WW-80

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J@pan Inc presents the Wireless Watch Japan Newsmagazine:

W I R E L E S S W A T C H J A P A N LITE

Commentary on the Business of Wireless in Japan
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Issue No. 80 (Lite Version)
Monday, November 11, 2002
Tokyo

+++ Noteworthy News
--> Japan Cellphone Market Posts Smallest-ever Rise
--> KDDI First-half Tipped to Rise on 3G demand
--> NTT DoCoMo is Streaming Video to Cell Phones
--> Vodafone's Japan Telecom Unit to Merge International Operations
--> Is Nintendo's Future Online?

+++ Subscriber Statistics, Corrections, Credits, Administrivia

================================EVENTS===============================

>> GLOCOM Platform International Forum in Tokyo
Socio-Economic Impacts of Mobile/Wireless Technologies:
Strategies and Policies

November 21 (Th) 13:30-17:30 and Reception, 17:30-19:30
The Japan Foundation, International Conference Room
(ARK Mori Building 20th floor)

This highly relevant seminar features presentations and discussion
panels focusing on the impact of current and new wireless
technologies on society. Program participants include professor
Jonathan Aronson from UCLA; David Isenberg, president of Isen.com;
vice president Shuji Tomita from NTT Communications; and Tim Pozar,
founder of the Bay Area Wireless Users Group as well as leading
researchers, policy makers, and thinkers from Japan and the US.

Admission: free
To confirm your reservation, send mail to: vox@glocom.ac.jp
or telephone: 03-5411-6714
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+++ Noteworthy News
(Long URLs may break across two lines so copy to your browser.)

--> Japan Cellphone Market Posts Smallest-ever Rise
http://www.reuters.com/news_article.jhtml?type=search&StoryID=1702016
Source: Reuters, Nov. 8

EXTRACT: Japan's saturated mobile phone market grew at its slowest pace on
record in October, leaving the big three mobile firms to fight over a shrinking
number of new subscribers. A telecom industry group said on Friday that mobile
phone subscribers grew by 363,900 to 72,444,900 in October -- the smallest
monthly increase since the group began compiling the monthly data in January
1996. The rise was just 65 percent of that seen in the same month a year ago.

COMMENTARY: Yesterday, CSFB telecom analyst Mark Berman said that October
wireless subscriber shares came in at 40 percent for NTT DoCoMo, 38 percent for
KDDI, and 22 percent for J-Phone. KDDI added 640,900 cdma1x subscribers the
"highest [monthly] total ever," according to Berman. J-Phone net adds fell to
just 81,100, down a massive 51 percent year-on-year, while DoCoMo pulled in
145,000 PDC and 6,700 FOMA subs (these unusually low figures may be due to the
market waiting for next month's 504iS series release).

It's widely believed that net adds and handset prices are closely, if not
tightly, inversely correlated. KDDI has the cheapest handsets, so one reason
they're getting the most adds is cost (and not necessarily 3G). Also, price
destruction is already starting for DoCoMo handsets (especially in Osaka) as
everyone starts to anticipate the launch of the enhanced 504iS-series in
December (incl. new camera keitai models). If the prices of the new 504iS-series
were also to fall quickly, one could also suspect that DoCoMo has increased
subsidies. Inversely, continued high prices of DoCoMo and J-Phone cellys likely
indicates that those carriers are slashing subsidies - and at least some
analysts think this is true in the case of J-Phone (will J-Phone/Japan Telecom
profits rise?). Berman concludes with, "The concern of course is whether all
carriers will start to match KDDI in order to generate subscriber growth. KDDI
has insisted that it is going to cut subsidies in the second half - an assertion
we remain skeptical about."

Also, see:

http://www.reuters.com/news_article.jhtml?type=search&StoryID=1700368
UPDATE 1-J-Phone Oct New Users Below 100,000, 1st in 2 Yrs

Note: Take a sneak peek at some new 504iS handsets from a yet-to-be-
released marketing brochure here:
http://k-tai.ascii24.com/k-tai/news/2002/11/07/639764-000.html

----------------------------------

--> KDDI First-half Tipped to Rise on 3G demand
http://sg.biz.yahoo.com/reuters/asia-132954.html#Scene_1
Source: Reuters on Yahoo, Nov. 8

EXTRACT: 3G has been kind to KDDI. Japan's second-largest telecoms operator,
KDDI Corp, is expected to post solid half-year results this week, boosted by
strong demand for its third-generation (3G) mobile phone service. Most industry
analysts focus on the full-year performance of KDDI , which does not provide
guidance for the April-September period. But corporate research firm Toyo Keizai
Inc forecast a group net profit of 14.5 billion yen ($118.9 million) for the
half-year - more than double the 6.7 billion yen net earned a year earlier.

COMMENTARY: In a separate report, CSFB's Berman said that KDDI's cdma1x ARPU was
9,840 yen - 29 percent above the AU division (cdmaOne + cdma2000 1x) average
(although ARPU was 9,610 yen in 2Q - down 8 percent QoQ). This ARPU is lower
than expected, but subscriber growth by March 2003 may be lower than estimated
(leading to lower subsidy costs), so financial year earnings are "likely to be
on target for the full year."

I personally believe that handset attractiveness, pricing, and other factors are
playing a bigger role in KDDI's success than 3G per se, although you can argue
that makers would have had no incentive to improve their models to the current
standards absent the cdma2000 1x network upgrade - so 3G should still get some
of the credit. Time will tell.

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

--> NTT DoCoMo is Streaming Video to Cell Phones
http://www.wirelesssoftware.info/show1news.php/698.html
Source: WirelessSoftware.com, Nov. 11

EXTRACT: M-stage V Live is a streaming service for video that is being provided
by in Japan by cellular network operator NTT DoCoMo. The platform used is NEC's
StreamPro - a streaming content distribution platform. The service distributes
both [live] and archived video streams to PDAs that are connected to
PHS-compatible cell phones.

COMMENTARY: Big D is also using PacketVideo's "pv3 Mobilemedia System," which is
compatible with 3GPP standards and enables distribution of MPEG4-encoded video
files. They are also using the Fujitsu and NMS (USA) "GeoServe SDS" streaming
server system for delivering video to FOMA 3G handsets (do these guys ever
**not** hedge all their bets? Why use two different streaming server systems?).
Watch next week's Wireless Watch Japan Video Newsmagazine for an in-depth look
at the Fujitsu/NMS system.

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

--> Vodafone's Japan Telecom Unit to Merge International Operations
http://quote.bloomberg.com/fgcgi.cgi?mnu=news&ptitle=Technology%20
UK&tp=ad_uknews&T=news_storypage99.ht&ad=uktechnology&s=APc9G2RdOV
m9kYWZv
Source: Bloomberg, Nov. 11

EXTRACT: Starting today, Japan Telecom, a unit of Vodafone, and its Japan
Telecom Network Information Service Co. unit will merge their
international-related businesses.

COMMENTARY: This appears to be a reasonable, if minor, rationalization of Japan
Telecom's business, and I suspect the lash of ROI expectation from Berkshire is
involved. In August, the company said it would sell off part of an engineering
(as in construction) subsidiary to Australian-based construction and real estate
company Bovis Lend Lease in an effort to concentrate on its core
telecommunications business. The Japan Times said the new Bovis Lend Lease unit
would mainly engage in construction of antenna bases for 3G networks.

=============================EVENT====================================
3GMOBILE WORLD FORUM 2003
14-17 January 2003, Tokyo, Japan
As with our hugely successful 2002 event, 3GMobile World Forum 2003
will aim to present a realistic view of the 3G opportunity, and to
provide a platform to transform 3G technology and demand for new high
value services into revenue across Asia-Pacific, Europe and the US.
For further information, visit: http://www.3gmobileforum.com
======================================================================

--> Is Nintendo's Future Online?
http://www.gamesindustry.biz/content_page.php?section_name=new&aid=919
Source: GamesIndustry.biz, Nov. 7

EXTRACT: Within the past fortnight, for example, Nintendo made an application
with the Japanese Patent Office to register a server technology related to
massively multiplayer online gaming. Details of the patent are scarce at the
moment, but it seems an odd move for a company ostensibly not interested in
online gaming. The company dipped its toes into this water relatively recently -
with the unique selling point for Pokemon Crystal in Japan being the ability to
battle or trade creatures over mobile phone links. By all accounts, this
functionality was a resounding success, although it never made it outside Japan,
thanks in no small part to the massive difference between Japanese and western
mobile phone networks.

COMMENTARY: Ironically, this news item states that "In many ways, Internet
access in the west is a lot closer to mobile phones than it is to the broadband
heaven Sony and Microsoft seem to believe in" - primarily due to the fact that
many in the US are still logging on via their trusty 56K modem and enjoying
bandwidth similar to that offered by 2.5G and 3G handsets in Japan. There have
been no killer multiplayer cell-phone games deployed in Japan yet, however, due
to the lack of bandwidth and to the potential cost in packet fees to play a
really splatter-and-guts-intensive round of, say, "Max Payne" on a celly.

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+++ Subscriber Statistics, Corrections, Credits, Administrivia

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