DoCoMo Strategic Shift – Smart Life Partner
DoCoMo Strategic Shift – Smart Life Partner

DoCoMo Strategic Shift – Smart Life Partner

DoCoMo Strategic Shift – Smart Life Partner

DoCoMo is always an interesting player to watch, and not just by comparison within our domestic market. Recently they made a clear ‘Mid-Term Vision’ statement shifting focus towards a so-called ‘Lifestyle Services’ company. Fair guess at first-blush on this for most folks overseas would be somewhere between ‘sure, nice PR speak’ and ‘good luck with that’ based on experience with their own local telcos. However, for those who have paid attention, again not just in Japan, the increasing action in OTT (as noted *importantly* below) and the 4th Wave concept are well upon us here.

Quick note off the top; I’ve been wanting to write this for awhile now, always hectic here, it’s a worthy topic that will be difficult to do justice with narrow window of time available to dedicate for the actual task required. Also, Yes, I know the official name is now DOCOMO in all-caps.. label me old-skool as the upper-lower case game is long hard-wired into the keyboard.

For starters, strongly suggest reviewing their latest Annual Report [.PDF], plenty of material to get your head around. The company has always been a trail-blazing operator, an extensive fact list too long for this space, the point being this move has already been coming underway for some time. While we could point to official press release “opening sentence” examples Before and After this new business year, it’s easily found in the wide range of JV’s they have lined-up. Whether it’s Healthcare or Travel, Automotive or Retail, they have increasingly put fingers into pretty much every real-world segment you can imagine. The Holy Grail is o2o (online to offline) with dMarket platform showing 11x jump from the previous year, booking $5.3Bn in revenue from new fields in 2012.

Next, let’s clear the air on this OTT noise, from the Japan perspective. Messaging, as one disruptive example elsewhere, has always been ‘essentially’ free here. Simply put Jpn telcos are ‘the top’ and have created a significant range of the value-added services generally left to 3rd parties in other markets. If (when) a new player brings something interesting to the table, local operators generally embrace them as their model has historically focused on providing great service(s) while encouraging subscribers to buy flat-rate data plans and lock-in recurring long-term revenues. From Enterprise to Entertainment, let alone R&D and Big Data, they have all made serious and continued efforts to ensure compelling bits in the pipe.

Now.. *importantly*: I have yet to mention one of the most valuable verticals, payments. Back in the day, read: 2004, DoCoMo did the world 1st commercial NFC deployment. Naturally, as with many other segments already mentioned in passing here, the company has vested stock interest in Sony FeliCa, the enabling tech, and within 2-years had completed arrangements with regulators for a banking permit. In April of 2006 DoCoMo rolled their branded iD platform, along with DCMX, links for overview on those offerings via footnote below. As stated in their IR material released March 2013; there are now 479,000 installed iD reader terminals in Japan with 18M iD subscribers, plus combined total of subscriptions to various DCMX services at almost 14M, representing 25-30% adoption by the DoCoMo only customer base of 61M. I should note that despite all the Mobile Wallet Buzz, and this “iD” brand name.. we still don’t have official drivers license on our phones.. yet.

This 2010 survey, by most reputable CIAJ, revealed 16% of all demographics, male – female, city – country, teens – seniors, were Daily Active NFC tap & go users. Flash forward a few years now and imagine males aged 20-40 in Tokyo; whether by rail, taxi, bus via vending machines or 7-11 (etc) these quick and simple small change transactions have become a common routine in our daily life. To be clear, this activity is by no means unique to DoCoMo users. By about now some of you might be thinking “why the telco”.. Ok, fair enough: how about Trust, Convenience and security. They already send me a bill every month, know who I am, so just tack-on those little extra expenses. The functionality is already pre-installed, good to go out of the box, and after all these years there has never been a (published, successful) hack of the Sony FeliCa NFC platform. It.Just.Works.

Finally.. here’s some juice: DoCoMo CEO Kato-san did sit-down interview [Jpn] where he stated they would make that exclusive iD solution available to all mobile customers in Japan, Regardless of Which Telco they were on, in effect a Telco going OTT of other Telcos! We have seen certain plays, in music and gaming for example, which were built and deployed under a single carrier and soon spun out – to full market scale – but never a long-established and branded payment solution. According to his comments they target November this year for the ubiquitous offering to go live here.. would love to hear of any other examples of this approach happening in another market – I’m pretty easy to contact.

Meanwhile.. Yes, DoComo reported negative churn at 0.8% losing 1.4M customers to the MNP (mobile number portability) war in last fiscal.. a good bet the corp. suite at Sanno Park Tower is not happy about that. However, TCA stats show net subs gain of 400k YoY from FYE 2012 to 2013, clearly they will pursue this new ‘Vision’ and adjust accordingly. As speculation continues on if/when DCM will carry the iPhone, the topic goes back ‘many’ years; following the not so weak signals it still seems not likely, while anything is possible, it’s a deep-water topic that deserves a dedicated post, someday**. I will say just for fun, maybe less surprised to see them take baby-steps with ipad as it’s that ‘mobile’ unit, with a SIM card, offered via the competitors which appears to be driving the penetration per capita here to +106%, just sayin.

In closing, of course the evolution of networks will continue to be core business, interesting to note that DoCoMo claims #4 position with +200 ‘essential’ patents for LTE while no other telco worldwide ranks in top 10, and devices are ‘the’ end users physical connection to a data world. We’re down to the service layer now, icing on the cake, where all the major opportunity action is and will be ‘growing’ forward. As always, it will be interesting.. and we’ll be watching!

Lars Cosh-Ishii

Filed Under: Editors Note

**Addendum Sept. 10th @18:00 JST

Ok.. since the ‘actual’ news on this ‘DoCoMo iPhone’ soap-opera is coming up fairly soon, and I have a few minutes, will add a few quick thoughts here finally. I’ve had a some time to troll through the Japanese interwebs, paying close attention to comments from several longtime industry veterans, summarized their key points below.

For starters.. nobody with a hard-earned reputation is staking clear up/down on this. Certainly making a definitive call is God/Dog business.. yet all considered, I still lean towards “No” at least for the 2013 calendar year. However, here are a few points that stood out, obviously we tire of the ‘boy calling wolf’ countless times since 2008.

– Subscriber Wars: DoCoMo has lost a total of 6% market share since the introduction of iPhone in Japan 5-years ago. Considering the natural tendency of incumbents with +50% market share to lose subs base over time, especially with low-cost competitors, it’s not such a huge surprise and stocking the iWhatever might not make much difference.

– NTT Resonant, member of same NTT DoCoMo group, already imports the iPhone5 from Hong Kong in bulk and provides (albeit 3G only) DoCoMo network sim. There are ‘certain synergies’ within the empire to consider.

– Personnel changes; since the board shuffle by DoCoMo in June, one of the main people who was strongly opposed to the iPhone integration (Nagata-san) is now running Kansai. He’s founding chair of the Tizen Foundation, devices we do expect to see yet this year.

– Issues related to minimum volumes; if the so-called 30% ratio is required, that would be 20M units for DoCoMo by subscriber base and considered difficult target to achieve.

– If you really do follow this, external branding and internal pre-installs are a huge issue for both sides. Also considered ‘difficult’ especially related to iTunes vs. dMarket (etc) and impending change of SP Mail to become DoCoMo Mail.. are just two simple examples.

– Network connectivity; it seems DCM has been testing in the 2GHz range, the clear desire from most locals to have DoCoMo iPhone is the network, can the company handle that expected bump from the heavy users targeted to switch-over?

– Interesting quote by Takashi Tanaka, President of KDDI, at recent press conference about the network of au, commented: “We are preparing to assume that the iPhone will be released from DoCoMo” although no timeline forecast.

– No mention by anyone I’ve seen online related to Patent issues, though have heard multiple times over the years from several sources, that the negotiations between these two titans had stalled based on some quid-pro for (global) DCM portfolio.. not likely.

From my personal perspective, DoCoMo would not take this avenue at least partly based on pride. Big D built the imode model that Apple now follows: design the handsets, control the offerings on-deck, take (10%) revenue share from platform created. The company has demonstrated ‘smart-pipe’ approach going back to the JV with Dentsu (D2C) in 2000, the ‘original’ mobile marketing agency. The list of partnerships, to out-right ownership, is exhaustive; from music with Tower Records to Television with TBS (not too mention the acquisition of PacketVideo), Payments with Sony NFC, Happy Mart (etc) convenience stores, Healthcare with Omron and Travel with JTB. I could go on, however the point is: having real-world touch-points with demonstrated revenues and real-user Data ‘may’ also be ‘difficult’ as an Apple dumb-pipe yet a key consideration for DoCoMo going forward. Perhaps a deal with Apple would open the door to rolling the iD App play OTT as noted above..!?!

As my original basis of this post noted; the Strategic Shift to a Smart Life Partner is about enabling o2o opportunities and, like we saw with OHA – which built Android, I’d rather put my bet on DoCoMo following open-standard solutions with the Tizen future. Will they pull the trigger, who knows.. maybe, guess we’ll all see soon enough. Meanwhile, as Noted Here on Sunday, would rather focus energy on facts. Come what may. [12-hours later: It’s Official]

Full iD and DCMX announcement day materials in English: April 4th, 2006 (presser – video)