Nippon Telegraph & Telephone’s NTT Docomo Cell Phone Unit Plans $18-Billion IPO

The cellular phone unit of Japanese telecommunications giant Nippon Telegraph & Telephone Corp. said Monday that it expects to raise $18 billion in one of the largest initial public offerings ever.

The unit, NTT Docomo, announced that its stock, which will make its debut on the Tokyo Stock Exchange’s first section Oct. 22, will be initially offered at 3.9 million yen, or $33,000, a share.

The IPO comes at a time when market volatility and falling valuations have killed plans for many IPOs around the world.

The IPO would put a value of more than $8 million on the 270 shares, or a 0.02% stake, owned by Mitsuhei Obuchi, the elder brother of Japanese Prime Minister Keizo Obuchi. He is the second-largest individual shareholder of NTT Docomo shares.

“The price is mostly in line with our expectations,” said Yasuo Ueki, general manager at Nikko Securities. “A price below 4 million yen is not expensive, which means NTT Docomo will not likely see a sharp fall on the day of listing.”

But some market participants were taking a more cautious view, saying that the offering price appears to be too high for individual investors hit hard by domestic economic stagnation.

The indicative price range for Docomo had been set between $27,900 and $36,400.

Docomo said investor demand for the issue clustered around $36,400 but that it had decided to set the price at $33,000 given current market conditions and to ensure smooth digestion by the market.

Analysts say that demand was healthy, particularly among institutional investors. Behind investors’ interest is Docomo’s potential to continue dominating Japan’s mobile-phone market, the world’s second-largest. Docomo has a 57% share of Japan’s cellular phone market, with 20 million subscribers. It has achieved a nearly sixfold increase in group net profit in the last two years.

With the IPO, Docomo will issue 327,000 new shares, raising $10.8 billion. Docomo said it would use the proceeds to repay debt and fund the development of the next-generation wide-band code division multiple access, or W-CDMA, mobile phone systems.

Parent company NTT would raise about $7.2 billion through the sale of 218,000 Docomo shares, which will reduce its stake in Docomo to 67.1% from the current 95%.