Telecommunications

February 2006

Cell-Phone Firms Adopt Different Strategies Outside Japan
Major Japanese cell-phone makers are taking different approaches toward overseas markets, with Sharp Corp. looking to boost sales of low-priced models in Europe, India and China, while NEC Corp. and Matsushita Electric Industrial Co. are sharply reducing operations. Sharp will release three of its first overseas-only 3G (third-generation) handsets in fiscal 2006. They feature fewer functions than the company's Japanese-model handsets, but prices are set lower for the highly price-sensitive European market. Sharp seeks to return to China by fiscal 2007, selling its 3G handsets directly. The company had supplied 2G cell phones to local firms on an OEM (original equipment manufacturing) basis, but stopped the business in 2003 because it was not profitable. Sharp also plans to sell a wider variety of handsets in Russia through local sales agents, and enter the Indian market as early as fiscal 2006. The company hopes these plans will culminate in a tripling of its annual overseas cell-phone shipments, to more than 10 million units, within a few years. In contrast, Matsushita and NEC, which led Japanese firms' expansions into overseas markets with their 2G handsets, decided late last year to sharply curtail operations outside Japan. In China and elsewhere, they have struggled to compete with such firms as Finland's Nokia Corp. and South Korea's Samsung Electronics Co. Meanwhile, Sanyo Electric Co. chose yet another path, pegging its success outside Japan on a joint venture with Nokia. This joint venture with the world's top cell-phone company is expected to initially sell slightly more than 30 million handsets, with plans to raise the figure to 50 million units as early as possible. (The Nihon Keizai Shimbun, February 15, 2006)

Cell Phone Service Firms To Lift Capital Spending 20% In FY06
Cellular phone service providers expect to boost capital investment by almost 20% to a total of more than 1.6 trillion yen in fiscal 2006, The Nihon Keizai Shimbun has learned. The increase of about 200 billion yen is attributed to preparations by newcomers as well as the introduction of a number portability system. Softbank Corp. and the two other firms that will launch cell phone service in the autumn or later are setting up base stations and computer systems for customer management. One of these two others, eAccess Ltd., plans to lay down roughly 100 billion yen next fiscal year. Capital investment by Softbank, eAccess and IPMobile Inc. is estimated to total 150-200 billion yen. The three existing cellular service firms -- NTT DoCoMo Inc., KDDI Corp. and Vodafone KK -- have started system development for the November start of the number portability program. Total development expenses by the trio in this field are estimated at 30 billion yen. The three existing firms expect to spend a total of roughly 1.4 trillion yen on facilities for cell phone service this fiscal year. They need to spend about the same or even more next fiscal year in order to construct base stations for 3G (third-generation) cell phones and for other equipment. Unlike the automobile industry, cellular service firms will make all of their capital investment at home, so this spending is expected to benefit a broad range of sectors, including telecommunications equipment and electronic parts manufacturers, software developers, and builders of base stations. NEC Corp. has received orders to configure a portion of the number portability system. It projects at least a 15% increase in orders for cell phone infrastructure next fiscal year. Foreign manufacturers with track records in overseas markets are also eyeing an entrance into the Japanese market. They see an opportunity because the new cellular service firms in Japan will not place orders based on past deliveries. Canadian giant Nortel Networks Corp. has started providing equipment on a trial basis so that it can eventually deliver base stations for Softbank. Others, including U.S. firm UTStarcom Inc. and Nippon Ericsson KK, are also making moves to win orders. (The Nihon Keizai Shimbun, February 6, 2006)