KDDI posts a profit, with a warning

In this story: Fierce competition Dwarfed by NTT RELATED STORIES, SITES

By Staff and wire reports

TOKYO, Japan -- Japan's number two telecoms carrier, KDDI, said on Friday it returned to profit, but earnings have been capped by a fixed-line price war.

KDDI posted a group net profit for the year ending in March of $109 million, up from the previous year's loss of $84.9 million.

That was in line with the company's November forecast of $105.5 million for 2000/01 and slightly above analysts' expectations of $81 to $97 million, but the company warned of continued tough conditions.

Fierce competition

"With the introduction of Myline (a carrier pre-registration system) in May, new players and rate cuts have sparked fierce competition for customers," KDDI said in a statement.

"In the wireless market, cell phones continue to evolve while new services content continues to expand… That has boosted competition between carriers to a new level and the market environment is increasingly difficult."

KDDI said it would absorb its wireless unit "au" by the end of this year in an attempt to improve profitability.

Its a move to spotlight KDDI's 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."

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

Dwarfed by NTT

Yesterday, NTT posted $3.77 billion in net profit for the year ending in March, dwarfing KDDI's earnings announcement.

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.

On Friday, KDDI shares closed up 1.5 percent at 542,000 yen. DoCoMo ended the day down 3.49 percent at 2,490,000.

Reuters contributed to this report.

KDDI, NTT play mobile profit cards
May 18, 2001

KDDI
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