Japan’s wireless carriers yesterday tumbled in Tokyo trading after the Japanese government said they have room to cut telephone 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 (US$9 billion) in market value off the three largest carriers combined after Japanese Chief Cabinet Secretary Yoshihide Suga made the remarks during a speech in Hokkaido, Japan.
He said competition is not 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 came ahead of a leadership vote for Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) and amid concern that Japanese might 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 yesterday. “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.
Support from local party members is to be vital for Abe to secure a convincing win over rival Shigeru Ishiba, who he narrowly defeated six years ago.
The Japanese government does not directly control mobile phone user fees, but it might recommend carriers set new pricing plans, the analysts said.
Statements by Abe in 2014 about the need for lower mobile phone rates did not 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 “will keep considering better services for our customers,” spokeswoman Hiroe Kotera said.
A spokesman for KDDI said the carrier would 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.
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