Summary
Inspite of having a control on half of the Japan’s mobile market NTT Docomo reported a drop in its profit by 21%. Since Japan’s market is reaching its maturity, it is facing tremendous competitive pressure within and outside its domestic market. Docomo is losing its subscriber to competitors like Softbank, KDDI and eMobile. Thus Docomo’s slump in profit is helping its competitors to make a gain.
Analysis
Japan’s dominant mobile phone carrier NTT Docomo reported a fall in its revenue and profit in its second quarter. The figure states that its net profit is dropped by 21% and revenue by 3.3%. The mobile carrier has also forecasted its operating revenues of JPY 4.28 trillion down by JPY 106 billion from previous forecast after analyzing declining its subscriber base and handset demand in market.
Telecom sector of the world’s second largest economy is struggling hard and facing cut throat competition within its domestic market as well as in the international market. New entrants are playing bigger roles in increasing the competition. Docomo’s drop in profit is also affected this high competitive pressure from KDDI and Softbank. Its rival Softbank enjoyed 41.1% increase in its profit. It gained around 112,900 subscribers in the period of June to September where ad KDDI reported a net gain of 43,800 subscribers however a new entrant eMobile added around 96,000 new subscribers to its network. These players claim to provide enhanced network coverage, better customer service, cost effective plans. They are also running new discount programs and new handset sales method.
Due to uncertainties in the economic conditions customers hesitate to make a new purchase and thus effecting Docomo’s handset sale. Customers are also moving aggressively towards low cost carriers. However Docomo is also taking further steps to lure its subscribers by slashing its fees, trying to provide better network coverage and service to stand by its position in the market. It is also diverting its focus on its data communication service to balance its loss from mobile service.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
