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KDDI takes lead in new mobile market strategy

KDDI slashed its monthly fees and raised handset prices in a strategic sea change for Japan’s mobile telecommunications market. Japanese mobile phone operators have in the past subsidised handsets heavily and inflated basic fees and calling charges to compensate. As a result, cutting-edge mobile phones are often priced as low as Y1 with operators paying as much as Y36,000 ($309) in sales incentives to vendors.

To remove this market distortion, the country’s telecommunications regulator recently recommended operators slash handset subsidies, which encourage people to switch phones frequently and, in effect, disadvantage users who hang on to the same phone for a long period.
KDDI, Japan’s second biggest mobile phone operator, said it would cut its lowest monthly base fee by 40 per cent from November 12. Subscribers opting to take advantage will have to pay Y20,000 more for new handsets, however.
Customers will still have the option of paying higher monthly fees to get new models cheaply.
NTT DoCoMo, Japan’s largest mobile phone operator with nearly a 50 per cent market share, is expected to follow suit. The change will hurt handset makers the most, say analysts, as consumers will be encouraged to switch less often. In Japan, users now switch phones on average every 24 months.
Investors have been selling shares of mobile phone operators since the government’s recommendation in June.
DoCoMo has lost 14 per cent of its value, KDDI is down 11 per cent and Softbank shares have declined 16.8 per cent.
“We want to lower subsidies to vendors over the long term and encourage development of more low-priced handsets,” said Makoto Takahashi, associate senior vice president at KDDI.
Japan’s top mobile handset makers, including Sharp, Matsushita, NEC and Casio, face tough times as they have no international market share and the domestic population is shrinking. As if to underline this trend, Casio cut its annual operating profit forecast by 30 per cent to Y37bn as a result of lacklustre mobile phone sales.
Economists are concerned that KDDI’s decision could lead to a price war and have a substantial impact on the core consumer price index, potentially prolonging the country’s brush with deflation.
Some estimate hefty cuts in mobile service fees could knock as much as 0.6 percentage points off headline CPI, which registered a 0.1 per cent decline in August.

Источник: Financial Times

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