DoCoMo to scale back PHS operations and focus on 3G

12 Sep 2003

Japan’s dominant cellco NTT DoCoMo [NYSE: DCM] has denied claims by the Nihon Keizai daily newspaper that it plans to exit the country’s struggling PHS market. The operator has stopped developing new handsets for its nine PHS networks and has seen subscriber levels tail off over the past two years as customers have opted for the more user-friendly and technologically advanced PDC, CDMA and W-CDMA services. Although PHS services offer cheaper call rates, they lack extensive geographical coverage and have proved unreliable for making calls in moving vehicles. The PHS market in Japan peaked in 1997 when there were more than seven million users nationwide. This figure has been in decline since mid-2000, standing at 5.37 million at the end of August 2003. DoCoMo’s share of the market has fallen accordingly, from a high of 2.15 million customers in late 1997 to 1.68 million at the end of last month. The PHS market leader, KDDI, had 2.95 million subscribers at the same date, exactly the same number as twelve months previously.

Although DoCoMo was quick to put down rumours that it is to exit the PHS market altogether, it failed to deny reports that it has stopped actively marketing the service or accepting new subscribers. DoCoMo registered a JPY28.3 billion loss from its PHS operations in the year to the end of March 2003. The poor returns come at a time when the operator is aggressively marketing its third-generation (3G) W-CDMA mobile service, to which it had 785,800 customers at the end of August, up from 659,000 the month before. At the same date it had 44.86 million subscribers to its PDC-800 and PDC-1500 networks, up from 44.67 million at the end of July; of these, 39.44 million were also taking DoCoMo’s hugely popular i-mode mobile internet service.

Source: Telecommunications Carriers Association