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NTT DoCoMo, Rakuten to tie up in online auction business

Posted by iTech - 2005-10-11

Japan's top mobile phone operator NTT DoCoMo and Internet commerce giant Rakuten said they have formed an alliance in online auctions to challenge domestic industry leader Yahoo.
Rakuten, Japan's largest online shopping mall operator, will spin off part of its online auction business catering to individual sellers and set up a wholly-owned subsidiary on December 1, the two companies said in a statement.

NTT DoCoMo will acquire 40 percent of the new firm's common shares for about 4.2 billion yen (36.8 million dollars), the statement said.

The new firm, named Rakuten Auction, will sell 12,000 new shares to NTT DoCoMo through a private placement. Rakuten itself will sell an additional 4,800 shares to Japan's largest mobile phone operator.

When all the transactions are completed on December 16, Rakuten will be left with a 60-percent stake in Rakuten Auction.

The agreement will enable NTT DoCoMo to share "Rakuten's expertise in the Internet auction business" whereas Rakuten can access DoCoMo's expertise in its "i-mode" Internet-linked mobile telephone system.

"We wish to nurture the alliance into the top-class auction business," Rakuten chief executive officer Hiroshi Mikitani told a news conference.

"Rakuten will expand its auction business through mobile Internet phones given increasing demand for DoCoMo's popular 3G service, while DoCoMo will further diversify its revenue streams by gaining a service not tied to communications traffic," the statement said.

Rakuten said it expected to book special capital gains of about 2.9 billion yen from the sale of its stake in Rakuten Auction.

Rakuten posted an operating profit of 83 million yen on revenue of 550 million yen in its online auction business in 2004.

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