Focus turns to scale of mobile phone rate cuts

Reform of Japan’s mobile phone rates, a signature policy of Prime Minister Yoshihide Suga, seems increasingly likely.

NTT Corp., aiming to realize Suga’s policy, is in the process of making mobile phone unit NTT Docomo, Inc. a wholly owned subsidiary to take full control.

“Docomo will become stronger. As a result, its financial basis will be solidified,” NTT President Jun Sawada said at a recent press conference, adding that the move would make it easier for the company to cut phone rates.

Meanwhile, au operator KDDI Corp. has already announced its plan to reduce rates. “We must take the government’s request seriously. We are being asked to provide rates that are in line with international standards,” KDDI President Makoto Takahashi said at a recent press conference. An executive at SoftBank Corp. said, “There is a decisive atmosphere for a price cut.”

The measure to reduce mobile phone rates is Suga’s primary plan to make his policy distinctive. Otherwise, it basically carries on with the Abenomics economic policy package.

In his campaign for the Liberal Democratic Party presidency, Suga insisted that the phone rates can be reduced by 40%. He has considered it problematic that Japan’s big three phone companies maintain phone rates that are considered high by global standards and secure large profits while using public airwaves.

With price cuts becoming inevitable, the focus now will be on the extent to which companies can reduce them and how they will squeeze their resources to do so.

In particular, the focus will be on how KDDI and SoftBank will compete with Docomo, which has become a giant through strengthening cooperation within its group.

Both KDDI and SoftBank have been able to attract a certain number of Docomo users and increase their number of subscriptions by offering low- cost brands that Docomo does not offer. However, with Rakuten Inc.’s full-scale entry into the mobile market in April offering phone rates about half those of the major players, it will be difficult for them to sustain growth by relying solely on budget brands.

KDDI and SoftBank are hurrying to strengthen their earnings outside the telecommunications sector, with financial services such as smartphone payments as a pillar of their business. However, a series of cases of funds being fraudulently taken from customers’ bank accounts through the “Docomo Koza” and other electronic payment services has put the brakes on this kind of business.

Like Docomo, KDDI and SoftBank have an urgent need to get out of their over-reliance on the domestic mobile business. With Docomo soon to become a wholly owned subsidiary of NTT, its rivals have raised concerns about whether fair competition can be ensured, with an executive of a major carrier saying the situation “could create an overwhelming powerhouse.”

SoftBank has released a statement saying that NTT’s takeover of Docomo should be examined from the perspective of ensuring fair competition in the telecommunications market.