DoCoMo’s bottom line hit by 3G costs

30 Jul 2004

Japan’s leading mobile operator NTT DoCoMo this morning announced a disappointing set of financial results for the three months to the end of June 2004 as intense competition and heavy marketing costs took a toll on its balance sheet. The operator said total revenues for the period fell by 2.5% to JPY1.22 trillion (USD10.88 billion), and net profits by 13.4% to JPY170.4 billion, due to higher subsidies for its third-generation FOMA service and intense downward competition on prices as Japan’s mobile operators aggressively market their latest mobile data offerings.

DoCoMo has forecast that it will post its first ever decline in revenues in the year to 31 March 2005, with total turnover expected to fall by around 2.5%to JPY4.92 trillion, and operating profit to decline by as much as 25% to JPY830 million. In a bid to maintain a lead over its domestic rivals, DoCoMo has been subsidising around JPY40,000 in incentives to sell its FOMA handsets, compared to JPY30,000 per handset on its more traditional 2G networks. During the quarter DoCoMo’s average voice revenue per user fell from JPY6,150 to JPY5,450, with average data revenue per user rising by only JPY40 to JPY1,950. Overall revenue per subscriber fell from JPY8,060 to JPY7,400. Since the end of March 2004 DoCoMo’s shares have fallen by almost 15%, leading its market capitalization to fall to below that of its parent company NTT for the first time in almost five years.