I post this because DDI is PHCM's lead customer in Japan.
Regards, Mark
Thu, 26 Aug 1999, 9:12pm EDT
DDI to Merge Nine PHS Mobile Phone Units, Write off 76 Bln Yen in Debts
By Junko Fujita
DDI to Merge PHS Units, Write Off 76 Bln Yen in Debt (Update3)
(Adds company's comment in 4th paragraph, revised earnings
forecasts in 5th paragraph.)
Tokyo, Aug. 26 (Bloomberg) -- DDI Corp., Japan's third-
largest telecommunications company, said it will combine its nine
personal handy-phone system units in a move to save as much as 10
billion yen ($90 million) a year.
DDI Tokyo Pocket Telephone Inc., the new unit, will issue
shares worth 29.7 billion yen to DDI. The parent company, in
turn, will write off 76 billion yen it lent six of the nine PHS
units.
The move comes as DDI, which serves 60 percent of Japan's
PHS users, is again repositioning its PHS service to take
advantage of its data transmission capabilities while the number
of PHS phone users is stagnating. The company also is trying to
present PHS as an alternative to fixed-line service for access to
the Internet.
''The market has changed drastically and technology has
advanced at such a speed that we need to merge the companies into
one,'' said Haruo Taneno, executive vice president at DDI.
The company lowered its earnings forecast for the year
ending March to reflect the write off of loans. DDI said it
expects a net loss of 24 billion yen from a net profit of 20.5
billion yen earlier forecast. The company raised its group net
profit forecast for the year through March to 31.5 billion yen
from 3 billion yen. The much larger group profit forecast is a
result of an accounting change.
Under new accounting rules, companies can set aside as
assets an amount of money equivalent to their tax breaks. The
money is considered as cash reserves. Loss-making companies will
benefit from the system because it can use these reserves to help
offset the losses.
DDI's nine PHS units, which now cover all of Japan, have
lost 143.6 billion yen since they started business in 1995. The
losses will be reduced to 60 billion yen after the merger in part
because the 76 billion yen in written off loans will appear as
profit. DDI wants to eliminate the losses within five years.
''DDI wants to merge them to consolidate management and
encourage quick decision making,'' said Hironori Tanaka, an
analyst at Morgan Stanley Japan Ltd. ''It's necessary because DDI
needs to streamline its PHS business.''
The company introduced cheaper monthly charges in April 1998
to retain users and to appeal to more potential users. The
company has also tried to attract new customers by emphasizing
PHS' larger capacity to transmit data and better sound quality.
PHS is superior to cellular phone service in both sound and
data transmission because the base stations transmitting the
radio signal are closer together, making the quantity of radio
waves is greater. More PHS base stations are needed, though,
because each is smaller and less powerful than cellular base
stations. PHS service also limits the users' ability to speak or
transmit data while moving.
Personal handy-phone system was introduced in Japan in 1995
and marketed as a cheaper alternative to cellular phones.
Competition forced cellular phone operators to cut prices on
phone calls, resulting in a narrowing of the price gap between
PHS and cellular phone services. PHS customers started switching
to cellular phones because of the more consistent service and the
lower prices.
The number of PHS users in Japan stood at 5.71 million at
the end of July, compared with 44.80 million cellular phone
users, according to government figures. DDI had 3.4 million users
in July, down from 3.45 million users in the previous month. The
company also has 5.76 million cellular phone users and offers
long distance and international phone services.
NTT Mobile Communications Network Inc., Japan's dominant
cellular phone, and Tokyo Telecommunication Network Co. also
offer PHS service.
DDI shares closed at 728,000 yen, up 22,000.
quote.bloomberg.com |
