With over 90m mobile subscribers on a population of 127m people, there is few space for market growth. It admittedly is a “saturated and mature market”. So the main game for a Japanese mobile operator is to chase customers from rivals. Mobile number portability was introduced in October and had for result to heat competition. There are three main mobile operators today: NTT DoCoMo, KDDI and Softbank Mobile (ex Vodafone KK). DoCoMo is the largest operator with over 52.2m users at the end of 2006 and a market share of about 55%, down almost 3 points. If DoCoMo is loosing ground, its challenger KDDI is gaining market share over recent years. KDDI ended 2006 with a subscriber base of 27.2m and a market share of 28.7%, up 4 points. Softbank Mobile is the smallest, born in 2006 when Softbank bought Vodafone KK operations to start mobile business. Softbank Mobile currently has 15.5m users and a market share of 16.3%, down 1 point. Japan is first a 3G country. The adventure started in 2000 when DoCoMo launched the first 3G/UMTS network in the world. Today, DoCoMo has shifted around 62% (or 32.1m users) of its total subscriber base to 3G and added about 12m new 3G users in 2006 (mostly through migration from its PDC old-2G technology base). PDC user number is sharply declining, but yet accounts for about 20m. KDDI adopted a different technology for 3G with CDMA 2000, more in line with its existing 2G cdmaOne and CDMA 2000 1-X technologies. KDDI currently has 25.1m 3G users (both 3G and 2.5G combined), or almost 92.5% of its subscriber base, and added 4.5m 3G users in 2006. Softbank Mobile added 3.7m 3G users in 2006, bringing its 3G customer base to 6m, accounting for almost 39% of its total customer base. Nowhere in the world, we can see similar 3G penetration. Globally, Japan has 63.2m 3G subscribers, almost 50% of the world market. But the main problem for mobile operators in Japan is ARPU. In spite of introducing 3G, their ARPU figures continue to decline, and it could be further challenged with the introduction of two new entrants, eAccess and IP Mobile, in 2007.
On the strategy side, each player has adopted a differentiated strategy. As the incumbent, DoCoMo focused on innovation and technology and adopted a more defensive strategy on prices and services. KDDI is more punchy on quality and services. Everybody acknowledges that its network is superior and it focuses on advanced and demanded mobile data services (i.e. music downloads). It benefited the most of recent mobile number portability. Softbank Mobile adopted a strategy in line with that of its parent company, Softbank, for broadband fixed access: aggressive pricing and heavy advertising, such as a cheaper flat-rate plan that paid off with almost 150k net additions in two months.
In conclusion, the market is mature, but well in advance on the technological and multimedia content fronts. Competition is heating and marketing will be key for a bright future.