11.6 billion yen loss prompts Hikari Tsushin restructuring

In a major shift in its corporate strategy, Hikari Tsushin Inc., which rapidly grew as a mobile phone resale firm, said Monday it will close several of its outlets and focus more on venture investment and new services.

The firm, whose stock price has recently dropped sharply, announced the same day that it expects 11.6 billion yen in operating losses for the business year that ends in August — its first operating loss.

Founded in 1988, the firm had previously projected 8 billion yen in operating profits.

Hikari Tsushin President Yasumitsu Shigeta said at a news conference that the turnabout in the business strategy is to cope with the rapid changes in the cellular phone business.

“We will start full-scale restructuring of the cellular phone business. . . . The business circumstances are rapidly changing. The overall (market) share of new common carriers is declining and NTT DoCoMo’s share is increasing due to the good sales of its i-mode (service),” Shigeta said.

Hikari Tsushin mainly resells phones of so-called new common carriers — or carriers other than the NTT group — and receives commissions in accordance with the sales of and telecom charges on mobile phones that the firm sold.

The firm now plans large-scale restructuring of its sales outlets and agent network, including closing unprofitable shops. It plans to bring all of its remaining shops into the black.

Of its 1,601 shops and agents, 291 shops will be closed or consolidated, and 413 shops will need some sort of business improvement, according to the firm.

In its projection for the current business year, Hikari Tsushin also lowered its sales estimate from 380 billion yen to 330 billion yen due to worse-than-expected prospects for cellular phone sales.

Monday’s downward revision came less than a month after the company announced earlier revisions of its earnings report.

“We are very sorry for revising our business forecast after such a short time. Actually, the circumstances have been changing very quickly during the past month. We could not help but admit that our judgment on the circumstances was wrong,” Shigeta said.

In a midterm earnings report that covers from last September to February, Hikari Tsushin posted 12.99 billion yen in operating losses, out of 191.31 billion yen in sales. However, it managed to churn out 7.4 billion yen in pretax profits thanks to the sales of its assets, namely stocks, and net profits worth 4.3 billion yen.

Facing a steep decline in its stock price, Shigeta stressed that the firm’s market capitalization stood at 1.589 trillion yen as of April 21 and his firm still has sufficient cash flow.