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DoCoMo rides out ratings downgrade
TOKYO, Japan (CNN) -- Japan's biggest stock, NTT DoCoMo, is trading higher Wednesday after ratings agency Moody's Investors Service cut its long-term debt outlook from stable to negative. Shares in the company are up 0.43 percent at 234,000 yen on a day the broader market, measured by the Nikkei 225 average, is down about 1 percent in early afternoon trade. Moody's said Tuesday it was changing from stable to negative the outlook for DocoMo's Aa1 senior long-term debt ratings. Moody's said the change reflected its concern over the future of DoCoMo's competitive advantage in third-generation (3G) telecommunications services. It said these 3G services -- which offer video, audio and data capability, along with high-speed Internet access -- were important for maintaining the long-term stability of the company's cash flow. DoCoMo, which is majority owned by state-controlled NTT, is Japan's leading mobile phone operator and holds stakes in several overseas telcommunications companies in Asia, Europe and the United States. It has 58 percent of Japan's wireless market of 42.5 million subscribers. First with 3GIn 2001, DoCoMo became the world's first operator to introduce a third-generation mobile network, using the W-CDMA format. However, subscriber growth has been below expectations, reaching only 149,000 at the end of November 2002. Competitors such as KDDI have gained more subscribers for rival 3G services. Moody's said the low subscriber number was mainly due to the relative overall attractiveness of FOMA (DoComo's 3G service name), such as original geographic coverage, battery life of handsets as well as service content, compared to that of existing second-generation (2G) services. Moody's said DoCoMo had expanded FOMA's coverage to about 90 percent of Japan's population and planned to introduce new handsets with longer battery life. "However, the company may have lost some of the lead-time it first had to solidify FOMA's position - before the emergence of competition - as a standard for next-generation services," it said. Moody's noted that DoCoMo paid about 1.8 trillion yen ($15 billion) for minority stakes in global partners AT&T Wireless Services, KPN Mobile in Holland and Hutchison 3G UK Holdings Limited - in order to expand its W-CDMA network worldwide. Revaluation losses"Its overseas partners in this venture suffered significant falls in their market capitalization largely due to the financial burden of their 3G-license acquisitions and delays in the launch of 3G services," it said. "For the last two years, DoCoMo has posted revaluation losses of approximately 1.4 trillion yen ($11.6 billion), or about 75 percent of its original investment. "While these revaluation losses do not represent cash outflows, delays by its partners in introducing 3G services may diminish the global competitiveness of W-CDMA," it said. Moody's said it did not expect DoCoMo's competitiveness in 2G services to face serious challenges in the intermediate term.
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