VCs LOOK FOR BASICS IN POTENTIAL IT AND TELECOM INVESTMENTS
The information technology (IT) and telecom markets are in “reconstruction mode” and investors are just beginning to “come out of their shells,” said Richard Lukaj, pres., Babcock Capital Partners. He spoke at a panel on technology needs of the telecom and IT industry at the International Finance Corp. (IFC) Global Technology Conference 2003 Wed. Venture capitalists have “very much gone back to the basics” in deciding what to invest in, he said. It’s much tougher to find financing for raw, pre-beta (testing) technologies, Lukaj said. However, he said, the woes of the developed IT markets are creating new opportunities for emerging markets.
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“We have all the technology we need,” said James Allen, senior consultant for Analysys. But he said bankers wouldn’t lend money until there were business models that worked and a regulatory environment that provided certainty.
Different business models have proved to be a major stumbling block to industry partnerships and joint ventures, said Sanford Hewitt, former exec. dir., AOL National Group. AOL and Japan’s NTT DoCoMo struggled to build a business for i-Mode, a wireless Internet service, he said. While AOL took an “all you can eat” approach to providing services to consumers -- with one price covering several services -- NTT DoCoMo proposed an “a la carte” plan that was much more expensive. The 2 companies worked out their differences, Hewitt said. “Uber-alliances can work,” he said, but it’s always a challenge to synchronize business plans. Partnerships between telecom and IT companies are critical, he said, but they must be given time to work through their philosophical differences.
NTT DoCoMo’s i-Mode serves 38 million subscribers, said Nobuharu Ono, pres. of NTT DoCoMo USA, and it’s also the world’s first 3G provider. Wireless services now count some 1.2 billion customers worldwide, he said. China leads with 200 million, followed by the U.S. (150 million) and Japan (80 million). I-Mode has been surprisingly successful from its debut, Ono said, and as NTT DoCoMo adds each new feature the number of subscribers increases.
On the other hand, Ono said, the company’s 3G service, rolled out in Oct. 2001, began slowly. The original service had 3 main problems, he said -- smaller service coverage than 2G, a shorter battery life and higher prices. Those problems were resolved, Ono said, with the result that NTT’s 3G service began taking off in the first quarter of this year and is expected to reach a coverage rate of 97% by the end of 2004. As the voice-only wireless communications field becomes saturated, he said, NTT will turn its attention to video communications applications and human-to- machine/machine-to-machine wireless communications.