Japan's KDDI to spend 1 trillion yen on 3G buildup

Japan's number two telecom firm DDI Corp said on Thursday it plans to spend about one trillion yen ($8 billion) in the next five years to deploy 3G mobile phone services.

Toshio Okihashi, DDI's managing director and head of mobile communication strategic planning division, said the investment costs were relatively small compared to rival NTT DoCoMo.

DDI, better known as KDDI, currently operates two cell phone systems, cdmaOne, using technology popularised by U.S. telecoms firm Qualcomm Inc , and PDC, a Japanese-developed system operated by its unit Tuka.

As KDDI plans to migrate to 3G by upgrading cdmaOne networks, analysts have questioned the future of the Tuka subsidiary.

Okihashi said KDDI is considering various options for Tuka, which currently has 3.8 million subscribers, including selling it or having cdmaOne operations absorb it.

"Selling it could emerge as an option," Okihashi said. "Of course there is also the question of whether there will be a buyer."

Okihashi did not say when KDDI would decide on Tuka's fate.

DISCOUNTS

KDDI's cdmaOne operations clinched around 17 percent of the new signups in the last three months through student discount rates which were introduced in November. As of February, total cdma One subscribers reached 10.7 million.

Okihashi said currently 10 percent of users are students and the company is searching for ways to keep them after graduation. He is cautious, however, about using competitive prices.

"There has been no evidence that cutting fees could lead to an increase of subscribers or lead to lower churn (rate of cancellation)," Okihashi said.

Okihashi added that KDDI planned to offer handsets in the fall equipped with the next generation WAP, a mark-up language for Internet-enabled mobile phones.

Analysts have said a reason for DoCoMo's success was that its Internet-enabled "i-mode" service is based on HTML, widely used for Internet websites.

The number of websites that "i-mode" users can access has grown to over 41,000, as content providers create i-mode sites by minimising Internet websites.

3G ON TIME

Okihashi said KDDI plans to launch 3G services, called "cdma 1x," in October as scheduled.

The cdma 1x will allow users to transmit data at speeds of 144 kbps, compared with 64 kbps under the current cdma One networks.

Although faster transmission should allow users to download and transmit larger content, Okihashi said he does not expect average revenue per user (ARPU) to rise after launching 3G.

"Those who are not satisfied with current services may spend more, but that won't be the case for everyone," Okihashi said.

Currently, cdma One's ARPU is about 8,000 yen, of which 3,000 yen was spent on data transmission.

As for foreign tie-ups, Okihashi said, "We are back to square one," as less foreign carriers have become keen on capital tie-ups these days than they used to.

But he said KDDI is looking for roaming partners outside Japan with carriers who operate cdmaOne systems.