AOL Teams With Japan Wireless Giant

America Online, the world's largest Internet services provider, is allying with Japanese cellular phone giant NTT DoCoMo in a $100 million deal that will give AOL greater access to the prized Japanese market.

The companies said Wednesday in announcing the deal they also plan to develop services linking personal computers and mobile phones with an eye toward marketing them internationally.

Under the pact, NTT DoCoMo will pay $100 million for a 42.3 percent stake in AOL Japan—making it the company's largest shareholder. AOL Japan, currently 50 percent owned by AOL and 40 percent by Japanese trading house Mitsui and Co., has been having difficulty attracting subscribers.

The alliance will give AOL a break into NTT DoCoMo's proprietary "i-mode" service that provides access to the Internet through cellular phones. I-mode is wildly popular in Japan, where AOL's dependence on personal computers has stunted its growth.

The companies said they plan to develop and test services linking personal computers and mobile phones in Japan and eventually market the services internationally.

"This is an important step for us to promote mobile multimedia services world wide," NTT DoCoMo President Keiji Tachikawa said in announcing the deal. "I want to see i-mode being used in New York in English."

The benefits for AOL are clear: access to wireless technology, considered the future of cyberspace, and access to i-mode's 12 million subscribers in a market where AOL's members number only 450,000.

"America OnLine has had great trouble making progress here. Basically ISP (Internet) subscriptions are not growing in Japan for PCs," said Ben Wedmore, an Internet and software analyst at HSBC Securities (Japan) Ltd. "All the growth is in wireless."

For NTT DoCoMo, the alliance will give i-mode the unmatched content of the world's largest Internet service provider. The challenge will be to transfer that content to the i-mode format.

"How many and how far sites can really be made to work on an i-mode phone remains to be seen, but I don't see why not," said Wedmore. "The whole story is good, it's just early days."

AOL International President Michael Lynton said his company—known for presenting the Internet in a user-friendly format—can help make i-mode easier to use.

"You really want to provide an experience where the consumer feels its as easy getting e-mail off the phone as it is off the PC," he said. "You want to be able to move it back and forth between the two accounts."

The deal also adds a new dimension to the competition heating up between i-mode and Internet portals such as Yahoo Japan, said Nicholas Spratt, an Internet and media analyst at Lehman Brothers Asia Ltd.

"While the competition between wireless portals and fixed-line portals isn't immediately apparent, as wireless Internet access grows as a media, we see the i-mode threat increasing," Spratt sai.

The companies said they will set up a senior-level working group to talk about developing new wireless technology, and they will promote AOL and i-mode Internet services in Japan.

The agreement also makes two AOL services—AOL-Mail and AOL Instant Messenger—available on i-mode.

The two companies also plan to set up a joint venture in the United States in a bid to promote i-mode services throughout the world.

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