Battle For Subscribers Shrinks Japanese Profits
By Eric Lin, Sat Oct 30 00:45:00 GMT 2004

Profits at both carriers are down, but DoCoMo's first half results look better than KDDI's on the surface. The difference isn't as significant after isolating what really counts.

The two largest Japanese carriers released their first half results this week (Japanese financial years begin April 1). DoCoMo's profits for the first half fell 6 percent from a year ago, but revenues only fell 3.3 percent. KDDI's net profits fell 9.3 percent, mostly due to a 20 billion yen ($189 million) write down of its undersea cable business.

After a net profit 335.19 billion yen for the first half, DoCoMo is forecasting total yearly profits of 758 billion yen, up from 650 billion last year. Half of that jump will be thanks to 497 billion yen gain from the sale of its share in AT&T Wireless to Cingular. The healthy gain in projected profits belie the projected year-end decrease in sales to 4.82 trillion yen, down from 5.05 trillion last year, and even down two percent from earlier projections because of an expected drop in handset sales and tariff revenues. Every aspect of DoCoMo's ARPU fell slightly as it continues to cut prices and makes special offers to reduce churn and increase the shift to FOMA among its own subscribers. Voice is down to 5,440 yen, 2G data is down 1,900 yen and 3G data has decreased to 9,890 yen.

KDDI is forecasting year-end profits of 198 billion yen, down significantly from earlier forecasts, but still up from last year's record profits KDDI's total ARPU continues to decline ever so slightly, down to 7,300 yen from 7,450 six months ago and 7,540 a year earlier. However ARPU from highly sought after data is increasing, now at 1,730 yen, even as voice decreases to 5,570. While this is the biggest drop in any category for either KDDI or DoCoMo, notice that it is still higher than DoCoMo.

KDDI continues adding new subscriber at a whirlwind pace -- 1.23 million have joined this half. That's 28 percent higher than DoCoMo's increase of 959,700 but DoCoMo maintains a huge lead in total subscribers -- about 2.5 times as many as KDDI. DoCoMo also has 6.4 million 3G subscribers, significantly more than KDDI's 1x EV-DO population, which is also where DoCoMo's strength in ARPU lies.