WW-141 -- Willcom's Fixed-Rate Plans: Headaches for Rival Carriers

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W I R E L E S S W A T C H

Commentary on Japan's Wireless World
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Wireless Watch Newsletter
Issue No. 141
Sunday May 15, 2005
TOKYO

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CONTENTS

@@ Viewpoint: Willcom's Fixed-Rate Plans: Headaches
for Rival Carriers

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@@ Viewpoint: Willcom's Fixed-Rate Plans: Headaches
for Rival Carriers

NTT DoCoMo announced this week the business results for the
fiscal year ending March 31, 2005. The number of subscribers
grew by 2.5 million and net income increased by 15%, while
operating revenues dropped by 15%. The forecast for the current
year is less sunny: The company expects operating revenues to
drop a further 0.8% and net income to drop by 33.5%. Increased
competition is forcing DoCoMo to discount its rate plans, which
impacts on revenues and profits. ARPU dropped to 7,200 yen last
year and is expected to fall to 480 yen this year. The Japanese
mobile market has peaked in revenues -- subscriber growth can
no longer compensate for ARPU.

We hope DoCoMo took into account the efforts of Willcom to push
PHS, the low-cost digital network. Last year the Carlyle Group and
Kyocera acquired 90% ownership of DDI Pocket from KDDI. In
February, DDI Pocket was re-branded to Willcom. The subscriber
base grew by 33,000 in March and by 60,000 in April. While
DoCoMo's executives will not lose sleep over these numbers,
Willcom's fixed-rate plans for voice and data services will
certainly cause some headaches.

Until now, the PHS operator used an ISDN-network to connect the
base stations. By replacing this ISDN-network with an IP network,
the backbone network can be operated for a fixed fee, making
possible low fixed rates.

Willcom introduced a fixed rate voice plan for 2,900 yen per month
including free email and unlimited calls within the PHS network.
The charge for interconnection to fixed-lines and IP-phones is 21 yen
per minute, and 26 yen to other mobile phone networks. This rate
plan is attractive for corporate users, and an increasing number of
companies are migrating to Willcom's services in order to reduce
communications costs. The Kyocera handset with Opera HTML
browser and 2.2 inch QVGA screen costs just 6,000 yen. Willcom
also targets families -- the basic subscription will only cost 2,200
yen per phone for two or more subscriptions.

In July Willcom will kick-off an 'all-you-can-eat' rate plan
including voice, data and email for just 5,000 yen per month. The
service allows customers to connect their PCs to the Internet via
their phones. Bandwidth will be limited to a maximum of 32 kbps,
sufficient for Japanese businessmen on the road who like to check
their corporate email.

We expect that Willcom's subscriber base will grow by at least
100,000 per month reaching 4 million by the end of 2005. While
that will not pose a threat to other carriers, it will put pressure
on them to introduce lower rates and cheaper voice and data fixed-
rate plans. The big winners are the customers -- they will see
further price drops for voice and data services.

Which of the three, DoCoMo, KDDI, or Vodafone, will introduce
fixed rate for voice and data for less than 10,000 yen? --
stay tuned.
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STAFF
Written by Arjen van Blokland; Edited by Burritt Sabin
(editors@japaninc.com)

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