DoCoMo - The Japanese Wireless Telecom Leader

DoCoMo - Problems Aplenty Contd...

FOMA failed to meet the expectations of DoCoMo as customers still complained of its short battery life, lack of coverage across the country and nuisance from hackers. Commenting on the factors, preventing FOMA's success, Hideki Nomura, Executive Vice President (Marketing), DoCoMo, said, “The largest reason is the limited service coverage. We are constructing the 3G network from scratch and the area is still very limited. The second is the development of handsets; the availability of handsets is quite limited — the variety is limited and the prices are also relatively expensive. The third reason is related to technology development. The battery life is too short.”

On account of such problems, FOMA's subscriber base amounted to only 89,000 by the end of March 2002, much below the expected 150,000 for fiscal 2002. Apart from this, the saturation of Japan's wireless telecom market was also posing a severe threat to the company's growth. The growth in subscriber base was declining through the early 2000s.

According to reports, the net growth in subscriptions went lower by 31.7% by December 2001 than in December 2000. This increased the competition in the market during early 2002. Reportedly, though DoCoMo still dominated the market (59%) it was facing fierce competition from the existing players and the new entrants in the market.

Its nearest competitor KDDI's Au and Tu-Ka services had captured 17.7% and 5.7% respectively, of the total cellular market in Japan. Vodafone's J-Phone, which launched the camera-equipped mobile phone Sha-Mail in 2001, had also increased its market share to 17.6% by early 2002. To meet the competition, DoCoMo had to offer handset subsidies and reduce its profit margins. But despite these measures, the company's ARPU continued declining during early 2002.

With the customers shifting to cheaper wireless e-mail services from DoCoMo's expensive voice-mail services, and with I-Mode also losing its initial pull, the ARPU figures were reportedly rather depressing. Apart from this, DoCoMo's ambitious investment drive went awry with the company forced to take a ¥ 664.49 billion write-down on its investment in AT&T.

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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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