WW-125 -- KDDI vs. DOCOMO -- The Battle Heats Up

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

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Wireless Watch Newsletter
Issue No. 125
Wednesday, April 14, 2004
TOKYO

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CONTENTS

@@ Viewpoint: KDDI vs. DOCOMO -- The Battle Heats Up

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@@ Viewpoint: KDDI vs. DOCOMO -- The Battle Heats Up

The subscriber growth numbers for March are out. To our surprise,
DoCoMo was not able to steal the top slot from KDDI. The KDDI group
added 466,000 new subscribers, while DoCoMo and Vodafone had 413,000
and 99,000 subscribers, respectively.

Historically, March has been a month of strong growth for DoCoMo.
DoCoMo sold 600,000 900i handsets, and the total number of FOMA
subscribers reached more than 3 million by March 31. As this is
less than 7 percent of the DoCoMo subscriber base, there is ample
room for further growth. KDDI sold 300,000 WIN-enabled handsets in
March.

Though Vodafone has reached the 15-million subscriber milestone, the
company's performance is not impressing us. Apparently this opinion is
shared at company headquarters; Vodafone has just posted a new
COO to Japan, usually a sign that internal management and procedures
will be shaken up.

The new COO used to run Vodafone's operations in the Netherlands.

The lineup of Vodafone's 3G handsets is still limited compared to its
competitors' offerings, resulting in a slow takeoff of 3G. Vodafone has
managed only 138,000 subscribers as of March 31. Once the company
introduces the new 3G handsets made by Sharp, we expect its number
of 3G subscribers to grow a lot faster.

The number of camera phones in the market has reached nearly 48 million,
representing a 60 percent share of all phones. The prices of these camera
phones -- which offer multi-million pixels, memory storage cards and
auto-focus -- are cheaper than those for middle-end digital cameras.

What surprises us is that not one of the Japanese carriers is willing to
give their existing 2G subscribers an incentive to upgrade their phones
to 3G. The FOMA N900i phone is, on average, 1,000 yen more expensive when
you want to exchange your 2G phone. It will be interesting to see who
the first carrier will be to provide a premium instead of a penalty to
their loyal subscribers. The current card loyality programs of the
carriers offer too many limitations concerning minimum monthly usage
to make full use of the perks offered.

Although DoCoMo is gradually loosing market share to KDDI, we do not
expect a price war to break out for new customers, as profitability is
still the top priority for both companies. Instead, they will likely
compete with new handsets and services, a competition at which KDDI --
which used to be a tech-driven company -- has excelled over the past
two years.

-- Arjen van Blokland

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STAFF
Written by Arjen van Blokland; Edited by Roland Kelts
(editors@japaninc.com)

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