Motorola, DoCoMo mull 3G handset deal

TOKYO: Motorola Inc. is in talks with NTT DoCoMo Inc. to provide its third-generation handsets to the Japanese wireless operator, a source close to the matter said, in a move aimed at prying open a market largely closed to foreign manufacturers.

Motorola and DoCoMo, Japan's largest mobile phone operator, were expected to make an official announcement as early as this week, the source said.

The deal to sell Motorola equipment had been expected since DoCoMo said in December that it would provide 37 billion yen ($340 million) to six phone manufacturers, including Motorola, to support development of 3G models.

It is not clear how many Motorola handsets DoCoMo is planning to procure, but the threat of entry by the world's second-largest mobile phone maker into the Japanese market is expected to give DoCoMo strong bargaining power in price talks with existing Japanese suppliers.

"If you are NEC or Sharp or Fujitsu, and DoCoMo says unless you give me handsets and reduce costs, I'll give my business to Motorola, then you are going to consider providing additional discount to DoCoMo," KBC Securities analyst, Bruce Kirk said.

Currently, DoCoMo sells 3G handsets from five Japanese handset makers -- NEC Corp., Sharp Corp., Fujitsu Ltd., Matsushita Electric Industrial Co. Ltd. and Mitsubishi Electric Corp.

It procures Motorola 3G handsets only for limited rental use.

For Motorola, successful business ties with DoCoMo would raise its profile as a dependable supplier of 3G handsets and help spur its global sales, analysts said.

DoCoMo became the world's first mobile operator to launch a commercial 3G service based on the W-CDMA standard in 2001.

It aims to win 10.6 million 3G users by March 2005, up from 3 million subscribers in March 2004.

Global mobile phone makers such as Motorola and Nokia have had little presence in Japan, in large part because Japanese second-generation mobile phone networks were based on a unique, home-grown technology.

But that has changed with DoCoMo's adoption of the global W-CDMA standard for its 3G service.

Nokia, the world's top cell phone maker, said in February that it was in talks with DoCoMo to supply 3G handsets.

Shares in DoCoMo closed down 0.48 percent at 208,000 yen, underperforming the Nikkei average, which rose 0.66 percent.