Westwardly Mobile

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Europe may be ahead of the u.s. when it comes to accessing the Internet on mobile phones, but Japan is ahead of Europe. So last week's deal with NTT DoCoMo of Japan to team on next-generation wireless services will give the Netherlands' KPN Mobile an important leg up in Europe's burgeoning mobile Internet sector.

DoCoMo is investing $4.5 billion in exchange for a 15% stake in the Dutch mobile operator. The idea is to marry KPN's strengths in wireless application protocol (WAP) with DoCoMo's expertise in packet-switched networks and mobile data and Internet services. Together, they plan to go on an acquisition spree to build a pan-European mobile operator.

DoCoMo's i-mode, a mobile Internet service which allows customers to use their mobile phones to exchange emails, do their banking, make airline reservations and use other services at over 5,000 websites has already attracted over 6.6 million users. Just one year after the launch DoCoMo's m-commerce business accounts for an estimated 25-30% of the Japanese mobile operator's total market value.

Until now, however, the service has been limited to Japan and by the fact that it was not based on WAP, the current world standard for mobile Internet. The new linkup with Dutch mobile operator KPN gives DoCoMo a foothold in the European market. It will be competing with European wireless operators and application developers for what promises to be a huge market. In a recent report McKinsey estimated that 25-45% of the total e-commerce market will move onto mobile devices by 2002. By then, this slice of the mobile or m-commerce market could be worth between $9 billion and $16 billion in Europe alone.

In addition to its early lead in developing mobile Internet services, NTT DoCoMo plans to be the first operator in the world to launch third generation, or 3G, mobile network services in the second quarter of 2001. "One should never underestimate the strength of Japan Inc. once it gets its machines rolling," says Kaj-Erik Relander, soon to become the next ceo of Sonera, a Finnish telecommunications company which is making its own global mobile push.

European operators like KPN want to catch up with global wireless operator Vodafone AirTouch, which took a big step toward regional dominance with its acquisition of Germany's Mannesmann earlier this year. KPN had hoped to broaden its European presence through a $60 billion merger with Spain's Telefónica. But that deal fell apart, according to KPN, because of opposition from the Spanish government. KPN now plans to leverage DoCoMo's technology and service expertise to boost its bid for U.K. mobile operator Orange and for other 3G licenses in Europe. The goal is to string together a powerful pan-European wireless network, says Diederik Karsten, CEO of KPN Mobile.

The driver for these deals is the need to go global. "The crazy prices for wireless third-generation licenses are really going to have a consolidation effect," says Keith Mallinson, senior vice president of consultancy Yankee Group Europe. "Hitherto mobile has really been a national play but that is changing and we are going to see players bulk up to go global." And Europe, it seems, is the hottest place to go roaming for partners.