DOCOMO reports 12% drop in full year net profit as discount promos to entice new users bite hard

29 Apr 2015

NTT DOCOMO, Japan’s leading mobile operator in terms of subscribers, says its net income for the full year ended 31 March 2015 dropped 12% year-on-year to JPY410.1 billion (USD344.6 million) as the impact of new, heavily discounted pricing plans designed to attract new subscribers weighed heavily on earnings. DOCOMO, the mobile arm of Japan’s former state-owned monopoly Nippon Telegraph & Telephone Corp (NTT Corp), reported that total operating revenue fell 1.7% to JPY4.38 trillion and operating profit slumped 22% to JPY639.1 billion from JPY819.2 billion a year earlier, well below its target figure of operating income of JPY750 million for the year. Operating expenses rose 2.8% to JPY3.74 trillion as a result of rising costs of equipment, it said, amongst other factors.

The cellco introduced a range of discount ‘monthly support’ voice and data tariff plans in June 2014, which proved more popular than DOCOMO envisaged, attracting more than 17 million users by 31 March 2015 – many of whom had switched from the carrier’s more expensive packages. Not surprisingly, the rush to sign up to cheaper ‘Kake-hodai & Pake-aeru’ billing plans in the months after launch impacted heavily on revenues from handset sales and turnover from its Smart Life business and other businesses, it said. Prior to the launch of Kake-hodai & Pake-aeru, DOCOMO had been bleeding subscribers to rivals KDDI (au) and SoftBank for a number of years, and its initiative appears to have staunched the outflow; DOCOMO added a net 3.49 million subscribers in the twelve months under review for a total of 66.6 million; churn rate improved by 0.16 points to 0.71%, although aggregate (voice/data) monthly ARPU fell 5.2% to JPY4,370. Further, the cellco noted that smartphones accounted for 61% of the 23.75 million handsets it sold last year, of which 92% were LTE-enabled.

DOCOMO trimmed its CAPEX sharply in fiscal 2014/15, by 6% to JPY661.8 billion, largely attributable to the fact that its 4G network rollout is almost complete. The operator added over 42,000 4G base transceiver stations (BTS) to its network last year, taking the total to close to 100,000 – with more than 50% of BTS supporting speeds of at least 100Mbps. CAPEX for the current financial year is expected to be JPY630 billion.

Japan, NTT DOCOMO