Please take a moment to review our new 5×5.wirelesswatch.jp website. Indeed, The ®evolution Continues. Yoroshiku!
Japan’s mobile carriers aren’t in turmoil — not so far, anyway. But Mobile Number Portability (MNP) has brought the nearest thing yet to a consumer-facing market meltdown, and the No. 1 Agent of Change is undoubtedly Masayoshi Son’s SoftBank Mobile.
The media, industry analysts and Japan Wireless Watchers everywhere have been hit with two sets of numbers in the past fortnight: the initial, media-and-analysts-only post-MNP subscriber churn numbers released on 31 October (one week after MNP start) by NTT DoCoMo and KDDI (SoftBank Mobile was silent), followed by the regular monthly release of overall subscriber numbers issued on 8 November by the TCA Telecommunications Carriers Association; keep in mind that the TCA release is based on self-reporting from the carriers).
Therefore, if the TCA numbers are genuine, SoftBank Mobile (SM) has pulled a modest usagi out of the hat in chalking up a net increase of 23,800 subscribers (on a loss of 255,000 2G subs and a gain of 278,800 3G subs). This boost to Masayoshi Son’s debt-paying customer base makes some of Vodafone Japan’s past months look positively anaemic!
Nonetheless, DoCoMo and KDDI both posted **better** numbers, with increases of 40,900 and a stunning 200,500 each, respectively. In fact, SoftBank Mobile’s overall 2G+3G subscriber base is little changed from April 2006!
In October, KDDI was clearly the not-to-be-beat winner in the first month in which consumers can switch carriers without loosing their phone number (but say Goodbye to that keitai email addy).
We can safely assume that most of SM’s 2G losses defected to KDDI (predominantly) and DoCoMo, while gains came from new market entrants and churn from other carriers, all attracted by the highly aggressive pricing on SoftBank right now: free calling within the network and free email to/from anywhere, plus additional discounts and reduced monthly fees for the first half-year.
But overall raw subscriber growth is not the most significant factor. Kieran Calder, telco analyst at CLSA Asia-Pacific Markets, an investment house, made several good observations in his newsletter last week:
“For example, KDDI/au is a net gainer so far, but is subsidizing handsets by 37,000 JPY per gross addition. This is about six months of ARPU, so two quarters until break-even, if margin was 100% (which of course it is not…)”.
He warns: “Watch margins, NOT market share.”
On 8 November, SoftBank told media and analysts they had, so far, lost 23,900 through MNP (port-in 31,100; port-out 55,000) but had a non-MNP gain of 47,700 (gross adds 192,100; non-MNP churn 144,400).
My overall impression from walking around Akihabara yesterday was that SoftBank is indeed putting on a big push at retail to boost raw head count but may be incurring a large cost to do so. There were SB Mobile sales reps at the front and center of many retail shops and my guess is that they are paying a lot into the retail chain to obtain beneficial product placement.
I’m also certain that SoftBank’s massive Cameron Diaz ad blitz (her rather stunning face is all over Shibuya) is helping drain the bank.
And while SoftBank has recently reported strong overall profit growth, mobile ARPU was still only 5,700 yen in the July-September quarter (up slightly from 5,590 yen in 1Q2006).
So if SoftBank Mobile’s cost to gain a customer is equal to KDDI’s (and it is probably higher, considering Cameron), it will still take roughly seven months (or more) to earn back.
November will be the first full month for MNP and DoCoMo have just rolled their very sexy new 903i-series (all equipped with GPS for the first time). Can Son keep his margins under control as the MNP war heats up in coming months? Time will tell…
Mobile Intelligence Japan (MIJ) Mission to Tokyo, 12-17 November
It’ll be a little quiet on the WWJ site this week as we run through the MIJ4 mission!
The final MIJ agenda includes a fantastic line-up of companies and individuals working at the center of Japan’s mobile ecosystem; during our 5-day programme, we’ll visit mobile service providers, content providers, application developers, local users and media, as well as catch up with a lot of mobile folks at tonight’s MoMo at the Canadian embassy (which is shaping up to be one of the best MoMo’s ever based on the 300+ registered attendees as of this AM).
WWJ’s digital media director Lawrence Cosh-Ishii and I will, nonetheless, post our regular news and commentary updates even if we have to burn late-night candles (… over the one or two glasses of umeshu).
Some sage advise when entering new turf; Stop, Look and Listen.. it’s also good to secure a local guide. Japan is the cradle of mobile civilization – we have been dedicated to this space since 2001 – trust our archives here offer some useful material.
Domestic activities continue to set the pace, and sharp players are looking at global markets. We have hard-earned industry expertise and trusted network of contacts with access to advanced intell. and potential deal flow. Need a lift.. Ok, buckle-up!