DoCoMo - The Japanese Wireless Telecom Leader

Details

Themes: Differentiation
Period : 1992 - 2003
Organization : NTT DoCoMo (DoCoMo) Inc
Pub Date : 2003
Countries : Japan
Industry : Telecommunication

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Case Code : BSTR049
Case Length : 17 Pages
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Business as Usual? Contd...

Meanwhile, DoCoMo's 3G initiative also began showing signs of revival. This was on account of the company's efforts to reduce the weight of its handsets and increase their battery life, combined with aggressive advertising which positioned 3G services as an 'affordable' service. The company also increased the coverage of the service during 2002, and by April 2003, covered 90% of Japan's population. On account of these initiatives, by April 2003, FOMA subscribers increased to 330,000, with 140,000 subscribers signing up in March 2003 alone (though DoCoMo sources was reported to have expected FOMA subscribers to reach 1.5 million by March 2004).

By April 2003, DoCoMo's subscriber base amounted to over 41 million (Refer Exhibit VI for growth in DoCoMo's subscriber base). However, most of this was still due to the I-Mode users who had subscribed to the company's services during the peak of its popularity (during 1999-2002). As the service seemed to be gradually losing its luster, DoCoMo had reportedly decided to focus back on it and improve its content base.

However, DoCoMo was still not free of problems. In April 2003, the Japanese Government passed a new law, The Local Taxes Amendment Law, which removed a loophole in the accounting rules. This rule had till then enabled Japanese companies to inflate their balance sheets by including items such as deferred tax assets. After taking into account the changes in the accounting rules, DoCoMo announced that it might result in a drop in its profits for fiscal 2002-03 as well. Thus, despite its turnaround on the anvil, investors remained unconvinced. Though the company's share price increased to $2000 in April 2003 (from $ 1700 in March 2003), the fact remained that the share price had fallen by a third during the previous year.

DoCoMo's investment partners such as KPN Mobile and Hutchison were in deep financial crisis during this period and had requested DoCoMo to infuse fresh capital. However, because of its shareholders' averseness towards its global investments, DoCoMo had to refuse the request. This crisis at DoCoMo's partner companies gave analysts room to doubt the company's chances to earn adequate returns on its investments.

Apart from the above issue, competition in the Japanese mobile telephony segment showed no signs of waning even by mid-2003. Customers were again finding little differentiation in the kind of services provided by the players. While competitors KDDI and J-Phone were increasing their market shares rapidly, DoCoMo's future prospects were being seen as rather shaky. The loss-making overseas investments, investor mistrust and a market nearing saturation were projected to be major hurdles in the company sustaining its growth and leadership.

Exhibits

Exhibit I: DoCoMo - Financial Statements (2000-2002)
Exhibit II: About Wireless Telephony 'Generations'
Exhibit III: DoCoMo - Partner Network
Exhibit IV: Strengths of DoCoMo's Business Model
Exhibit V: DoCoMo - Stock Price Movements (2000-2003)
Exhibit VI: DoCoMo Subscriber Growth