DoCoMo - The Japanese Wireless Telecom Leader

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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
Price: Rs. 500;

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DoCoMo - Problems Aplenty

In early 2001, though DoCoMo still remained the largest company in Japan by its market capitalization and the second largest mobile phone company in the world (after Vodafone), it was facing problems on account of its aggressive overseas investment drive. With wireless stocks plummeting across the world during early 2001, DoCoMo was forced to write off $7.7 billion, due to the decline in the value of its investments in various foreign wireless companies.

Meanwhile, DoCoMo was facing problems in launching FOMA. The launch, originally scheduled in May 2001 had to be postponed by 5 months. The company also announced that it would launch a 'mini trial' service of FOMA in the introductory phase, by providing it to about 4,000 customers in Tokyo. FOMA allowed its users to exchange moving images and CD-quality sound files over the Internet.

Commenting on the decision to postpone the launch, Yuichiro Kuwahata (Kuwahata), the company's spokesman said "Our base stations and networks are ready for commercial launch. However, we did not have enough time to complete further testing to ensure 100% network quality for our customers."

He further explained "When we only had a small number of customers for our I-Mode service, we did not have any technical problems. But when the number of users skyrocketed and exceeded our expectation, we had to deal with a lot of technical problems. We do not want that to happen with our 3G services."

Company sources said that they wanted to take feedback from the customers to improve the service quality before going ahead with a full-fledged launch of the service. However, analysts felt that the reason behind postponement of the service was that DoCoMo was experiencing some technical problems with its 3G networks, and that it had bought time to rectify those mistakes. They remarked that the company was planning to strengthen its networks and work out the differences between the W-CDMA standard used by the company and the Universal Mobile Telecommunication Service (UMTS) standard used in the European countries to launch its 3G services globally.

However, analysts were quick to comment that such a delay in launch might prove disadvantageous because competitors like J-Phone Communications were also planning to launch 3G services by early 2002. If this happened, DoCoMo would have very little time to establish itself in the market and reap the first-mover advantage.

In early June 2001, media reports indicated that the initial enthusiasm over 3G services created by DoCoMo was slowly dying down across the world. Many wireless companies seemed to doubt the commercial viability of the service in the long run. As investors began losing interest in 3G services, stocks of companies foraying into 3G services fell drastically. In the words of Niq Lai, Director, Telecom Research Center, Hong Kong, "Investors have now practically written off 3G."

DoCoMo's share price declined during this period. Analysts said that customers might not be interested in buying costly 3G enabled handsets, just to have faster service and view pictures and video. They felt that mobile phones might not be suitable as multimedia devices as they had small screens and weak batteries. Hideo Okinaka, Manager, KDDI (a DoCoMo rival), opined," People would not like to stare at video on a tiny screen for a long time."

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