WW-126 -- ARPU numbers from Japan -- A Goldmine?

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Wireless Watch Newsletter
Issue No. 126
Wednesday, April 21, 2004
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CONTENTS

@@ Viewpoint: ARPU numbers from Japan -- A Goldmine?

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@@ Viewpoint: ARPU numbers from Japan -- A Goldmine?

The success of 3G services in Japan is often measured by the number of
subscribers. But how is the performance measured in average revenue
per user (ARPU)? Is it higher than for 2G services, and is the ratio of
data revenues higher? KDDI and DoCoMo publish at regular intervals their
ARPU numbers for their 3G services. This week we take a closer look at
the stats.

DoCoMo's FOMA ARPU in the fourth quarter of 2003 was 10,270 yen per
month, of which 3,260 yen (32 percent) is data revenue. The ARPU
from the 2G PDC services was 7,730 yen, with 1,930 yen (25 percent)
from data services.

ARPU from FOMA is still increasing because of improving coverage and
better handset functionality, enabling more advanced mobile applications
and services. One has to be careful, however, to conclude that FOMA
drives up ARPU, because the first FOMA users were most probably the
heavy PDC users generating the highest revenues.

Following KDDI, DoCoMo will introduce flat data-rates for its FOMA
service. For 3,900 yen, the customer has unlimited access to i-mode
services and usage of i-mode mail. This service plan is only available
to those customers that have bills higher than 6,700 yen per month.
The minimum revenue per user would come at 10,600 yen per user --
higher than the current FOMA ARPU. According to DoCoMo, 30 percent
of their FOMA users consume more than 6,700 yen on their phone service
and could benefit from this service plan. Though the new rating plan
starts on June 1, it is already widely advertised in prime time TV
commercials.

Who says KDDI's growth has no impact on DoCoMo?

KDDI's ARPU on its total user base is 7,490 yen, of which 22 percent
is generated by data services. The company's 3G service's ARPU
(including WIN) is 8,400 yen (29 percent from data). The churn rate of
KDDI is 1.4 percent per month.

Churn in Japan in much lower than in other countries because of the
high ratio of post-paid subscribers, lack of number portability
and, most importantly, the fact users cannot take their phone with
them when transferring to other carriers' services. KDDI's flat-rate
service is more transparent than DoCoMo's, offering a monthly
"all you can use" for 4,200 yen to its 3G WIN customers --
independent of their monthly usage.

Vodafone's ARPU in December 2003 was 6,690 yen, of which 22 percent
was from data. This is higher than the ARPU in the UK, which was
26 pounds (roughly 5,000 yen). Revenues from 3G were not released.

Our conclusion? Japan is not doing badly at all for voice and
data-services.

-- Arjen van Blokland

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Written by Arjen van Blokland; Edited by Roland Kelts
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