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24th January 2003

TOKYO (Dow Jones) - Dutch cellphone giant KPN Mobile N.V. (N.KPM) plans to pitch third-generation mobile communications services at both individual and corporate users, but its push into 3G may depend more on business customers, Chief Executive Officer Cees van den Heijkant says.

Inset is The First i-Mode Shop In Europe in The Hague, Holland. Will we now see 3G shops around the globe ?
"It could be that our move into 3G is driven more by the business market than it is by the consumer market," Heijkant told Dow Jones Newswires in an interview at the recent Marcus Evans' 3G Mobile World Forum in Tokyo.

Heijkant said to win over business users, companies will need to become comfortable with the prospect of unlocking their closed information technology networks to allow outside access to them via devices such as mobile phones and notebook computers.

That should be possible. The CEO said there's "a case to be made that moving to 3G will bring benefits to companies," including financial benefits.

Companies could work more efficiently, more effectively and generate higher productivity via mobile devices that can access "horizontal" applications from their corporate intranets, such as Microsoft Corp.'s (MSFT) Outlook software, and that can use "vertical" applications like order entry processing, Heijkant said.

To bring such benefits to firms, cellular operators, companies and system integrators need to work closely together to overcome the challenge of managing what Heijkant calls "the tunnel" from the company's network applications to the mobile device.

For the consumer market, KPN Mobile has positioned its "i-mode" service in Belgium, Germany and the Netherlands as its "container" for all mobile data services, Heijkant said.

KPN Mobile's "i-mode" service is based on NTT DoCoMo Inc.'s (DCM or 9437) wildly popular "i-mode" service.

Regardless of whether the mobile communications network is 2.5G or 3G, the key selling point for KPN Mobile is the Web sites and applications that are available to consumers via its "i-mode" service, Heijkant added.

Third-generation services that are likely to prove popular among consumers in Europe could include video conferencing, video streaming, wireless broadcasting of television programs and gaming, Heijkant said.

The 3G network that KPN Mobile intends to begin rolling out in Belgium, Germany and the Netherlands this year will be based on universal mobile telecommunications system, or UMTS, technology - the European version of wideband code division multiple access, or W-CDMA, technology.

UMTS enables cellphones to offer a wide range of advanced voice, text and video functions, enabling phone owners to surf the Internet and watch television.

Sticks To Forecast Of 1M "I-mode" Users In 2003

KPN Mobile, in which Japan's dominant cellular operator NTT DoCoMo holds a minority stake, has signed up a total of more than 200,000 subscribers since launching its "i-mode" mobile Internet service in the Netherlands and Germany last year, Heijkant said.

The "i-mode" service was launched by KPN Mobile in the Netherlands last April and by its E-Plus subsidiary in Germany last March.

KPN Mobile also launched an "i-mode" service via its BASE subsidiary in Belgium last October, but "i-mode" subscriber figures there aren't available yet, Heijkant said.

For 2003, KPN Mobile is still targeting a combined "i-mode" subscriber base of 1 million users in the Netherlands, Germany and Belgium, he said.

Last March, when KPN Mobile announced the launch of its "i-mode" service, the company said it expected to attract 1 million "i-mode" subscribers in Europe in 2003.

Popular "i-mode" content services in the three European nations range from ringer melodies to financial information. In total, KPN Mobile has around 400 "official" i-mode sites, which are registered on the i-mode menu, and over 7,000 "unofficial" i-mode sites.

But, the Dutch mobile phone operator has recently begun to face growing competition in Europe from other advanced mobile services, such as Vodafone Group PLC's (VOD) "Vodafone live!" consumer-oriented service.

Launched last October in several European countries, the Vodafone service enables consumers to take and send picture messages, download and play games and use other sophisticated applications.

To fend off the challenge posed by its competitors, KPN Mobile will introduce new i-mode services in Belgium, Germany and the Netherlands in 2003, Heijkant said.

"We will extend our i-mode services with camera functionality, because we will introduce devices with cameras," he said. "We will have picture messaging combined with i-mode."

KPN Mobile, the mobile arm of Royal KPN NV (KPN), plans to sell camera-equipped cellphone handset models that will enable consumers to take both still and moving images, and it will market other handset models as well, Heijkant said.

Currently, KPN Mobile sells the same three i-mode cellphone handset models in all three European countries - NEC Corp.'s (NIPNY or 6701) "n21i" and "n22i" and Toshiba Corp.'s (J.TOS or 6502) "TS21i."

The Dutch cellular operator's handset procurement strategy is to source its mobile phone handsets from two directions - Europe and Asia, Heijkant said.

"Up till now, we have had discussions with European vendors, and we carry on talking with European vendors," he said. "Of course, we are very happy with the sourcing we are doing in Japan and perhaps also Korea."

Recently, NTT DoCoMo's financial relationship with KPN Mobile has changed. Last December, DoCoMo decided to allow its stake in KPN Mobile to fall to roughly 2.2% from 15% after by not exercising its right to subscribe to new shares to be issued by KPN Mobile.

(Copyright (c) 2003, Dow Jones & Company, Inc.).