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April 6, 2007 12:07 pm

KDDI takes advantage of new rules

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Japan’s second biggest mobile carrier, KDDI, is taking full advantage of a sharpening of the rules of competition with new figures published Friday indicating it added 2.75m new subscribers in the year to March.

Its advantage was hammered home by figures showing it added 530,000 net new subscribers in March alone, compared with only 298,000 for NTT DoCoMo, the country’s largest mobile provider.

KDDI’s 2.75m increase brings its total number of subscribers to 28.2m – closing the gap on DoCoMo, which increased by 1.48m to 52.6m. Softbank, the smallest of the big three, added 127,600 subscribers last month and 698,600 over the year as a whole, pushing up its customer base to 15.9m.

Analysts said KDDI was winning the race for new subscribers because of strong music services and high network quality.

DoCoMo had advertised discount packages heavily to try to turn round its losses by the spring. March - the time when people start school, college, and working life - is traditionally the busiest month for mobile subscriptions in Japan.

Growth among Japan’s carriers was much more one-sided than usual last year because of the late October introduction of number portability, which allows customers to change carrier without changing their number. In the past six months, DoCoMo has lost a net 629,800 customers who have switched carrier under the new rules.

But even if last year’s triumph was repeated, at the same rate it would still take KDDI almost 20 years to take the top spot in market share from DoCoMo.

Moreover, DoCoMo argued on Friday that “in contrast to projections before the start of [number portability], there is not a large use of it. This is in line with our expectations.”

The effect of number portability appears to already be declining. DoCoMo suffered its highest net number of defections, 163,900, in November.

Jean-Philippe Biragnet, Tokyo-based telecoms expert at Bain & Company, the management consultancy, said the Japanese experience so far confirmed the historical pattern of other countries such as France and Korea.

Number portability “somewhat creates a spike” for a few months, but the effect “rapidly recedes over time”.

But supporters of number portability – which was introduced by the carriers under government pressure – argue that even if the defection rate between companies returns to its previously low levels, the regime will have been a success. This is because the three carriers have cut prices and improved handsets for fear of losing customers.

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