Japanese telecoms groups hit by Shinzo Abe directive
Shares in Japanese wireless carriers fell sharply on Monday following an unusual directive by Prime Minister Shinzo Abe urging a reduction in what are some of the world’s highest mobile phone bills.
The government does not have a direct say in mobile phone rates but Mr Abe’s remarks come as smartphone fees account for a rising portion of Japan’s household spending, which has remained sluggish despite stimulus efforts to lift the economy.
NTT DoCoMo, Japan’s largest mobile phone carrier by subscribers, was hit hardest with a drop of 9.8 per cent while KDDI fell 8.6 per cent and SoftBank slid 5.5 per cent. The broader Nikkei was down 1.6 per cent.
Analysts said it was highly unusual for the prime minister to intervene in the pricing of mobile phone rates, which are set independently by the carriers. Questions also remain on how effective lower phone rates would be in boosting overall consumer spending.
Monday’s share price declines came after Akira Amari, economy minister, disclosed on Friday that Mr Abe had instructed the telecommunications minister to study lowering mobile phone fees.
“Some people say the three-player structure [in Japan’s mobile phone industry] has become so solid that the competition strategy is not working,” Mr Amari said in explaining why Mr Abe wanted lower rates.
Government figures show that telecom costs including mobile phone fees accounted for 4.9 per cent of annual household spending in 2014, up from 4.1 per cent a decade ago.
Monthly bills for smartphones users in Tokyo — averaging a total of around Y7,500 ($62) — are among the highest in the world, compared to Y7,000 in London and Y5,400 in Seoul, according to a recent government white paper. Tokyo prices are lower, however, than monthly bills in New York and Düsseldorf at Y8,700 and Y9,000 respectively.
Satoru Kikuchi, an analyst at SMBC Nikko Securities, said it was unlikely that carriers would lower fees in response to Mr Abe’s remarks, especially for multi-function smartphones where higher costs are justified to some extent.
However, he added that “it’s a sensible debate. It’s not about lowering pricing, but diversifying the plans available”.
He said companies should consider offering cheaper packages for people shifting from old-fashioned “feature phones” to smartphones, who still only use the devices for simple functions such as chatting and messaging.
Currently, monthly bills for feature phone users in Tokyo are among the cheapest in the world, at less than Y2,000.
The fall for NTT DoCoMo shares was exacerbated by Mizuho Securities on Friday lowering its rating on the stock to underperform from neutral, taking the view that profits will be hit hard if it follows KDDI in lowering monthly fixed rates for voice traffic.