Profits at NTT DoCoMo Inc have fallen sharply, as Japan’s largest mobile operator faced greater spending costs in an effort to maintain market shares in the face of fierce competition in the Far Eastern market.
For the six months ending September 30, the Japanese operator posted net income down 20% to JPY 309.8bn ($2.63bn), down from JPY 385.3bn ($3.27bn) a year earlier. Sales meanwhile rose 0.4% to JPY 2383.4 trillion ($20.27bn) from JPY 2373.5 trillion ($20.18bn).
DoCoMo has a 56% share of the Japanese market, but its main rivals, KDDI Corp and Softbank (formerly the mobile operation of Vodafone Group Plc) have been making life pretty tough for the Japanese market leader, forcing it to increase its sales and marketing spend.
KDDI caused problems after it added more customers during the period thanks to its music service via mobile handsets, while Softbank is concentrating on cutting prices to acquire market share. DoCoMo is responding by concentrating on offering web surfing and music services to increase data download revenues via its high speed 3G system, known as FOMA. However this 3G drive is also pushing up the operator’s costs, as 3G handsets are more expensive, meaning that DoCoMo is have to pay more to subsidize handset costs.
The DoCoMo President, Masao Nakamura, hinted at the fierce competition during his presentation to the Tokyo Stock Exchange. While the competitive environment is expected to become increasingly fierce, we aim to build up our competitiveness by responding swiftly to changes in the market, he said.
Besides the competition, DoCoMo is facing a regulatory change that will make it easier for Japanese customers to switch service providers. This means that DoCoMo will have its work cut out for it, but the operator has said that it plans durng the second half of the year to introduce 20 new handset models, including devices featuring significantly upgraded music, game, and Osaifu Keitai functions.
This last point is interesting, as Osaifu Keitai refers to phones equipped with a contactless IC card. This allows the phone to be used as electronic money, a credit card, an electronic ticket, a membership card or an airline ticket. This is a hugely powerful feature, and no doubt there will be a number of Western mobile operators carefully studying customer take-up of such a service.