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NTT DoCoMo making gains, anticipating pain in price war

NTT DoCoMo has clocked up early gains in Japan's mobile price war, but its bottom line is increasingly being held up by its digital businesses.

The company, now a fully owned unit of parent NTT Group, reported 6.3% higher full-year earnings of 629 billion yen (US$5.74 billion). Revenue was 1.6% higher at 4.73 trillion yen ($43.14 billion) while operating costs were flat.

Non-telecom services, and in particular the cards and transaction businesses, accounted for a third of revenue and a fifth of operating profit.

The Smart Life business, which includes the popular D Card and D Payment services, boosted operating profit by 8% and revenue by 13%.

But with the arrival of 5G and new competitor Rakuten, the core mobile business is engaged in an old-fashioned price war that threatens margins and growth.

Quarterly mobile revenue, which had fallen in the first half of the year, grew slightly in the last two quarters, although over the full year it was flat at 2.7 trillion yen ($24.6 billion).

The new Ahamo discount plans, launched in March, attracted more than 1 million new customers to the end of March, most of them aged under 30, CEO Motoyuki Ii told analysts on Thursday.

"It will be good if we can continue this momentum for 12 months, but it will have a negative impact on revenue. That is going to be painful for us," he said.

While he doubted that the trend would continue for the full year, the company has forecast mobile services revenue will contract another 2% this financial year.


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In the 5G race, DoCoMo had 3.1 million customers on March 31, with a target of 10 million in the coming year.

It will expand the number of 5G basestations from 7,100 to 20,000, with many of them replacing old 3G basestations.

Ii said DoCoMo would offer its first 5G standalone services this year. The network would be deployed only "where there is actual demand" for enterprise services such as network slicing.

DoCoMo's most promising 5G solution was a JV with machinery company Komatsu to provide smart construction services, he said. These would be sold globally through NTT Group sales channels as well as locally.

He said more projects were in the pipeline but it would take some time before they became viable.

"I think we need to accelerate these initiatives, but to be candid, compared with our competitors and other companies, we are not especially strong when it comes to acquisitions.

"We have very small scale investments – we don't have large scale partnerships."

CFO Takahashi Hiroi said the company is planning new financial services through its new alliance with MUFG Bank and was also exploring new initiatives in healthcare.

In its guidance, DoCoMo forecast a 1.4% increase in operating profit for the 2021-22 financial year, with Smart Life services expected to improve earnings by 9.3%.

It anticipates telecom group operating profit will fall 1.6%.

— Robert Clark, contributing editor, special to Light Reading

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