WW-106 -- KDDI -- Japan's Front-runner with 3G and a Host of New Services

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J@pan Inc presents the Wireless Watch Newsletter:

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

Commentary on the Business of Wireless in Japan
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Wireless Watch Newsletter
Commentary on the Business of Wireless in Japan
Issue No. 106
Monday, September 8, 2003
Tokyo

Subscribe for FREE:
http://www.japaninc.com/newsletters/index.html?list=ww

CONTENTS

++ Viewpoint: KDDI -- Japan's Front-runner with 3G and a Host of New
Services

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++ Viewpoint: KDDI -- Japan's Front-runner with 3G and a Host of New
Services

Our recent newsletters focused on the advances of DoCoMo and Vodafone /
J-Phone, so this week we take a closer look at KDDI -- Japan's second
largest carrier, with the fastest growing user base nationwide. While
Vodafone is DoCoMo i-mode's big competitor abroad, KDDI is seriously
challenging DoCoMo痴 business on the homefront.

Over the past two years, KDDI has transformed itself from a primarily
tech-driven company into a powerful consumer marketing machine. It
stopped its PDC (2G) network service this March to focus exclusively
on the development of its CDMA-services. The use of Qualcomm's CDMA
technology has proven to be a smart move so far. All 3G (CDMA1X) handsets
are backwards compatible with the 2G cdma2000 network, resulting in
solid country-wide coverage. Thus far, results have been most
impressive.

KDDI's subscriber growth topped that of DoCoMo in August. KDDI's market
share of 3G handsets in Japan is 92.7 percent, and the company boasts
an impressive subscriber base of 9.2 million. Because it operates only
a single network, KDDI can keep costs lower than DoCoMo and J-Phone,
both of whom have to maintain their PDC and W-CDMA networks. KDDI passes
on some of its cost reduction to customers by giving discounts and
subsidies on handsets to attract new users.

After the start of its CDMA1X service, data ARPU was priced at 3,470 yen.
More recently, this number has fallen to 2,290 yen, which is quite
reasonable. Reduction of KDDI痴 packet fees led to an increase in traffic
by a factor of three.

KDDI痴 content providers may also benefit from the growing traffic.
Total sales of KDDI痴 official content partners grew by 9 percent to
437 million yen in three months to June. With these numbers, KDDI shows
a slightly better performance than DoCoMo.

The most interesting service introduced by KDDI is "chaku-uta." Users can
download high-quality real music files of 100kB and set the 20-second
songs as "alarm bell" or "phone ringer." The higher bandwidth available
for the CDMA1X phones enables this service by using the EZmovie format,
KDDI痴 video format.

At Mobidec2003 late last month, KDDI's content manager Makoto Takahashi
showed off the success of the chaku-uta service. "There are about 5 million
downloads per month," he proudly announced, "and in mid-August we reached
the 20 million download mark."

Suprisingly, KDDI痴 statistics do not show any cannibalizing effect of
"chaku-uta" on "chaku-mero" (the ring tones service). By the end of the
year, Takahashi is planning to introduce some chaku-movies that will make
full use of the high bandwidth. Before Christmas, the Sannaklaus songs and
video-clips will be playing away merrily on the phones of KDDI customers
each time friends or family give them a call.

-- Arjen van Blokland

Link: "DoCoMo Loses New User Lead for Second Time" from The Nikkei Business Daily
http://www.nni.nikkei.co.jp/AC/TNKS/Nni20030908D08HH858.htm

===============EVENT=========================
SECOND COST CUTTING STRATEGIES SEMINAR FOR FOREIGN
MANAGERS IN JAPAN

Date: Sept. 19, 2003
Location: JETRO BSC Hall, Akasaka Twin Tower Main Building
Organized by: LINC Media Inc., Japan Inc. Communications KK
(publisher of J@pan Inc magazine) and the Shizuoka
Prefectural Government. We are pleased to present the second
of our ongoing program of cost cutting seminars for foreign
managers. Our keynote speaker is Mr. Andrew Fried, a
partner with IBM Business Consulting (previously PwC).

View complete Seminar information at: http://www.japan.com/shizuoka/
Registration fee: free of charge
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================== EVENT ===================
GARTNER'S SYMPOSIUM/ITXPO 2003
Date: Nov. 19-21, 2003
Location: Le Meridien Grand Pacific (Odaiba, Tokyo)

Business today is all about reducing time, increasing speed, and
improving profits. Technology is the enabler.
Keeping up - and looking ahead - is your challenge and our strength.
Join over 2500 senior IT decision makers to hear Gartner's leading
global and Japanese analyst address technology issues that will
have the biggest impact on your enterprise over the next year.

View complete Symposium information at:
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STAFF
Written by Arjen van Blokland; edited by the
J@pan Inc staff (editors@japaninc.com)

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