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KDDI ready to start Internet telephone service this month

KDDI Corp, Japan's No. 2 mobile phone company, will offer an online phone service this month to companies subscribing to its Internet service, and wants to extend it to other users later this year to vie with Softbank Corp and other net phone service providers.

"We have to compete," KDDI spokesman Yosuke Fukuma said yesterday.

KDDI will announce details of the business service, with 10,000 subscribers, later this week, and will decide charges for its 2.1 million residential users later, he said.

KDDI and rivals such as Nippon Telegraph and Telephone Corp, the country's biggest telephone company, are focusing on the market for online services as growing numbers of people move to mobile phone and Internet services, making fixed-line telephony less profitable.

"Pricing will become everything," said Hiroshi Mizutani, a fund manager with Asahi Life Asset Management Co.

There is no longer a difference in this Internet technology between rival companies, he said.

KDDI's shares fell Japanese yen 9,000, or 2.45 percent, to Japanese yen 359,000. They have lost 28 percent of their value over the past year, Softbank Corp, Japan's biggest Internet investor, already offers an online telephone service and more entrants will increase competition in the country's Japanese yen 6 trillion (US$49.9 billion) phone market. Softbank charges Japanese yen 7.5 for a three-minute domestic or overseas call to a fixed-line phone.

Softbank had 100,000 subscribers for its Internet phone service by the start of June, said company spokeswoman Misao Konishi.

KDDI plans to charge residential users Japanese yen 8.5 for a three- minute call, with a Japanese yen 900 monthly charge to cover other costs including modem rental, the Nihon Keizai newspaper reported yesterday.

The newspaper quoted an unnamed KDDI official as saying its service will cost more than Softbank's because it will have better sound quality.

"At such a low charge, the merit will not be in terms of increased revenue," said Sadaharu Nagumo, who manages Japanese yen 20 billion in Japanese equities for Japan Investment Trust Management Co.

"The purpose is to expand Internet services."

Investors are also cautious about how much such a service will contribute to the bottom line.

"I worry that its existing businesses, such as its mobile or fixed telephone businesses, will weaken with the company's shift in focus or people," said Kenji Tomita, who helps manage Japanese yen 25 billion at T&D Taiyo Daido Asset Management Co, referring to KDDI.

"It will have to prove that it can win over the others in quality."
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