DoCoMo rises on talk of rosy results

DoCoMo's shares have gained 59 percent since marking a 20-month low of 1.8 million yen on March 5, outperforming the TOPIX's 20 percent rise during the same period

In this story: Market outperformer Beating profit forecasts Data is the driver RELATED STORIES, SITES

By Staff and wire reports

TOKYO, Japan -- NTT DoCoMo shot up 7.43 percent to 2.89 million yen on Monday ahead of expected strong earnings results to be announced on Wednesday.

Its parent company, NTT, also advanced 2.9 percent to 898,000 yen.

Analysts said revenue and profits at Japan's leading mobile operator for the latest business year would exceed the company's forecasts due to brisk growth in new subscribers and wireless Web services.

Market outperformer

Takayoshi Koike, an analyst at Societe Generale, said investors were likely picking up Japan's dominant mobile phone carrier ahead of an expected strong result.

"Amid doubts over current and future earnings of high-tech issues -- especially in the telecommunications sector -- DoCoMo stands out as a solid performer and the market is rewarding that," said Koike.

DoCoMo's shares have gained 59 percent since marking a 20-month low of 1.8 million yen on March 5, outperforming the TOPIX's 20 percent rise during the same period.

Beating profit forecasts

A poll of telecom analysts last week resulted in a median consolidated operating profit of $6.26 billion and an average $6.21 billion for the 2000-01 year ended on March 31. That is higher than DoCoMo's forecast of $6 billion, a 33.4 percent rise from the previous year.

Chief executive Keiji Tachikawa said recently that DoCoMo can "comfortably reach this level" given steady subscriber growth for its I-mode service, where 23.22 million users surf the Internet on credit card-sized screens.

But despite the robust projections -- a record for the company, which was spun off from parent NTT in 1998 -- analysts are describing 2000-01 as a year of revenue rather than profit.

"Fiscal 2000 was a year defined by growth in revenue, and 2001 will show growth in profitability," said Kirk Boodry, telecom analyst at Kresdner Kleinwort Wasserstein. He expects $37.7 billion in revenue and $6.19 billion in operating profit for 2000-01.

The median forecast in the poll called for revenue of $37.86 billion while net profit was pegged at $2.94 billion.

Investors seem to agree that DoCoMo's raw earning power will remain intact.

After sliding to a fourth of their value from last year's peaks, DoCoMo's shares have recovered 59 percent since early March and closed at 2.89 million yen Monday.

DoCoMo's price-earnings ratio is expected to be 66.85, according to the median of 10 forecasts. In the broader market, the Nikkei 225 stock average has an implied price-earnings multiple of about 44.

Data is the driver

DoCoMo's robust outlook is also due to its shift in revenue source to data transmission from voice calling.

That is expected to boost profitability in the net business year, since DoCoMo is expected to spend less on acquiring new subscribers and instead focus on getting existing users to increase their use of I-mode and data services.

Shinji Moriyuki, telecom analyst at the Daiwa Institute of Research, said he sees data making up 10 percent of average revenues per user for the latest business year.

"I think this will grow to close to 20 percent in 2001-02," said Moriyuki, who estimates last year's revenue at 4.65 trillion yen and profit at 767 billion yen.

DoCoMo itself sees half of its transmission revenue originating from data in 2005 as more advanced wireless services come to market.

It expects to be the first in the world to begin fast third-generation, or 3G, wireless services on May 30 when it begins an introductory service in the Tokyo metropolitan area.

DoCoMo plans to invest $8.25 billion over the next three years on 3G and said it would be profitable in four years.

Reuters contributed to this report.

DoCoMo says nationwide 3G by 2002
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DoCoMo plunges on report of 3G delay
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3G reprieve for Japan handset makers
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