NTT DoCoMo profits drop 20%

Japanese powerhouse NTT DoCoMo announced Friday that its profits have fallen 21 per cent this quarter which it blamed on rising expenses.

The company said its net income fell to 163.5bn yen, or £758m, during the quarter compared with 207.9bn yen a year earlier. Sales rose 2.7 per cent to 1.22tn yen from 1.19tn yen a year ago.

The Japanese mobile market is estimated to be worth around $77bn and is fiercely competitive. The country’s second-largest provider, KDDI, has eroded Docomo’s market share with an aggressive strategy that has reduced its lead from 56.1 per cent in June 2005 to 55.6 per cent today.

Aware that expectations for the firm to perform are high, the company noted in its results that it would launch its own version of the “Chaku-Uta Full”, full-music track downloading service which it will call “Music Channel”. The new service will, according to the firm, “allow users to download music programs(sic – meaning files) of high sound quality.”

Mark Newman, chief research officer at Telecoms.com’s parent, Informa Telecoms and Media, said DoCoMo’s hard times are far from over: “It’s only going to get tougher for DoCoMo,” he said. “When number portability comes into effect in November we can expect to see a drift of customers away from DoCoMo to its two competitors. And when Softbank relaunches the old Vodafone service, and eMobile, a fourth operator, begins commercial operations in 2007, DoCoMo is gong to come under extreme pressure to cut costs to remain competitive. The one positive that can be drawn from these results is the continued growth in revenues from data services which now account for 29% of total ARPU.”

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