Qualcomm Inc (QCOM)

[khemara_qc]

DoCoMo shares drop to a five-year low


May 11, 2004

Reuters

Shares in NTT DoCoMo fell to a five-year low and dragged down Japan's whole telecoms sector after it forecast a bigger-than-expected decline in operating profit in the current business year.

DoCoMo's stock closed down 13.43%, or 29,000 yen, at 187,000 yen on the Tokyo Stock Exchange, the lowest level since it introduced i-mode, its revolutionary always-on Internet service.

Late last week the company posted a slightly higher full-year operating profit for the year that ended on March 31 but it surprised analysts by forecasting its first-ever drop in full-year revenue and a 25% decline in operating profit for the current business year.

"The negative news from DoCoMo is sparking a sell-off in the entire telecoms sector," said Fujio Ando, senior managing director at Chibagin Asset Management Co Ltd, before the close.

DoCoMo had attributed its bleak profit forecast to increases in family discounts, price cuts for data services, the introduction of a fixed-rate data plan for its 3G service and higher phone subsidies.

"Investors are concerned because DoCoMo seems to be willing to sacrifice profit to keep its market share without a clear view of what will follow," said Kazuyo Katsuma, an analyst for J.P. Morgan."

Still, many analysts said they believed DoCoMo was being a little too conservative with its operating profit target as well as its anticipated average monthly revenue per user, which was almost 8% lower than the previous year.

"I think what the company has decided to do is to get all the bad news out there at once," said Bruce Kirk, telecoms analyst with KBC Securities.

"They've set the bar very low this year and they've set it to a level that they're extremely confident about. I think they're going to overachieve in their numbers."

Goldman Sachs said in its research report that investors were unlikely to regain confidence in DoCoMo until the company took back market share in new subscribers, as it is expected to do in the latter half of the business year.

COPYRIGHT: © Reuters 2004

http://www.telecomasia.net/telecomasia/article/articleDetail.jsp?id=95027