KDDI "AU" and WIN v. DoCoMo FOMA
... looks like NTT DoCoMo has picked a successor (Shiro Tsuda) to president Keiji Tachikawa.
>> KDDI Flashes Lights to Pass DoCoMo
Eric Lin
TheFeature
April 12, 2004
thefeature.com
DoCoMo still owns over 50% of the wireless market in Japan. They may have the most subscribers, but KDDI took the title for most new subs in financial year 2003.
Japanese subscriber data for March has just been released. The news is good for DoCoMo, who added 412,800 subscribers. This is a dramatic increase in new users compared to the paltry gains made in the last few months, doing especially well in FOMA subscriptions which have grown by one million in last two months alone. Despite DoCoMo's healthy recovery, they were still edged out by KDDI who added 475,700 subs last month.
This month KDDI was only 15% ahead of DoCoMo, but combined with the rather healthy gains they made over the last few months, KDDI actually beat out DoCoMo for most new subscribers in FY 2003. "Japan Today" ¹ translates the results: DoCoMo added 2,065,700, while KDDI add almost a million more users growing by 2,909,700.
"Business Week" ² must have written their report before this month's results were in, because they only added up the past 11 months instead of the past year. However they have some thoughtful analysis on the KDDI vs. DoCoMo situation. They cover our usual pro-KDDI points (sexy handsets, affordable flat-rate data), but also point out that although KDDI's 1xRTT "AU" is doing very well, their 1xEV-DO "WIN" platform is starving with less than half a million subscribers.
When looking at the current match up, as well as how each company is approaching the future, Business Week digs up an amusing quote from current DoCoMo chief Keiji Tachikawa. He admits, KDDI is ahead, but only "if you call their technology 3G." Since AU is based on 1xRTT, it isn't technically 3G, but the perceived speed difference between 1xRTT and i-Mode, as well as its similarity to FOMA make it feel like 3G to users. For a company like DoCoMo who invest huge amounts of money into managing and maximizing user experience, this is rather a weak argument. We bet Tachikawa knows better. Now that the 900i FOMA handsets are doing rather well, it would have been refreshing to hear him admit it was the weak appeal of FOMA handsets and prices. <<
¹ japantoday.com
² See Below: (reflects 11 months figures according to Eric Lin above)
>> DoCoMo vs. A Mouse That's Roaring
Bruce Einhorn in Tokyo
Asian Business
BusinessWeek Online
April 19, 2004
businessweek.com
As KDDI grabs subscribers with sleek handsets and low rates, the leader is starting to stagger
NTT DoCoMo Inc. (DMC ) isn't accustomed to sitting in second place. The company has long dominated the Japanese cellular market, and today boasts 56% market share, twice that of its rival, KDDI Corp. And while other carriers were struggling to offer any kind of wireless data services, DoCoMo five years ago rolled out i-mode, an always-on connection to the Internet that was an instant hit, allowing users to e-mail, shop, and bank online all through the medium of their handset.
So imagine the discomfort that DoCoMo's executives are feeling in the wake of news that for the 11 months ending in February, KDDI signed up 2.4 million new subscribers, vs. DoCoMo's 1.6 million. "For three years, we struggled to get a good market perception," says Hideo Okinaka, a vice-president and general manager for KDDI. "This is the first time ever that DoCoMo failed."
Even more embarrassing, KDDI's success has come in the sort of advanced data services that are supposed to be DoCoMo's specialty. In 2001, DoCoMo launched the world's first third-generation cellular service with great fanfare. And 3G, you remember, was supposed to usher in superfast transmission of voice, data, and video, creating a high-speed wireless Net that would make the earlier cellular age look Jurassic. Customers, though, avoided DoCoMo's 3G offering because of high prices for the service, clunky, expensive handsets, and spotty coverage even in key locations like the Tokyo subway. DoCoMo "has been struggling," says Kazuyo Katsuma, an analyst in Tokyo with J.P. Morgan Chase & Co. (JPM ). "The service level has been so poor."
KDDI'S GOLD MINE: Meanwhile, KDDI, an industry also-ran created in 2001 through the merger of three smaller companies, flew in under the radar two years ago with a slower but less buggy data offering called AU that quietly built momentum. Consumers liked AU's sleek handsets, longer-lasting batteries, and fun services such as easy video mail and song downloads. Then last fall, the cocky KDDI stunned the industry by offering a fixed-rate monthly tariff of about $40 for unlimited use of AU's data services. DoCoMo costs much more. As a result, KDDI today has 13 million high-speed subscribers, compared with DoCoMo's 3 million.
KDDI'S AU service is a gold mine. The company's net profit is forecast to jump 80%, to $996 million, on sales of $27.3 billion for the fiscal year that just ended in March. Lehman Brothers Inc. (LEH ) estimates profit will surge $1.7 billion this year. Not that DoCoMo is a slouch: It earned an estimated $5.9 billion on sales of $49 billion for the year. But investors like KDDI's story better: Its shares are up 79% in the past 12 months, vs. a decline of 1% for DoCoMo.
Now DoCoMo is launching a counterattack. In February, the company began expanding the network coverage of its 3G service, called FOMA (for Freedom of Mobile Multimedia Access). And in March, DoCoMo announced it will offer a monthly fixed rate similar to KDDI's. This represents a major shift for DoCoMo, which grew its i-mode business by charging users based on the amount of data they send. That worked well when people were mostly sending simple e-mails. But as consumers send more data -- from downloading photos to sharing videos and games -- the pay-as-you-go model costs too much.
Keiji Tachikawa, DoCoMo's president and chief executive, is also pushing his speedier technology. Yes, KDDI is ahead, but only "if you call their technology 3G," he says. In fact, KDDI uses a system called CDMA2000 1x, which it claims is 3G. Tachikawa says his technology -- which at up to 384 kilobits per second is nearly three times as fast -- is the real 3G, based on a standard called Universal Mobile Telephone System (UMTS). The new fixed rate is helping FOMA pick up steam. On Mar. 31, DoCoMo announced that it had a total of 3 million FOMA subscribers, with 1 million having signed up in February and March alone.
And Tachikawa is looking beyond wireless communications. DoCoMo is working with Sony Corp. (SNE ) to offer phones with "smart cards" embedded in the handsets that will allow DoCoMo subscribers to use their phones to buy such items as train and cinema tickets or restaurant meals, usually by passing the phone-with-smart-card over an electronic sensor. "We can't depend totally on the [mobile] traffic business any longer," says Tachikawa. "We have to collaborate with other industries."
Analysts think DoCoMo is on the right track. Goldman, Sachs & Co. predicts FOMA will add 7 million subscribers in the coming year. And KDDI has stumbled lately. The company started up a new high-speed service, called WIN [DO], offering speeds comparable to those of FOMA, but the service has fallen short of its goal of 450,000 subscribers by the end of March.
It's a fierce dustup, and one with big implications. The much-heralded age of 3G has been so slow to arrive around the world that no single standard has emerged to dominate. The slugfest between DoCoMo and KDDI is a real-time test of two standards in the marketplace, and carriers the world over are watching with keen interest. Even as they battle in Japan, KDDI and DoCoMo are trying to outflank each other on the global front. KDDI is advising China Unicom Ltd. (CHU ), the second-largest mobile operator in China, on its 2G network, which may help it win business if Unicom gets a license to operate a 3G network based on CDMA2000 1x. DoCoMo is waiting to make its China move. It expects Chinese regulators to award at least one 3G license to one of the country's state-owned operators that's compatible with DoCoMo's 3G technology. Then DoCoMo will be the natural choice to team up with that carrier.
China isn't the only game. In tandem with local telco partners, DoCoMo is heavily promoting its i-mode service in Europe and has 2 million subscribers, most of them in France, Germany, the Netherlands, and Spain. And DoCoMo owns 20% of 3UK, a 3G carrier controlled by Hong Kong-based Hutchison Whampoa Ltd. The Hutchison service has been a bust in Britain and the industry is abuzz with speculation that DoCoMo, having written off the bulk of its $1.74 billion investment, may sell its stake back to Hutchison and team up with British rival mm02 PLC. Tachikawa denies the rumors.
In the meantime, DoCoMo has set up labs in Beijing and Yokosuka, Japan, focusing on the next generation of high-speed wireless service, dubbed 4G. By the end of the decade, 4G could offer speeds up to 100 times faster than 3G. But if the past is prologue, Tachikawa had better keep looking over his shoulder for KDDI. <<
>> A New Prez for DoCoMo?
John Alderman
The Feature
Apr 12, 2004
thefeature.com
It looks like NTT DoCoMo has picked a successor to president Keiji Tachikawa.
Shiro Tsuda, currently a senior vice president, seems to be the chosen one. The choice will be made official in June, at a shareholder's meeting. He, like Tachikawa, started his career as an engineer at NTT.
Reviews of Tachikawa's leadership mix praise for vision and depth of understanding with criticism that this forward-looking vision might have impaired his decisions.
While some have referred to him as "the ideal of an internationally-minded engineer-turned-executive" some point to wrong choices like expanding as the market slowed, and misjudging the readiness of the market to accept 3G.
Two years ago, at the height of a downturn, looking back without regret, he said, "if we did not take risk at that time, we could not see any chance to expand i-mode-like services in overseas markets." He pointed to i-mode's acceptance in Germany as an example of the strategy on its way to success.
Elsewhere he described the situation facing companies that sit on the cutting edge, explaining his bets on growth: "No matter how advanced your technology may seem at a given point, once consumers get used to it, they want more, and that is what we have to constantly provide. Generational changes used to take a decade or so, but nowadays we have to come up with major service enhancements every couple of years." <<
- Eric - |
