NTT DoCoMo reports first ever drop in revenue

NTT DoCoMo's revenue dropped for the first time in its corporate history last year as lower prices took their toll. The mobile phone operator's bottom line was saved largely by the sale of its stake in AT&T Wireless Services, it said Tuesday.

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Revenue for the year ended March 31 was ¥4.8 trillion ($45.1 billion, as of March 31), down 4 percent on the previous 12-month period, and operating profit, which measures the money made in its core telecommunications business, dropped 29 percent to ¥784 billion, the company said in a statement.

The root of the company's poor performance lies in increased competition in NTT DoCoMo's home market. Japan's top three cellular carriers have been rolling out discount packages to combat slower subscriber growth but the cheaper prices have been hitting the total revenue collected from subscribers.

"The hefty discounts introduced last fiscal year were the major cause," DoCoMo President and Chief Executive Officer Masao Nakamura said at the company's financial news conference in Tokyo.

The average revenue that NTT DoCoMo collected from its users each month dropped ¥690 compared to that of the previous financial year, to ¥7,200, the company said.

NTT DoCoMo's net income for the year didn't reflect the tougher business conditions thanks to the ¥502 billion gain recorded when NTT DoCoMo sold its 16 percent stake in AT&T Wireless to Cingular Wireless Services Inc. in October last year. Largely as a result of that gain, the company's net income rose 15 percent to ¥748 billion.

For the current year, which could be the last full fiscal year before the introduction of number portability, NTT DoCoMo expects competition to become increasingly harsh, it said. Revenue is expected to drop again, by just under 1 percent, and net income is expected to drop by about a third. NTT DoCoMo expects operating income will rise by just over 3 percent despite costs incurred moving more of its subscribers to 3G services.

The company expects to more than double the number of its 3G subscribers to 24.1 million, and 3G customers will make up nearly half of the company's subscriber base by the end of March 2006, Nakamura said

"Migration will peak this coming year.The focus is now on 3G," he said.

While the company predicts its total subscriber base will grow nearly 2 million to 50.7 million, overall average monthly revenue from its subscribers will fall 6 percent, said DoCoMo's chief financial officer, Yoshiaki Ugaki.

To offset this decline in subscriber revenue, DoCoMo has been trying to develop new applications such as adding smart card technology into its handsets so that they have an electronic cash function. While more than 3 million handsets and about 20,000 retail outlets can handle such payments, the service will not provide significant revenues for the company this year, Nakamura said.