JIN-224 -- NTT Tightens Death Grip on Competitors

J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the Week's Business and Technology News

Issue No. 224
Wednesday, April 23, 2003


++ Viewpoint: NTT Tightens Death Grip on Competitors
++ Noteworthy News
- Wal-Mart Begins to Reshape Seiyu
- E*Trade, Other Online Brokers Hit Hard by Slump
- NTT Sets Sights on Fiber-Optic Internet Phone Services

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++ Viewpoint: NTT Tightens Death Grip on Competitors

Heisei Denden is doing its best to bring down the cost of making phone
calls in this country. It now charges just 6.8 yen per three minutes
for fixed-line phone calls anywhere in Japan. That's cheaper than the
Internet phone services on the market. But Nippon Telegraph and
Telephone is hoping to choke competitors like Heisei Denden into
submission with a hike in interconnection fees that the telecom
ministry approved Tuesday, according to Japanese media reports.

The NTT rate hikes, which would be in effect from this month for the
next two years and average 5 percent, are likely to severely crimp the
business of discounters like Heisei Denden. Surely, that is their
intention. Some firms plan to bring a lawsuit to fight the rate hikes,
but while that plays out in Japan's notoriously plodding court system,
discounters will probably be forced to raise rates.

Heisei Denden has long fought the practice of charging exorbitantly
for fixed-line-to-cellphone calls. It now offers a plan that charges
49.5 yen per three minutes for those calls, which is the cheapest
we've seen. While it has negotiated with cellphone carriers, who fix
the rates on fixed-line-to-cellphone calls, it has faced an uphill

Heisei Denden won't win the battle for cheaper phone calls if the
negotiations stay in the back rooms of government ministries and large
telecom companies. It just doesn't have the clout. But there is
evidence that a massive PR campaign to win the "hearts and minds" of
Japanese consumers, to use a current phrase, may resonate. A recent
poll released by the telecom ministry shows that consumers are getting
fed up with their cellphone bills. A full 85 percent think that
cellphone charges are "expensive," according to the survey, and 88
percent complained about fixed-line-to-cellphone charges. Yet just 52
percent realized that it was the mobile carriers that fix the charges
on those calls. The survey of 1,000 people was conducted in January.

If Heisei Denden and other telecom companies offering discount prices
pool their resources, maybe they can launch a PR campaign to shame the
NTT empire and the other mobile giants into allowing cheaper rates.
That is supposed to work in this country, isn't it?

-- Bruce Rutledge

Editor's note: We will not publish next week due to the Golden Week

From the Asahi Shimbun (in Japanese)

Heisei Denden discount plan

Nikkei Net (subscription required)

"Conspiracy Theories: Some Calls Are More Equal Than Others," from our
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** Wal-Mart Begins to Reshape Seiyu

In Brief: Retailer Seiyu, swamped by 90.8 billion yen in losses in the
year through February, will adopt an executive committee that conforms
with US corporate governance practices and offer stock options to some
employees, the company reported this week. The changes show the
increasing influence of Wal-Mart, which has controlled 37.7 percent of
Seiyu's shares since December

Commentary: Wal-Mart may still elect to control up to 66.7 percent of
Seiyu's shares per their deal last year. The Japanese retailer has
become the second prominent company, following Sony, to adopt US
corporate governance standards recently -- something that has become
possible due to Commercial Code revisions.

Seiyu expects a return to profitability this fiscal year. When
Wal-Mart first struck a deal with Seiyu, the world's largest company
seemed tentative, and no one new what it had in store for Seiyu. Now
Wal-Mart is making bolder steps and its Japan experiment is unfolding

The Financial Times

"Martha, Wal-Mart and the Next American Invasion," from our July 2002

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** E*Trade, Other Online Brokers Hit Hard by Slump

In Brief: E*Trade Japan reported this week group losses of 2.23
billion yen for the year through March, according to media reports.
That follows the fourth straight year of losses reported by online
broker Monex. E*Trade Japan said it lost money on the weak
securities-related business in Japan and a valuation loss in its share
of E*Trade in the US. The online broker reported a 44-percent drop in
underwriting commissions.

Commentary: More bleak news for stock traders in Japan. In this week's
Money Watch newsletter, Darrel Whitten characterized the markets this
way: "There may be a few interesting 'punts' in Japan, but Japan
continues to be the playground of hedge funds, restructuring
funds and private equity."

From the Nikkei Net (subscription required)

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** NTT Sets Sights on Fiber-Optic Internet Phone Services

In Brief: In its three-year business plan released this week, NTT says
it will begin to offer Internet telephone services through fiber-optic
networks in the next three years. NTT is choosing not to jump into the
ADSL fray, saying that fiber-optic services will prove to be more
reliable in the long run. It plans to build a fiber-optic network and
allow videophone users to connect with users of NTT DoCoMo's 3G
services as well.

Commentary: Significant news here. The battle lines have been drawn
both in the short (see this week's viewpoint) and long term.

From the Nikkei Net

"Booming IP Telephony Challenges NTT's Telecom Empire" from our March

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Written and edited by J@pan Inc staff (editors@japaninc.com)


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