Following moves by its rivals, KDDI Corp. said Wednesday it will roll out new cut-price smartphone plans, further intensifying competition among mobile phone carriers under intense pressure from the government.

KDDI said it will introduce a new low-cost mobile service plan with 20 gigabytes of data for ¥2,480 a month starting in March, the cheapest among the three mega-carriers’ comparable offers. The two other competitors — NTT Docomo Inc. and SoftBank Corp. — recently announced their 20GB plans for ¥2,980.

While the offerings of NTT Docomo and SoftBank, which will also start in March, include up to five minutes of free talk time per domestic voice call, KDDI will make that a ¥500 option in an effort to differentiate itself.

KDDI said the reason why it made the free five-minute call optional was because more than 60% of users under the age of 30 make less than 10 minutes of voice calls a month, as they can also use other apps, such as Line, to make them for free.

KDDI Corp. President Makoto Takahashi speaks during a news conference in Tokyo on Wednesday. | KYODO
KDDI Corp. President Makoto Takahashi speaks during a news conference in Tokyo on Wednesday. | KYODO

KDDI does not currently have a 20GB plan, but currently charges ¥2,980 for 10GB under its low-cost brand UQ Mobile, meaning that the new plan is significantly cheaper.

The competition among the telecom giants rapidly intensified after NTT Docomo unveiled its 20GB plan last month, following persistent pressure from the government on the major mobile carriers to lower smartphone fees to ease financial burdens for consumers.

“NTT Docomo’s announcement of the new plan has really pushed our employees to gear up (for competition),” since KDDI has a long history of competing with the NTT group, said KDDI President Makoto Takahashi.

“In that sense, we are excited that we’ve come up with the ¥2,480 plan, which is the cheapest and will let users add a variety of ‘toppings.’”

KDDI said it will prepare extras that can meet various users’ needs. For instance, if users know that they will be consuming lots of data for watching movies or online meetings on a certain day, they can pay ¥200 to get unlimited data usage for 24 hours outside of the 20GB included in the plan.

The new 20GB plan will be managed basically online, meaning procedures, such as subscribing and canceling, will be conducted using the internet instead of done at physical shops, just like similar low-cost plans recently unveiled by NTT Docomo and SoftBank.

KDDI also said it will slash the price for its unlimited ultrafast 5G data plan to ¥6,580 monthly from the current ¥8,650.

In addition, it will update prices for its UQ Mobile brand starting February, with ¥1,480 for 3GB, ¥2,480 for 15GB and ¥3,480 for 25GB.

Asked how the new strategy will affect revenue and profit, Takahashi admitted that “there will be an impact, as we are making a quite bold move with these plans.”

However, the firm needs to prioritize keeping pace with the competition and will strive for sustainable growth by streamlining operation costs and cultivating new revenue sources, he added.

Prime Minister Yoshihide Suga’s administration has been adamant about fueling competition among the major carriers, as it has set lowering smartphone fees as a pillar of its economic policy amid the COVID-19 pandemic, which has ravaged the economy.

Initially, KDDI was reluctant to make a huge price cut, as Takahashi had reportedly said in November that the carrier wasn’t planning such a move in the immediate future.

But the situation has changed since NTT Docomo surprised the public last month with the new low-cost plan, with SoftBank following suit soon after and KDDI consequently backed into a corner.

KDDI Corp. President Makoto Takahashi introduces new cut-price plans during an online news conference on Wednesday. | COURTESY OF KDDI CORP.
KDDI Corp. President Makoto Takahashi introduces new cut-price plans during an online news conference on Wednesday. | COURTESY OF KDDI CORP.

Although the new low-cost plans by the three major carriers will translate into savings for many consumers, some industry observers have expressed concern that the sharp price cuts may hurt healthy competition in the long-term by reinforcing the market dominance of the big three.

The government has long been trying to stir up competition through mobile virtual network operators. MVNOs lease mobile networks from the major carriers and usually offer cheaper data plans than the telecom giants.

The three carriers’ new prices have been lowered pretty much to the levels offered by MVNOs, which has already prompted some of those operators to launch further price cuts. A downward spiral in prices will likely make it even tougher for some firms to survive from now on.

A week after NTT Docomo’s unveiling of the Ahamo low-cost plan in December, Japan Communications Inc., one of the pioneers of MVNOs, announced it would offer the same service with 20GB of data for ¥1,000 cheaper at ¥1,980.

Rakuten Mobile, which has joined the market as a fourth carrier, will also be put in a difficult position. To attract users from the three big carriers, Rakuten has been offering a ¥2,980 unlimited data plan, but its advantage will be reduced because of their new plans.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.