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AOL to take on Japan's mobile Internet

The world's biggest online service provider has inked a deal with the world's biggest wireless Internet service
Written by Matthew Broersma, Contributor

America Online and Japanese cell phone leader NTT DoCoMo said Wednesday they had signed a deal to jointly develop and market mobile Internet services, extending their international reach.

Under the deal, which has been expected by industry watchers for some time, NTT DoCoMo will take a 42.3 percent stake in AOL's Japanese unit, AOL Japan, and invest around $100m (£68.8m) cash.

"We hope to converge our fixed and mobile Internet services and spread them on a global scale," NTT DoCoMo president Keiji Tachikawa told a news conference in Tokyo called by the two firms.

DoCoMo will now market AOL Japan as its preferred Internet service provider and will offer services such as AOL Instant Messenger and AOL Mail to the 12 million subscribers of its popular "i-mode" wireless Internet service.

However, the companies said they had yet to set a date for starting joint services.

US Internet giant AOL will reduce its 50 percent stake in the Japan unit to 40.3 percent while original joint venture partners Mitsui and publisher Nihon Keizai Shimbun will own a combined 17.4 percent in AOL Japan.

Currently, Mitsui owns about 40 percent in AOL Japan and Nihon Keizai Shimbun owns a ten percent stake.

Following DoCoMo's investment, AOL Japan will boost its capital by 11bn yen, with DoCoMo providing up to 5.7bn yen of that amount, the companies said.

As part of the deal, the companies said they will begin a joint initiative to create an Internet portal for wireless carriers and develop technologies and services worldwide to meet the growing demand for Internet access through wireless devices.

AOL and DoCoMo, a unit of Nippon Telegraph and Telephone, also said in a statement they are establishing a committee that will invest in companies that are driving the convergence of fixed-line and mobile technologies.

Through AOL Japan, DoCoMo would get a foothold in the fixed line Internet access market. It is already Japan's biggest Internet service provider through its hugely popular "i-mode" service, which allows users to browse the Web on business-card sized screens on cell phones.

That figure dwarfs AOL's Japanese subscriber base of 440,000 dial-up users, although globally it leads with 24 million subscribers worldwide.

AOL Japan, for its part, would be able to make use of DoCoMo's presence in the domestic market and try to boost its subscriber base.

Analysts have said that while the alliance has promise, its success will depend on the extent to which the firms are willing to integrate their respective services.

They also said the relatively small size of the deal meant there were no major downside risks or, conversely, any huge benefits seen at this stage.

While AOL is an Internet powerhouse in the United States with about 24 million subscribers, it has struggled to gain the same dominance abroad.

The deal will also help give DoCoMo its much sought after international presence and access to the vast array of content that will become available after AOL's merger with media giant Time Warner is completed.

DoCoMo recently signed deals in Asia and Europe but has yet to gain a strong foothold in the United States.

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