get straight to
the data services. Telefónica is "using everything
except the logo" says van Doorn. "Everything behind the hub is
i-mode. The software is the same."
There is some coordination between partners, he says, in
that the different carriers meet up about once a month, though
questions about whether the content providers also work across
all countries get vaguer answers. Executives are unwilling to
say how many content providers there are. In Japan, literally
thousands of independently provided websites are available to
i-mode customers. "I can't say," shrugs van Doorn. "We set a
minimum requirement — there has to be a minimum number
of content providers" before an operator starts to offer
There is obviously the language issue in Europe — a
Spanish content provider working with Telefónica might
have a challenge translating everything into German for E-Plus
users or into French for Bouygues' customers. With Wind and
Cosmote about to join the European i-mode community, that issue
will only get worse.
DoCoMo might once have seen 3 as a content engine, bringing
entertainment and sports-based i-mode services from Europe's
hub of content and games providers to a range of other European
partners. If that is so, the opportunity has clearly been
Bouygues in France is the biggest European success, DoCoMo
executives seem to agree. "Bouygues has gone for it," says van
Doorn. "They are big i-mode fans. They understand it and they
In early January 2004 Bouygues issued a statement that it
had 500,000 active i-mode customers, put on since its service
launch in November 2002.
And Bouygues disclosed a little later that the world's total
number of i-mode customers outside Japan was two million at the
end of January — but that includes all the Europeans
plus another partner, Far EasTone in Taiwan.
At the end of February, KPN Mobile said it had one million
i-mode customers across its three networks. "The increasing
interest from the market is very pleasing," said Guy Demuynck,
CEO of KPN Mobile, in a statement. He announced that "more than
560 i-mode services" are available "from over 400 national and
international content partners including Disney, CNN and
Reuters", and that "i-mode users can also visit the more than
10,000 independent i-mode sites offered by individuals and
organizations throughout Europe".
In Japan DoCoMo stimulated the market by taking a modest 9%
share of the revenue from interactive services, letting the
independent content providers keep the other 91%. The company
has lobbied hard for a similar arrangement in Europe, and
revenue is shared: "That's part of the rule," says van Doorn.
"That positive cycle has to be started." He doesn't name names,
but thinks there is still a tendency for European operators to
want to control the content business too much: "They seem to
still think for their customers rather than let them get what
Omote says he is happy with the European i-mode sales
figures. Telefónica's offering, sold as MoviStar
e-moción, "enjoys good numbers", but he "can't disclose"
the figures. But 3? He doesn't speak but the expression on his
face clearly shows extreme dismay. Worse than that,
In early March rumours emerged from Tokyo that DoCoMo was
considering ending its ties with 3 in the UK. Reuters quoted
"sources close to the matter", who apparently also suggested
that DoCoMo would seek a partnership with mmO2. Meanwhile the
name of KPN Mobile is also being linked with that of mmO2.
Clearly spring has brought thoughts of restructuring, though
nothing had happened when this issue went to press.
The next generation
Meanwhile, with 3G getting going, what's next? Well, the
fourth generation, of course. "The current target for 4G is
2010," says Dr Toru Otsu, another deputy managing director of
DoCoMo Europe, "but it depends on the market." The vision is
for a common network, based on internet protocol or IP, but
running separate technologies — including wireless
local area networks and UMTS or today's 3G services. Operation
will change according to the environment.
"The most difficult part of the project is the radio
technology that can provide a higher bit rate," says Otsu.
DoCoMo is looking at rates of a gigabit a second to a
stationary terminal — replacing today's wifi or
wireless LAN — and 100 megabits to a moving terminal.
"We have developed an experimental system that we are testing
now," he adds.
Seishi Tsukada, president and CEO of DoCoMo Europe (France),
says the evolution to 4G will allow services of a wholly new
quality to start. He compares the coming change to what is
already happening with the arrival of camera phones: "The user
experience has expanded." 4G will provide "more beautiful
But seven years is a long time, adds Otsu. Who could imagine
today's services seven years ago, in 1997? And there are other
issues to sort out, including spectrum. Developers of 4G
systems have their eye on frequencies ranging from 2.5 to 5
gigahertz. But 2.5 GHz is already used for 3G, and the 3-5 GHz
range is being used for satellite systems. Coexistence will be
"We need to consider mitigation technologies to reduce
interference," says Otsu. "But we have five years," he adds
—allowing the following two years to get systems into
production. A world conference in 2007 will consider the
And then, a speech by Kiyoyuki Tsujimura, a senior vice
president of NTT DoCoMo and a member of the board of directors,
based in Tokyo and focused on international relations. A
diplomatic comment on AT&T Wireless: "We are reviewing our
options in order to contribute most to our shareholders' value.
That's all." But he let it be known that six mobile operators
were too many for the US.
He was resolutely optimistic about i-mode and the mobile
internet. "The mobile internet is always on, always connected.
It is the new sociological phenomenon in the mobile world."
He didn't comment — on or off the record —
about 3. But given what his colleagues were implying, it's hard
to see any optimistic outcome of that relationship.