BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Telecomunications sector of Japan

This quarter Japan’s three main mobile operators – NTT DoCoMo, KDDI and Softbank Mobile – remained focused on tariffs, handset variety and applications as they braced themselves for the entry of mobile number portability (MNP), which commenced on October 24 2006. Growth in the mobile market remained slow over the quarter, with just over 1mn net additions, leading operators to focus on retaining the loyalty of their customer base. Indeed, NTT DoCoMo managed to do this just prior to the entry of MNP, with its latest figures for the three months ended September 2006 announcing that its churn rates had improved by 0.21 percentage points to 0.6%. KDDI also reported better churn rates, with a 0.09 percentage point improvement over the quarter.

However, in the month after MNP was introduced, NTT DoCoMo saw the biggest loss in subscriber numbers as a result of its implementation. The operator lost 17,500 users over November, which brought its user base to 52.126mn for the period, while also announcing that 160,000 of its users had switched to other operators. Neither did Softbank Mobile’s discount tariff, which undercut its competitors, manage to save it from losing customers to rivals as a result of MNP. The operator announced that while it saw 68,700 net additions over the month, it had lost 53,900 users. Only KDDI reported a substantial rise, up by 325,000 net additions, of which 225,300 users derived from rival operator networks.

KDDI, which has been encouraging migration of users from its PHS service, TU-KA, to its au service, has also sought to encourage growth of its customer base through MNP. This it has managed to achieve by introducing a range of new handsets, with 14 autumn/winter models, and a simpler and cheaper range of tariffs from its Double Flat Rates Light Package to its My Plan Discount. In addition, the operator also recently signed a contract with Google to add to its mobile music and news services. Looking forward to 2007, KDDI has stated that in order to attract customers, its main targets will be to enhance retention measures and customer acquisition with MNP by boosting product competitiveness. Reinforcing its competitive edge in terms of handset charges and content, as well as improving product development capabilities, will continue to feature, alongside the promotion of sales together with mobile solutions services.

However, despite this internal shuffling as a result of MNP, we retain our belief that the mobile market will continue to grow as previously forecast, leading us to maintain our existing mobile predictions. Neither have we changed our forecasts for fixed-line or internet markets, while BMI holds its belief that broadband, while continuing to rise, will be fuelled increasingly by optical access services rather than ADSL. This is a trend acknowledged by NTT. The operator stated that ADSL connections fell by 1.7% between March and September 2006, against Hikari Phone, its optical IP Phone services, which over the same period announced a 127% rise.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - Business Environment

Asia

Japan

Japan Business Environment Industry SWOT

Chapter 3 - Industry Forecast Scenario

Fixed-Line

Table: Japan Telecoms Sector – Fixed-line – Historical Data & Forecasts

Internet

Table: Japan Telecoms Sector – Internet – Historical Data & Forecasts

Mobile

Table: Japan Telecoms Sector – Mobiles – Historical Data & Forecasts

Chapter 4 - Macroeconomic Forecast Scenario

Second Quarter Growth Down To 02%

Table: Japan – Macroeconomic Forecasts

Chapter 5 - Country Snapshot: Japan Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Chapter 6 - Competitive Landscape

Competitor Analysis

Table: Key Players: Japan Telecoms Sector

Table: Selected Operators Financial Indicators (FY end March 31 unless stated)

Key Players

Fixed-Line

Table: Regional Fixed-Line Penetration Overview

Internet

Table: Regional Internet Penetration Overview

Mobile

Table: Regional Mobile Penetration Overview

Market Data Analysis

Fixed-Line

Internet

Table: Japanese Wireless Internet Market, September 2006

Table: Japan DSL Market (December – March 2006)

Table: Japan Broadband Technologies (December 2005 – March 2006, mn)

Mobile

Table: Japanese Wireless Market (Cellular/PHS) September 2006

Table: Japanese Wireless Net Additions Market

Table: Japanese ARPUs Q106-Q306 (JPY/month)

Table: Japanese Data ARPUs Q106-Q306 JPY/month

Table: Japanese Voice ARPUs Q106-Q306 JPY/month

3G

Table: Japanese 3G Market September 2006

Table: Japanese 3G Net Additions Market

Industry Developments

MNP

MVNO Entrant

Chapter 7 - Company Profiles

Regional Case Study – Motorola

Table: Motorola Net Sales by Region (US$mn)

Table: Motorola Market Sales by Locality of End Customer

Table: Leading Mobile Phone Handset Sales (mn) – Q306

Operators

NTT Corporation

KDDI Corporation

Softbank Corp (formerly Vodafone KK)

Chapter 8 - BMI Forecast Modelling

How we generate our industry forecasts

Telecommunications Industry

Sources

Chapter 9 - Appendix: Regional Demographic Data

Table- Manufacturing Wages (ave per annum), US$

Table - Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Asia Telecommunications Reports: Sample of Companies Ranked

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Commentary on key operators highlighting ownership structures, latest available revenue figures, market share analysis and ARPU counts. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company SWOTS Covering all leading telecommunications operators and manufacturers operating in each market, including competitive intelligence on geographic presence and competitive positioning against local companies; local market share; leading products, services and technologies; foreign direct investments, projects, merger and acquisition strategies.

Network of Asian Telecommunications Sources

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BMI's Asian Telecommunications Reports are based on an extensive network of multilateral organisations, government departments, telecommunications industry associations, chambers of commerce and company reports. Information sources include: