WW-155 -- Mobile Number Portability - Impact on Market Shares

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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. 155
Tuesday August 7, 2006
Tokyo

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CONTENTS

++ Viewpoint: Mobile Number Portability - Impact on Market Shares

This autumn the Japanese carriers will introduce mobile
number portability (MNP), which makes it possible for
customers to retain the number used with their current
operators after concluding a contract with a new
operator. Currently, customers changing mobile phone
operators have to cancel their contract at the shop of
one operator and visit the shop of the other operator to
conclude a new contract, without the option of keeping
the same phone number. MNP will make it possible to
cancel the old contract and conclude the new contract
in one visit to the new operator’s shop. However, the
customer must pre-apply with their current operator to
change the carrier. To transfer the number to the new
carrier only takes a few hours.

While customers can retain their phone number when
switching carriers, the email address issued by their
carrier cannot continue to be used. Switching also
requires use of the new carrier’s handset because
the handsets and networks are not interoperable
between carriers.

What will be the impact on the market shares of the
carriers? Market growth in terms of new subscribers
is slowing down - in June, just 312,000 new mobile
subscriptions were registered, bringing the number
of subscriptions to almost 93 million. In a saturated
market, adding new subscribers is challenging and
margins shrink under competitive pressure. DoCoMo
has a market share of 56 percent, while KDDI and Vodafone
have shares of 28 percent and 16 percent, respectively.

At DoCoMo’s annual shareholders’ meeting, investors
were told that every year a total of 2 to 3 million mobile
phone subscribers either switch to DoCoMo or cancel
their contracts with it.

Market research by Japanese publisher ITmedia
shows that 18 percent of mobile subscribers want to switch
carriers, while 20 percent want to remain with their present
carrier. Current AU subscribers who wish to switch
carriers are most likely to choose Vodafone, while
DoCoMo subscribers prefer to switch to KDDI,
according to Itmedia’s market survey.

Asked the reason for switching carriers, most replied
handsets or music. AU seems to appeal to new
customers with music services and high-spec-design
handsets. DoCoMo is regarded as a reliable but
expensive carrier, and Vodafone is attractive for its
overseas roaming.

It is difficult to say who will add more subscribers,
since there are so many variables. We expect incumbent
DoCoMo to be the biggest loser after the implementation
of MNP. DoCoMo is already introducing more attractive
pricing schemes to forestall a hemorrhage of its
subscription base. Meanwhile, Vodafone would be
wise to develop better handsets and improve network
quality -things it can’t accomplish overnight. Will
Vodafone’s owner, Softbank, ignite a price war, as
it did with broadband access? Stay tuned.

-- Arjen van Blokland

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STAFF
Written by Arjen van Blokland; edited by the
J@pan Inc staff (editors@japaninc.com)

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