WW-139 -- Time to Recover Vodafone Japan Operations - Start with the retail channel

J@pan Inc presents the Wireless Watch Newsletter:


Commentary on Japan's Wireless World

Wireless Watch Newsletter
Issue No. 139
Wednesday February 9, 2005

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@@ Viewpoint: Time to Recover Vodafone Japan Operations
- Start with the retail channel

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@@ Viewpoint: Time to Recover Vodafone Japan Operations
- Start with the Retail Channel

Since Vodafone took over J-Phone, its Japanese subsidiary
is loosing ground. In January Vodafone lost 59,000
subscribers, while DoCoMo and KDDI added 184,000 and 164,000,
respectively. What is happening to Vodafone Japan? Can it
start growing again?

DoCoMo and KDDI have introduced new services and devices to
stay competitive. It is often argued that Vodafone Japan
slowed down introduction of new services in Japan to wait
for the rest of the world to catch up. By aligning
procurement worldwide, costs would be reduced, thereby
increasing share-holder value.

Last week we did some shopping for the latest Vodafone
gadgets to get a better feeling of the company's current

Vodafone launched a line-up of new 3G phones. Vodafone
operates two networks in Japan: PDC and W-CDMA. The 3G
phones, however, only operate on GSM and W-CDMA. Without
3G coverage, these phones will not work. Frequent overseas
travelers, like us, do not mind this too much, as Vodafone
provides worldwide roaming - at rip-off prices though,
but who cares in the high-end segment.

At Yodobashi Camera, a major mobile phone outlet in
Tokyo, the salesman tried to discourage me from buying
a Vodafone phone. "Many Vodafone 3G customers are
complaining about bad coverage," according to the salesman.
"Outside Tokyo in rural areas and deep in building
interiors, the phone cannot be used." Long-term IT
entrepreneur, Mizuno-san, recently trashed his FOMA
phone and bought a Nokia 702NK. He tells another story:
"I got frustrated by the bad reception of FOMA. Vodafone
3G is much better in the mid-town area of Tokyo where
I live," said Mizuno-san.

What phone to choose? The Sony Ericsson 802SE user
interface was not intuitive enough for us - we could
not even find the button to end calls. A few weeks
after the Motorola phones were introduced, it was
out-of-stock. Too much demand? We doubt that.
Out-of-the-box, we saw a Motorola phone freezing
during the boot process. Quality would seem to remain
a challenge for foreign manufacturers entering the
Japanese market.

We decided to buy the Sharp 802SH. After doing all the
paperwork, it took the Vodafone customer center more than
two hours to activate the SIM. According to Yodobashi's
salesman, the Vodafone system was down for a couple of
hours - not the best experience for a new customer.

After the phone was finally activated things turned for
the better. Voice quality in Tokyo was excellent and even
in our concrete building we did not have problems with
dropped calls. Video-calls between Vodafone 3G and FOMA
worked smoothly. Roaming worked well, even with
data-services. Well done! Vodafone 3G grew by 40 percent
in January to 527,000 subscribers. Still, that was not enough
growth to cover the loss of 2G customers who seem to prefer
KDDI and DoCoMo.

It is time for the non-Japanese Vodafone executives to come
down from their ivory tower in Atago Hills and do some street
research. Procurement can be aligned worldwide and
cost-cutting is not difficult. The customer experience starts
the moment a potential subscriber enters a shop. Improve
relations with your retail channels and let your own staff
in the Vodafone shop serve with a smile - it will help.

-- Arjen van Blokland

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