WW-56 -- Not All the Low-Hanging Fruit's been Picked

=====================================================================
J@pan Inc Magazine Presents:
W I R E L E S S W A T C H
Commentary on the business of wireless in Japan
=====================================================================

Issue No. 56
Tuesday, May 13, 2002
Tokyo

INDEX

+++ Viewpoint: Not All the Low-Hanging Fruit's been Picked

+++ Noteworthy News
--> DoCoMo Profit Withers on Writedowns, Vows Recovery
--> KDDI Says 3G Users Reach 330,000 in April
--> PHS-WLAN Combined Service is Planned
--> Japan Mayday Cellphone Helps Locate Accident Sites
--> Summerly i-mode from Toshiba

+++ Events (Advertisements)

+++ Sign of the Times: Cellphone Scam Preys on Call ID

+++ Subscriber Statistics, Corrections, Credits, Administrivia

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+++ Viewpoint: Not All the Low-Hanging Fruit's been Picked

April saw some pretty interesting developments in subscriber growth.
The Telecommunications Carriers Association (http://www.tca.or.jp) reported
that overall cellular subscribers in Japan reached 69,767,500 --
approximately 54 percent of the population. Total new subscribers was
down a whopping 40 percent year on year, but the subscriber base grew
by 12.5 percent over April 2001.

In terms of overall cellular voice subscribers, NTT DoCoMo had a
58.85-percent market share while KDDI Au, J-Phone and Tu-Ka had 17.79
percent, 17.78 percent and 5.58 percent, respectively. The key point
to notice is that KDDI has edged back ahead of J-Phone to retake the
No. 2 slot overall.

The wireless Internet ordering was unchanged from the month before.
Of 52,970,400 mobile surfers in Japan, DoCoMo's i-mode was in the
lead with 32,638,000 (61.61 percent), J-Phone's J-Sky was in second
place with 10,356,000 (19.55 percent), and KDDI's EZweb came in last
with 9,976,400 (18.83 percent).

By network system, 2G PDC (used by NTT DoCoMo, J-Phone and Tu-Ka) had
58,477,100 users (83.82 percent) and 2G CDMA (used by KDDI Au) had
10,851,200 (15.55 percent). For 3G, W-CDMA (NTT DoCoMo) had 105,500
users (0.15 percent) and cdma2000 1X (used by KDDI Au) had 334,100
(0.48 percent).

Note here that in the first seven months of official operation,
DoCoMo's 3G FOMA service has gained 105,500 subscribers, while KDDI's
cdma2000 1X system has gained more than three times as many
subscribers in one month.

J-Phone leapt into second place for wireless Internet last fall and
for voice subscribers this past spring -- largely on the strength of
its Sha Mail and Movie Sha Mail handsets. "For J-Phone, monthly
Sha-Mail net additions were strong, supporting the company痴 strategy
of quickly increasing penetration of the service to lock in
subscribers (and theoretically lower the churn rate)," wrote CSFB
analyst Mark Berman last week, adding that some 38 percent of
J-Phone痴 subscriber base now own a Sha Mail-enabled handset (but he
wondered if this will lead to J-Phone痴 voice ARPU being cannibalized
by Sha-mail usage).

Has KDDI turned the market-share battle around? The carrier has
established a net add rate of some 31 percent of all new subscribers
in Japan, versus 42 percent for DoCoMo and 27 percent for J-Phone,
and has stepped up to the market-share plate with a strong lineup of
3G handsets from the likes of Sanyo, Casio and Kyocera.

All offer 144 Kbps (nominal) download speeds, 132 x 176-dot TFT
displays (Casio's has 262,144 colors) and Java; the Sanyo model can
be fitted with a removable camera while the Casio has a built-in
350,000-pixel CCD camera. The Kyocera A1012K comes in three
hyper-cool metallic colors (silver, blue, lime), is just 20
millimeters thick and boasts a beveled-edge design that the Shibuya
crowd will die for -- or, at least, will fork over 8,800 yen (price
as of mid-April) for.

Despite KDDI having targeted a much more bullish 3G growth forecast,
we think they're doing just fine, thank you very much, and their
success, however modest, highlights the gloom surrounding J-Phone's
delayed 3G launch, which now won't happen until December. Watch to
see whether KDDI's EZweb can grab second place back from J-Phone --
not because it's a cooler Internet service, but because the 3G
handsets offer better functionality than J-Phone's 2G models.

KDDI's numbers are also benefiting right now from a marketing blitz
and the absence of any new models from DoCoMo or J-Phone. Reminder to
Big D R&D and marketing staff: Weren't the 504-series i-mode phones
supposed to be out by now? (We were just wondering....)

Clearly, not all the low-hanging fruit's been picked, and it looks
like there is still lots of room for the Big D competitors to grab
increased market share, for an additional reordering of market share
holdings and for overall growth in the national subscriber base. Some
have argued that Japan is experiencing marginal subscriber effects
and that carrier growth can only come at competitor expense (or by
enabling vending machines and pets -- see WW No. 45), but these
points may not be (entirely) true.

--Daniel Scuka
daniel@japaninc.com

=============================ANNOUNCEMENT============================

The latest issue of J@pan Inc magazine is now available online!
Access: http://www.japaninc.com/contents.php?issueID=36

Subscribers can read our hot-off-the-press features, including:

** Okinawa: A troubled island has visions of IT paradise

** Running On Empty: Gregory Clark, president of Tama University,
says prime minister Junichiro Koizumi spends too much time tinkering
with supply when it's demand that is the problem.

** The Final Showdown: Digital technology is rapidly replacing
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=====================================================================

+++ Noteworthy News
(Long URLs may break across two lines so copy and paste to your
browser.)

--> DoCoMo Profit Withers on Writedowns, Vows Recovery
http://www.forbes.com/newswire/2002/05/08/rtr595345.html
Source: Reuters on Forbes.com, May 8

EXTRACT: NTT DoCoMo said on Wednesday that its net profit shrank to
just 862 million yen in the last business year, hit by appraisal
losses on investments abroad. The result nevertheless outperformed
expectations after the company said in early April it expected to be
in the red by 36 billion yen due to a non-cash writedown of 813
billion yen for 2001/02. While it took the writedown as expected,
cuts in administrative costs helped its bottom line stay barely in
the black, albeit at a tiny fraction of the previous year's 365.5
billion yen. DoCoMo said it now expects to keep growing, but more
slowly, in this business year. "We only had an 800 million yen profit
last year but we expect this year to be back to normal," DoCoMo
president and chief executive Keiji Tachikawa told a news conference.

COMMENTARY: For the fiscal year ending March 2002, DoCoMo's operating
profit was 1 trillion yen, an increase of 29 percent year on year,
against revenue of 5.17 trillion yen, up 10.4 percent. DoCoMo said
that with the market approaching "saturation," consolidated revenue
growth in the current business year was forecast at a modest 3.9
percent (to 5.37 trillion yen), while operating profit was expected
to increase 5 percent to 1.05 trillion yen. Hmmm... as we said above
in the Viewpoint, it doesn't look to us like the Japan market is all
that saturated. Still though, you have to say something in your
financial statements. DoCoMo also said it will:

** Cut capital spending this year by 7 percent (to 960 billion yen)
** Consolidate control of its eight regional units
** Buy back up to 1 million of its own shares (worth up to 500
billion yen)

--> KDDI Says 3G Users Reach 330,000 in April
http://www.forbes.com/newswire/2002/05/09/rtr597079.html
Source: Reuters on Forbes.com, May 9

EXTRACT: KDDI said on Thursday it sold 330,000 3G phones in April,
the first month of operation, surpassing its own 280,000 target.
Also, the company said it had shipped 1.02 million of the (2G)
video-enabled and GPS handsets since the services were launched in
December. The strong start in its visual and high-speed Internet
access services helped KDDI's wireless arm 'au' to regain its spot in
April as Japan's second-largest mobile operator, which it had lost a
month earlier. The No. 2 spot had been held by J-Phone, which stole
that position in March.

COMMENTARY: KDDI looks like it's benefiting from the start of a good,
low-cost (compared to FOMA) 3G network, some cool handsets (see
Viewpoint above) and solid marketing. Now if they could just unload
some of that debt and dump Tu-Ka, they'd have a great little service
on the roll.

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=====================================================================

--> PHS-WLAN Combined Service is Planned
http://www.phsmou.org/articles/TTNetPHSWLan.HTML
Source: PHSMOU.org, April 2002

EXTRACT: Youzan and Tokyo Telecommunications Network unveiled their
alliance with PHS carrier Astel at an April 2 joint press conference.
Mr. Takatori, the president of Yozan, expressed the company's
intention of installing WLAN hotspot equipment in Astel's PHS cell
stations by this autumn. Its goal is to realize a general mobile
Internet service combining PHS, WLAN and paging services.

COMMENTARY: The new service will be dubbed 'Magic Mail Unit' and
offer a 2-Mbps WLAN (802.11(b)) service inside Tokyo's 23 wards
utilizing a network of hotspot base stations. The service area could
be expanded to other cities later in 2003. This will be one more
wireless LAN network, in addition to those planned by NTT DoCoMo and
Yahoo BB.

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=====================================================================

--> Japan Mayday Cellphone Helps Locate Accident Sites
http://sg.news.yahoo.com/020510/16/2p9vh.html
Source: Asia Pulse on Yahoo, May 10

EXTRACT: Japan Mayday Service Co. said Thursday that it will start
offering a new service that enables a subscriber in an emergency
situation to provide rescuers with his or her exact location by using
a wireless phone equipped with GPS. The firm -- jointly owned by such
companies as KDDI, Toyota Motor and Matsushita Communication
Industrial -- already offers an emergency road service to drivers.
But the new service, to be launched June 7, will enable subscribers
with special cellular phones to call from such remote areas as
mountains and the beach so long as they are within a calling area.

COMMENTARY: The service will work via KDDI's cdma2000 1X handsets
equipped with Qualcomm GPS chips, already available under the gpsOne
brand on the 2G cdmaOne network. The service will cost 315 yen
per month.

--> Summerly i-mode from Toshiba
http://www.infosync.no/show.php?id=1804
Source: Infosync.no, May 8

EXTRACT: Later this summer, Toshiba will make available the TS21i
i-mode dual-band GSM/GPRS phone on Dutch, German and Belgian i-mode
networks, offering the NEC N21i some competition. While the
introduction of i-mode in Europe seems to have progressed smoothly so
far, customers haven't had much of a choice when it comes to
handsets. NEC's N21i model was the first model on the market and is
still the only model offered, but later this summer Toshiba will cook
up some competition for NEC. Toshiba has chosen a candy bar design
for its phone, whereas NEC decided to go with clamshell for the N21i.

COMMENTARY: The newest Euro i-mode handset will feature a 256-color
display; dual-band GSM 900/1800 operation; 16-voice polyphonic sound;
180-minute standby time; support for English, French, German,
Italian, Dutch and Spanish; and the T9 predictive input system. The
phone should be available for baby i-modes in Holland, Belgium and
Germany during the second half of 2002. As this news report somewhat
waggishly points out, are the additional language capabilities
related to as-yet-unconfirmed i-mode expansion plans targeting
France, Spain and Italy? Actually, the plans for France are already
public -- NTT DoCoMo will enter into a non-capital partnership with
third-tier operator Bouygues.

===========================ANNOUNCEMENT==============================

WIRELESS WATCH STREAMS!

We now produce a weekly streaming video version of the Wireless Watch
newsletter, courtesy of the media gurus at Video-link.com.

Here's the program lineup for the next two weeks:

May 13 -- This week, we finish up our Killer Interview
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=====================================================================

+++ Events (Advertisements)

The International Computer Association (ICA) and the Japan-America
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----

Carriers World Japan 2002
Tokyo, Japan
10-11 July 2002

With telecom deregulation throwing its doors open to international
players, Japan is experiencing tremendous interest from global
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The event will present road maps to help you navigate your way
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For more information, visit us at:
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=====================================================================

+++ Sign of the Times: Cellphone Scam Preys on Call ID

From the "Don't Call Back Unless You Know it's Phil" Dept.

Last winter, military officials warned of a scam whereby
swindlers randomly call cellphones and, after just one ring,
leave a return telephone number in the phone's memory bank.
Upon returning the call, individuals reached a recorded
message in Japanese, often with sexually explicit material.
Armed with a record of the call, a representative of a bogus
company would call back and ask the cellphone user for an
exorbitant amount of money for having called the phone
service. If the cellphone owner refused to pay, the
representative threatened to tell others of the calls to the
adult service lines.

Pacific Stars & Stripes, May 7
http://www.estripes.com/article.asp?section=104&article=7809&archive=true

=====================================================================
+++ Subscriber Statistics, Corrections, Credits, Administrivia

WIRELESS WATCH EMAIL NEWSLETTER SUBSCRIBERS
2,372 as of May 13, 2002

WIRELESS WATCH VIDEO
Feb 1-28, 2002: 3,796 streams (908 mins/day); 3.2 views/visitor
Mar 1-30, 2002: 4,621 streams (1,557 mins/day); 1.75 views/visitor
Apr 1-30, 2002: 4,750 streams (1,393 mins/day); 1.54 views/visitor

90-day Totals from Feb. 1:
/wireless/index.asp 6,891 (visitors)
Streams: 13,167
Mins/hrs viewed: 113,991 mins/1,899 hrs
Avg. length per visit: 16.5 mins

STAFF
Wireless Watch newsletter and Wireless Watch Video Newsletter
researched and hosted by: Daniel Scuka ( daniel@japaninc.com )

Edited by: J@pan Inc editors ( editors@japaninc.com )

Wireless Watch Video Newsletter produced and edited by: Lawrence
Cosh-Ishii ( video@japaninc.com ) in cooperation with
http://www.video-link.com

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