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. Last Updated: 07/27/2016

Paper: DoCoMo in $1Bln Deal

TOKYO -- Shares of DoCoMo, Japan's largest cellphone network, had their biggest gain in a month on a Nihon Keizai newspaper report the company may pay 100 billion yen ($936 million) for a stake in Sumitomo Mitsui Card to expand in wireless payment systems.

DoCoMo stock rose 1.8 percent to 168,000 yen at close in Tokyo on Wednesday.

DoCoMo is studying ways to broaden its wallet-phone business, which allows users to pay for rail tickets or snacks, said spokesman Tomohisa Ueno, declining to comment on the report. Sumitomo Mitsui Financial Group, Japan's third-largest bank, said in a statement its credit card unit is considering cellphone-related businesses.

Japan's mobile-phone companies were the world's first to offer so-called third-generation services such as electronic payments, high-speed web access and video clips delivered to handsets.

Rival Vodafone Group has been using Japan's 3G market, which accounts for more than 50 percent of the world's users, to test the services before their global release.

"DoCoMo has a billing relationship with over 50 million subscribers that represents a fantastic distribution network for a consumer finance company," said Bruce Kirk, director of equity research at KBC Securities Japan in Tokyo. "However, it's still unclear whether users have any interest in using their mobile phone as a credit card."

The Nikkei newspaper had reported that DoCoMo would buy a 33.4 percent stake in the card unit. Sumitomo Mitsui's statement said no details of its new businesses had been decided. Shares of Sumitomo Mitsui Financial fell 0.2 percent.

DoCoMo, which began its wallet-phone service in July, wants Sumitomo Mitsui's knowledge about credit card services, which may help DoCoMo expand in the banking business in the long-run, said Hitoshi Hayakawa, a Tokyo-based analyst at Credit Suisse First Boston. Hayakawa rates DoCoMo stock as "outperform."

The phone company is developing new services for its high-speed phones to retain users before the introduction of number portability in 2006, which lets users switch carriers without changing numbers.

DoCoMo has so far sold about 1.5 million handsets outfitted with Sony's Felica chip, a device which allows users to pay for cash transactions by swiping their handsets over a sensor, DoCoMo's senior executive vice president Masayuki Hirata said in February.

The company has a total of 9.3 million customers who use the company's third-generation FOMA phones, he said.

The company said about 20 percent of customers with Felica-installed phones have used the technology at least once, according to an e-mail sent Wednesday from Hironobu Sawake, an analyst at UFJ Tsubasa Securities.

"For new services such as wallet-phones to gain momentum and help revenue, we need about 10 million signups," Hirata said.

Sumitomo Mitsui Card has 12.75 million members with 3.26 trillion yen ($30.4 billion) in sales as of March 2004, according to its web site.