Business / Corporate

NTT Docomo to lower mobile phone fees after government call for charges to be cut

Kyodo, Reuters, Bloomberg

NTT Docomo Inc. said it will cut its mobile phone charges by 20 to 40 percent from the April-June quarter next year amid a call by the government for cell phone carriers to reduce their fees.

NTT Docomo will offer lower charges with new plans, under which handset payments and service charges will be separated. The move by the largest mobile carrier in Japan is expected to prompt its two major rivals KDDI Corp. and SoftBank Corp. to follow suit.

The top three mobile carriers currently offer similar packaged plans combining handset and service fees.

“The (existing) plans are complicated and difficult to understand. We want to review our plans boldly to make them simple and easy to understand,” said NTT Docomo President Kazuhiro Yoshizawa at a news conference Wednesday.

The decision comes after Chief Cabinet Secretary Yoshihide Suga said in August that mobile phone charges in the nation should be reduced by 40 percent.

The Ministry of Internal Affairs and Communications recently set up a panel to discuss mobile phone charges.

“This is our own decision,” Yoshizawa said when asked whether the government’s call had any impact on its decision. The cuts in service charges will reduce consumers’ payments by up to ¥400 billion ($3.5 billion) a year, he noted.

For investors, Docomo’s plan to cut mobile rates sparked concern that industry profits will slump for years and exacerbated anxiety over a market that’s already saturated and increasingly competitive.

“What surprised investors is that Docomo will take about five years to recover above the profit level for the current fiscal year,” said Naoki Fujiwara, chief fund manager for Shinkin Asset Management Co. in Tokyo. “Other major mobile carriers may have little choice but to follow Docomo with price cuts.”

On Thursday, KDDI President Makoto Takahashi said the company won’t follow Docomo’s price cuts. He said KDDI had already introduced lower rates.

The Nikkei stock exchange fell on Thursday, pulled down by large cap mobile phone companies after NTT Docomo’s announcement. NTT Docomo’s shares nose-dived over 15 percent to a two-year low.

KDDI Corp. plunged 16 percent to a four-year low, while SoftBank Group Corp. plummeted 8.2 percent as the news put pressure on the technology conglomerate before the planned initial public offering of its mobile-phone unit in December.

While Japan’s mobile phone market has long been dominated by the top three carriers, there are continuing consumer complaints that mobile phone fees have been too high in comparison with other countries.

In April, the government granted approval to e-commerce giant Rakuten Inc. to enter the business from October 2019, in a move that is expected to spur greater competition.

Households of two or more people spent on average around ¥122,500 in mobile phone fees in 2017, according to the latest survey by the ministry.