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Corporate Focus: DoCoMo Feels Heat of Rival
Monday, May 17, 2004 02:27 AM ET Printer-friendly version

Tokyo -- MASAO NAKAMURA, who Friday was named president and chief executive of Japan's largest cellphone provider, has his work cut out for him.

NTT DoCoMo Inc. (DCM, news), struggling to maintain its chunk of Japan's fiercely competitive cellphone market, announced May 10 that it expects its first drop in annual revenue and a 25% drop in operating profit this fiscal year.

DoCoMo's shares fell 13% after the gloomy forecasts, and analysts are downgrading their outlook for the company. Meanwhile, things are looking better for DoCoMo's main rival, KDDI Corp., whose popular "au" mobile-phone service is beating DoCoMo in the number of new subscribers gained a month.

That is a big change for DoCoMo. Since launching its popular i-mode Web- browsing service a few years ago, the company has been viewed as a successful world leader in cellphone technology. Now, the unit of Nippon Telegraph & Telephone Corp., faces ballooning costs as it tries to persuade users to switch to its third-generation high-speed service while competition for new products is heating up.

"I want to make sure we have a recovery as soon as possible," the 59-year-old Mr. Nakamura said, adding that he is aiming to develop new services and revenue sources and to push the number of subscribers to DoCoMo's 3G service to more than 10 million by March 2005. Subscriptions reached 3.1 million at the end of March of this year.

Mr. Nakamura, now senior executive vice president in charge of marketing, will start his new job after a shareholders' meeting next month, succeeding Keiji Tachikawa, who is retiring from the post but will stay on as an adviser.

Analysts said it won't be easy for Mr. Nakamura. For a start, the company is lagging behind KDDI in churning out glitch-free new products.

KDDI rolled out its own version of 3G service much more smoothly than DoCoMo. The high-speed service allows users to do things that had been impossible with cellphones, such as participate in teleconferences and watch videoclips.

KDDI also launched handsets with unusual shapes and bombarded the airwaves with hip, youthful ads, scoring more new subscribers than DoCoMo for the seventh consecutive month in April.

"They've definitely over the past year and a half had products on offer that DoCoMo has had a hard time countering," said Kirk Boodry, an analyst with Dresdner Kleinwort Wasserstein.

KDDI's mobile-phone division reported 12% growth in revenue for the fiscal year ended March 31. Its operating profit more than tripled, and the company forecast robust growth this fiscal year.

Friday, DoCoMo closed at 196,000 yen ( $1,716), up 1.6%. The company also said it would spend as much as 600 billion yen to repurchase as many as 2.5 million of its shares. KDDI was at 596,000 yen Friday, up 0.5% from the previous day.

Mr. Nakamura, whose experience ranges from finance to labor management, said he expects to boost revenue by expanding into areas that don't rely solely on revenue from voice and data traffic, such as mobile commerce. He also said the company will focus more on increasing the number of corporate cellphone customers. Analysts said the move is crucial for DoCoMo, since it has clout among corporate clients and likely will be able to persuade them to adopt new mobile technology.

DoCoMo also is striving to rekindle its glitzy image. At a Tokyo business show focusing on digital technology last week, the company set up an enormous, flashy display highlighting its latest technology and handsets. This included phones aimed at niche markets, like the new Premini, a sleek, simple handset about the size of a business card and aimed at fashion-conscious men.

The company soon will test a system that allows people to use cellphones to turn electrical appliances on and off when the people are away from home.

Another phone in tests has a chip that allows the phone to function as an electronic wallet or key.




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