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ANALYSIS-DoCoMo outright Orange purchase unlikely
Posted: 07-Feb-2000 [Source: Reuters]

[Rumors about a possible acquisition of England's Orange by Japan's NTT may be premature.]

By Yuko Inoue, Tokyo -- "Japan's NTT Docomo, the world's second-biggest mobile phone firm, is looking at investments such as Britain's Orange Plc to step into the European market, but it will likely settle for minority stakes, analysts say.

"Over the weekend, Britain's Sunday Business newspaper, quoting investment bankers, reported that NTT Docomo is mulling a $35 billion bid for Britain's mobile phone operator Orange once the company is spun off by Vodafone AirTouch Plc .

"News that Docomo's future could be Orange drove the Japanese carrier's shares up 2.13 percent to 3.84 million yen ($35,700) in Tokyo, despite a vaguely worded Docomo statement that did not confirm or deny the report.

"We are mulling broad investment opportunities in Asia and Europe, but we are not at a stage where we can make any official comment, including whether we are now considering such a bid," a Docomo spokesman said.


"Analysts say the chances are small that Docomo would seek an outright acquisition of Orange, the third-biggest mobile phone operator in Britain but one of its fastest-growing.

"Industry sources in Tokyo estimated that an outright bid for Orange would cost Docomo a total of around $55 billion -- a price most analysts consider too high for the unit of Japan's NTT Group, which has never made an overseas investment of more than 100 billion yen ($929.8 million).

"Such a hefty purchase would likely force Docomo to raise funds by issuing new shares -- a situation which Docomo's parent NTT would be sure to resist given NTT's stated desire not to dilute its 67 percent Docomo stake.

"The analysts also doubt Docomo would turn to the debt markets to raise capital for an outright purchase.

"I think the reports that Docomo is preparing to bid for Orange is just pure speculation," said Nikko Salomon Smith Barney analyst Makio Inui.

"European operators are moving to spread their reach across content and communication because that will help cut their mobile phone charges. But I don't think acquisition of Orange will bring about a huge benefit to Docomo that justifies a huge debt and opposition from the parent," he said.

"Docomo aims to list its shares in New York and London this year, seeking measures allowing the company to enter into equity swap transactions with potential foreign partners by offering new shares.

"But NTT has adamantly opposed the listing plans, industry sources said


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