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Business trends

Low-cost mobile carriers eating into KDDI profit

Japan's wireless giants struggle to stem customer exodus

KDDI President Takashi Tanaka, left, at a July 10 event in Tokyo announcing lower rates for the au wireless service.

TOKYO -- KDDI and NTT Docomo are feeling the effects of intense competition from budget wireless carriers, with the impact showing up in their results for the April-June quarter.

KDDI is seen posting an operating profit that is little changed from the 275.1 billion yen ($2.46 billion) booked a year earlier. 

Sales are estimated to have edged up to 1.13 trillion yen, helped by the January acquisition of internet service provider Biglobe, as well as an increase in mobile subscribers.

The uptick in subscriptions, however, came in the low-cost mobile virtual network operator (MVNO) business, including UQ Mobile.

"With customer outflows to MVNOs gaining momentum, we are struggling to retain customers," President Takashi Tanaka said recently, implying that the premium au brand suffered a fall in subscriptions.

The company expects au subscriptions to slide 1% to 24.77 million in the year to March 2018. MVNO subscriptions are expected to double to 1.78 million.

Across the industry, the number of MVNO subscriptions in Japan shot up 25% to 15.86 million in the year ended in March, according to the Ministry of Internal Affairs and Communications.

To hold onto subscribers, KDDI granted reward points to long-term customers in the April-June quarter, and improved online shopping services. The company also stepped up advertising for UQ Mobile to prevent customers from switching to competitors.

KDDI this month rolled out discounts of up to 30% for its core service plans, a step that will reduce annual sales by 20 billion yen.

The company had already factored the discounts into its full-year forecast so it is expected to keep its fiscal 2017 projection unchanged when releasing April-June results Tuesday. Operating profit for the year is expected to rise 4% to 950 billion yen.

Docomo profit declines

Meanwhile, Docomo on Thursday reported a 7% operating profit drop to 278.2 billion yen for the April-June quarter and an 8% decline in net profit to 189.9 billion yen.

NTT Docomo President Kazuhiro Yoshizawa announced 1Q results Thursday.

The company in May rolled out a 980 yen unlimited talk option for family members, and another package that lets a family share 30 gigabytes of data. And in June, the company introduced a 1,500 yen monthly discount for long-term customers. These measures squeezed quarterly profit by about 10 billion yen.

A change last fiscal year in the method used for fixed-asset depreciation also contributed to the profit declines. President Kazuhiro Yoshizawa said April-September profit is also expected to shrink on the year.

But for the full year through March, Docomo kept its projection of a 2% increase in operating profit to 960 billion yen. Net profit is projected to reach 655 billion yen, slightly higher than last fiscal year. Cost reduction efforts will bear fruit in the second half and the company is confident of achieving the annual forecast, Yoshizawa said.

(Nikkei)

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