Asia Times Online :: Japan News and Japanese Business and Economy

Japan

Apr 12, 2005

All ears for Japan's wireless telephony trade

TOKYO - Vodafone KK, Japan's third-largest mobile-phone service provider, has been struggling to stop contraction of its customer base. In January, the unit of the British cellular-service giant Vodafone Group Plc suffered a net loss of 58,700 subscribers. In the same month, NTT DoCoMo Inc recorded a net gain of 184,400 subscribers and KDDI Corp's "au" mobile-phone service posted an increase of 163,700 subscribers.

The exodus of the subscribers to the rival service providers did not stop in February as Vodafone lost 53,200 subscribers while NTT DoCoMo and KDDI saw the number of their customers increase by 246,100 and 183,700 respectively. In a bid to reverse the downtrend, the company announced on February 7 that its Vodafone UK chief executive William Morrow would assume the presidency of the Japanese unit on April 1. Shiro Tsuda, a former vice president of NTT DoCoMo who just took over the helm of Vodafone KK in December, would leave his post to become chairman.

It was last June 23 when Tsuda's predecessor, Darryl E Green, suddenly announced his resignation. Green, who had led the company for two and half years, was known for his understanding of the uniqueness of Japan's mobile-phone market. But despite Green's local market-oriented strategy, Vodafone KK's precursor J-Phone Communications Co, which was the mobile-phone unit of Japan Telecom Co, was lagging behind NTT DoCoMo and KDDI in introduction of the third-generation (3G) service.

In addition to this delay, the confusion in the company's operations during the transition phase to become a Vodafone company in October 2003 had exacerbated the decline in the number of subscribers and contraction in revenue. For the year ended March 2004, both NTT DoCoMo and KDDI posted record profits, but the Vodafone Japan group suffered a net group loss of 100 billion yen (US$1 billion). To catch up with its two rivals, Vodafone KK had been preparing for the introduction of its fixed-rate 3G data transmission service to the Japanese market, but the plan failed to win the approval of its UK parent company.

Some insiders point out that incompatibility between the UK parent company, which insisted on integrating the operations in Japan into its uniform global strategy, and the Japan unit, which pursued its independence in the marketing, led to Green's resignation. Tsuda was selected to succeed Green for his expertise in mobile phone technology. In 2001, while president of a NTT DoCoMo subsidiary, he led the introduction of the freedom of mobile multimedia access (FOMA) service, the world's first commercial 3G service.

As the new president at Vodafone KK, Tsuda pushed ahead with the fixed-rate 3G data transmission service, but again the parent firm is said to have turned down his proposal. At the same time, several discount plans were also suspended after only six months of their introduction. In Japan, mobile phones are not only tools for person-to-person communications over radio waves they also function as personal computers, personal digital assistants, portable games and other entertainment content consoles. And consumers use the handsets for checking the latest news and weather reports, shopping, booking reservations, buying airplane tickets and downloading music and games.

Many consumers and corporations long for a low-rate data-transmission service that allows them to exchange both voice and non-voice data fast among handsets and personal computers. In February, NTT DoCoMo's FOMA 3G service won 925,700 new subscribers. Even Vodafone saw the number of its 3G service subscribers increase by 148,000 the same month. As the popularity of its 3G service indicates, there is still a possibility of turning around the company's performance by winning the hearts of consumers. But the time for reconstruction is running out.

Outlook
A unification of VoIP (Voice over Internet Protocol) and wireless local area networks (WLANs) has long been considered a dream solution by both telecommunications service providers and corporate users. Now NEC Corp, Oki Electric Industry Co and other telecom equipment makers are offering their VoIP mobile phone over WLAN systems to corporate users that are seeking smoother, seamless communications and lower phone bills.

With this solution, corporations that maintain LAN infrastructures will be able to use mobile phones for intra- and inter-office communications while taking full advantage of low-cost IP telephony. Last July, NTT DoCoMo introduced the N900iL dual network 3G FOMA handset that runs on both the FOMA network and WLANs. To date, this handset developed by NEC is the only machine available in Japan for VoIP mobile phone over WLAN systems.

NEC has started marketing the system combining the FOMA 3G cellular-phone handset and the VoIP over WLANs. The package that includes wireless LAN base stations and IP telephony servers is sold for 2.95 million yen or more. Currently NEC receives 40-50 orders per month.

This marriage of VoIP mobile phones and WLANs has problems that it has to overcome. Stronger encryption technology is required for protection of corporate data from unauthorized access. Uneven voice quality of IP telephony is another problem. Furthermore, greater availability of cheaper handsets capable of handling both voice and non-voice data over the LAN environments will be necessary. Nonetheless, the fusion of the VoIP mobile phone and WLAN is likely to draw the attention of corporate users and telecommunications service providers as a hot area of wireless telephony.

(Asia Pulse)

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