DoCoMo - The Japanese Wireless Telecom Leader

Life After The Loss Contd...

Decreasing revenues and failed global initiatives resulted in a sharp decline in the value of DoCoMo stock which fell by 33.8% from its 52-week high in mid 2002 (Refer Exhibit V for DoCoMo's stock price movements during 2000-03). On account of its problems with its overseas partners, DoCoMo announced in October 2002 that it was considering freezing its overseas investments. According to analysts, the company was forced to consider this option to control its own costs. FOMA was yet to make profits even in late 2002, while competitors KDDI and J-phone's 3G services were doing rather well.

To attract subscribers, DoCoMo had to offer heavy discounts on FOMA handsets and services. During this period, the company also began offering free global roaming to its FOMA customers to retain its existing customers and to lure new customers. According to the company sources, such discounts and free offerings took a heavy toll on the company's revenues.

Meanwhile, the performance of the I-Mode launched in other countries was also not found to be encouraging. In Netherlands and Germany, where I-Mode was launched in July 2002, the service could gain only 34,000 subscribers. AT&T also was disappointed with the performance of mMode (AT&T's version of I-Mode).

Business As Usual?

In January 2003, DoCoMo decided to reduce its promotional expenditure on 3G services and focus on increasing profits. Commenting on this, CEO Keiji Tachikawa said, “Reckless spending on network expansion will not help promote (3G services); we'd better focus more on returns on investment.” The company thus decided to focus on offering better phones with good battery life and to enhance the quality of its content through better content partnerships.

By February 2003, on account of DoCoMo's aggressive marketing initiatives, the sales of FOMA handsets increased to over 191,500 (though still behind the target of 320,000 units for fiscal 2002-03). However, the company's new handset P2102V launched in mid March 2003 reported sales of one million handsets by the end of the month.

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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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