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DoCoMo eyes new device strategies after strong quarter
Published: 3 February, 2010
Tags >> Financial | Japan | NTT DoCoMo | Softbank Mobile | iPhone | LTE
The leading Japanese HSPA operators, DoCoMo and Softbank Mobile, reported strong quarters and looked forward to early '4G' moves, where they need to catch up with the mobile broadband headstart of CDMA rival KDDI, with its stake in WiMAX-based UQ Communications. DoCoMo will deploy LTE from this year and promises to show a prototype handset at this month's Mobile World Congress, while Softbank is expected to take a major stake in a restructured Willcom, holder of a 2.5GHz license suited to WiMAX or LTE.
For its third fiscal quarter ended December, market leader DoCoMo saw net profit rising 48% year-on-year to ¥135bn ($1.5bn), despite a 1.3% drop in revenues to ¥1.097 trillion. Operating profit was up 28% to ¥217.4bn. The profit leap was achieved by a shift to higher value services like mobile payments, and the earlier than expected ending of 2G device sales, in November 2008. This aggressive move of the customer base towards 3G is in line with DoCoMo's position as early adopter of each new generation of technology. It also accelerates the conversion of its base to 3G-only, amortizing its 2G business and reducing cost.
But revenues were under pressure from falling voice prices and reduced handset sales during the downturn. For the full fiscal year ending in March, the company still expects a group net profit of ¥493bn on revenue of ¥4.276 trillion.
DoCoMo plans its first commercial LTE services at the end of this year. In contrast to the 3G stage, when it was so far ahead of other cellcos that it used a pre-standard technology, FOMA, it will lag behind a few other early adopters like TeliaSonera. However, it expects to be the first carrier to make smartphones available rather than just datacards and netbooks. Japanese mobile internet usage is far more geared to phones rather than PCs than elsewhere, so until handsets are available, DoCoMo's urgency to go live with LTE is muted.
Although chip vendor Qualcomm believes the commercial LTE handset silicon roadmap will not support phone launches until the turn of 2012, DoCoMo plans to show at least a prototype smartphone at MWC, from NEC. The cellco is working only with local suppliers at this stage in its LTE device program, namely NEC, Fujitsu and Panasonic.
The demonstration in Barcelona will use a prototype LTE chip developed by the four companies, said NEC. This silicon was first demonstrated in October in concept data cards.
In another device innovation, designed to protect its market lead from disruptive players like eMobile, DoCoMo is reported to be planning to be the first Japanese major to sell SIM cards unbundled from handsets. This would be a significant break with tradition in the country, where carriers expect absolute control of their phone specifications. Dow Jones reports that DoCoMo would experiment with SIM-only - a huge growth area for some operators in competitive markets, such as O2 UK - initially outside the handset mainstream, possibly with the new Apple iPad. A SIM card for the iPad would be about half the size of a typical SIM card for cellphones in Japan making it incompatible with phone SIMs.
However, Google is seeking to disrupt the Japanese status quo, perhaps its toughest challenge, by introducing Nexus One soon, with an open SIM approach. This is making DoCoMo consider a limited move to selling SIM-only deals, according to local reports.
