Insight - Docomo buyout shows ‘dumb pipes’ no longer cut it

Good margin: People wearing protective face masks walk past a NTT Docomo shop in Tokyo. Docomo has maintained a respectable operating margin of around 20% in recent years. — Reuters

NIPPON Telegraph & Telephone Corp’s (NTT) buyout of its NTT Docomo Inc wireless unit marks the end of an era for a company once hailed as the world’s leading mobile operator. It also signals a stark new reality in the telco business: that mere connectivity isn’t enough.

Although Docomo’s board met yesterday to accept NTT’s proposal, it was already moot: The parent already owns 66% of the subsidiary. It is offering a 40% premium on the share price.