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Apr. 29, 2009

NTT DoCoMo's revenues have fallen sharply amid Japan's worst recession in many decades.

DoCoMo’s profits and wireless handset sales fell and it lowered its fiscal guidance for next year to below analysts’ previous forecasts.

The company’s 4th quarter net profit fell to 34.2 billion yen from 114.7 billion yen in 2008, as the company’s marketing efforts failed to lure in cash-strapped mobile customers.

Japan’s wireless and wireline phone market has become increasingly competitive and the country’s population is both aging and shrinking, presenting a difficult environment for businesses even without the country’s economic woes.

Mobile services dropped to 1.07 trillion yen in sales from 1.19 trillion yen in the fourth quarter on a 21.8 percent drop in mobile handset sales in the company’s 2009 fiscal year.

Nevertheless, NTT DoCoMo still managed to increase its subscriber base a mere 2.3 percent to 54.6 million subscribers in its 2009 fiscal year ended March 29. For the full year 2009, net profit fell 3.9 percent to 471.9 billion yen on a 5.6 percent decline in sales, which hit 4.4 trillion yen.

Ronald Gruia, principal information analyst with research firm Frost & Sullivan says “whenever NTT DoCoMo does a move like this they may be ahead of the curve. They’re always a little innovative in their approaches to things.”

“It’s more catered to the middle aged group, who are very hard working and don’t have time during the day to shop,” added Gruia.

“KDDI and Softbank have been very, very aggressive to get more mobile subscribers with lower fees. It’s better for DoCoMo to safeguard its customer base because the Japanese market is very mature and holding on to your base is extremely critical for your own survival,” said Gruia.

The fifty-two percent drop in minimum data charges aims to boost data usage as revenue from voice slips. But the cuts come at a price. NTT DoCoMo expects the move to trim operating profit by 40 billion yen over the course of this year, and ARPU (average revenue per user) is likely to fall to 5,280 yen from 5,710 yen for most of 2009.

The Japaneze wireless carrier holds half of the country’s mobile phone market, but rivals KDDI and Softbank Mobile have recently sought to unseat DoCoMo with lower, more competitive pricing.

In response to all of this, DoCoMo plans to cut minimum data charges on select plans to 490 yen beginning Friday.

DoCoMo said operating profit, or sales minus the cost of goods sold and administrative expenses, will remain a flat 830 billion yen in its 2009 fiscal year ending March 31, 2010.

Analysts polled by Bloomberg expected the figure to come in at 858 billion yen. Net income is expected to rise slightly, to 493 billion yet but sales are likely to slip 1.5 percent to 4.38 trillion.

NTT DoCoMo recently purchased a controlling stake in TV shopping company Oak Lawn Marketing in a 31 billion yen bid to expand its e-commerce segment and diversify revenue streams.

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Source: NTT DoCoMo.