DoCoMo reports first-half profit drop on subscriber losses

26 Oct 2007

Japan’s largest mobile operator by subscribers NTT DoCoMo, today posted a 21% year-on-year fall in operating profit for its fiscal first-half to 30 September as price cuts failed to staunch the outflow of subscribers to rivals KDDI and Softbank Mobile, but maintained its full-year outlook. DoCoMo reported group operating profit of JPY408.5 billion (USD3.57 billion) in April-September, versus JPY516.9 billion in the corresponding period of 2006, although the figure was higher than the JPY404 billion forecast by Mizuho Securities. Net income dipped to JPY246.5 billion, or JPY5,692.33 per share, in the six months ended 30 September, from JPY309.8 billion a year earlier, while turnover decreased 2.4% to 2.33 trillion yen. Nevertheless, DoCoMo, a majority-owned unit of Japan’s fixed line behemoth Nippon Telegraph and Telephone Corp (NTT), stuck by its full-year forecast of a one percentage point rise in operating profit to JPY780 billion, which is above the market consensus of JPY760.5 billion by 16 analysts polled by Reuters. The worrying downturn in subscriber numbers has seen DoCoMo’s share price slip 20% since January, compared with 5.5% and 6.3% gains for KDDI and Softbank respectively.

DoCoMo has been hardest hit by the introduction of mobile number portability (MNP) in Japan in October 2006. It has seen a long line of subscribers defect to its rivals, with the country’s third largest operator, Softbank Mobile, claiming the greatest gains in the last six months on the back of high-profile marketing campaigns featuring Brad Pitt and Cameron Diaz. DoCoMo’s 50% price cut, announced in June, has failed to stop the rot, partly because KDDI and Softbank still offer cheaper mobile phones. At the end of September DoCoMo and its eight subsidiaries had 52.941 million users, up just 96,000 from 52.845 million in June, compared with 29.217 million for KDDI (508,300), 17.052 million for Softbank Mobile (611,500), and 122,300 for newcomer eMobile (+62,100). Hiroshi Suyama, an analyst at Mizuho Investors Securities, said ‘It’s hard for DoCoMo to find a way to reverse the current subscriber trend, considering price cuts haven’t worked out,’ adding, there is ‘little possibility’ of DoCoMo catching up to rivals in customer additions. The cellco plans to allow users to pay for handsets through one- or two-year contracts from 26 November in a move to enable it to reduce expenses for handset subsidy payments. It also plans to merge the eight subsidiaries with itself by 30 September 2008 to simplify its operations.

Japan, KDDI (au), NTT DOCOMO, SoftBank Corp