AOL, DoCoMo part ways

Yuko Inoue and Yoshiyasu Shida

TOKYO: NTT DoCoMo Inc, Japan's biggest mobile phone operator, said that it had pulled out of its troubled joint venture with U.S. Internet service provider America Online (AOL).

DoCoMo said it had sold all of its 20,980 shares in Japanese Internet service provider DoCoMo AOL Inc to the U.S. partner.

DoCoMo declined to reveal the sales amount, but sources close to the deal told Reuters that it had sold the stake for about 440 million yen ($4.09 million), or 21,000 yen per share -- about one-fortieth of what it had invested over the past three years.

A DoCoMo source said the sale of the stake will have only a very small impact on DoCoMo's earnings forecast. But the deal comes at an awkward time for AOL, which has been seeing droves of customers flee to lower-cost competitors and high-speed Internet providers.

DoCoMo took a 42.3 percent stake in the joint venture in September 2000 and had invested 17 billion yen, but it slashed the book value of the investment to around 1.3 billion yen by March this year due to a rapid deterioration of the business, the DoCoMo source said.

DoCoMo most recently owned a 43.23 percent stake in DoCoMo AOL.

DoCoMo and AOL had intended through the joint venture to provide a new service linking personal computers and cell phones over the Internet. Japanese media reports said the company, which does not disclose subscriber numbers, had problems attracting customers from the beginning.

"Part of the reason was that the parent company AOL was only focused on the U.S. market," DoCoMo AOL Chief Executive, Takashi Yamakawa told Reuters in an interview last February. "They didn't care about Japan operations because the U.S. business was growing so rapidly."

AOL is the online unit of the world's largest media company, Time Warner Inc. It remains the subject of two federal investigations into past accounting practices.

When America Online and Time Warner merged in 2001, they promised to transform the media industry by marrying old and new media. But just months after the $112 billion deal, the technology bubble burst and the value of the AOL online division plunged, dragging the whole company down.

AOL Time Warner stock had already fallen 70 percent when Steve Case, the founder and co-architect of the deal, resigned as chairman of the company in January this year. In October, the board of AOL Time Warner voted to remove AOL from its name.

Two other shareholders in DoCoMo AOL -- trading company Mitsui & Co Ltd and the Nihon Keizai Shimbun newspaper group -- also said that they had sold all of their stakes to AOL.

Mitsui had owned 11.85 percent and the newspaper group held 5.74 percent. AOL held the remaining 39.18 percent.

Shares of DoCoMo closed down 4.42 percent at 216,000 yen on Wednesday. The benchmark Nikkei average unofficially closed down 1.74 percent as investors locked in profits after a rally that followed the weekend capture of Saddam Hussein.

Shares of Time Warner closed down nine cents at $17.53 on the New York Stock Exchange on Tuesday.

(Additional reporting by Yukari Iwatani Kane)