TOKYO -- Nippon Telegraph & Telephone on Tuesday announced the completion of its tender offer for the remaining shares in subsidiary NTT Docomo, a move it sees as key to seizing the initiative for the next level of wireless technology after its slow start on 5G.
At NTT's annual R&D forum, President Jun Sawada suggested that the wireless carrier will be integral to IOWN, the telecommunications group's vision for networks based on optical technology, seen as key to unlocking sixth-generation wireless.
"By making Docomo stronger, we want to promote activity that will make Japan and the world more prosperous through IOWN," Sawada said.
The IOWN, or Innovative Optical and Wireless Network, initiative aims to develop networks that can handle data volumes 100 times as high as existing technology, with minimal lag. Should this bear fruit, NTT sees it as an opportunity for Japan, which has been outpaced in 5G by China, South Korea and Western countries, to lay the foundation for future global networks and for NTT itself to compete with the likes of Google and China's Huawei Technologies.
Docomo is expected to be delisted in December and become a wholly owned NTT subsidiary. Once it does, the parent looks to integrate the carrier with NTT Communications, which operates cloud services and data centers, and software developer NTT Comware.
This would bring together technologies that have been scattered throughout the group, as well as cut down on redundant investment, moving it closer to becoming profitable enough to compete on a global scale.
But effectively taking advantage of Docomo's customer base and online services will be a challenge. NTT may be able to boost profits by offering not only simple connectivity to wireless infrastructure -- a low-margin "dumb pipe" -- but also more valuable services further along the chain.
A potential example is Docomo's "d point" program, which lets its more than 78 million members earn loyalty points at convenience stores, e-commerce sites and other retailers. Making the program easier to use both online and offline via smartphone will help retain customers.
That said, rival carriers KDDI and SoftBank, whose PayPay app has already gained a foothold in Japan, have already shown themselves to be adept at this business model.
Docomo itself, meanwhile, "is trapped by its past success with store-focused sales," an executive at the company said. The takeover by NTT offers an opportunity to reform Docomo's change-averse culture.
Japanese government pressure to slash wireless service rates is another issue. KDDI and SoftBank have already decided to cut fees for budget brands UQ Mobile and Y! Mobile. Docomo, which lacks such a brand and has been preoccupied with the NTT tender offer, will likely need to make some tough choices about setting new rates.
Ever since the focus of competition in the telecom sector shifted from landline phones to wireless, NTT has been stuck playing catch-up. The roughly $40 billion Docomo tender offer, if handled well, could help it vault back onto the global stage.