Competition bites: DoCoMo’s Q1 net income down

27 Jul 2007

Japan’s largest mobile operator by subscribers, NTT DoCoMo, has reported a 25% drop in net profits for its fiscal first quarter to 30 June, amid stiff competition from rivals KDDI and Softbank Mobile, and rising costs to transfer users to its high-margin FOMA 3G network. DoCoMo posted net income of JPY122.81 billion (USD1.03 billion) for the quarter, down from JPY163.51 billion in the same period a year ago. Operating income dropped 25.2% to JPY203.88 billion as revenues dipped 2.9% to JPY1.182 trillion. Nonetheless, the company has reiterated its projections for the full year of net profit of JPY476 billion, operating profit of JPY780 billion and revenue of JPY4.728 trillion.

DoCoMo said its rising costs were in part the result of efforts to entice subscribers to migrate to its FOMA network in the hope they will start to use more advanced data services and reverse the downward trend in average revenue per unit (ARPU). The number of people signed up to the company’s 3G service reached 37.85 million at the end of June, accounting for 71.6% of its total subscriber base. The company forecasts that this figure will rise to 82.4%, or 44.42 million users, by the end of March 2008. However, the planned increase in ARPU has yet to materialise. In the latest financial period DoCoMo saw blended APRU dipping to JPY6,560 from JPY6,900 a year earlier, despite data ARPU rising from JPY1,970 to JPY2,120. The operator is investing JPY750 billion on its networks this year as it looks to expand FOMA coverage and improve connectivity. But it faces the prospect of having to halve its basic fees if it is to match the recent offer being touted by KDDI. From September DoCoMo is offering a discounted service plan to customers who sign a two-year contract, but industry watchers are concerned the operators are on the brink of an all-out price war that could ultimately harm the whole sector.