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J-Phone's Limited Appeal

Light Reading
LR Mobile News Analysis
Light Reading
12/31/2002

NTT DoCoMo Inc. (NYSE: DCM) hardly has a roaring success on its hands with its WCDMA service in Japan, but it won't be quaking in its boots over the competitive threat from rival J-Phone Co. Ltd., part of Vodafone Group plc (NYSE: VOD). J-Phone launched its 3G service on December 20, but it had only 150 handsets available on day one, with just 31 of its 1,929 retail outlets carrying the precious devices (see J-Phone Heads for 3G). That's one way of being able to manage early demand, I suppose. The carrier was expecting a slow start, so it's not worried about limited device availability for now, though more handsets are trickling out into the shops. At present, those wanting the special dualmode phones can only get an NEC Corp. (Nasdaq: NIPNY) product, while Nokia Corp. (NYSE: NOK) and Sanyo Electric Co. Ltd. (Nasdaq: SANYY) are due to deliver early in 2003. J-Phone is aiming for a very particular market. The devices are dualmode WCDMA/GSM, but there are no GSM networks in Japan. J-Phone's 2G infrastructure is a PDC (Personal Digital Cellular) network. J-Phone is counting on Japanese business customers who travel abroad to countries with GSM networks signing up to have whizzy 3G service at home and then be able to use the same handset to roam overseas. At present, roaming is available to 50 countries, a figure that is set to rise to more than 60 by the end of January. J-Phone says this figure would represent 98 percent of all destinations visited by Japanese travelers. At the moment, subscribers will still need a second phone for connectivity in Japan outside J-Phone's 3G network coverage. Its WCDMA network currently covers 71 percent of the Japanese population, though the operator plans to offer 98 percent coverage by the end of March 2003. This offer clearly has limited appeal, and may only attract those subscribers who travel to Europe a lot. For those Japanese business users who spend most of their time overseas in the U.S., China, Australia, and Korea – prime CDMA territories – KDDI Corp. seems a more viable option. It operates a national 800MHz CDMA network and offers higher-speed data services through its CDMA2000 1xRTT network. One handset can connect to both 2G and 2.5G networks, and then be used in other CDMA territories. All the major CDMA-oriented countries have at least one operator with an 800MHz network. So we await J-Phone's first 3G subscriber numbers, which could be revealed when the parent group announces its full-year financial results (to March 2003) in May. It will be praying for good initial uptake, as it plans to have 1 million 3G customers by March 2004. Given that DoCoMo does not quite have 150,000 subscribers on its WCDMA network, which was launched in October 2001, that target could come back to bite J-Phone in the backside. — Ray Le Maistre, European Editor, Unstrung

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