Japan's Fastest Wireless Network

A little embarrassing for us on this side of the pond...


Japan's Fastest Wireless Network
Forbes
Chana R. Schoenberger 03.24.08, 12:00 AM ET

A Japanese telecom legend is making the biggest bet of his long career.

Sachio Semmoto is on his fifth entrepreneurial venture, which, in Japan, is five more than the usual. Twenty years ago Semmoto founded KDDI, Japan's number two phone company, and then expanded it into wireless. Mobile phone deregulation hit Japan in 1988; the cost of a wireless call has declined 95% since then.

At 65 Semmoto is betting his hard-earned reputation, and $3 billion in investors' money, on building the world's fastest wireless data service, called Emobile. Since its launch a year ago Emobile has gained 200,000 subscribers, who get 7.2 megabits a second, 100 times as much as Verizon (nyse: VZ - news - people )'s fastest wireless service in the U.S., for the same price. The company is signing up 13,000 subscribers each week.

But the growth is costing him. The spending to roll out Emobile has caused its publicly traded parent Eaccess to slump from a $41 million profit on $543 million in 2006 to a loss of $10 million on revenue of $545 million last year. Eaccess is the number three DSL service provider in Japan, after NTT and Masayoshi Son's Yahoo (nasdaq: YHOO - news - people ) BB.

Semmoto knows his new company is feeding off his old: "The mobile broadband era will come after fixed broadband," he says. "Emobile is a very important strategic group company for Eaccess."

Semmoto has made a career out of attacking big telecom companies ever since he left the national monopoly, NTT. Semmoto started there in 1966 and might have stayed had he not used a Fulbright scholarship to get his engineering Ph.D. at the University of Florida in Gainesville.

When Semmoto announced his excitement about going back to his NTT post, his roommate in a fraternity house, also a southern pastor's son, told him that his job was crap. Semmoto still wears his Gator tiepin in appreciation.

Semmoto didn't get up the nerve to leave NTT until 1983 when, with the backing of Kyocera and Sony (nyse: SNE - news - people ), he started a wireline rival to NTT. This eventually became KDDI. Profitable within three years, KDDI spawned a wireless carrier, now called AU, and the Willcom wireless data service.

In the last decade Semmoto (along with Masayoshi Son, whom he dubs a "good and worthy rival") has been attacking Japan's slow, expensive Internet access market. With the help of partner Eric Gan, a former Goldman Sachs (nyse: GS - news - people ) research analyst,

Semmoto raised $180 million to start Eaccess in 1999. Charging $25 a month for digital subscriber line service running at 1.5 megabits, Eaccess became profitable after its first year. It sold 20% of the company for $74 million in a 2003 initial offering.

But with the DSL market slowing, Semmoto and Gan decided it was time to go mobile. The ease with which they raised the necessary capital--$1.3 billion in equity and another $2 billion in debt--drew gasps in Asia.

Emobile has a leg up in the race to deliver high-speed (3G) wireless to Japan because, unlike its larger rivals, it started fresh. Its base-station equipment is smaller and easier to install. Docomo spent ten times Semmoto's $3 billion to deploy its 3G network, says Makio Inui, an analyst with UBS.

The company has no plans to expand into the U.S., but Semmoto reassures Americans that a faster mobile network surely will soon be theirs. "It is just a matter of time," he says. "The trend toward wireless broadband is global."