Japan Delivers $9 Billion Blow to Mobile Phone Operators
Japanese Phone Carriers Plunge as Government Suggests Lower Fees
(Bloomberg) -- Japan’s wireless carriers tumbled in Tokyo after the government’s spokesman said they have room to cut phone bills by about 40 percent, sparking concern that lawmakers will renew a push for greater competition in a sector dominated by three big players.
The declines wiped about 1 trillion yen ($9 billion) in market value off the three largest carriers combined after Chief Cabinet Secretary Yoshihide Suga made the comment during a speech in Hokkaido, Japan. He said competition isn’t working at the companies. Kyodo News earlier reported the remarks, which were confirmed by Suga’s office.
NTT Docomo Inc. fell 4 percent, the biggest drop this year, while KDDI Corp. declined 5.2 percent and SoftBank Group Corp. slipped 1.6 percent at the close of Tokyo trading.
Government calls to reduce service prices have pushed carriers’ shares down before, notably in 2014 and again in 2016, and the providers have in turn vowed to reduce rates. Still, revenue rose at Docomo and KDDI last fiscal year. Suga’s comment comes ahead of a leadership vote for Prime Minister Shinzo Abe’s Liberal Democratic Party and amid concern that consumers may balk at a sales tax increase planned for next year.
“The government may be targeting mobile phone charges as a means of reducing pressure on household finances ahead of the October 2019 consumption tax hike,” MorganStanley MUFG analysts including Tetsuro Tsusaka wrote in a note to clients Tuesday. “We also think the statement is timed to coincide with the increase in popular interest in politics ahead of the upcoming LDP presidential election.”
The remarks were unusually blunt for Suga, an Abe loyalist and key player in the administration since the prime minister returned to power in 2012. Suga delivered them in a speech on the northern island of Hokkaido as Abe prepares for the ruling Liberal Democratic Party’s leadership election next month.
Support from local party members will be vital for Abe to secure a convincing win over rival Shigeru Ishiba, who he narrowly defeated six years ago.
The government doesn’t directly control mobile phone user fees, but it might recommend carriers set new pricing plans, according to the MorganStanley MUFG note Tuesday. Statements by the prime minister in 2014 about the need for lower mobile phone rates didn’t have a major effect on earnings, the note said.
“We will keep reviewing and improving our mobile billing,” Docomo spokesman Yosuke Owada said when asked to respond to Suga’s comments. The carrier has already introduced some low-cost plans “to give back to our customers,” he said.
SoftBank spokeswoman Hiroe Kotera said the company “will keep considering better services for our customers.” A spokesman for KDDI said the carrier will keep improving its services.
The three big carriers have responded to past government calls for lower prices by offering new low-capacity plans, while focusing marketing efforts on luring heavy users away from rivals by making it easier to pay for smartphones with the latest features. The focus has also turned to contracts that lock in users for multiple years, deterring defections to mobile virtual network operators that used leased capacity and offer significantly cheaper services.
The government has exerted pressure on some of longer-term contracts as well.
In June, the Fair Trade Commission said mobile phone contracts by KDDI and SoftBank may conflict with antitrust laws. The contracts in question in the June statement allow customers to forgo paying the balance of a previous contract if they agree to buy a new phone and extend their contract for another two years, the FTC said. The warning to the companies was a follow-up to a report two years earlier admonishing them against misleading and complex service agreements.
--With assistance from Isabel Reynolds, Yuji Nakamura and Pavel Alpeyev.
To contact the reporter on this story: Maiko Takahashi in Tokyo at mtakahashi61@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Dave McCombs
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