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Docomo will slash mobile rates by up to 40%

Market leader shakes up the field ahead of Rakuten's arrival

NTT Docomo is lowering service charges in response to calls by the government as well as its customers.   © Reuters

TOKYO -- Japan's top wireless carrier, NTT Docomo, will lower its service charge by 20% to 40% while giving subscribers more freedom on phones, including letting them bring unlocked and secondhand devices to its network.

The new pricing scheme will take effect sometime in the April-June quarter, the company said Wednesday.

Japan's mobile carriers face mounting pressure from the government to lower rates, which are significantly higher than in other advanced economies. Chief Cabinet Secretary Yoshihide Suga said in August that mobile rates in Japan could be lowered by as much as 40%.

With e-commerce giant Rakuten set to enter the mobile service market as Japan's fourth major player next fall, Docomo CEO Kazuhiro Yoshizawa told reporters: "We will boost our competitiveness ahead of the change in the market landscape."

Docomo generally bundles service fees with discounted device payments. Many consumers have complained that the details of these schemes are hard to understand, so the company has decided to offer new mobile plans with low service fees but without any discounts on the devices themselves. It is considering completely separating the two charges in the future.

While Docomo already does offer similar plans, they are currently limited to a handful of models. The new plans are expected to give customers more freedom to choose the handsets they want, including used devices bought from third parties.

"The price cuts will more than offset the [loss of] phone discounts," Yoshizawa said. The new pricing scheme, details of which will be announced as early as April, is expected to save customers on the whole as much as 400 billion yen ($3.54 billion) a year.

"We will fully shift gears to new businesses" like fifth-generation service, he also said. The company is working on new offerings with eyes on its 67 million reward point members.

But lower service fees are expected to take a toll on Docomo's earnings starting next fiscal year. Docomo anticipates it taking five years for operating profit to recover to fiscal 2018 levels.

Also on Wednesday, Docomo announced that it will buy back up to 600 billion yen of its shares in an effort to shield its stock price from the anticipated earnings hit.

With Japan's mobile service market undergoing profound change, the price cuts by the top player likely will prompt similar moves by rivals KDDI and SoftBank Group.

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