Japan’s deepening recession has hit the country’s top wireless carrier, NTT DoCoMo. The company’s profits and handset sales fell and it lowered its 2010 fiscal guidance to below analysts’ expectations.
DoCoMo’s fourth-quarter net profit fell to 34.2 billion yen from 114.7 billion yen last year as the company’s marketing efforts failed to lure in cash-strapped customers. The company recently purchased a controlling stake in TV shopping company Oak Lawn Marketing in a 31 billion yen bid to expand its e-commerce segment and diversify revenue streams.
“Whenever NTT DoCoMo does a move like this they may be ahead of the curve: They’re always a little innovative in their approaches to things,” says Ronald Gruia, principal information and communication technologies analyst with Frost & Sullivan. “It’s more catered to the middle aged group, who are very hard working and don’t have time during the day to shop.”
Japan’s telco market has become increasingly competitive and the country’s population is both aging and shrinking, presenting a tough environment for businesses even without the country’s economic woes. Sales slumped to 1.07 trillion yen from 1.19 trillion yen in the fourth quarter on a 21.8 percent drop in handset sales in the company’s 2009 fiscal year.
Still, the company managed to increase its subscriber base 2.3 percent to 54.6 million subscribers in its 2009 fiscal year ended March 29. For the full year 2009, net profit fell 3.9 percent to 471.9 billion yen on a 5.6 percent decline in sales, which hit 4.4 trillion yen.
DoCoMo holds half of Japan’s mobile phone market, but rivals KDDI and Softbank Mobile have recently sought to unseat DoCoMo with lower, more competitive pricing. In response, DoCoMo plans to cut minimum data charges on select plans to 490 yen starting May 1.
“KDDI and Softbank have been very, very aggressive to get more subscribers with lower fees,” says Gruia. “It’s better for DoCoMo to safeguard its customer base because the Japanese market is very mature and holding on to your base is important.”
The 52 percent decrease in minimum data charges aims to boost data usage as revenue from voice slips. However, the cuts come at a price: The company expects the move to trim operating profit by 40 billion yen over the course of this year, and ARPU is likely to fall to 5,280 yen from 5,710 yen this year.
The company said operating profit, or sales minus the cost of goods sold and administrative expenses, will remain a flat 830 billion yen in its 2009 fiscal year ending March 31, 2010. Analysts polled by Bloomberg expected the figure to come in at 858 billion yen. Net income is expected to rise slightly, to 493 billion yet but sales are likely to slip 1.5 percent to 4.38 trillion.