Vodafone struggling to make headway in Japan

12 Jan 2005

Vodafone is facing a tough future in Japan as its local mobile subsidiary Vodafone KK added just 900 net new subscribers in December while rival operators NTT DoCoMo and KDDI saw net gains of 247,500 and 257,100 respectively. The UK-based company has seen its share of the Japanese cellular market slip from 18.5% at the end of 2003 to less than 17.8% last month.

The long-time market leader, NTT DoCoMo, ended 2004 with 47.91 million subscribers, up from 45.73 million twelve months earlier, while KDDI added 2.71 million new customers during 2004 to end the year with 22.36 million users. Vodafone saw customer numbers rise from 14.77 million at the end of 2003 to 15.21 million last month, a net gain of just 437,000 in twelve months.

Vodafone fared a little better in the 3G market, ending 2004 with 366,400 high speed customers, up from 296,900 in November and 111,700 at the end of 2003. The introduction of two new 3G handsets last month helped boost 3G take-up, but the company has suffered from being the last of the country’s three cellcos to enter the 3G arena. KDDI is the largest 3G operator, with 16.83 million CDMA2000 1x users at the end of December, up from 11.76 million a year before. 2004 was also a good year for DoCoMo’s wideband CDMA FOMA 3G service; its customer base jumped from 1.88 million to 8.5 million over the period.

With penetration levels now standing at around 70% the Japanese cellular market is becoming increasingly competitive as carriers switch their attention from growing subscriber numbers to squeezing extra income from existing users. Nevertheless, Vodafone will still be worried by the December customer figures as it receives around a quarter of its global revenues from Japan. Part of Vodafone KK’s problems may stem from its greater reliance on the less lucrative pre-pay sector. 11% of its customers use pre-paid packages, while its rivals have pre-pay levels of less than 2%. NTT DoCoMo is expected to stop selling pre-paid phones soon.