NTT DoCoMo is looking for investment and business opportunities abroad to cushion the impact of dwindling revenues at home and counter the entry of mobile services using internet protocol (IP) technology, says the head of the company's global business department.
“We are trying to find new revenue sources overseas again,” Toshinari Kunieda, managing director of global business, said in an interview with the Financial Times. He added that DoCoMo was considering investing in overseas carriers, particularly in the Asia-Pacific region, as well as launching new businesses abroad.
DoCoMo's renewed interest in overseas markets highlights the growing pressure being felt by Japan's largest mobile phone operator in its home market.
Just a few years ago, DoCoMo was forced to take massive write-downs of nearly Y1,500bn ($13.4bn) on its investments in overseas carriers including AT&T Wireless, KPN Mobile and Hutchison 3G.
Following that experience, DoCoMo has focused on rebuilding its position at home, where it has faced a strong challenge from the number two operator, KDDI, amid falling traffic revenue in a mature market.
Last year, DoCoMo posted its first fall in revenues and operating profits. This year the group is forecasting flat revenues of Y4,805bn and a 34 per cent drop in net profits to Y497bn.
The introduction next year of number portability, increased competition from new entrants and the launch of IP mobile services makes the outlook more unclear.
Mr Kunieda believes that “IP mobile phones will have the same [negative] effect on DoCoMo as it did on [NTT's fixed line business]”. NTT lost Y1,000bn in revenues over three years after the introduction of IP telephony, which sharply cut the cost of telephone calls.
“The same thing is bound to happen to DoCoMo in three years when IP mobile telephony hits the market,” Mr Kunieda said. “Things will change dramatically. Unless we do something, DoCoMo's revenues of just under Y5,000bn will fall under Y4,000bn.”
Any investment is unlikely to be on a scale similar to the deals DoCoMo made five or six years ago. There are fewer opportunities with large operators in developed countries, and DoCoMo's falling profitability also restricts what it can do, Mr Kunieda said. “But if there is a chance [to make a large investment] we will think about it.”
The Asia Pacific region is the most attractive for investments since there is still room for growth, according to Mr Kunieda. Europe's 2G market is saturated and it will take time for 3G to provide returns.
Furthermore, DoCoMo already has 10 partners in Europe committed to providing the company's mobile internet service, i-mode. In the US, mobile consolidation has made operators too big for DoCoMo to make a meaningful investment, Mr Kunieda said.
DoCoMo is keen to start new services in foreign markets to generate additional revenues. Global roaming, for example, is expected to generate Y14bn this year. Mr Kunieda said DoCoMo was also working on providing application services, such as mobile payment and fleet management overseas, and could eventually offer a DoCoMo cash card, as it plans to do in Japan.
The initial investment in these “peripheral” businesses would be small but “as we gain confidence, we could increase our investment [and even acquire whole networks eventually]”, Mr Kunieda said.
He stressed that DoCoMo had to seek new income at home and overseas or the entire NTT group would be in jeopardy. “The NTT group does not have much room for manoeuvre. It is surviving somehow because of DoCoMo alone,” he said.