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NTT Docomo braces for 20% profit hit from June fee cuts

Law change to put brakes on earnings growth at Japan's top mobile carrier

NTT Docomo is planning a series of steps to minimize the impact of the rate reductions.

TOKYO -- Japan's largest mobile carrier NTT Docomo anticipates a 20% decline in operating profit for the just-started business year, as rate reductions prompted by new legislation will cut into its margins, Nikkei learned on Friday.

Any decline in group operating profit would be the first in five years.

Docomo is expected to report a small increase in group operating profit to about 1 trillion yen ($8.9 billion) for the fiscal year that ended in March. But the carrier is due to reduce rates in June, likely hamstringing its performance this year.

Following a new law banning the bundling of discounted handsets with higher service fees, Docomo will introduce new fee schedules that will lower its rates by up to 40%.

The company expects the revised fees to reduce operating profit by 200 billion yen for the current business year, despite planned steps to minimize the impact. The countermeasures include promoting higher-priced plans that would allow users to download large volumes of data, and reducing discounts on handsets.

Docomo is also considering further cost-cutting efforts, including efficiency enhancements related to relay station operations and marketing. There is a possibility that these moves, if successful, could limit the profit fall to less than 200 billion yen.

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