docomo (report and analysis)

(c) 2014 Eurotechnology Japan KK www.eurotechnology.com NTT Docomo (Version 29) May 13, 20141
Version 29 of May 13, 2014

!
by Gerhard Fasol PhD, Eurotechnology Japan KK

http://www.eurotechnology.com/

fasol@eurotechnology.com

this is a free version of the report with selected pages.

purchase and download the full report here: http://www.eurotechnology.com/store/docomo/
NTT DOCOMO

EXECUTIVE SUMMARY
• Docomo pioneered many mobile communication services, and created the first successful mobile internet, i-Mode
which was introduced on February 22, 1999.With i-Mode and mobile Java applications and the “official i-Mode Menu”
Docomo created a mobile eco-system very close to Apple’s and Google’s Android ecosystem, but based on a packet
switched 2G network. Docomo then built the first and most advanced 3G mobile network globally. For this pioneering
work, Docomo was globally admired, and in the expectation of global growth, Docomo achieved very high market
valuations.

• However, Docomo did not succeed to build global business of any scale based on i-Mode or other successes. Docomo
invested in KPN-Wireless,AT&T-Wireless,Three/Hutchinson, and introduced i-Mode to many countries all over the
world from USA, many EU countries, in Russia and Australia, however, most of these investments failed and were written
off at large losses, approximately US$ 10 billion losses in total. In March 2014, Docomo announced to terminate
participation in a joint venture withTATA in India, withdrawing from India.

• That said, today with approx. 63 million subscribers, steady annual revenues ofYEN 4500 billion (US$ 45 billion) and
steady annual net income ofYEN 500 billion (US$ 5 billion) is a stable, very successful and admirable mobile operator,
one of the world’s most important.

• However NTT-Docomo has now been overtaken in terms of global number of subscribers, annual revenues, operating
income and net income by the SoftBank Group.

• What will the future bring? I think Docomo has a choice of either remaining a mainly Japanese domestic operation, in
which case we can expect Docomo’s revenues and income to slowly fall in tune with Japan’s falling population numbers,
or on the other hand, if Docomo follows SoftBank’s example, Docomo could also use Japan-know-how to make
acquisitions outside Japan. However in that case, Docomo will need to find ways of making overseas investments
successful.
2

NTT-DOCOMO REPORT -VERSION OVERVIEW
3
Version Date Revision and comments
1 started as i-Mode report
2
3
4
5 August 26, 2003
6 June 15, 2004
7
8 October 4, 2004
9
10
Subscribe to this report, and we will regularly send you the latest versions.

!
subscription, monthly payment, you can end the subscription any time (no refunds):

!
subscription, annual payment, you can end the subscription any time (no refunds):

4
11 started as i-Mode report
12 January 22, 2005
13
14
15
16 January 2, 2006
17
18
19
20

!

!

5
21
22 January 22, 2009
23 May 18, 2009
24 May 20, 2009
25 June 1, 2009
26
27 December 13, 2010
28 January 6, 2011
29 May 12, 2014 update, reformat
30

!

!

LICENSE
6
Thank you for purchasing licenses to our reports, and for your cooperation with our licensing conditions.

Only through your purchases can we continue to produce high-quality market reports from Japan

!
INTHE CASE OF SINGLE LICENSE: If you have purchased a single copy license of this report, you are not permitted to copy this report except for a single back-
up copy

!
INTHE CASE OF CORPORATE LICENSE: in the case that your company has purchased a corporate license, you may distribute this report inside your company
including protected corporate information servers locked to the outside, but you cannot distribute this report outside your company

!
ANNUAL SUBSCRIPTION: we offer annual subscriptions for a particular report, and also for all our reports in one single transaction at a great discount - please
contact us for details. Corporations subscribing will receive all updates at the time of publication, so that you can be sure to have the latest up-to-date information

!
This research report comes without any warranty of any kind.The authors and Eurotechnology Japan K. K. do not warrant that the information in this report is
without error, nor that the information serves any particular purpose. For legal advice please consult properly licensed legal professionals, for investment advice
please consult properly licensed ﬁnancial advisors.Trademarks mentioned are the property of their owners. 
Eurotechnology is a trademark or registered trademark in Japan and other countries.

AGENDA
• Japan’s telecom industry – overview

• NTT and NTT-DoCoMo

• Financial results

• Wireless markets

• market shares, subscriber numbers and trends

• Spectrum allocation and base stations

• 3G

• Handsets

• The i-mode eco-system

• “Ofﬁcial” and “un-ofﬁcial” (“katte”) i-Mode sites

• Search on i-Mode

• Mobile music on i-Mode

• Mobile games

• Mobile commerce

• Mobile banking

• Mobile payments and keitai-credit

• Mobile media and information

• Mobile manga and e-books

• Messaging and email

• E-moji

• Advertising and marketing

• Why is i-Mode so successful in Japan?

• Summary
7

NTT-DOCOMO
8

NTT docomo docomo = do communications over the mobile network
Founded
August 14, 1991 as NTT Mobile Communications Planning Co.

April 1992 named NTT DoCoMo, July 1993 split from NTT
Founder
Headquarters Tokyo
Stock Exchange
TokyoTSE 9437 (IPO: October 22, 1998),

NYSE: DCM (IPO: March 2002), LSE: NDCM (IPO: March 2002)
Consolidated sales YEN 4240 Billion (US$ 47.5 Billion) (FY2011, ended March 31, 2012)
Number of employees 23,289, consolidated (March 2012)
Major share holders
NTT (66.65%) (since Japan’s Ministry of Finance owns 32.6% of NTT,
the Ministry of Finance owns 21.7% of NTT docomo via NTT)
Major business areas mobile communications

HISTORY OF NTT-DOCOMO
•July 1, 1968: NTT starts “Pocket Bell” Service, paging service

•December 3, 1979: NTT starts car telephone service (mobile phones in cars)

•November 1985: NTT sets up “mobile telephone business division”

•October 1988: NTT mobile communications KK regional companies founded

•1990-1993: regional NTT mobile communications companies formed and
restructured

•October 22, 1998: NTT mobile communications network KK (エヌ・ティ・ティ移
動通信網（株）), IPO onTokyo Stock Exchange

•April 1, 2000: Company name changed to NTT Docomo

•October 1, 2013: ofﬁcial company name changed to 株式会社NTTドコモ (KK NTT
Docomo)
10

STATE OWNERSHIP OF NTT AND NTT DOCOMO
•as of March 31, 2012, the Japanese State via the Ministry of
Finance owns 32.6% of the NTT Holding company, Nippon
Telegraph andTelephone Corporation (NTT Corporation).

•NTT Corporation owns 63.32% of NTT Docomo.

•Thus the effective State ownership of NTT Docomo via NTT and
via the Ministry of Finance is 20.64%
11

DOCOMO WITHINTHE NTT GROUP 
 
NIPPONTELEGRAPH ANDTELEPHONE
CORPORATION
12

NTT
• Founded April 1, 1985 as a result of privatizing the nationally owned telephone operations

• One on of the world’s largest telecommunications companies

• Largest share holder:The Government of Japan

• Discussions about reform of the group structure are continuing

• Major NTT Group companies

• NTT Communications (100% owned by NTT)

• NTT East (100% owned by NTT)

• NTT West (100% owned by NTT)

• NTT DoCoMo (65.3% owned by NTT)
• NTT Data ( 54.2% owned by NTT)

• Other companies

• NTT Business Associe

• NTT Electronics

• NTT AdvancedTechnology

• NTT Facilities

• NTT Leasing

• NTT Urban Development

• NTT Advertising

• NTT Comware

• NTT Software

• NTTAFTY

• NTT Resonant

• and many more
13

COMPARING NTT-DOCOMO AND NTT MARKET CAP
•NTT is traded on theTokyo Stock Exchange (Code 9432), and on
May 12, 2014, NTT’s market cap isYEN 6498.5 billion.

•NTT owns 63.32% of NTT Docomo.

•NTT Docomo is traded on theTokyo Stock Exchange (Code
9437). On May 12, 2014 NTT Docomo’s market cap isYEN
7154.2 billion.

•Subtracting the value of NTT’s share of NTT Docomo (63.32% x
YEN 7154.2 billion) from NTT’s market cap (YEN 6498.5 billion)
we obtain:YEN 1968.46%.

•Thus on May 12, 2014, about 70% of NTT’s market cap is the
value of NTT’s holding of NTT-Docomo - thus NTT-Docomo is
the most valuable part of the NTT Group.
14

DOCOMO’S MARKET LANDSCAPE: 
JAPAN’S MOBILE INDUSTRY
15
For a general report on Japan’s telecom industry see:

http://www.eurotechnology.com/store/jcomm/

DOCOMO’S FINANCIALS
COMPAREDTO JAPAN’S
COMPETING MOBILE OPERATORS
19

ANNUAL NET (AFTERTAX) INCOME OFTHETOPTHREE CARRIERS
•NTT-Docomo’s net income peaked around 2005, and has been falling rapidly following the peak in 2005.
Recently, net income has stabilized.

•SoftBank through rapid growth of net income has recently exceeded NTT-Docomo in terms of net income.

•NTT-Docomo’s losses during the 2001-2003 period are about US$ 10 billion in total, and are due to writing
off failed investments in KPN-Wireless,AT&T Wireless, and Hutchinson Wireless during the “telecom bubble”.
22
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
200
0
200
400
600
800
annualnet
incomeyearYENBillion
Annual net income of Japan's mobile operators in YEN Billion
DoCoMo
KDDI
SoftBankVodafone Japan
US$ 2 Bill
US$ 4 Bill
US$ 6 Bill
US$ 8 Bill
iPhone
SoftBank
July 11, 2008
iPhone 4S
KDDI
Oct 14, 2011
i Mode
Feb 22, 1999
iPhone 5
Softbank KDDI
Sept 21, 2012
c2014EurotechnologyJapanKK
www.eurotechnology.com

QUARTERLY FINANCIAL RESULTS 
DOCOMO COMPAREDTO
COMPETITORS
23

QUARTERLY NET INCOME
• NTT-Docomo achieves regular quarterly net income on the order ofYEN 120 billion (US$ 1.2 billion) per quarter.

• While annual net income is fairly stable, there are strong ﬂuctuations in quarterly net income data, caused by investment ﬂows,
handset purchases, the big peak in new handset purchases and new subscribers registrations in March of each year and other factors.
26
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
100
0
100
200
300
netincomequarterYENBillion
iPhone
SoftBank
July 11, 2008
iPhone 4S
KDDI
Oct 14, 2011
Quarterly net income loss of Japan's mobile operators
DoCoMo
KDDI
SoftBank
Vodafone Japan
US$ 1 Billion
US$ 2 Billion
iPhone 5
Softbank KDDI
Sept 21, 2012
SoftBank acquires
Vodafone KK
March 17, 2006

DOCOMO’S MARKET POSITION: 
SUBSCRIBER NUMBERS AND MARKET
SHARE 
29

MARKET SHARES
• NTT-Docomo currently has a market share of approx. 40.8% in terms of subscription numbers in Japan’s mobile communications market

• NTT-Docomo’s market share is continuously falling, e.g. market share dropped from 42.0% in April 2013 to 40.8% in March 2014, one
year later.

• All carriers are looking outside Japan for growth, however most major overseas investments by NTT-Docomo have failed and NTT-
Docomo has withdrawn from most major overseas investments and often also written off the investments.
31
DoCoMo 40.8
KDDI UQ 28.9
UQ
SoftBank eM Willc WSP 30.3
eMobile
Willc.WSP
Mobile Operator group market shares March 31, 2014
DoCoMo 42.0
KDDI UQ 28.7
UQ
SoftBank eM Willc WSP 29.3
eMobile
Willc.WSP
Mobile Operator group market shares April 30, 2013

DOCOMO IS CONTINUOUSLY LOSING MARKET SHARE
• Docomo’s growth of market share has been continuously in the red since 2010, Docomo is losing market
share.
36
Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015
0.004
0.003
0.002
0.001
0
0.001
0.002
0.003
monthly
changeofmarketshare
Growth fall of subscriptions market shares of Japan's mobile operators
DoCoMo
KDDI
SoftBank
eMobile
Willcom
UQ
iPhone 4S
SoftBank KDDI
Oct 14, 2011

DOCOMO’S SPECTRUM AND BASE
STATIONS- 
HOW MANY BASE STATION DOES
DOCOMO DEPLOY?
37
More details and frequent updates of Japan’s base station markets in our

J-COMM report series:

http://www.eurotechnology.com/store/jcomm/

LTE
47

DOCOMO’S SERVICES
50

DOCOMO SERVICES
• Docomo has a long tradition and much experience in developing services tuned to the needs of
Japanese customers

• Since February 22, 1999 Docomo operated i-Mode mobile internet services based on “Galake”
traditional Japanese-only handsets.

• With the emergency and success of smart-phones Docomo developed a suite of services which are
tuned to smartphones and can replace some of the functionality of i-Mode, and generate corresponding
income for Docomo, and provide services tuned to the preferences of Docomo’s Japanese subscribers.

• Docomo does not hesitate to market these services quite intensively, for example when customers
approach Docomo stores for handset repairs, handset replacements, upgrades and at other
opportunities.
51

DOCOMO’S PHONES

(TRADITIONAL JAPANESE
“GALAKE” PHONES)
53

“GALAKE” PHONESVS SMART PHONES
• For many years Docomo’s the control of handsets was a core part of Docomo’s business model.

• Docomo dictated the specifications of handset to four core handset makers, and to a number of other Japanese handset
makers. In the 1990s there were about 17 Japanese mobile phone makers competing for Docomo’s favor, and access to
Docomo’s customers. Docomo purchases the handsets from manufacturers and then sells the handsets to Docomo
customers. Handsets are specific to Docomo’s requirements, include DoComo-specific services such as i-Mode, and were
locked to Docomo’s network. Handset makers created beautiful “Japan-only” Galapagos - islands keitai = “Galapagos keitai”
= Galake.

• This model could work as long as the main value of mobile phone handsets was hardware, and software was a minor issue.
However, smartphones are are computers, where the main value consist of the software, and the developer community,
and the application development platform, and where global scale is necessary to spread costs and developer communities.

• Docomo had some of these components in place with i-Mode, and provided an excellent demonstration of the potential
of the mobile internet, but Docomo and Docomo’s suppliers lacked global scale, depth of software development
capabilities, and lacked the support of a global developer base.

• Docomo attempted for a long time to escape a relationship with Apple, where Docomo would be the junior partner.
Docomo as the incumbent in Japan, has never been the junior party to anyone in Japan, except maybe to majority
shareholder NTT. Docomo subscribers started to vote with their feet, and in order to stop the loss of subscribers to
competitors, Docomo in autumn 2013 finally started to offer iPhone 5s and iPhone 5c.

• Today still a large fraction of handsets are very advanced, but old-style “Galake” mobile phones, and slowly but surely
subscribers move over to smartphones.This is transition from very advanced Galake feature phones to smart phones is
slow but steady.

• In the following sections we will explain some of Docomo’s Galake phones.
54

DOCOMO’S 900I SERIES
• This photograph shows DoCoMo’s 900i series in
October 2006

• The 900i FOMA series are DoCoMo’s top line
handsets, most include FeliCa chips for mobile
payment, and increasingly also GPS.

• Street prices are usually in theYEN 20,000-YEN
30,000 range including subsidies, higher for the newest
models, and lower for older models, and when
discounts are applied.

• Manufacturers are:

• NEC

• Panasonic

• SHARP

• SONY-Ericsson

• Mitsubishi Electric

• Fujitsu
55

DOCOMO’S NEW SERIES
58

DOCOMO’S NEW HANDSET
SEGMENTATION IN FOUR SERIES
• Smart

• Style

• Pro

• Prime
59

DOCOMO’S SEGMENTS: STYLE / PRIME / SMART / PRO
• From autumn 2008 DoCoMo introduces a new segmentation for handsets
60

PHONES FORTHE SILVER MARKET
61

THE I-MODE ECO-SYSTEM
64

I-MODE IN A NUT-SHELL:
• i-Mode’s portal reminds of elements of AOL’s portal services. i-Mode gives access to the open internet
+ to DoCoMo’s i-Mode portal services
68
Menu-List Weather & News
Weather
i-Menu
(Macromedia
Flash Format)
inside Camera
for video-calls and
self/group-portraits
(c)2004EurotechnologyJapanKK

THE I-MODE USER INTERFACE 
ANDTHE I-MODE DIRECTORY HIERARCHY
71

THE “OFFICIAL” I-MODE MENU LIST
82

“NON-OFFICIAL” (“KATTE”)  
I-MODE SITES
86

THE ENGLISH I-MODE MENU
88

SEARCH ON I-MODE
90

MOBILE MUSIC ON I-MODE
93

CHAKU-MELO (RING-TONES) ON I-MODE
99

CHAKU-UTA (TRUE-SOUND) ON I-MODE
102

MUSIC SALES AND MUSIC INFORMATION  
ON I-MODE
106

MOBILE GAMES
111
More about games, mobile games and Japan’s games sector:

http://www.eurotechnology.com/store/jgames/

DOCOMO PROMOTES SQUARE ENIX
119

TRANSACTIONS, BANKING, M-COMMERCE, 
AND M-PAYMENTS
120
More about mobile payment and mobile transactions:

•http://www.eurotechnology.com/store/mobilepayment/

•http://www.eurotechnology.com/store/walletphone/

•http://www.eurotechnology.com/store/suica/

•http://www.eurotechnology.com/store/cmode/

MOBILE AUCTIONS
133

DOCOMO’S  
STRATEGIC INVESTMENT IN  
RAKUTEN AUCTIONS
135

PHONES ASTRAINTICKETS
• For more information on mobile phones as train tickets:

• http://www.eurotechnology.com/store/suica/
138

MOBILE BANKING
• For more information on mobile money and mobile banking, see: http://www.eurotechnology.com/store/mobilepay/
140

TOKYO-MITSUBISHI-UFJ  
MOBILE BANKING AND EDY
141

MOBILE PAYMENTS AND  
KEITAI CREDIT IN JAPAN
• For more information on mobile payment systems see:

• http://www.eurotechnology.com/store/mobilepay/

• http://www.eurotechnology.com/store/suica/
151

MOBILE MEDIA AND INFORMATION
• For more about Japan’s media sector

• http://www.eurotechnology.com/store/jmedia/
158

MOBILE MANGA AND BOOKS
• For more about Japan’s media sector

• http://www.eurotechnology.com/store/jmedia/
163

LOCATION BASED SERVICES (LBS)
• For more about location based services (LBS) in Japan:

• http://www.eurotechnology.com/store/location/
167

I-MODE EMAIL AND MESSAGING
173

E-MOJI
176

ADVERTISING AND
MARKETING ON I-MODE
179

MOBILETV
• More on MobileTV in our mobileTV report:

• http://www.eurotechnology.com/store/mobiletv/
187

BEETV
• More on MobileTV in our mobileTV report:
http://www.eurotechnology.com/store/mobiletv/
191

ADVERTISINGTHE START OF BEETV
192

WHY WAS I-MODE SO SUCCESSFUL IN
JAPAN?
197

SUMMARY
202

SUMMARY
203
• With approx. 63 million subscribers, steady annual revenues ofYEN 4500 billion (US$ 45 billion) and steady annual net
income ofYEN 500 billion (US$ 5 billion) is a stable, very successful and admirable mobile operator, one of the world’s
most important, however NTT-Docomo has not been overtaken in terms of global number of subscribers, annual
revenues, operating income and net income by the SoftBank Group.

• Docomo pioneered many mobile communication services, and created the first successful mobile internet, i-Mode
which was introduced on February 22, 1999.With i-Mode and mobile Java applications and the “official i-Mode Menu”
Docomo created a mobile eco-system very close to Apple’s and Google’s Android ecosystem, but based on a packet
switched 2G network. Docomo then built the first and most advanced 3G mobile network globally. For this pioneering
work, Docomo was globally admired, and in the expectation of global growth, Docomo achieved very high market
valuations.

• However, Docomo did not succeed to build global business of any scale based on i-Mode or other successes. Docomo
invested in KPN-Wireless,AT&T-Wireless,Three/Hutchinson, and introduced i-Mode to many countries all over the
world from USA, many EU countries, in Russia and Australia, however, most of these investments failed and were written
off at large losses, approximately US$ 10 billion losses in total. In March 2014, Docomo announced to terminate
participation in a joint venture withTATA in India, withdrawing from India.

• What will the future bring? I think Docomo has a choice of either remaining a mainly Japanese domestic operation, in
which case we can expect Docomo’s revenues and income to slowly fall in tune with Japan’s falling population numbers,
or on the other hand, if Docomo follows SoftBank’s example, Docomo could also use Japan-know-how to make
acquisitions outside Japan. However in that case, Docomo will need to find ways of making overseas investments
successful.

CONTACT AND MORE INFORMATION
204
Contact

•Gerhard Fasol PhD

•Eurotechnology Japan KK,Tokyo, Japan

•http://www.eurotechnology.com/

•Mobile +81-90-8594-6291

•fasol@eurotechnology.com

•gfasol@gmail.com

!
More information:

•reports:http://www.eurotechnology.com/store/

•twitter: http://twitter.com/gfasol/

•website: http://www.eurotechnology.com/

•personal site: http://fasol.com

docomo (report and analysis)

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (19)

En vedette

En vedette (19)

Similaire à docomo (report and analysis)

Similaire à docomo (report and analysis) (20)

Plus de Gerhard Fasol

Plus de Gerhard Fasol (16)

Dernier

Dernier (20)

docomo (report and analysis)