December 3, 2007 / 8:26 AM / in 12 years

UPDATE 2-NTT DoCoMo, KTF in $200 mln Malaysia mobile deal

(Recasts, adds analysts’ quotes, background, share price)

SEOUL/TOKYO, Dec 3 (Reuters) - Japan’s top mobile phone firm, NTT DoCoMo, and South Korea’s second biggest, KTF, on Monday entered the Malaysian market by spending $200 million on a stake in the owner of the country’s last independent 3G mobile licence.

NTT DoCoMo (9437.T) and KTF 032390.KS will invest $100 million each in U Mobile, an unlisted firm partly owned by Malaysian tycoon Vincent Tan, in return for a combined 33 percent stake and a say in running the business, the two companies said.

U Mobile, formerly known as MiTV Networks, won a licence last year to offer third-generation, or 3G, high-speed mobile services. A new player in the industry, it had been expected to tie up with an established partner before building its network.

Analysts said the investment could take time to pay off, noting that Malaysia’s market was now mature, with 78 percent of the population owning a mobile phone. Price wars have also lately been a feature of the battle for market share.

“KTF’s willingness to go abroad is a welcome development,” said telecoms analyst Kim Kyung-mo of Mirae Asset Securities in South Korea. But he added: “Investments like these can take much longer than expected to pan out.”

U Mobile plans to launch commercial services across Malaysia in the first quarter of 2008 and aims to post annual revenue of 500 billion won ($543 million) by 2012, KTF said in a statement.

Malaysia’s smallest mobile operator, DiGi.Com, part owned by Norway’s Telenor (TEL.OL), is forecast to make revenues of about $1.3 billion this year, according to Reuters Estimates.

Analysts expect U Mobile to make a strong start next year, partly because the telecoms regulator handed it an auspicious marketing advantage: U Mobile has the right to start all its phone numbers with the dialling prefix “018”.

Ethnic Chinese make up about a third of Malaysia’s population and in Chinese culture the number “8” stands for prosperity.

“What I think will happen is there will be a few hundred thousand people who will go out and buy it,” said Prem Jearajasingam, a Kuala Lumpur-based analyst with Macquarie Bank.

But he said many customers might buy a U Mobile pre-paid number for good luck but continue to use their existing services with rival mobile firms, at least until U Mobile expanded its coverage or until the market adopted number portability.

Number portability means customers can keep their number when they change mobile phone operators.

“Everyone has already factored in competition increasing next year,” Jearajasingam said, adding that he did not expect any upheaval for the established mobile carriers right away.

Malaysia’s only pure mobile phone stock, DiGi.Com (DSOM.KL) was unchanged at 25.77 ringgit after news of the entry into Malaysia of NTT DoCoMo and KTF.

DiGi missed out on a 3G licence in last year’s state auction but recently bought 3G spectrum from TIME dotCom (TCOM.KL), another small local firm that had won a licence last year.

Malaysia’s two biggest mobile carriers — Maxis, whose major owner is local tycoon Ananda Krishnan, and Celcom, a unit of state-linked Telekom Malaysia (TLMM.KL) — also have 3G licences.

KTF also said that U Telecom Media Holdings, a parent company of U Mobile, would invest $51 million in its mobile affiliate. Tycoon Tan is also a big shareholder of Malaysian conglomerate Berjaya Group (BGRO.KL) (Reporting by Marie-France Han in Seoul, Mayumi Negishi in Tokyo and Mark Bendeich in Kuala Lumpur; Editing by Keiron Henderson and Jan Dahinten)

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