NTT Docomo Inc. unveiled a new budget smartphone plan that is considerably cheaper than those of its chief rivals on Thursday as Prime Minister Yoshihide Suga’s government relentlessly prods telecom giants to slash costs as many struggle to make ends meet during the pandemic.
Japan’s largest mobile phone carrier by number of subscribers said it will launch a new monthly plan that will cost ¥2,980 for 20GB of data and free domestic calls that last five minutes or less, the cheapest plan among the nation’s three major carriers.
NTT Docomo President Motoyuki Ii said Docomo is targeting young users, a demographic with whom the carrier has been losing ground, with the new offer.
“We didn’t have the right plan for them. We are falling behind, so we need to make a competitive offer,” Ii said during a news conference.
He added Docomo is looking to lower fees for other plans as well.
Japan’s two other top carriers — KDDI Corp. and SoftBank Corp. — announced their 20GB plans in October.
KDDI said it will roll out its new 20GB plan for ¥4,480, including 60 minutes of free domestic calls, as early as February through its low-cost brand UQ mobile. Through its budget brand Ymobile, SoftBank said it will launch a 20GB option for ¥4,480 with free domestic calls that last 10 minutes or less.
Unlike KDDI and SoftBank, Docomo does not have a budget brand and is set to lower fees for its main brand — a sign that the carrier is succumbing to government pressure. Reducing mobile phone costs has been one of Suga’s major economic policy agendas.
Despite the cheaper plans announced by KDDI and SoftBank prior to Docomo’s announcement, Internal Affairs and Communications Minister Ryota Takeda remained displeased.
He pointed out that users need to pay around ¥15,000 to switch their plans from the main brand to the budget brand in some cases.
“They have introduced new low-cost plans with their sub-brands and have given more options, which I appreciate to a certain extent,” said Takeda during a news conference last week. But users face high hurdles in switching to the sub-brands, he said.
“I believe the only way for people to actually feel (the alleviation of costs) is for the carriers lower fees for their main brand,” he said.
In a recent interview with the Nikkei business daily, KDDI President Makoto Takahashi said the firm is not considering cutting data fees for au, its main brand, in the immediate future, saying that “the government has no right to set prices.”
But KDDI and SoftBank may have to rethink their strategies in response to Docomo.
While many users will probably welcome the price competition by the three major carriers to provide lower-fee options, some industry observers have questioned whether the government’s push will really spur healthy competition over the long term.
For years, the government has tried to promote MVNOs (mobile virtual network operators) that lease mobile networks from the major carriers. This would allow budget carriers to offer cheaper data fees than the telecom giants. Users who want to lower their smartphone fees could switch to MVNOs, which would eventually stimulate competition among the mega-carriers and MVNOs and lower fees overall.
But now that the carriers are set to offer lower fees, the government’s pressure on them might just strengthen their user retention. In fact, Docomo’s new ¥2,980 plan for 20GB is actually cheaper than comparable offers by some MVNOs.
Asked how Docomo’s new plan will affect MVNOs, Ii said Docomo does not intend to squeeze them out and will seek to coexist, adding that the carrier is looking to work with some MVNOs to provide super low-cost plans.
In addition, Rakuten Mobile Inc., which made a foray into the market in a bid to become the fourth major carrier, will likely face tough competition as well. Rakuten is offering a ¥2,980 plan that includes unlimited data usage and voice calls.
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