Japan Telecom silent on loss report

By CNN's Kristie Lu Stout

TOKYO, Japan (CNN) -- Third-ranked Japan Telecom declined to comment Monday on a news report that it is set to post a loss for the full business year to March.

The loss report weighed on Japan Telecom shares, sending its stock price down 2 percent in Monday morning trading to 400,000 yen.

The Nihon Keizai Shimbun on Sunday said that Japan Telecom, controlled by Vodafone, may break even or post a 2 billion yen loss for the year, in contrast to an earlier forecast of 7.5 billion yen in unconsolidated pretax profit.

"We cannot make any comment on this speculative article," Japan Telecom spokesman Mitsuhiro Kurano told CNN.

Worsening performance

The Japanese business daily also said that due to worsening business performance, the carrier is drafting a restructuring plan that includes an early retirement scheme.

UBS Warburg analyst Kate Lye said the telco is highly likely to post a loss, even steeper than what was reported over the weekend.

"Our forecasts are a lot lower than even the numbers in the Nikkei," said the Tokyo-based Lye.

"When they announced the downward revision in early October, I thought the second half forecast seemed too aggressive."

To promote its Myline fixed-line phone serivce, the firm spent 25 billion yen in the first half, 10 billion more than planned, the Nihon Keizai Shimbun reported.

But Japan Telecom's fixed-line market share fell short of its target, shrinking 10.2 percent as of end-September.

"I wouldn't be surprised if their Myline numbers are worse than expected," said Lye.

Lye added that a downward revision by Japan Telecom would be due to its fixed-line market share losses rather than related marketing costs.

J-Phone lift

Last month, Vodafone gained a controlling stake in Japan Telecom -- a deal in line with industry speculation that the UK mobile giant had been seeking a greater presence in Japan Telecom to gain control of its mobile arm J-Phone.

J-Phone is currently the number-three mobile operator in Japan. However, it has seen its number of subscribers surge in recent months, raising expectations that it could soon challenge KDDI for the number-two spot.

While Japan Telecom's fixed line services have been hit by stiff competition, analysts expect to see more uplifting results from J-Phone.

"J-Phone's ARPU (average revenue per user) and subscriber numbers are better than expected. It will be in line with or higher than expectations," said UBS Warburg's Lye.

Japan Telecom's half-year results will be formally unveiled on November 21.