re: DoCoMo Corporate Focus (Challenges)
>> DoCoMo Targets Businesses Amid Slower Growth
July 23, 2001
Tokyo, Reuters
Japan's NTT DoCoMo Inc, which almost single-handedly put the Internet into the pockets of ordinary users with its wireless Web services, is now looking to repeat its success in the largely untapped business market.
"The image of DoCoMo right now is that it has a lot of retail customers," Ryoji Sugiyama, a manager in DoCoMo's multimedia division, told a recent mobile computing conference. "Right now we are working on developing a corporate customer base."
DoCoMo dominates Japan's sizzling mobile communications market with 58.6 percent of all 63.4 million cell phone users. Nearly all are registered individually rather than on business accounts.
Subscriber growth, which averaged 1.8 percent a month in 2000, is now decelerating. It was just one percent in June.
Critics say DoCoMo, unlike Britain's Vodafone Group Plc, has not adequately addressed the needs of businesses, which make up only 10 percent of its subscriber base but are often willing to pay more for premium services.
Seiji Sanda, president and chief executive of unlisted Japan Communications Inc (JCI), said DoCoMo was stuck in a mind-set that served it well in winning retail customers through savvy marketing but kept it from opening corporate doors.
"The (mobile) market in Japan is 90 percent consumer. Only five percent of Japanese corporations take responsibility for bills, while in Europe it is 60-70 percent in many cases," Sanda said.
"The (wireless) carriers' distribution is geared around pull. It's not focused on push -- companies don't come to buy wireless services so you have to go sell it to them."
Mari Matsunaga, one of the founders of the i-mode service that allows Web-browsing on credit card-sized screens, said DoCoMo specifically targeted ordinary users by playing down the phones' high-tech capabilities.
The point was to avoid "alienating customers unfamiliar with personal computers and Internet technology", she said.
The strategy paid off, with i-mode showing stunningly rapid growth. The service has captured 25.53 million subscribers in nearly 30 months since its launch and handed DoCoMo a record profit of 365.5 billion yen ($2.97 billion) in the business year that ended March.
A Corporate Side
NTT DoCoMo has quietly been building up its corporate sales operations, with some 150 sales staff and engineers now serving 1,000 large corporations in the Tokyo area, said Kate Lye, senior analyst at UBS Warburg.
"The next key for ARPU (average revenue per user) is corporate services," Lye said. "DoCoMo has a near-monopoly over all corporate users and our feeling is that this will be a key driver."
New revenue streams, especially from higher-margin corporate customers, could push EBITDA -- earnings before interest, taxation, depreciation and amortisation -- beyond the 12.5 percent growth over the next three years that UBS Warburg expects.
That suggests DoCoMo's share price is undervalued at 1.71 million yen, its close on Monday near a three-year low.
Senior management has indicated that business-driven revenue will begin to appear from the October-March half.
In DoCoMo's brand-new headquarters near Tokyo's Akasaka business district, a legion of consultants and contract staff have been hired to upgrade systems to serve corporate customers.
"DoCoMo is trying to figure out what they need while they're putting it in," said one systems engineer in the corporate sales department. "But everything is so complicated."
New Systems, New Partners
One of the hurdles DoCoMo's faces is at the basic level of its billing system, which is designed for the individual rather than corporate subscriber.
Because users cannot separate personal and private calls, many have grown used to tedious monthly expensing or even carrying two mobile phones.
JCI works with DoCoMo and corporate clients to serve as a billing intermediary to address this problem. It has created a system that marks calls and separately charges users for personal use and companies for business use.
While DoCoMo is gearing up to gain a new customer base, number two carrier KDDI Corp's "au" (ay-you) wireless unit and Japan Telecom Co Ltd's J-Phone mobile operator, whose main shareholder is Vodafone, look set to lag behind because they compete mainly in the niche market for younger users.
Companies themselves have been slow to adopt mobile phones and services, which can offer instant access to databases, pricing information, group schedules and contacts.
Handheld computer makers have targeted Japan's wireless market as an area of growth. Casio Computer Co Ltd tied up with DoCoMo this year to begin selling a PDA with a built-in wireless connection to companies.
And PDA makers such as Compaq Computer Corp and software firms such as Oracle Corp Japan are also targeting companies as buyers of wireless products and services.
The advent of third generation (3G) wireless services with faster transmission speeds, making quicker Net access and video downloads on mobile phones possible, is also expected to be a key driver of a new corporate sales.
And analysts say the cost of rolling out 3G cannot be justified without a larger share of corporate usage. DoCoMo, when it launched trial 3G services in May, made a point of including a printing firm and construction company in its opening ceremony.
"And corporate managers thought these were just toys," said Sanda. <<
- Eric - |
