KDDI, NTT play mobile profit cards

Facing a slump in fixed line revenues, KDDI and NTT are pushing into mobile

In this story: KDDI's mobile push DoCoMo boosts NTT profit RELATED STORIES, SITES

By CNN's Kristie Lu Stout

TOKYO, Japan (CNN) -- KDDI said it would absorb its wireless unit by the end of 2001 in a move to spotlight its faster-growing and more profitable mobile business.

Japan's number-two telco also said it would roll out new Bluetooth handsets by next month. Both announcements, arriving before the firm's earnings release later Friday, signal KDDI's bid to push into mobile.

The announcements also come after Japan's top telecom operator NTT said it returned to the black for the year ended in March as its stunningly successful mobile division offset its weak fixed line unit.

KDDI's mobile push

KDDI's wireless units were united under a single brand called "au" when the company was created through a three-way merger last October. The company has said it eventually wants to float "au."

KDDI will also unleash new handsets using Bluetooth, the wireless technology that links mobile phones to other devices.

The handsets, manufactured by Sony, will feature a color screen and high-quality audio -- features that the telco hopes will drive mobile traffic.

KDDI's latest moves represent its desire to spotlight the fast moving mobile business, a business that in Japan boasts a high margin that doesn't exist in the fixed line environment.

"But it seems a bit late to be doing this," Gartner Group mobile analyst Nick Ingelbrecht told CNN.

"They are pushing into mobile as hard as they can. But they are doing this very late. They should have thought about this earlier. But better late than never." The telco is set to announce earnings by the end of Friday. The results are expected to show a smaller than expected group net profit of $81.18 to $97.42 million, more than half of which is supported by revenue from the wireless business.

KDDI has 11 million wireless subscribers, compared to NTT DoCoMo's 36 million.

DoCoMo boosts NTT profit

On Thursday, NTT posted $3.77 billion in net profit for the year ending in March. But the result indicated striking differences between NTT's operating units.

"If you look at NTT results, they are driven pretty strongly by DoCoMo performance and we expect that to continue," said Ingelbrecht.

The year result was fueled by DoCoMo's record net profit of more than $3 billion for the year, a 45 percent increase from the year earlier.

DoCoMo's profits largely stem from its I-mode Internet data service -- the wireless phenomenon that has attracted 23 million users since 1999.

In contrast, NTT's two regional fixed line units, NTT East and NTT West, have been dragging the telco down due to fierce price competition.

"Results from the fixed line business are not very good," NTT president Junichiro Miyazu told reporters after the earnings announcement Thursday.

NTT West reported a net loss of $360 million, while NTT East managed to post a profit of around $160 million.

NTT said that the latest financial year would be bleak, anticipating a 72 percent drop in net profits.

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NTT DoCoMo Net
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