WW-119 -- Intel Invests in Japan's Wireless MVNOs -- Our Analysis

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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 Japan's Wireless World
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Wireless Watch Newsletter
Issue No. 119
Monday, February 2, 2004
TOKYO

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CONTENTS

@@ Viewpoint: Intel Invests in Japan's Wireless MVNOs --
Our Analysis

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@@ Viewpoint: Intel Invests in Japan's Wireless MVNOs --
Our Analysis

Despite the rapid and glamorous rise of 3G-services, comparatively
mundane PHS services remain popular. Three network providers --
DDI Pocket, DoCoMo and Astel -- have a total of 5.2 million PHS
subscribers. Network coverage has increased in recent years,
making PHS available to more than 90 percent of the population.

Besides voice transmissions, the PHS network is also used to enable
data communications. DoCoMo and KDDI's subsidiary, DDI Pocket,
provide reasonably-priced flat fees for using their packet-switched
PHS network.

The monthly fee for the 128kbps DDI network is 8,430 yen, while the
32kbps option costs only 4,930 yen. And connecting to the Internet
is simple. Just plug a PCMCI-card into your notebook and connect
via dial-up.

MVNOs (Mobile Virtual Network Operators) have now entered the PHS
market. MVNOs buy PHS bandwidth from carriers and resell data
services by adding marketing, branding and value-added options.

A major player in this field is Japan Communications Inc (JCI).
JCI uses the DDI Pocket PHS network. JCI's president is former
Apple Japan CEO Frank Sanda -- an extrovert criticaster of the
old Japan telecommunications establishment.

JCI's b-mobile services offer a flat-fee 128kpbs service,
including PCMCI-card, for a monthly flat fee of 7,500 yen.
B-mobile is a prepaid service: The total cost for the duration
of the service must be paid in full and in advance.

"For consumers, b-mobile is less popular than DDI's service," says
a salesperson at Yodobashi Camera, a major discount electronics
chain based in Tokyo. "Individuals do not like paying the total
cost in advance. On the other hand, corporations actually prefer
b-mobile because of its cheaper pricing and lower administrative
overhead."

JCI also offers combined 128kpbs PHS data communication and
Wi-Fi access at hot spots. And it has secured an agreement with
Wi-Fi hot-spot providers to cover more than 3,000 locations
nationwide. The multi-link service costs 148,000 yen per year.

It is not yet known whether JCI is profitable or not -- or
how many of its subscribers are currently using b-mobile.

But Intel recently invested in JCI, becoming its fourth-
largest shareholder (complete financial details have not
been disclosed.) Intel will help JCI promote its b-mobile
multi-link services, and Japanese PC OEMs will be outfitted
to pre-install b-mobile service software on notebook PCs,
with Intel Centrino's mobile technology.

While we expect Japanese carriers to unveil major flat-rate
3G data communication services this year, significant
opportunities remain for MVNOs. In order to succeed, however,
MVNOs need to evolve from bandwidth resellers to system
providers that enable a mobile working environment.

Is this the future Intel envisions? Stay tuned ...

-- Arjen van Blokland

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STAFF
Written by Arjen van Blokland; Edited by Roland Kelts
(editors@japaninc.com)

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