NTT DoCoMo, Japan’s leading mobile phone operator, is considering consolidating its regional sales subsidiaries in an effort to streamline its bulky operations so it can more effectively compete with rivals that are gnawing away at its market share.
The mobile phone company declined to comment on how many jobs could be culled from merging its eight regional units, which together have about 6,000 employees.
Analysts said the move would help streamline DoCoMo’s operations at a time when the company is losing subscribers to Softbank, its new competitor, and KDDI, Japan’s second-biggest carrier.
DoCoMo still has a 54 per cent market share, but its position has steadily eroded in Japan’s Y9,000bn ($79bn) mobile phone market. “Cleaning up back-office operations will have minimal impact on DoCoMo’s bottom line, but tidying up the regional sales divisions will have a material impact,” said one analyst in Tokyo. “Sales people at DoCoMo enter forecasts of how many handsets they are going to sell in a month – obviously these are bullish – and if they didn’t sell then it was a big overhead for DoCoMo.” Observers say the over-orders account for as much as a third of all operating expenditures at DoCoMo.
DoCoMo has suffered since customers were allowed last year to keep their mobile phone numbers when moving their accounts between providers. It lost a net 22,900 users in August to KDDI and Softbank.
Last year, Softbank bought Vodafone’s Japan operations and has since sparked a pricing war with rock-bottom rates.
In order to compete with Softbank, which has attracted new users with a flat monthly fee programme, DoCoMo and KDDI are halving their basic fees this month.
DoCoMo is also looking to invest in overseas markets. The mobile phone operator is seeking to make a sizeable investment in the booming markets of Vietnam, China or India, reversing a long-held stance to stay away from overseas markets after losing $9bn in botched investments six years ago.
DoCoMo has already acknowledged weakness in marketing by announcing a new “corporate branding” division that will group the marketing department with related divisions. The company has spent heavily on marketing this year but still trails its rivals in the battle for new customers. It won only 225,000 new users during the three months ended June – trounced by Softbank, which added 532,000, and KDDI, with 521,000.