Yahoo Japan Corp. surprised the telecommunications market in March by announcing it would acquire eAccess Ltd., operator of mobile Internet service Emobile, and personal handyphone service Willcom Inc. to start a cellphone carrier in June.
The Web portal giant — part of the SoftBank group — said the new cellphone firm would be named Y!mobile and become the nation’s first Internet carrier as well.
Yet the announcement has given rise to several questions, such as what kinds of services Yahoo Japan has up its sleeve, why it has to buy both eAccess and Willcom, both of which are in the SoftBank group, and whether Yahoo Japan and SoftBank Corp. will resort to fighting each other for subscribers in the future.
Industry observers said Yahoo Japan, which built its powerful business model on PC users, is trying to reinforce its position in the mobile Internet business by becoming a carrier itself so it can lure smartphone users into using Yahoo Japan’s services directly.
They also said it is most likely that Y!mobile will try to become a budget carrier for smartphones to target those who haven’t yet made the switch from mobile phones to smartphones, which cost more to maintain.
At a press conference on March 27, Yahoo Japan CEO Manabu Miyasaka stressed that the firm wants to boost smartphone users.
“We can say that most of the recent increasing portion of sales come from smartphones. Because of the spread of smartphones, our company is growing . . . we thought the best way to keep the growth is that we should directly get involved in accelerating the speed of the spread,” said Miyasaka.
Yahoo Japan’s ad sales for fiscal 2013 were ¥215.7 billion, up ¥25.2 billion from the previous year. Likewise, smartphone ad revenue jumped to ¥45.2 billion from ¥25 billion compared with fiscal 2012.
SoftBank originally planned to merge eAccess and Willcom in April, but Yahoo Japan proposed acquiring them and operating an Internet carrier under Yahoo Japan.
After absorbing the customers of Emobile and Willcom, Y!mobile will have a base of about 10 million users.
Becoming a carrier will create synergies by boosting ad revenue, Yahoo Japan’s e-commerce transactions, and the number of paid Yahoo Japan members, said Miyasaka.
He said Y!mobile will pre-install some of Yahoo Japan’s applications so more people can easily access and use its services through smartphones.
Yahoo Japan has many smartphone apps, including news, shopping and map services.
“This will increase the traffic to Yahoo, meaning ad revenue and e-commerce billing will increase, too,” said Miyasaka.
He also said that once Y!mobile launches, it will ask subscribers to become paid Yahoo Japan members when they sign up to Y!mobile.
Industry observers said Yahoo Japan’s plan is to solidify its position in the smartphone Internet market.
“Yahoo has built its status as a search engine or a portal site in an era of the PC Internet and gained a massive user base. Those users naturally set Yahoo Japan as the top page (on their PC Internet browsers),” said Hideaki Yokota, director and executive analyst at MM Research Institute.
But for smartphones, they might choose something else for the top page, which will eat into Yahoo Japan’s traffic and presence, he said.
Yokota pointed out that more than 50 percent of the nation’s cellphone users are still shunning smartphones, so Yahoo Japan is aiming to increase smartphone use and market Yahoo’s services by becoming an Internet carrier.
Indeed, Yahoo Japan’s prime targets are people without smartphones.
“We want to provide services that will make them want to use smartphones,” said Miyasaka, claiming it is a shame that more than a half of all cellphone users are still opting out of smartphones despite knowing of their convenience.
Yahoo Japan was slow to get jump onto the smartphone bandwagon, but since Miyasaka took the helm, it has been shifting its resources to the new gadget.
But he also said that Yahoo Japan is still working to come up with specific services and pricing plans, and that the company is set to disclose the details before June.
Analysts said it is most likely that Yahoo Japan will try to undercut the existing major carriers, including Docomo, KDDI’s au and even its parent firm, SoftBank.
“Because of the pricey data fee, I think many people are hesitant to use smartphones . . . whether Y!mobile can present itself as a budget carrier for smartphones will be important,” said Mitsuru Miyazaki, senior analyst at SMBC Friend Research Center.
Compared to cellphones, smartphones tend to consume more data. Thus, major carriers set monthly data fees of around ¥5,000 to ¥6,000 for 7 gigabytes, which is more expensive than that for cellphones.
This is why many nonsmartphone users are reluctant to switch.
Yokota of MM Research Institute said that price is the main concern of smartphone users, so if Y!mobile cannot provide reasonable services acceptable to both sides, “it won’t be able to survive.”
While Y!mobile’s strategy is still unclear, Y!mobile is likely to be competing not only with Docomo and KDDI, but also with parent SoftBank.
“(Competing with SoftBank) can’t be helped. I think they will have to make some arrangements,” said Miyazaki of SMBC Friend Research Center.
Yahoo Japan’s Miyasaka admitted that a certain amount of competition will be unavoidable, but Emobile and Willcom were in the same situation and competed with SoftBank from time to time.
Yokota said the trend toward reasonably priced smartphone service has been noticeable, with Aeon and Bic Camera gaining ground.
This trend will probably continue, so SoftBank probably thinks it will be better to lose some customers to Y!mobile than to other nongroup companies, since Y!mobile will be part of its group.