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According to new data, Japan’s third-placed mobile operator, Softbank Mobile, is continuing to outperform its two larger rivals, NTT DoCoMo and KDDI. During the first-quarter of the year, Softbank captured a 38 percent share of new additions – some 633,000 subscribers – and reported double-digit annual subscriber growth (11 percent), compared to overall market growth of 4.6 percent. The operator claims to have been a market-leader in net additions for the past 23 consecutive months.

The market continues to suffer from a slowdown in handset sales, as the operators have reined in large handset subsidies in order to boost profitability. Softbank saw net sales at its mobile unit shrink 4.2 percent for its fiscal year 2008 (ending 31 March 2009), with a decline in handset sales slightly offset by increased service revenue attributed to its fast-growing customer base. Softbank’s performance during the year was boosted by sales of Apple’s iPhone 3G and the introduction of various FMC services in conjunction with its fixed-line broadband arm.

DoCoMo and KDDI have been replicating Softbank’s discount pricing strategy for over a year to varying levels of success. This has had a significant impact at DoCoMo, which has overhauled its handset subsidy model in order to allow customers to pay for their handsets in instalments over the course of a contract. This meant that DoCoMo’s handset sales declined by 22 percent to 20.1 million in the year to March, and are forecast to drop by a further 2 percent in its current fiscal year. However, the operator has been able to keep its market share at above 50 percent and is ahead of its closest rival, KDDI, in terms of net additions.

KDDI, which has also introduced a handset instalment plan, saw handset sales decline 32 percent to 10.8 million in the year to March, and recorded JPY25.7 billion (US$259 million) in losses for write-off and disposal of handset inventory. But while operating revenue at KDDI’s mobile unit declined 5 percent over the year, operating income jumped 10.2 percent. eMobile, the HSPA-based mobile broadband specialist launched in 2007, is also emerging as a serious player in Japan, accounting for over 17 percent of net additions in 1Q09. 

Japan’s mobile operators have been successful in migrating subscribers to high-speed networks. According to new Wireless Intelligence data, DoCoMo had less than 5 percent of its connections on Japan’s second-generation PDC network by 1Q09, while Softbank had 8 percent. Both operators have schedules in place to shut down the PDC networks over the next few years. Alongside the CDMA-based KDDI – which has almost three-quarters of its subscriber base migrated to CDMA2000 1xEV-DO – Japan is on track to become one of the first operators in the world to fully migrate its entire connections base to high-speed networks.

The country is therefore well advanced in its plans to migrate to the next-generation Long Term Evolution (LTE) technology. DoCoMo has announced plans to commercially launch its LTE network next year, making it one of the first mobile operators in the world to do so. Reports this week suggest that Japanese operators will together invest JPY1 trillion (US$10 billion) in LTE networks over the next five years, and all four are understood to have applied for the appropriate licenses from the Japanese government. Softbank, KDDI and eMobile are expected to launch services between 2011 and 2012, a year after DoCoMo. 

Matt Ablott, Analyst, Wireless Intelligence

Softbank Mobile has maintained its impressive share of net additions into 2009, despite the fact that many of its pioneering initiatives are now being successfully replicated by competitors. The operator’s famous discount price tariffs have been augmented with a strong handset portfolio that has made Softbank able to target both the high and low end market segments. By the end of its fiscal year, over 90 percent of Softbank’s customer base had been migrated to WCDMA and the operator is now recording significant growth in data ARPU, which currently accounts for over 40 percent of total ARPU. However, Softbank’s ARPU remains significantly lower than that of its competitors, and voice revenues declined further over the year as additional discount plans were introduced. While Softbank will continue to focus on building market share in its current fiscal year, it will also look to boost user profitability via new services such as FMC.