TOKYO -- Japan's big three mobile carriers have become the country's most profitable public companies, a position that is likely to intensify demands on them to lower the rates they charge consumers.
SoftBank Corp., NTT Docomo and KDDI have reported more than 1.74 trillion yen ($16.6 billion) in combined operating profit for the first fiscal half ended September, up 6% from a year earlier.
The carriers are expected to emerge as the top three operating income earners among listed companies for the period.
Softbank, the top earner among all listed corporations that have reported so far, said Wednesday that its first half consolidated operating profit climbed 7% to 589.6 billion yen. The company, along with affiliate Yahoo Japan, flourished amid the rise in telecommuting and online retailing. Net profit, however, dipped 4%, due in part to losses at other units.
The operating margins at the three wireless companies were between 23% and 25%, much higher than the 5% average at listed companies that have already reported results, reflecting their collective 90% share of the domestic market and pricing strategies that have largely converged.
The numbers are roughly on par with carriers in the U.S., where an oligopoly has also formed. Verizon generated a 23% margin while AT&T turned in 17%, according to the most recent data from QUICK-FactSet.
But it is a different story in Europe, where major players compete with operators offering more affordable plans. Great Britain's Vodafone, Germany's Deutsche Telekom and France's Orange report margins between 11% and 12%.
In Japan, the three biggest carriers have displayed the ability to rake in cash. Their equipment operations, which spend extensively in base stations and other capital expenditures, have generated cash flow in recent years due to the lull in 4G investment.
The free cash flow at the three companies alone account for 10% of the five-year total at roughly 3,400 listed companies, a group that excludes financials.
KDDI and SoftBank have introduced new subscription plans that align with Prime Minister Yoshihide Suga's agenda to lower mobile fees. Sub-brands at the two companies will roll out low-cost plans with large data volumes.
Yet when choosing plans with high data volumes, consumers focus on those with high-speed 5G services, so customers mostly sign contracts with mainstay brands. Many market analysts believe that the new plans will have only a limited impact on earnings.
"I don't think [the new fee plans] will decrease earnings," said SoftBank Corp. President Ken Miyauchi.
Mobile phones have become an integral part of the quality-of-life of people. Although the carriers have actively returned earnings back to investors, pressure could mount to prioritize customers and lower prices. This would push the carriers to develop fresh earnings models that balance discounts with investments in 5G.