Vodafone squeezes Japan costs

Japan Telecom has taken cost-cutting measures following pressure from British mobile giant Vodafone, which won a controlling stake in the company last month.

Japan Telecom has offered all employees over 45 years old - about 20% of its 3,000 staff - a voluntary early retirement plan.

Vodafone has demanded that Japan Telecom cut costs since increasing its stake in the firm to 66.7% from 45% last month, said Japan Telecom spokesman Mitsuhiro Kurano.

The entire telecoms sector is struggling to stem costs in order to increase profitability undermined by the heavy investment needed to upgrade mobile phone networks.

J-phone staff escape

Staff at Japan Telecom's mobile phone unit, J-phone, are not affected.

J-phone generates around 70% of the group's revenue, and is presumed to be the main reason why Vodafone has been aggressively upping its stake in the Japanese group.

"The program is being introduced in response to a rapidly changing telecommunications environment that has made strengthening Japan Telecom's business a matter of priority," the Japanese firm said in a statement

The downturn in the sector has piled pressure on telecoms firms around the world, which are desperately seeking to increase their average revenue per user (Arpu).

Desperate to reverse the Arpu trend

Earlier this month, Vodafone itself took cost cutting measures, by slashing 650 UK jobs because of the change in the mobile phone market.

Orange UK Q3 results

Turnover +26%

7% increase in annual rolling Arpu

Total new customers 320,000

New contract customers 148,000

Both Vodafone and its closest European rival, Orange, released Arpu figures on Thursday.

But neither managed to impress the stock markets.

As many of the key European marketplaces approach saturation, Arpu has replaced subscriber numbers as the most important way of judging the success of a mobile phone firm.

Vodafone's Arpu has been falling steadily over the past year, a trend that the British company has desperately tried to reverse.

Contract vs pay-as-you-go

Both Vodafone and Orange released statements on Thursday saying that Arpu has stabilised between July and September.

Orange added 320,000 new net customers in the UK, about 68% of whom were on a contractual basis, rather than on pay-as-you-go.

Earlier this month, Vodafone revealed that it had added 251,000 in the UK, with the number of contract subscribers more than 100,000 above the second quarter.

Contractual customers tend to spend more money than pay-as-you-go clients, therefore boosting Arpu.

In mid-afternoon trading, shares in Orange were down 6%, while Vodafone had fallen 3%.