DoCoMo profits suffer as price war escalates

by Shinichi Terada

NTT DoCoMo Inc. said Friday its operating profit in the April-June quarter dropped 25.2 percent from a year earlier to 203.9 billion yen amid an intensifying price war with its rivals.

The company also announced it will cut its monthly fees by 50 percent for users who sign up for two-year contracts starting in late August to keep pace with discounts rates announced earlier by rivals KDDI Corp. and Softbank Corp.

Japan’s largest wireless operator reported quarterly net profit of 122.8 billion yen, down 24.9 percent. Sales declined 2.9 percent to 1.18 trillion yen.

DoCoMo President Masao Nakamura told reporters in Tokyo that the quarterly results were “bad.”

The fresh price battle came after the introduction of the number portability system last October, which allowed users to switch carriers without changing phone numbers. This caused a large number of DoCoMo users to defect to KDDI and Softbank.

Nakamura explained that the effect of the new number portability system was lessening, noting the cancellation rate was in decline compared with the initial period after the introduction.

He also said the latest discount package will likely erode 40 billion yen from sales in the full year to next March.

In a bid to keep its customers, DoCoMo announced discounts late last month, but on July 19, KDDI announced deeper discounts starting in September and Softbank followed. This led DoCoMo to expand on its discounts.

For the full year to March, the carrier kept its earlier forecast of a net profit of 476 billion yen, up 4.1 percent from a year earlier. Sales will probably decrease 1.3 percent to 4.73 trillion yen, and operating profit is expected to slightly increase 0.8 percent to 780 billion yen.

Sanyo exits cell phones

OSAKA (Kyodo) Sanyo Electric Co. has decided to withdraw from the cell phone handset sales business by putting up for sale its handset marketing arm to focus on core businesses such as rechargeable batteries and commercial-use equipment, sources said Friday.

Several companies, including a Mitsui & Co. subsidiary, are expected to tender bids for Osaka-based Telecom Sanyo Co. in an auction Sanyo soon plans to hold. The sale price is expected to reach several billion yen, according to the sources.

Sanyo is in the middle of restructuring. It booked a consolidated net loss in the year through March for the third year in a row.

The increasingly tough business environment in the mobile phone sector could have also been a consideration that prompted Sanyo’s decision, the sources said.

The Internal Affairs and Communications Ministry is studying a plan to redress telecom carriers’ common business practice of shouldering the bulk of cell phone handset costs to sell them cheaply to consumers and later make up the costs by charging high phone rates.