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Top New Stories
1. Mobile operators stagnate growth in Japan
2. DoCoMo anticipates 20% profit drop
3. O2 chose i-mode over WAP for service differentiation
4. 3G growing to two-thirds DoCoMo subscibers by March 2007
5. KPN pulls plug on i-mode in Germany
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1. Mobile operators stagnate growth in Japan
News of DoCoMo's forecast of a 20% drop in net profit this financial year was accompanied by the often rolled-out furphys of mobile saturation and "intense" competition by many commentators to help explain the predicted drop in profitability.
- see next item
But the facts are that mobile density in Japan is 11th in the world, with plenty of headroom, and there is no substantial competition since the only real competitor is KDDI, until the takeover of Vodafone Japan by Softbank and the entry of new carriers such as eMobile. DoCoMo would have been unlikely to have included any affects from those events in their current profit downgrade - that will come later.
There has been in effect a duopoly - and the failure of Vodafone to compete is the reason that Vodafone Corporate gave up the fight and sold out to Softbank. But in the brave world of corporate DoCoMo any negative impact of Softbank's entry would not yet have been acknowledged and not have yet found its way into the released profit forecasts. Of course the introduction of number portability has been well factored in:
"There will be a greater movement of customers between operators this year," DoCoMo President Masao Nakamura told reporters.
(He expects subscriber cancellations to increase by 0.08 point - from 0.77 to 0.85% - after a 0.24 point improvement in fiscal 2005.)
But the main point is not that fierce multidimensional competition has and will lead to profit erosion as reported last year and forecast for this year. It is simply that effective and successful competition from a sole competitor - KDDI - has had an impact and also that both carriers have failed to expand market penetration and density - except for similar campaigns which won both some new elderly customers and some very young customers.
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2. DoCoMo anticipates 20% profit drop
DoCoMo reported that its group revenue dropped 1.6% in fiscal 2005 from the previous year to 4.77 trillion yen, falling for the second successive year due to a decline in the sales volume of mobile phones.
But group operating profit rose 6.2% to 832.64 billion yen partly because of a fall in operating costs.
In a consolidated earnings report based on U.S. accounting standards DoCoMo said its group net profit for the financial year to March 31 dropped 18.3% to 610.48 billion yen. Its pretax profit fell 26.1% to 952.30 billion yen. For the current business year to March 2007, the company anticipates group net profit will fall a further 20.1% and that pretax profit will decline 14.4%.
According to the Financial Times, the gloomy prediction for the coming year – though higher than the market had been expecting – highlights the industry's expectations of a much tougher future environment in the Japanese market.
The company acknowledged that operating income would decline partly because of higher investment aimed at strengthening its competitiveness. But it planned to create new revenue sources by broadening the range of services provided by partners, including a recently launched credit payment service.
DoCoMo currently holds 55.7% of the domestic cellphone market.
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3. O2 chose i-mode over WAP for service differentiation
Mobile Europe (24 Apr 2006) reported on How and Why O2 went for i-mode. It offers some interesting rationale, consistent with those offered by other i-mode partners, while in a sense missing the main points of the branding and marketing and sales process that is also different to "WAP" - a technology - versus i-mode a business ecosystem and user experience.
O2 had already been offering a mobile internet service for four years based on i-mode's open standards-based rival, the Wireless Access Protocol (WAP), so the decision to invest in a second network technology was clearly not taken lightly. There were several reasons why O2 opted to deploy another mobile internet offering from its WAP service (O2 Active).
"The decision to go with an i-mode service was primarily for the differentiation it could bring in the UK and Ireland, giving us the opportunity to offer high volumes of content with a different business model from WAP," says Steve Hayhow, Head of i-Mode Platform at O2.
Secondly, there is the fact that NTT DoCoMo's proprietary technology is based on the cHTML markup language, a subset of regular HTML that makes migration of a fixed-line website to i-Mode a shorter journey than to WAP, which uses Wireless Markup Language, or WML.
Not only does this mean a less costly process for content providers to establish an i-Mode site, but also enables a richer user experience than is possible within WAP.
"From the customers' perspective, i-mode represents the availability of more content, for a reasonable financial outlay," argues Hayhow, "and a faster experience, thanks to the way it holds menus and icons, with less clicks required to access the content they're looking for."
The article quotes the distinctive difference in the business model, as compared to WAP: the business model that accompanies the technology is fundamentally different from the one used by carriers with WAP-based services.
The barriers to entry for content providers are considerably lower, not only because of the cHTML factor already mentioned, but also because the operator only charges commission fees on transactions carried out on so-called official i-mode sites, i.e. those for which it carries out billing and settlement services. The commission fee is also considerably lower, between a half and two-thirds below that of the fees paid by site operators on WAP carriers' services.
It's worth a read to see the carrier's perspective on moving to i-mode.
4. 3G growing to two-thirds DoCoMo subscibers by March 2007
At a press conference announcing the last year financial results DoCoMo CEO Nakamura said that its FOMA 3G service will soon make up half of all the carrier's subscribers, and will account for two-thirds of its subscribers by this time next year.
DoCoMo started its 3G service in October 2001, although for the first 4 years the service was a failure mainly because of poor handsets. But after fixing the problems the service took off in 2005 and the end of March this year DoCoMo had 23.5 million 3G subscribers, representing 46% of all subscriptions. It expects this to rise to 35 million users, or 66% of subscribers, by March 2007.
DoCoMo plans to invest ¥905 billion (US$7.92 billion) in the coming year, mostly to expand and improve the 3G network. At present it operates about 30,000 base stations, and the figure is expected to jump to about 44,000 by this time next year.
In the middle of this year it will start to upgrade its 3G network to offer 3.5G higher-speed data services. The service will initially be available in the Tokyo area, and expanded to reach about 70% of the country by March 2007, Nakamura said.
5. KPN pulls plug on i-mode in Germany
The Mobile Europe article on O2 and i-mode (see above) contains a few hotspots, perhaps unintentional but worth quoting on their own:
Firstly it states that the first i-mode partner, KPN, is withdrawing i-mode from its German operations: "In the case of Germany, where O2 also has operations, another carrier — E-Plus — is already offering i-mode, but is phasing it out; consequently O2 has delayed its launch so as not to overlap".
Isn't this hot news and highlights DoCoMo's current growing challenge in its international strategy?
Secondly, a snippet, that "O2 also has the right to sub-license to MVNOs on its i-mode network".
Thirdly, although in the early stages of i-mode development "the unofficial sites will not be a significant factor in the overall ecosystem" O2 (via Steve Hayhow, Head of i-mode Platform) acknowledges that, "if unofficial site development takes off as it has in Japan, the traffic it generates should be a significant contributor to O2's overall revenue from i-mode".
Doesn't this hope fly in the face of the trend to flat-rate data pricing?
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