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Japan Mobile Phone Market at Dawn of Price War

Posted on: Wednesday, 17 August 2005, 18:00 CDT

Tokyo, Aug. 17 (Jiji Press)--A fierce battle is about to erupt in Japan's mobile phone market between the existing triumvirate that, with its overwhelming dominance, enjoys hefty profits and new forces aiming to undercut them.

Opening the door to new entrants for the first time in more than a decade, the government will start accepting applications for new frequency band allocations on Monday and decide by the end of this year which companies should be allowed to enter the market. This will be the first issuance of a new mobile phone license in Japan since 1994.

Softbank Corp. and eAccess Ltd. , both of which are expected to get a license, are taking on the oligopoly of NTT DoCoMo Inc. , KDDI Corp. and Vodafone K.K. "We want to be a mobile phone operator that rival DoCoMo and KDDI," Softbank President Masayoshi Son has said, referring to the two biggest mobile operators.

If their applications are accepted, Softbank and eAccess are expected to start services by the spring of 2007.

To steal market shares, the companies are gearing up to wage a price war. "Our entry will push down prices," Son said.

Sachio Senmoto, president of eAccess, expressed his company's intention to offer its service at a price half the level of the incumbent operators' rates. "The current prices are kept too high by the oligopoly," he said.

Thanks to limited competition, DoCoMo and its two rivals are enjoying juicy profits. In the business year that ended in March, DoCoMo logged a group operating profit of 784.1 billion yen and KDDI posted a profit of 296.1 billion yen. Even Vodafone, which is trailing far behind DoCoMo and KDDI, earned 158 billion yen.

The incumbents are hoping to retain their users despite increased competition, because of the proven reliability of their services. "The most important thing about mobile phone services is whether or not you can connect," DoCoMo President Nakamura said.

To offer seamless services across the nation, each of the new entrants would have to build a nationwide telecommunications network of its own with a hefty investment of hundreds of billions of yen, and it could be difficult to recoup the investment while offering cut-rate services.

For their part, the three existing carriers are trying to strengthen their defense.

DoCoMo is trying to prevent user defections by offering deeper discounts to long-term subscribers, while KDDI is planning to acquire PoweredCom Inc., the fixed-line communications unit of Tokyo Electric Power Co. , so that it can retain users by offering integrated services including both mobile and fixed phones.

Vodafone is also exploring a possible tie-up with a fixed-phone carrier.

Still, users may feel easy about switching to a new mobile operator with the introduction of so-called number portability in the autumn of 2006, which will allow mobile phone users to retain their numbers when they change phone companies.

Faced with the prospect of intensified competition, DoCoMo's Nakamura put on a brave face, saying, "Just because prices drop, there will not be a major shift of users." Perhaps, the existing mobile operators are keeping their fingers crossed that their customers will not prove so mobile in their choice of carrier.END

Source: Jiji Press English News Service

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