Suga Win Boosts Data-Firm Stocks While Mobile Carriers Drop
Suga Win Boosts Data-Firm Stocks While Mobile Carriers Drop
(Bloomberg) -- The formal takeover by Yoshihide Suga as Japan’s prime minister this week is already creating winning and losing stock ideas.
The contrast in the new era of “Suganomics” was stark in Tokyo on Friday, with the nation’s largest telecommunications providers dropping further on his latest push to cut mobile phone bills while stocks related to his plan for a new “Digital Agency” gained.
NTT Docomo Inc., the country’s largest mobile carrier, extended its three-week loss to 12% after Suga ordered communications minister Ryota Takeda to realize the new premier’s long-held goal of reducing mobile phone fees. SoftBank Corp., which has also been hurt by the selldown of its parent’s stake, fell 5% Friday, while KDDI Corp. dropped 4.1%.
In some of the most specific directives yet, Takeda said Suga had told him to “reach a conclusion” on his request to cut fees, according to a Kyodo article. Cutting bills by only around 10% couldn’t be called reform, Takeda said.
Separately the Nikkei reported that the government will push to establish the Digital Agency by fall of 2021. That drove up NTT Data Corp., another unit of the former telco monopoly, by 7.6%, with industrial electronics firms Fujitsu Ltd. and NEC Corp. gaining more than 4% each. Minister Takuya Hirai is charged with overseeing the digitization of Japan’s paper-heavy society.
Reducing phone bills and revamping inefficient public services will be popular with voters and therefore a priority for Suga, who will be keen to avoid being seen as a careholder leader, said John Vail, chief global strategist at Nikko Asset Management Co. “In order to solidify his position, he must quickly deliver on some popular economic reforms,” he wrote in a note.
Mobile Battle
Suga’s battle to lower mobile phone bills goes back at least two years. He stunned the market in 2018 when, as chief cabinet secretary under Shinzo Abe, he called for a 40% reduction in mobile fees, repeatedly blasting the fat profit margins at the three main carriers. While his campaign had some success, encouraging Rakuten Inc. to enter the market and scrapping fees aimed at discouraging customers from switching carriers, it did little to introduce true competition.
“The government will remain focused on supporting a competitive environment,” SMBC Nikko analyst Satoru Kikuchi wrote in a report. “If that support proves more effective than in the past, telecom carrier earnings could fall,” he said, adding that the impact could be cushioned with rate diversification and 5G contracts.
KDDI and Docomo have now lost more than $24 billion in market value since Abe resigned. The two companies are the biggest decliners on the Nikkei 225 Stock Average since Abe’s shock resignation, followed by Nippon Telegraph and Telephone Corp., the parent of both Docomo and NTT Data. Rakuten has been the biggest gainer, adding more than 30% in that time.
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