Profit Plunge at DoCoMo

October 30, 2006 - source: BWCS

Dominant Japanese mobile operator, NTT DoCoMo, admitted today that its profits during the six months to the end of September 2006 dropped dramatically. The company reported a fall in net profit of nearly 20% to Yen 310 billion (US$2.6billion) as it struggled to fend off competition from rivals KDDI and Softbank.

DoCoMo, which still commands 55% of the Japanese market for mobile customers, said group net profit plunged 19.6% compared to the same period last year. Pre-tax profits at the operator fared little better, falling 17.8%, year-on-year, to Yen 520.27 billion. Revenues managed a small increase of 0.4% to Yen 2,383.37 billion.

Analysts put the disappointing profit figure down to DoCoMo's increased spending, as it feels the pressure from its two smaller rivals. The arrival of mobile number portability in Japan has helped to bring this increasing competition into sharper focus. Not only has DoCoMo spent more on improving its high-speed network, but it has been forced to bring down prices. Rivals Softbank this week reported it had cut its tariffs by up to 70% in some cases and threatened more was to come.

In a statement, DoCoMo president, Masao Nakamura, said, "While the competitive environment is expected to become increasingly fierce, we aim to build up our competitiveness by responding swiftly to changes in the market."

Recent figures from Japan's Telecommunications Carriers Association show that DoCoMo's massive lead in the mobile market is being eroded. In the six months to September 2006, it added 959,300 subscribers, while fierce rival, KDDI, managed to attract 964,000 new customers.