The President of NTT DoCoMo has stated that the company may miss its end of fiscal year 3G subscriber target for the second year running. DoCoMo had expected to have signed up 1.38 million FOMA subscribers by 31 March 2003. However with just 127,400 customers at the end of July, DoCoMo would have to see a significant increase in its monthly take-up rate to have any hope of meeting its target. In March this year FOMA subscriptions were 61,000 short of their 150,000 target.

Since its launch in October 2001 FOMA has added an average of 11,581 customers per month and during the second quarter of 2002 its monthly net additions dropped sharply from 16,100 in April to 6,800 in May and just 2,200 in June. This decline came largely in response to the April launch of KDDI’s rival 3G service, which is priced lower than FOMA and also provides superior coverage and backwards compatibility with second generation CDMA services. Average monthly subscriptions for KDDI’s CDMA2000 service are running at 410,975.

Insight

Japanese users need no convincing to spend money on 3G features. Picture and video messaging services are hugely popular and subscribers are signing up for KDDI’s rival 3G service at a prodigous rate. NTT DoCoMo’s failure to meet its targets is a reflection on a poorly executed launch strategy, which saw the company rush out an unfinished service plagued by technical glitches and a poor selection of handsets.

The primary reason for the low uptake is the lack of 3G coverage and the absence of dual-mode handsets which would allow roaming on the existing network. The vast majority of users are never going to pay a premium for an expensive 3G handset only to find that they still have to carry their existing model to ensure they can make calls.

3G coverage is expanding, but there is a real danger that these early months do irreperable damage to the FOMA brand. All the while KDDI is signing up 3G subscribers at a rate of 700,000 per month and these customers will be much more difficult to win back once they have moved to a new operator. The priorities for DoCoMo must now be rapid expansion of coverage, delivery of dual-mode handsets and a PR campaign to improve perceptions of FOMA.