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Docomo to cut mobile fees by separating handset costs

KDDI and SoftBank likely to follow move by Japan's top wireless carrier

Docomo's revenue per user has declined steadily since mobile data service became available (Photo by Akira Kodaka).

TOKYO -- NTT Docomo intends to lower mobile charges as early as next fiscal year by offering more plans in which fees are not tacked onto monthly bills to offset sharp discounts on handset purchases.

The move is likely to spur price cuts by rivals KDDI and SoftBank Group, as the trio braces for looming competition from fourth big player Rakuten.

Many Docomo subscribers pay service charges of 4,000 yen to 10,000 yen ($35 to $88) a month under existing plans. Some pay as little as 2,000 yen or so, by combining various discount programs. Many users are confused about eligibility requirements for such programs, often because discounts on handsets are linked to service charges.

Japan's largest wireless carrier thus decided to consider simplifying service plans by separating handset payments and service charges. It has offered similar plans for users of select handsets bought from Docomo since June of last year. The broader program may lead to widespread use of secondhand smartphones, the market for which has been virtually non-existent in Japan.

Docomo will reveal more details of the new plans in its medium-term business plan to be announced on Wednesday.

The average revenue per user for Docomo's mobile services has been declining, and the makeup has shifted significantly. The revenue was 8,740 yen per month in fiscal 1999, the year after Docomo launched mobile internet service. The bulk of the revenue came from phone calls. Data revenue gradually increased in proportion and surpassed call revenue in fiscal 2010. Now data charges account for roughly 70% of the revenue.

The ARPU in fiscal 2017 was 4,710 yen, and is expected to decline further as Docomo rolls out the new plans. Data transmission volume is expected to rise when fifth-generation service becomes available. But lower unit prices for data service are expected to curb growth in related revenues.

The mobile service industry faces strong pressure from the government to lower charges. Chief Cabinet Secretary Yoshihide Suga said in August that mobile charges could be slashed by around 40% from current levels. And virtual mall operator Rakuten is moving to enter the market as a fourth big carrier in Japan, so competition will only intensify.

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