DoCoMo - The Japanese Wireless Telecom Leader

DoCoMo - Problems Aplenty Contd...

The company also had to write-off the value of its various other investments during early 2002. All these factors culminated in the DoCoMo posting one of the biggest ever, corporate losses in Japan (Refer Exhibit I).

Life After The Loss

DoCoMo's decision to continue with its global strategy met with apprehension in the markets, though the Government of Japan gave it support stating that DoCoMo was Japan's “flag bearer” in the global arena. In the words of Hiroyuki Arai, Director, Parliament Telecom Policymaking Committee, “DoCoMo is our flag bearer. If the company takes its time getting into the global arena, we will lose our lead to American or other foreign companies. Without that kind of commitment from Japanese companies, our economy will never recover.”

However, the company's management had to face the wrath of its shareholders in July 2002. Following this, DoCoMo announced that its management too would shoulder the burden of the losses and cut the salaries of its top executives by 10%-20% for a year. In April 2002, KDDI launched CDMA2002 1x, its 3G service, which though slower than FOMA, gained more than one million subscribers in the first three months.

This was because its technology upgrade was in sync with technology standards worldwide and did not require rebuilding of a whole system, as required by FOMA or I-Mode. J-Phone's 3G service IMT- 2000 also, launched in June 2002, proved successful in the market.

In mid 2002, it was reported that DoCoMo was facing problems in convincing its partner wireless companies in other countries to adopt its technology. Reportedly, its partners were reluctant to spend huge amounts in upgrading their wireless networks as they feared that DoCoMo's products and services might not attract as many customers in their countries as expected.

According to reports, these companies had spent billions of dollars in acquiring licenses to operate 3G services and landed in huge debts. Commenting on the reluctance of these companies to join the 3G bandwagon, Yasumasa Goda, analyst, Merill Lynch (Japan), a leading financial services firm, said, “The whole point of investing abroad was a speedy roll-out for 3G. But clearly this is no longer realistic.”

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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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