Qualcomm Inc (QCOM)

[Mindy]

Reuters
UPDATE - Japan's KDDI posts record earnings, strong outlook
Wednesday April 28, 6:07 am ET
By Yukari Iwatani Kane

http://biz.yahoo.com/rc/040428/telecoms_japan_kddi_3.html

(Adds more details, company and analysts comments, byline)
TOKYO, April 28 (Reuters) - KDDI Corp (Tokyo:9433.T - News), Japan's second-largest telecoms operator, doubled its net profit to a record high last year and forecast further growth on the back of strong demand for its mobile phones and high-speed 3G service.

"I think we've achieved a good balance between handset selection, pricing and contents in our mobile consumer business," KDDI President Tadashi Onodera told a news conference on Wednesday.

"Going forward, we hope to strengthen our corporate mobile business as well as our landline broadband business." KDDI said it expected to earn a consolidated net profit of 190 billion yen ($1.74 billion) on revenue of 2.98 trillion yen for the current business year ending in March 2005. That was higher than analysts' average forecast of 176.0 billion yen on revenue of 2.95 trillion yen, according to Reuters Research.

Onodera said he expected its main mobile business, "au", to continue to be competitive as it pushes its ultra high-speed wireless service, "WIN", which it introduced last November.

He said WIN customers on average spent twice as much on data as the rest of its customers because the majority of them subscribed to its 4,200 yen a month fixed rate plan.

KDDI: THE STAR IN TELECOMS

"There's a possiblity that investors will chase KDDI after its bullish outlook," said Hiroshi Fujimoto, a fund manager at Okasan Capital Management Co Ltd. "KDDI is a domestic stock, so investors who are avoiding tech stocks due to the volatility in the currency market and on Wall Street might prefer them."

KDDI is considered a star performer in a sector characterised by fierce competition for mobile services, heavy costs to promote third-generation phone networks and a looming price war in data services.

Its shares have risen about 87 percent since April 2003, outperforming the Tokyo stock market's communications sub-index (^ICOMS.T - News), which has risen about 38 percent.

NTT DoCoMo Inc (Tokyo:9437.T - News), Japan's dominant wireless operator, is expected to report on May 7 that it almost tripled its earnings after heavy overseas losses a year earlier, but its operating profit is expected to increase by just three percent.

Some analysts expect DoCoMo to forecast its first-ever decline in operating profit in the current business year, as the cost of phone subsidies for its 3G service weighs on results.

Vodafone Holdings KK (Tokyo:9434.T - News), the number-three operator, owned by Britain's Vodafone Group Plc (London:VOD.L - News), releases its full-year report on May 25.

KDDI's consolidated net profit for the year to March 31 rose to a record 117.02 billion yen, in line with its forecast, from 57.4 billion yen a year ago.

Its revenue rose just 2.2 percent to 2.85 trillion yen, hurt by a sales decline in all of its units other than "au". Its operating profit doubled to 292.1 billion yen.

Au's net profit jumped more than fivefold to 130 billion yen, but its strong performance was offset by a 28.8 billion yen loss in its broadband unit, whose voice revenue is declining as customers make more calls on mobile and Internet phones.

The broadband unit was also hurt by a 78 billion yen one-time loss to write off its microwave equipment assets.

Au's exceptionally strong growth has been driven by its aggressive discounts, attractive phones and innovative services such as ring tones with vocal music.

Au was the first operator to introduce a fixed rate plan for data for its WIN service last November, forcing DoCoMo to start a similar plan from June. Au on Tuesday dropped its rates for data on its previous-generation 3G service, CDMA 2000 1X, to which the bulk of its customers subscribe.

Au finished the year with nearly 17 million mobile customers, higher than the 16.8 million it expected and 20 percent more than a year ago. It forecast a rise to 19.15 million by March 2005.

Nearly 80 percent, or 13.2 million, of its subscribers were on its 3G services, far more than the three million for rival DoCoMo's service.

"We'll continue to be very competitive with DoCoMo's 3G 'FOMA' service with a good selection of phones, attractive services and appropriate pricing," said Onodera. "I don't see our customers moving to FOMA just yet, and we're likely to gain some DoCoMo customers who are thinking about upgrading to 3G."

Shares in KDDI closed down 0.46 percent at 651,000 yen ahead of the results.