NTT DoCoMo and Japan’s Wireless Industry
15.249C: Japan/Korea
Anu Bhave
Haakon Brown
Will Chu
Jose De Oteyza
Mario Lewis
Wendy Miller
Luis Pintado
March 15, 2001
Agenda
Introduction
NTT DoCoMo
• Company Overview
• Organizational Overview
• Product & Service Overview
• Industry Overview
• Strategy Overview
• Current Challenges
• Questions to Ask
Conclusions
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Company Overview
Major Lines of Business
• Mobile voice, PDC cellular phones: 34,218,000 subscribers (12/31/00)
• Mobile data, i-mode: 20,468,000 subscribers (3/11/01)
Ancient History
• 1987
 Mobile telephone service offered by NTT
• 1991
 Provisional parent company established
 Subsidiaries established in 8 regions
• 1992
 Renamed NTT Mobile Communications Network, Inc.
 Takes over all of NTT's mobile operations
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Company Overview (cont’d)
Current Facts and Figures
• Japan’s largest mobile communications firm
 2nd largest firm worldwide (behind Vodafone AirTouch)
 57%+ market share but penetration rate flat
 1.75% “churn” rate (extremely low)
• i-mode service
introduced in 1999
and is hugely
successful
20,468,000 total users
Avg new subscriber rate
= +750,000/month
= +25,000/day
= +1,000/hr
• i-mode on pace to
pass AOL and
become the
world’s largest ISP
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Company Overview (cont’d)
Financial and Operational Highlights
• 67% owned by NTT
• IPO 1998; traded on NYSE, ticker NTDMY (ADR)
• Market Capitalization: ~$160 billion, P/E 65 (March 2001)
• 15,000 employees
• 2000 Revenues: ~$32 billion
• 96% of revenue from mobile phone service
• Over the past three years EBITDA grew at 22%
• EBITDA to sales ratio of 38%
 Comparables: Vodafone Airtouch (33%) and AT&T Wireless (16%)
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Organizational Overview
Typical Japanese company?
• Intricate relationship with sub’s
March 15, 2001
• Heavy organizational structure
6
Product & Service Overview
i-mode (information-mode)
• Mobile voice and data services
• 99% coverage within Japan (8 regions)
• Monthly fee + data usage charge
• 25+ i-mode compatible phones (OEM)
 Advanced phones (256-color displays)
• E-mail (¥1 to ¥10/message)
• Aggregated transaction services
• Information portal
• Internet access
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Industry Overview
General Characteristics of the Industry
• Rapid deregulation in each country
• Increasing mergers and acquisitions
• Entry of various global players into local markets
Five Force Analysis
• Illustrates drivers of profitability
• Provides insights into industry dynamics
• Helps identify key success factors for NTT DoCoMo
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Industry Overview (cont’d)
Intensity of Competition: High
• Emergence of international players
• Fight fiercely to defend their large specific assets
• Difficult to differentiate
Supplier Power: Moderate
• Handset Manufacturers – Low (Philips, Sony)
• Infrastructure Providers – High (Motorola, Ericsson)
• Technology Developers – Moderate (Qualcomm)
Buyer Power: Low
• Very fragmented
• But low switching costs
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Industry Overview (cont’d)
Threat of Substitution: Low
• Any kind of communication method
Barrier to Entry: Moderate to High
• Ownership of wireless spectrum licenses
• Excess network capacity
 Deters new investment
 Allows for reseller type new entrants (Virgin)
Profitable industry, but increasing competition can erode profit
margins in the near future
Currently DoCoMo is well positioned - dominant status,
ownership of key technologies
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Strategy Overview (Resources)
Core Competencies
• Strong management team (Sloan MBA’s in executive positions)
• Marketing skills
• Investments in R&D and Technology
• Relationships with manufacturers
• Relationships with content and service providers
Resources
• Economies of scale
• Financial resources
• Brand recognition
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Strategy Overview (Execution)
Internationalization
• "Friendly" alliances to enter new markets
• Partnerships & Joint Ventures
Global Strategy
• Sliver global strategy
• Expansion of technology (set W-CDMA technology standard)
• "Friendly" alliances and acquisitions
 42.3% AOL Japan (40.3% owned by AOL)
 20% KG Telecom (Taiwan)
 16% AT&T Wireless (U.S.A.)
 20% Hutchinson 3G (U.K.)
 15% KPN Mobile (Europe)
 19% Hutchinson Telecom
(Hong Kong)
 3.6% Telefonica Celular (Brazil)
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Current Challenges
Major player in the global telecom market
• Increased rivalry in wireless industry
• Investing in telecom infrastructure
• Young and inexperienced player
• Implementing an aggressive global strategy
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Questions to Ask
• What are the management skills required to make the leap from a
leading domestic player to a major global player?
• Have you thought about seeking a major partner or acquisition to help
make the transition to a global player?
• What are your growth targets over the next 5 years in terms of
revenues, subscribers and market share?
• How do intend to finance the build out of worldwide mobile
communications infrastructure?
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