The three-way merger of KDD Corp., DDI Corp. and IDO Corp. in October will turn the new firm into a competitive mobile phone and Internet business that will enable KDD to shine, KDD President Tadashi Nishimoto says.

"KDD will play a central role in international operations," Nishimoto, 63, said in a recent interview with The Japan Times. "This is not only about fixed-line services, but also mobile services."

The three carriers, which between them possess expertise in long-distance, international and mobile communications services, are to merge into a comprehensive telecommunications company called KDDI.

"Deregulation (in Japan) over the past 15 years has drawn foreign carriers into the Japanese market. In contrast, Japanese carriers have not been active expanding overseas," Nishimoto said, adding that KDDI will rely on KDD's experience to make that leap.

KDD has been negotiating business tieups with foreign carriers, Nishimoto said, and the future expansion of KDDI as an international operator includes the possibility of entering mobile communications markets abroad.

Until two years ago, KDD had been limited to international services. But the merger will enable the firm put its technological capabilities in wireless communications and Internet-based networks, expertise honed over itsdecades-long monopoly of Japan's international telecom services, to full use, Nishimoto said.

DDI, which will survive the merger, expects KDDI to post about 3.55 trillion yen in consolidated sales in fiscal 2002.

KDDI's international strategy will primarily focus on the United States, the world's largest telecom market.

"It is often said that Asia is a prospective market. But the U.S. market is big after all, and the primary target of major international carriers," Nishimoto said.

KDD was inaugurated as a special public company by the KDD Law in 1953. After the domestic market for overseas services was opened in 1989, the deregulatory move brought the KDD monopoly to an end, leading to the law's abolishment in 1998.

In recent years, international telephone rates have witnessed considerable drops due to intensifying competition, and sharp falls in revenue have forced KDD to branch out into new fields.

In the fiscal year that ended in March 1999, KDD's revenue from international services fell 21.8 percent from the previous year to 195.8 billion yen. This plunge carried over into the first half of fiscal 1999, with revenues declining by about 25 percent to 80.5 billion yen compared with the same period in 1998.

To build up domestic services, KDD decided in 1998 to merge with Teleway Corp., a long-distance carrier affiliated with Toyota Motor Corp. The decision to merge with DDI and IDO was another step in this direction, Nishimoto said.

As an increasing number of Japanese consumers use mobile phones to access the Internet, new types of mobile devices are likely to create new opportunities. Nishimoto sees one such opportunity in car phones.

"There about about 70 million registered vehicles (in Japan), a number actually larger than NTT's fixed-line subscribers," he said.

KDDI's capital ties with Toyota, Japan's top automaker, will prove to be a competitive edge if people begin using car terminals for new types of mobile communications, he said. Toyota is expected to own at least 10.3 percent of KDDI and become its second-largest shareholder behind Kyocera Corp., which owns 25 percent of DDI.

Wireless communication via automobiles is expected to expand as a means to send and receive information for traffic control and emergency rescue, Nishimoto said.

"Such information will go to a control center for car-based mobile terminals, which will then allow it to perform other actions, like changing traffic lights (to ease congestion)," Nishimoto said. "Only KDD and NTT have that kind of wireless technology."

KDD's wireless technology, Toyota's expertise in the automobile business, and DDI's strong marketing capabilities will serve as the KDDI's main pillars, Nishimoto said.