Fri, Nov 02, 2018 - Page 10 News List

Docomo leads telecoms rout on plans to cut rates

PRESSURE:With government officials saying Japanese telecoms have room to reduce prices, NTT Docomo on Wednesday announced plans to cut prices by 40%

Bloomberg

NTT Docomo Inc yesterday led a ¥3.8 trillion (US$33.6 billion) stock rout of Japan’s top three mobile carriers after it appeared to cave in to pressure from the government, which has long claimed that the nation’s phone bills are among the highest in the world.

Docomo, which on Wednesday said it might cut rates by 40 percent and “return” ¥400 billion to customers, plunged as much as a record 15 percent in Tokyo trading.

Rival KDDI Corp tumbled as much 17 percent, and Softbank Group Corp slumped as steeply as 9.1 percent amid concern that they would follow suit.

Docomo’s plan to cut mobile rates in the year starting on April 1 sparked concern that industry profits could slump for years, exacerbating investor anxiety over a market that is already plagued by saturation and increasing competition.

The move comes after the government, particularly Japanese Chief Cabinet Secretary Yoshihide Suga, repeatedly called for carriers to reduce phone bills.

“What surprised investors is Docomo will take about five years to recover above the profit level for the current fiscal year,” said Naoki Fujiwara, chief fund manager for Shinkin Asset Management Co in Tokyo. “Other major mobile carriers may have little choice but to follow Docomo with price cuts.”

Docomo’s warning on Wednesday that the firm would offer plans starting on April 1 that would lower rates by 20 to 40 percent overshadowed the announcement that it would repurchase as much as 7.24 percent of its stock for ¥600 billion to help drive up shareholder returns. It said it would consider canceling all the shares it buys back.

KDDI president Makoto Takahashi yesterday said the company would not follow Docomo’s price cuts. He said the company had already introduced lower rates.

Softbank said it was considering its pricing based on competition and user needs.

The latest round of comments by government officials began in August, when Suga said carriers have room to cut bills by 40 percent.

In response, investors lopped more than US$14 billion off the combined market value of the three big carriers over two days. The shares had fully recovered from that plunge, only to plummet yesterday.

Japanese carriers are a big part of the Nikkei 225 Stock Average, with the big three accounting for 6.7 percent of the index’s weighting.

The benchmark fell 1.1 percent yesterday.

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