DoCoMo defies telecoms gloom

DoCoMo's i-mode mobile internet service is powering profits

NTT DoCoMo - the wireless arm of Japan's Nippon Telegraph & Telephone - has confounded the telecoms doomsayers, reporting a better-than-expected $3bn net profit for the past financial year.

The company said net profit was up 45% to a record 365.5bn yen ($3bn; £2.1bn) on revenues 26% improved at 4.69 trillion yen.

This shows that Japan's mobile communications market is still strong

Keiji Tachikawa, DoCoMo chief executive

The main driver of growth was the fast-growing i-mode service, with its "always on" connection that allows subscribers to browse the internet on their mobile phones.

Analysts said the results announcement was likely to have a positive effect on the company's share price, which already has risen about 30% this year in the best performance by a major wireless operator worldwide.

i-mode subscriptions hit 23 million

"We are very pleased with the results and they are above our original expectations," said DoCoMo president and chief executive Keiji Tachikawa.

"This shows that Japan's mobile communications market is still strong."

The company said i-mode subscribers numbered 23.2 million as of 6 May, up from 22 million a month earlier.

DoCoMo said it expected to have about 30 million i-mode subscribers by the end of the current business year - a forecast some analysts said was conservative.

3G delay

The company is also at the forefront of developing much-hyped third-generation (3G) mobile phone services although the commercial launch of DoCoMo's Tokyo operation has been delayed by four months until October.

The delay is not expected to have a negative impact on future profits.

Mr Tachikawa said he expected sales of 3G handsets and services to reach a relatively modest 20bn yen in this business year.

Concerns about the expense of 3G, both for providers and consumers, have been a significant factor behind the sharp falls in the market value of telecoms companies since last year.

DoCoMo - which has about 60% of its domestic wireless market - has been at an advantage compared with other operators worldwide because it already offers a number of mobile phone services beyond the standard voice services that have proved profitable.

With the advent of 3G, DoCoMo plans to expand i-Mode.

The company is reported to be planning to invest 50bn yen ($400m) overhauling it.

Under the 3G i-mode, users will, among other things, be able to attach image and music files to i-mode e-mail.

NTT has also recently won government approval to offer its fixed-line customers a similar service, to be known as the L-mode.

Three-year plan

In a revised three-year business plan published in April, DoCoMo's parent company said it wanted to cut costs across its business to counter the threat of increased global competition.

Accelerated restructuring of some of NTT's many subsidiaries including the regional carriers is envisaged.

The plan has reportedly received a mixed reception by the Japanese government which wants the former state monopoly to take more steps to encourage competition.

It also wants NTT to reduce its stake in DoCoMo - currently more than 60% - to less than 50%.

AT&T purchase

Like many other mobile phone operators, DoCoMo has also built up large debts in the past few years, through acquisitions and the high cost of developing 3G.

Among the acquisitions are a 16% stake in AT&T Wireless - which some industry observers view as a prelude to taking full control of the US firm's wireless division - and investments in KPN Mobile of the Netherlands, the UK's Hutchison 3G, Hong Kong-based Hutchison Telephone and Taiwan.

To help finance this, DoCoMo in January carried out Japan's biggest sale of new shares by a listed company.

This year, the company has also taken out a 1,200bn yen loan from five Japanese banks and sold $180bn worth of five and 10-year bonds.

DoCoMo shares closed at 2.64m yen on Wednesday, having traded in a range of 1.8m-2.9m yen this year.