In early 1999, Japan's top mobile-phone company, NTT DoCoMo, received cheers from customers and analysts alike for introducing its i-mode mobile Internet service.
The service, which claims 37 million subscribers and lets them check stock quotes, sports, news and other information over their cell phones, was hailed as the greatest invention in Japan since the Walkman. When similar services were introduced in the United States last year, one DoCoMo executive remarked to the news media that U.S. cell phones were still like "black-and-white TV sets" -- so passé compared to the color i-mode phones in Japan.
Nowadays, DoCoMo isn't gloating.
While the company maintains a 58 percent share of the cell-phone market and a lofty reputation at home, it has struggled with an image problem abroad.
Compared to glowing reports two years ago that i-mode would conquer all -- even cell-phone markets outside of Japan -- news coverage on DoCoMo has lately focused on foreign investments gone awry and software glitches plaguing its high-speed 3G FOMA service.
"We are afraid we had to recognize impairment loss with respect to some of our overseas investments," said Miki N. McCants, a DoCoMo representative. "And, unfortunately, sometimes NTT DoCoMo's FOMA third-generation (3G) service may be perceived as poorly performed.
"But this year we will further enhance the quality of our FOMA service."
It has been almost two years since DoCoMo launched FOMA, the first 3G service in the world to give cell-phone users video clips and other multimedia content at up to 2 megabits per second -- twice as fast as a fixed-line broadband connection. However, the service has been plagued by software problems that have caused the carrier to recall handsets.
DoCoMo said it will barely meet analyst expectations to sign up 320,000 new FOMA subscribers -- a number revised from 1.38 million last year -- by the end of March.
To shore up those numbers, the company plans to invest $330 million to subsidize the cost of 3G cell phones. The idea is to entice customers to adopt the service and help handset manufacturers recoup some of the losses for making the phones.
DoCoMo also said this week it plans to introduce a FOMA cell phone in the next few months that is backwards compatible with older, slower phone networks. The decision reverses previous statements by the company that it would wait for customers to adopt 3G on their own.
Meanwhile, DoCoMo's competitors continue to gain market share. KDDI and J-Phone -- owned by the world's largest cell-phone carrier, Vodafone -- signed up millions of customers in just a few months for a competing 3G service that is slower than DoCoMo's.
Industry analysts say that J-Phone was able to lure many subscribers with the development of "Sha-mail" cell phones that enable users to shoot and send digital photos as well as short video clips.
"With this investment (purchase of J-Phone), Vodafone is making life harder for DoCoMo on two fronts," said Gerhard Fasol, president of Eurotechnology-Japan, a business development and consulting firm in Tokyo. "Vodafone directly competes on a day-to-day basis with DoCoMo in Japan, and Vodafone can bring technology and business models from Japan to Europe and other markets where Vodafone's subsidiaries compete with DoCoMo's new partners."
J-Phone now boasts 18.2 percent of the Japanese cell-phone market compared to 13.8 percent right after it opened its doors in 1996.
And while Vodafone's involvement has clearly helped provide upward momentum for J-Phone, DoCoMo has been dragged in the opposite direction by losses from investments in overseas carriers.
In October, DoCoMo was forced to write off $4.7 billion from these investments. The losses cut so deep that some analysts speculated the company would freeze foreign investments altogether.
Among other holdings, DoCoMo owns a 16 percent stake in AT&T Wireless (AWE) and a 15 percent stake in KPN of the Netherlands.
"We continue to seek opportunities for global investment, but with caution," McCants said.
Nonetheless, analysts say DoCoMo needs to redefine its strategy abroad. The company should be frugal, they say, but when it does invest it should do so in a big way.
Seamus McAteer, an analyst with market research firm Zelos Group, said DoCoMo should consider owning more than 15 percent of a company to wield more influence in a particular market.
"You either own it or you don't," he said. "DoCoMo is still the dominant carrier in one of the most innovative markets in the world. We do have a lot to learn from DoCoMo's experience."
For now, DoCoMo, is considering how it might export technology that is popular in Japan to the rest of the world. Besides helping subsidize 3G cell phones for Japanese consumers, the company is mulling strategies to extend access to its FOMA service by letting foreigners use it in Japan and letting Japanese business travelers use their cell phones abroad.
"We are hoping to become profitable when ... 3G service is available throughout the world, where both DoCoMo and our partner companies' customers can enjoy the same kinds of services with one mobile phone everywhere they go," McCants said.
As of Tuesday afternoon, DoCoMo's (DCM) shares were down 31 cents to $20.10.
