February 1, 2014 1:28 am JST

NTT Docomo outpaced by peers despite iPhone

MAI NEMOTO, Nikkei staff writer

TOKYO -- Japanese telecommunications giant NTT Docomo Inc.'s earnings growth fell far short of industry rivals, as the high cost of smartphone service discounts squeezed profit.

     Docomo said Friday group operating profit fell 2% on the year in the April-December period. Sales edged down to 3.36 trillion yen ($32.3 billion).

     Meanwhile, KDDI's operating profit grew more than 30% for the same period. SoftBank is expected to announce a large profit increase as well.

     Although Docomo's net increase in subscriptions led the industry in December, helped by the introduction of the iPhone to its lineup three months earlier, the cost of discounts on monthly smartphone service charges weighed on results.

     Smartphones accounted for 61% of all of Docomo's handset sales, up six points from a year earlier.

     Customer outflows to other carriers came to 1.01 million, worse than the year-prior period. Income from mobile communication services shrank 7% to 2.22 trillion yen, while content sales expanded.

     The firm was unable to gain as many new customers -- which provide high profit margins -- as planned. So average revenue per user came to 4,570 yen a month, falling by 320 yen.

     The introduction of the iPhone to Docomo's lineup added to discount costs. "The impact will grow further from next fiscal year," said Hirotaka Sato, managing director of accounts and finance.

     But some of the positive effects of adding Apple's iPhone are starting to emerge. Customer outflows under the number portability system decreased from 130,000 in September to 50,000 in December. "We are regaining competitiveness each month," President Kaoru Kato said.

     The firm kept its full-year forecast unchanged, calling for an 840 billion yen operating profit, slightly up on the year, on sales of 4.64 trillion yen, a 4% gain. The company would have to generate more than 150 billion yen in profit for the January-March period to achieve the target, more than its usual 130 billion yen in the quarter.