Competition To Take Toll On DoCoMo
By Carlo Longino, Fri May 07 16:15:00 GMT 2004

NTT DoCoMo tripled profits in its last fiscal year, but says sales and earnings will take a hit this year as it deals with ferocious competition from its rivals.

DoCoMo earned a record 650 billion yen ($5.9 billion) in the fiscal year that ended March 31 on sales of 5.05 trillion yen ($46 billion), and operating income was up to 1.103 trillion yen ($10 billion), driven by solid uptake of its 3G FOMA services.

The carrier now has 3.05 million FOMA subscribers, though that still pales in comparison to its more than 40 million 2G users. DoCoMo hopes to have 10.6 million 3G users by the end of the current fiscal year, though much of that will be from 2G users upgrading rather than new customers, as rival KDDI continues to outpace DoCoMo's subscriber adds.

DoCoMo also gave a bleak outlook for the current year. While it said net income will rise to 751 billion yen, much of that will come from the sale of its 16% stake in US carrier AT&T Wireless to Cingular. The company projects a 2.5 percent drop in sales (that's 130 billion yen, or $1.5 billion) and a 25 percent fall in operating profits.

ARPU is falling as the carrier cuts tariffs and increases handset subsidies in an effort to stop market share losses to KDDI. DoCoMo expects ARPU to slide 8.5 percent to 7,270 yen, and it's clear why they want to shift users to its 3G net: FOMA user ARPU is about 25 percent higher. Data ARPU was 1900 yen, or 24% in the year, and even with KDDI's gains, DoCoMo still has 56.3 percent of the market.

The company's balance sheets have been hit by significant writeoffs in its overseas investments. It initially invested $9.8 billion for a 16 percent stake in AT&T Wireless, and last year wrote off about $6 billion in that investment as well as some in British, Dutch and Taiwanese carriers.

News has also emerged today DoCoMo may be looking to unwind its 20 percent stake in UK carrier 3, for which it paid 184.6 billion yen ($1.68 billion at current exchange rates) in December 2000. 3's parent, Hutchison Whampoa, paid The Netherlands' KPN GBP 90 million (about 130 million euros) to buy out its 15 percent stake in 3 last November -- a stake which initially cost KPN 1.2 billion euros 3 years ago.