DoCoMo steps up Japanese price war

NTT DoCoMo has intensified the price war in the highly competitive Japanese mobile phone market by announcing a deep cut to one of its tariffs. The move by Japan's biggest mobile operator is the latest attempt by DoCoMo to halt its recent poor performance in a market worth Y9,000bn ($76bn) annually.

DoCoMo's recent woes were highlighted on Friday by weak earnings. Operating profit fell 25 per cent to Y203.9bn in the three months to June. 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 quarter - trounced by Softbank, which added 532,000, and KDDI at 521,000.

Many analysts blame poor marketing, and worse network coverage and voice quality than KDDI, its largest competitor. DoCoMo's share price has dropped 21 per cent since early March. But an increasingly fierce price war has also pushed down the share values of DoCoMo's two main rivals by more than 10 per cent over the same period. Softbank has promised to respond to each competitor's price cut with its own in 24 hours.

DoCoMo's shares fell 2.3 per cent to Y170,000 on Friday, while rival KDDI's fell 3.2 per cent to Y810,000. The mobile telecoms battle intensified last October with a rule change allowing customers to switch carrier without switching number. This increased defections. DoCoMo has already acknowledged weakness in marketing by announcing a new "corporate branding" division, which groups the marketing department with related divisions. Masao Nakamura, president, said on Friday: "We would like to reshape DoCoMo's corporate image from scratch once again."

The company's results contrast with KDDI's announcement on Monday of a 16 per cent profit increase to Y140.9bn.