DoCoMo - The Japanese Wireless Telecom Leader

"DoCoMo is like a huge sumo wrestler overpowering the market. There's nowhere left for it to go but overseas."

- Takeo Tsukada, Senior Adviser, IDO Corp., a rival Japanese mobile operator, in 2000.

The Tsunami in Trouble

In May 2002, NTT DoCoMo (DoCoMo) Inc., Japan's largest mobile phone company, announced a net loss of ¥ 116.19 billion and a goodwill write-off of ¥ 624.6 billion for the fiscal ending March 2002. Though the company registered an increase in operating revenues from ¥ 4,669.37 billion in 2000-01 to ¥ 5167.14 billion, the revenue growth was stated to be well below its company expectations. Company sources attributed this to the general decline in Average Revenue Per User (ARPU) for voice services and slower growth in new cellular subscribers across the country (Refer Exhibit I for DoCoMo's financials and ARPU data).

DoCoMo’s announcement did not come as a major surprise to industry observers, as media reports had been forecasting losses for the company since early 2002 itself. What was noteworthy about this development, however, was the fact that the company was largely believed to be performing exceptionally well in the recent past.

The fact that DoCoMo had roped in as many subscribers as the leading US-based media company AOL, but much faster, was often cited as a proof of Japan finally waking up to the challenges of the ‘new’ economy.Analysts claimed that DoCoMo was paying the price for its aggressive overseas expansion drive during 1999-2002, in the form of these losses.

DoCoMo had to take a huge write-off in its books on account of a decline in the value of its foreign investments and the slump in the global telecommunications market in 2001. While some analysts felt that DoCoMo should revamp its global strategy, a few others said that the company should take measures to increase ARPU.

In the words of Hironobu Sawake, an analyst at J P Morgan (leading global financial services firm), “The question is whether we can see a rise in profitability.” DoCoMo announced that its commitment towards globalization was intact. The company also brushed off analysts’ view that the focus should be on increasing the ARPU.

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Case Details

Case Code : BSTR049
Themes: Differentiation
Case Length : 17 Pages
Period : 1992 - 2003
Organization : NTT DoCoMo (DoCoMo) Inc
Pub Date : 2003
Teaching Note : Available
Countries : Japan
Industry : Telecommunication

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