Bloomberg News

DoCoMo Plans Spending Boost as Data Surge Drives Revenue

February 20, 2012

(Updates the share price in the 12th paragraph.)

Feb. 17 (Bloomberg) -- NTT DoCoMo Inc., Japan’s biggest mobile phone carrier, plans to spend about 1.5 times annual profit to strengthen its network as it relies on a surge in smartphone use to end a four-year decline in revenue.

The company may raise capital outlays to about 730 billion yen ($9.3 billion) in the 12 months starting April 1, from a previous plan for 700 billion yen, Chief Financial Officer Kazuto Tsubouchi said in a Feb. 14 interview in Tokyo. The company is maintaining its target to increase operating profit 3.4 percent to 900 billion yen in the next fiscal year, he said, without elaborating.

DoCoMo is adding wireless capacity as more of its 58 million users stream or download video, swelling an onslaught of data that in January contributed to a fifth service disruption in eight months. Revenue from data transmission has exceeded that for voice at the carrier since the three months ended March 31, 2011, according to figures from the company.

“Traffic is increasing beyond their initial expectation,” said Atsuo Takahashi, an analyst at Mizuho Securities Co. “DoCoMo is lagging behind the most in dealing with network capacity among carriers, considering the number of subscribers they have.”

KDDI Corp., DoCoMo’s biggest rival, said on Dec. 15 it would spend 440 billion yen next fiscal year to expand capacity, while Softbank Corp., the No. 3 carrier, said in October it planned outlays of 500 billion yen.

KDDI was this month told by the communications ministry to improve its service after as many as 6.2 million users were unable to send or receive e-mails for some time on Feb. 11.

Reviving Revenue

More than half of wireless-service subscribers will use smartphones by March 2015, Tokyo-based MM Research Institute Ltd. forecast in July. They made up 8.8 percent of total 109 million accounts in March last year, the researcher said.

Rising smartphone use may help DoCoMo boost revenue this fiscal year for the first time since 2007, according to analyst estimates. Revenue is projected to gain 1 percent to 4.27 trillion yen in the year ending March 31, according to the average of 20 analyst estimates compiled by Bloomberg.

The carrier had cash, near cash and short-term investments of about 907 billion yen as of March 31, the highest at fiscal year-end since 2005, according to data compiled by Bloomberg.

Equipment makers also stand to benefit from DoCoMo’s spending to keep up with the tide of data.

Fujitsu Ltd., Cisco Systems Inc. and Alcatel-Lucent are among the telecommunications gear makers supplying the company, according to data compiled by Bloomberg. Fujitsu is counting on DoCoMo for about 10.5 billion yen of its fourth quarter revenue, according to Bloomberg estimates.

Shares Slump

DoCoMo shares rose 0.2 percent to 137,000 yen at the close of trading in Tokyo. The stock has declined 14 percent over the past 12 months, compared with a 13 percent drop for the benchmark Nikkei 225 Stock Average.

The carrier has forecast net income of 474 billion in the year ending March 31, compared with 490 billion yen in the previous year.

Japan’s communications ministry last month ordered DoCoMo to report measures taken to expand its network capacity by March 30 after a service disruption on Jan. 25 that affected as many as 2.5 million users.

The planned improvements include installing new servers for text messaging, expanding data capacity and inspecting all equipment, DoCoMo said last month. Voice and data services on DoCoMo’s network were interrupted for more than four hours on Jan. 25, because of a surge in wireless traffic on the company’s switching equipment, the company said that day.

--With assistance from Naoko Fujimura. Editors: Dave McCombs, Suresh Seshadri

To contact the reporters on this story: Yoshinori Eki in Tokyo at yeki@bloomberg.net; Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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