Recent Developments in the Telecommunications Industry

Transcription

1 Recent Developments in the Telecommunications Industry Japanese Economy Division Summary Japan s fixed-line phone market is shrinking while the mobile phone market continues to expand. The IP telephony market is growing rapidly in terms of number of subscribers. NTT DoCoMo is by far the leader in terms of number of mobile phone subscribers. Third-generation mobile phone subscribers are steadily increasing. Call rates for both fixed-line and mobile phones are falling as a result of deregulation and other factors. Three majors groups NTT, KDDI and SoftBank are the leaders, but two companies not affiliated with these groups will enter the mobile phone market in Japan s telecommunication market, according to the Ministry of Internal Affairs and Communications White Paper on Information and Communications, comprises five major areas: information and communications core services, related services, product manufacturing, systems construction and research (Fig. 1). This paper focuses on fixed-line, mobile and IP telephony services. 1. Market Overview A. Market Scale In 2004, sales within the telecommunications industry declined by 1.4% from the previous year to 16,512 billion yen (Fig. 2). The trend over the past several years has been a shrinking market for fixed-line communications and a growing market for mobile communications, even though the latter is rather saturated. Services incidental to telecom refer to wireless communications in the fishing industry, cable broadcasting and telephone services, and wireless mobile services. The number of companies in the telecom industry grew by 5.2% to 13,744 in 2004 (Fig. 3). Although the number has increased steadily, the rate of growth has declined in recent years. B. Capital Investment Capital investment has been strong among registered telecom carriers, which account for a substantial portion of the market (Fig. 4). Much of the investment has been in response to increased demand, and investment in conjunction with the start of new services is growing (Fig. 5). Among the new services are fiber to the home (FTTH) and IP telephony services. In addition, investment in third-generation (3G) mobile phone networks is growing. C. Employment Employment in the telecom industry increased 0.8% to 422,208 persons in 2004 (Fig. 6). 2. Use and Services A. Number of Subscribers The number of fixed-line phone subscribers is declining, but mobile phone subscribers are increasing. At the end of fiscal 2005 (March 31, 2006), mobile phone subscribers outnumbered fixed-line phone subscribers by about 70 percent (96.48 million versus million). Also, the number of new IP phone subscribers is growing rapidly (Fig. 7). By carrier, NTT DoCoMo has the most subscribers (Fig. 8), more than double that of the KDDI Group

2 ( au brand). Recently, however, au has beefed up its services, narrowing the gap with NTT DoCoMo. New subscribers to 3G 1 services have been increasing steadily, growing 59.2% to million at the end of fiscal 2005 to account for 52.7% of all subscribers (Fig. 9). By country, at the end of 2004 only China and the United States had more subscribers than Japan, but the penetration rate was not particularly high at 70%. The highest penetration rate is % in the United Arab Emirates. IP telephony, a voice service using Internet Protocol (IP), is frequently offered as an additional service by providers of ADSL and other broadband. There are two types: 0AB-J and the increasingly popular 050, which offers free calls among subscribers of the same and partner providers. IP telephony subscribers increased 37.9% to million in fiscal B. Number of Calls and Call Times Calls and call time continued to decrease in fiscal 2004 (figs. 10 & 11), down 2.7% to billion calls and down 10.1% to 4.67 billion call hours. For mobile phones, however, the figures increased slightly. C. Calling Rates The rate for local calls from fixed telephones is approximately eight yen per three minutes (Fig. 12). Rates have declined by about 20% since the 1980s as a result of deregulation and other factors. Long-distance rates have fallen to about one-fifth that of 1985 (as of March 2006) 2. Mobile phone users can select from a wide variety of plans offering various rate structures and discount services (figs. 13 & 14). Phone number allocations for IP telephones began in Calls made by IP telephones are routed via the Internet rather than switched lines, so distance doesn t matter and calls are less expensive (Fig. 15). By international comparison, one-time subscription fees are overwhelmingly high in Tokyo, but basic fees are approximately the same as those in other major cities of the world (Fig. 16). Local calling rates in Tokyo are the least expensive, but long-distance rates are the second highest, after New York City (Fig. 17). Mobile phone rates are about average (Fig. 18). D. Access Fees Fees for both local and long-distance calls from fixed-line phones declined in 2006 (Fig. 19). Such fees include interconnection fees paid by other carriers to NTT East and NTT West, subsidiaries of the privatized former public monopoly NTT. In 2005, NTT DoCoMo s mobile phone access fees declined for both inter-company calls (among subscribers of the parent DoCoMo and its regional companies) and inner-company calls (among parent DoCoMo subscribers) (Fig. 20). 3. Information and Communications Policies * See Fig. 21 A. Competition Policies The Ministry of Internal Affairs and Communications (formerly the Ministry of Posts and Telecommunications) has encouraged competition in the long distance and international service markets through measures such as the elimination of barriers between domestic and international services, the 1997 abolition of the supply and demand adjustment provision, and the 1998 elimination of restrictions on foreign investment. Measures implemented to encourage competition include the introduction of number portability for fixed-line phones, followed in October 2006 by number portability for mobile phones. Major sources of telecom carrier regulation in Japan are the Telecommunications Business Law and the NTT Law. 1 Third-generation mobile phones offer better sound quality, enhanced multimedia services and large-volume data transmission. 2 For more about calling rates: Ministry of Internal Affairs and Communications, White Paper on Information and Communications 2006.

3 B. Regulation of End-user Rates Former monopolies NTT and KDDI enjoy the top positions in the market, followed by the new common carriers (NCCs). Although they had been required to publicize contractual provisions of rates and other service conditions, increasing competition led to a lifting of the prohibition on negotiated transactions in 2004, thereby allowing them to set calling rates for individual corporate customers. C. Interconnection Fees When NTT s interconnection fees became a matter of international concern, negotiations were held with the United States and EU in The resulting decision was to lower interconnection fees by 20% over a period of two years. It was also decided that a basic fee would be phased in to replace NTS costs (expenses not dependent on traffic volume) from fiscal D. National Strategy In 2004, the u-japan strategy was announced as an extension of the existing e-japan IT strategy. The strategy is aimed at facilitating greater unification of various electronic networks to help Japan deal with a range of difficult issues in areas such as lifestyles and society, healthcare and welfare, and transportation and logistics. 4. Industry Trends A. Fixed-line Phones Carriers offering fixed-line services include NTT East, NTT West, KDDI, SoftBank Telecom and J:COM. B. Mobile Phones Mobile communications carriers include three groups: the NTT DoCoMo Group, the KDDI Group (au) and the SoftBank Group (Fig. 22). NTT DoCoMo operates through several regional companies. The au brand is offered by KDDI and Okinawa Cellular Telephone Company. In October 2005, the KDDI Group acquired three Tu-Ka Group companies, so the group has the au and Tu-Ka mobile phone brands, as well as the KDDI fixed-line phone brand, making it the only mobile company that engages in both fixed-line and mobile communications. DoCoMo, however, is part of the NTT Group, which also offers fixed-line services. In April 2006, SoftBank entered the mobile phone business by acquiring Vodafone s local operations. Two other firms emobile, a subsidiary of eaccess, and ip mobile which use the 1.7 GHz and 2 GHz bands, respectively, plan to begin offering services in C. PHS PHS services are offered by the NTT DoCoMo Group, Willcom (formerly DDI Pocket) and the Astel Group. The NTT DoCoMo Group and the Astel Group have decided to withdraw from the PHS business in the future, leading to a strong possibility that Willcom will be the only PHS operator in Japan. D. IP Telephony IP telephony companies are divided into two groups by phone number types: 050 and 0AB-J. The 050 type includes SoftBank BB, NTT Communications, KDDI, Japan Telecom and Tokyo Electric Power Company. The 0AB-J companies include NTT East, NTT West, KDDI and Chubu Electric Power Company. The 050 group only offers minimum phone services, while 0AB-J services include all those available to fixed-line phones, including connection to 110 and other emergency numbers.

4 5. Developments by Leading Companies in Fiscal 2005 A. NTT Group 1) NTT East and NTT West NTT East and NTT West began offering discounts on basic fees for fixed lines of customers who pay for multiple lines under a single bill. They also promoted Hikari Denwa, a high-quality IP telephony service for optical fiber customers, launched a multiple channel service for dual, simultaneous communication on the same line, and additional services for up to five phone numbers. In light of the shrinking fixed-line phone market and fierce competition in broadband, NTT East s operating income dropped 2.5% to 2,125.3 billion yen, and NTT West s declined 3.3% to 2,029.6 billion yen. 2) NTT DoCoMo NTT DoCoMo enhanced its rate plans and services, and aggressively introduced new handsets. The company also increased and improved the functions of its mobile wallet phones, which also function as e-money cards, credit cards, train passes and other payment applications. Amidst intense competition in fees and services, NTT DoCoMo s consolidated operating income dipped 1.6% to 4,765.9 billion yen. B. KDDI Group The KDDI Group expanded and enhanced discounts for fixed-line services, began offering a basic ISDN interface communications mode for business customers, as well as dual, simultaneous communications on a single line. The company also upgraded network security with a variety of functions to better protect personal information. As a result of these developments, as well as its merger with telecom carrier PoweredCom, KDDI s operating income from fixed-line services increased 3.9% to billion yen in fiscal In mobile communications, KDDI acquired the three companies of the Tu-Ka Group in October 2005, and then integrated its au and Tu-Ka businesses. KDDI launched a variety of handsets to enhance its lineup, including the world s first model compatible with Japan One Segment digital terrestrial broadcasting system for mobile phones. KDDI also expanded and improved discounts, and allowed users to shift from Tu-Ka to au mobile phones with the same phone number. KDDI s operating income from mobile services increased 8.0% to 2,510.4 billion yen. C. SoftBank Group SoftBank successfully introduced the Otoku Line fixed-line service, helping the company to raise consolidated operating income 5.3% to billion yen. In mobile services, following its acquisition of Vodafone, SoftBank introduced a large number of third-generation (3G) handsets and straightforward rate structures. These include a flat-rate plan for unlimited s to and from mobile phones in Japan, and a flat-rate family plan for unlimited calls among family members. SoftBank s consolidated mobile operating income dipped 0.2% to 1,467.6 billion yen. 6. Issues in Telecom Industry A. First New Mobile Firms in 12 Years On November 10, 2005, the Ministry of Internal Affairs and Communications issued letters of approval to BB Mobile (a subsidiary of SoftBank), emobile (a subsidiary of eaccess), and ip mobile to enter the mobile phone business. This is the first time that companies have entered the market since the Digital Phone Group and the Tu-Ka Group entered the market in SoftBank, after acquiring Vodafone in 2006, relinquished its own mobile-phone license to the ministry. Both emobile and ip mobile plan to phase in services from 2007.

5 B. Start of One Segment Services The One Segment system, which enables digital terrestrial broadcasts to be viewed on cell phones, PHS, and notebook PCs, started centering in Tokyo, Nagoya and Osaka in April Programming is currently the same as existing digital broadcasts, but programs created specifically for handsets are expected to be offered, thereby creating new broadcasting and communications markets. C. Acquisition of Vodafone of the U.K. by SoftBank SoftBank acquired Vodafone on April 27, 2006 to make a full-scale entry into the mobile phone market. As a result, the industry is now dominated by three major competing groups NTT, KDDI and SoftBank just as in the fixed-line phone market(fig. 23, 24). D. Sale of Blackberry Handhelds NTT DoCoMo announced on September 19, 2006 that it would begin selling Blackberry mobile information terminals, manufactured by Canada-based Research in Motion Limited (RIM). Popular among businesspeople in North America, the Blackberry to be sold in Japan will also be useable overseas. The Blackberry, which can be used to make voice calls and send/receive data, is equipped with a standard keyboard and is operated like a PC. Willcom launched the W-ZERO 03, a handset with PC functions, on December 14, 2005, although the Blackberry is smaller and lighter. E. Start of Number Portability Number portability, inaugurated on October 24, 2006, allows subscribers to switch mobile phone carriers while retaining their original phone numbers. This means that carriers must now compete more intensely on fees and services to retain customers, since the former demerit of losing one s number when switching carriers is no longer a factor. 7. List of Companies Please refer to the following Ministry of Internal Affairs and Communications link: 8. Entering Japan s Telecom Business Please refer to the following Ministry of Internal Affairs and Communications links: English Japanese Reference Materials Information and Communications Handbook 2006, InfoCom Research, Inc. White Paper on Information and Communications 2006, Ministry of Internal Affairs and Communications *Telecoms Data Book 2006, Telecommunications Carriers Association Financial reports of various carriers * has been published only by Japanese.

6 Information and communication s industry Information and communications industry Information and communicationsrelated manufacturing industries Posts Mobile phone Services incidental to telecommunications Public broadcasting Posts Local telecommunications Long-distance communications Other telecommunications (including cable broadcasting) Mobile telecommunications Services incidental to telecommunications Public broadcasting Private television broadcasting Private radio broadcasting Private satellite broadcasting Cable television Cable radio Software (including package software (but excluding game software) and development under consignment) Game software Information processing services Information provision services Movie and video program production and distribution Newspapers Publishing News provision Video information production and distribution Video, voice, and text information Newspapers production Publishing News provision Non-ferrous metal manufacturing Communications cable production Communications cable production Cable communications equipment and tools manufacture Wireless communications equipment and tools manufacture Radio receiver, television receiver, vide equipment manufacture Electric audio equipment and tools manufacture Computer and related equipment manufacture Computer and related equipment manufacture Electrical equipment and tools manufacturing Other electric equipment and tools manufacture Magnetic tale and disk manufacture General equipment and tools Office, service, and private-sector equipment manufacturing and tool manufacture Office equipment and tool manufacture Other manufacturing Manufacturing not included in other categories Information recording media manufacture Communications equipment and tools rental Communications equipment and tool manufacture Office equipment rental Office equipment ant tool rental Computer and related equipment rental Advertising Advertising Advertising Printing, plate making and book Printing, plate making and book binding Printing, plate making and book binding Entertainment Movie and other theaters, etc. Movie and other theaters, etc. Information and Telecommunications facility communications-related Telecommunications facility construction Telecommunications facility construction construction construction Research Research Research Research Fig. 1. Definition and Scope of Information and Communications Industry Communications Broadcasting Information services Information and Goods rental communicationsrelated service industries (not included in other categories) Information and communications device manufacturing Fixed-line phone Private broadcasting Cable broadcasting Software Information processing and provision services Communications equipment and tools and related equipment and tools manufacture Note: The scope of the information and communications industry includes the production, processing, storage, distribution, and provision of information and materials and equipment necessary to perform these actions.

7 Fig. 2. Scale of Japanese Telecommunications Market by Segment (Billion yen, percent) Year Fixed-line phone 8,236 8,836 9,328 9,561 10,205 10,877 10,766 10,673 10,434 10, Mobile phone 1,641 2,683 3,845 4,595 5,123 5,789 5,940 5,884 6,255 6, Services incidental to telecommunications Total telecommunications market 9,941 11,584 13,238 14,222 15,390 16,729 16,761 16,615 16,741 16, Notes: 1. Market scales are nominal domestic values. 2. Lower rows indicate year-on-year % change. Fig. 3. Number of Companies Involved (No. of companies, percent) Fiscal Year No. of telecom businesses 4,726 6,024 6,780 7,900 9,350 10,520 11,318 12,518 13,090 13, Reference: Number of ISPs 1,703 2,661 3,365 4,234 5,612 6,741 7,527 8,860 9,111 9, Note: Lower rows indicate year-on-year % change. Fig. 4. Capital Investment (Billion yen, percent) Category FY 2004 FY 2005 Estimate YOY Change Planned YOY Change Registered telecom cos. 2, , of which: NTT New common carriers 1, , Other telecoms (notifications) Total 2, ,

8 Fig. 5. Investments, by Objective (%) FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 Actual Actual Actual Estimated Planned 276 firms 254 firms 255 firms 183 firms 174 firms Respond to new demand Of which: Expand service area Launch new services Enter new business Maintenance and repair Updates (replace old equipment) Research and development Streamlining and labor saving Improved safety and reliability Other Total Digitalization Mobile systems Of which: Related to 3G Not related to 3G Not related directly to mobile systems Note: Number of companies indicates respondents. Fig. 6. Telecom Employees, by Sector (No. of persons, %) FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 Fixed-line phones 287, , , , , , , , , , Mobile phones 69,382 91, , , , , , , , , Services 8,496 8,529 8,366 8,362 7,692 7,784 6,835 7,110 6,311 6, Total 365, , , , , , , , , , Note: Lower rows indicate year-on-year % changes.

9 Fig. 7. Telecommunications Service Subscribers (Thousand persons, %) Year Subscriber phones ISDN Fixed-line phone Mobile phones PHS Mobile systems IP telephony 50,998 10,327 61,325 69,121 5,698 74,819-51,162 9,610 60,772 75,657 5,461 81,118-51,592 8,627 60,219 81,520 5,135 86,655 5,276 51,626 7,981 59,607 86,998 4,476 91,474 8,305 50,563 7,491 58,053 91,792 4,692 96,484 11, Note: Lower rows indicate year-on-year % changes. Fig. 8. Subscribers, by Carrier (Thousand subscribers) Fiscal year-end NTT DoCoMo Group 36,219 41,011 44,149 46,328 48,825 51,144 KDDI (au) Group 10,986 12,214 14,049 16,959 19,542 22,699 Vodafone Group 9,978 12,232 13,963 15,002 15,041 15,210 Tu-Ka Group 3,954 3,891 3,783 3,632 3,590 2,739 Total 61,137 69,349 75,944 81,921 86,998 91,792 Vodafone Group numbers for 2002 and before are for defunct J-Phone Group. Source: Telecommunications Carriers Association Fig. 9. 3G Mobile Phone Subscribers (Thousand subscribers) FY2001 FY2002 FY2003 FY2004 FY2005 W-CDMA NTT DoCoMo Group ,045 11,501 23,463 Vodafone ,038 CDMA2000 1x KDDI (au) Group - 6,806 13,509 17,935 21,828 Total 89 7,161 16,692 30,353 48,329 % of total mobile market 0.1% 9.4% 20.4% 34.9% 52.7% Source: Telecommunications Carriers Association

10 Fig. 10. No. of Calls, by Caller Phone Type (Billion calls) FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 PHS Mobile phone Fixed-line phone Total Note: Fixed-line phones include all subscriber, public and ISDN lines, and IP phone lines as of Fig. 11. Call Time, by Caller Phone Type (Million hours) FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 PHS Mobile phone 1,036 1,343 1,516 1,598 1,659 1,672 Fixed-line phone 5,017 5,573 4,935 3,995 3,315 2,847 Total 6,152 7,027 6,566 5,747 5,198 4,673 Note: Fixed-line phones include all subscriber, public and ISDN lines, and IP phone lines as of Fig Line Startup and Monthly Fees (NTT East and NTT West) One-time payments (Yen) Installation 36,000 Contract 800 Type 1 1,450 Household Type 2 1,550 Basic fees Type 3 1,700 Type 1 2,300 Business Type 2 2,350 Type 3 2, Fees are for dial-up lines. 2. Type 1 is 1 to less than 50,000 lines. Type 2 is 50,000 to less than 400,000 lines. Type 3 is 400,000 or more lines. 3. Amounts are exclusive of consumption taxes. Source: NTT East and NTT West websites

11 Fig Calling Rates (Yen) NTT Communications NTT Communications Platinum Line KDDI SoftBank Telecom Local Calls 8.5 (8.5) [8.5] 8.5 (8.5) [8.5] 8.9 (8.9) [8.9] Adjacent area 20 (20) [20] 20 (20) [20] 21 (21) [21] Innerprefecture Up to 30 km Up to 20 km 8 (8) [8] 30 (30) [20] 30 (30) [20] 31.5 (31.5) [31.5] long distance Up to 60 km More than 60 km 40 (30) [20] 40 (30) [20] 42 (31.5) [21] Adjacent area Up to 20 km 20 (20) [20] 20 (20) [20] 21 (21) [21] Up to 30 km 30 (30) [30] 30 (30) [30] 31.5 (31.5) [31.5] Interprefecture & 15 (15) [15] Up to 60 km 40 (30) [30] 40 (30) [30] 42 (31.5) [31.5] Up to 100 km 60 (40) [30] inner-city 60 (40) [30] 63 (42) [31.5] Up to 160 km 80 (60) [40] 84 (63) [42] Up to 170 km 80 (70) [40] More than 170 km 80 (70) [40] 84 (73.5) [42] Note(s): 1. Figures on left are for daytime (8:00 a.m. to 7:00 p.m.), center figures in parentheses are for nighttime (7:00 p.m. to 11:00 p.m.), weekends and holidays, and right figures in brackets are for late-nights/early mornings (11:00 p.m. to 8:00 a.m.). 2. All rates are for three-minute calls. 3. Rates are as of October 31, All rates are exclusive of consumption taxes. Source: Company websites Rate plan Fig. 13. NTT DoCoMo Mobile Phone Rate Plans Contract fee Monthly basic fee Free time (yen) Call rate SS Type 3,600 1, seconds/20 yen S Type 4,600 2, seconds/18 yen M Type 6,600 4, seconds/14 yen FOMA & L Type 9,600 6, seconds/10 yen mova 3,000 LL Type 14,600 11, seconds/7.5 yen Business Type 9,800 Weekdays 8:00 a.m. - 7:00 p.m.: 15 yen/minute 5,500 7:00 p.m. - 8:00 a.m., and weekends & holidays: 30 yen/minute Limited Type 4,200 2, seconds/20 yen Note: Business rates (weekdays 8:00 a.m. - 7:00 p.m.) are for calls to other than NTT DoCoMo phones. Source: NTT DoCoMo website (Yen)

12 NTT DoCoMo au SoftBank Mobile Tu-Ka Fee-based services Free services Fee-based services Free services Fee-based services Free services Fee-based services Free services Source: Company websites Fig. 14. Mobile Phone Services, by Operator Two-month free-time carryover Family discounts Successively higher annual discounts for continuing subscribers "i-mode" mobile Internet "Osaifu Keitai" e-wallet for e-money, credit card and other payment functions. Video phone 50% rate discounts for calls to up to three specified numbers (limited to au and fixed-line phones) Student discounts of 50% on basic fee, voice calls and SMS, and 20% for calls to cell/phs phones of other companies 50% discounts on calls home from au phone "Ezweb" mobile Internet "Ezbook" electronic publications (novels, magazines, etc.) that can be read on mobile phone "EZmail reading" voice readout of 50% rate discounts for voice calls to SoftBank, fixed-line and IP phones, and video calls to three specified numbers Free calls and to SoftBank phones during specified times Unlimited use of and Internet for flat rate "S! Cast" digital magazine (fashion, etc.) subscriptions "S! GPS" location search using GPS navigation Video phone 15% discount on monthly fees for all family members "Dontoku" discounts up to 35% on basic rates according to years of subscription Half-price calls on caller's birthday Mobile Internet Prepaid services "Trio de Talk" three-party calls Fig. 15. IP Telephony Rates (Yen) Carrier Service name Basic fee Inner-carrier Domestic fixed-line Mobile phones SoftBank BB BB Phone (60) NTT Communications OCN Dot Phone KDDI KDDI Japan Telecom ODN IP phone Tokyo Electric Power (DTI) POINT Phone NTT East Hikari Denwa NTT West Hikari Denwa Notes: 1. Basic fees are monthly. 2. Costs of hardware (modem, adaptors, etc.) purchase/rental fees not included. 3. Rates show cost of first three minutes. 4. Rates do not include consumption taxes, except those of NTT Communications and Japan Telecom. 5. SoftBank BB divides its mobile phone rates into two time slots: 8:00 a.m. to 11:00 p.m. and 11:00 p.m. to 8:00 a.m (latter shown in parentheses) 6. KDDI mobile-phone rates are for calls to non-au phones (calls to au mobile phones cost 51 yen). 7. ODN IP plan is "ODN ADSL Plan 8M." 8. NTT East and NTT West plans are "Hikari Denwa A (Ace)." Source: Company websites

13 Fig. 16 Subscription and Basic Fees in Major Cities (FY2005) 40,000 35,000 (Yen) 36,800 30,000 25,000 20,000 15,000 17,400 Subscription fee Basic fee 10,000 5, ,500 6,600 7,400 1,700 1,768 2,085 1,667 1,960 Tokyo New York London Paris Dusseldorf Notes: 1. In the U.S. and France, subsidies are provided for basic fees. 2. Basic fees are monthly. Fig. 17 Fixed-Line Call Rates in Major Cities (FY 2005) (Yen) Local calls Long-distance calls Tokyo New York London Paris Dusseldorf Notes: 1. Rates are for three-minute fixed-line calls at 12 noon on weekdays. 2. Long-distance calls are according to the farthest region in the country

14 Fig. 18 Mobile Phone Average Monthly Call Charges in Major Cities (FY 2005) (100 yen/month) Tokyo New York London Paris Dusseldorf Notes: 1. Voice calls only. 2. Assumes 99 minutes of use per month Fig. 19. NTT Access Charges (3 minute call from subscriber phone) (Yen) Local exchanges Long-distance exchanges Source: NTT East and NTT West Fig. 20. NTT DoCoMo Connection Fees (Yen/second) Inner-company connection Inter-company connection Source: NTT DoCoMo

15 Fig. 21. Measures for Balanced Competition in Telecom Industry NTT Long-distance & international calls Local calls Rates NTT, the former domestic-phone monopoly, was restructured under a holding company (July 1997). Domestic and overseas carriers entered the telecom market. Elimination of domestic/international barriers and supply/demand adjustments (1997), and restrictions on foreign investment (1998) Introduction of third-party connection to NTT local exchanges and My Line system for users to specify preferred carrier. Rate restrictions were largely relaxed by changing from fair compensation rates to advance notice and price caps. Other than for NTT East and NTT West, all transactions between carriers and customers are decided by market. NTT East and NTT West may negotiate prices with large customers. Others Restrictions on NTT group carriers were introduced, universal service mechanism established, business categories (Types 1 & 2) were eliminated, carriers other than NTT East and NTT West allowed to decide rates, effective competition assessments were introduced in each market, and other business laws were revised in National strategy The e-japan Strategy and e-japan Strategy II were introduced as IT national strategies, followed by the u-japan Plan to create a ubiquitous-network society for connectivity anywhere, anytime by Source: InfoCom Research, Inc. Fig. 22. Carrier Groups Providing Mobile Phone Services NTT DoCoMo Group KDDI Group SoftBank Group (800 MHz and 1.5GHz bands) (800 MHz band) (1.5 GHz band) (1.5 GHz band) Hokkaido NTT DoCoMo Hokkaido Tohoku NTT DoCoMo Tohoku Kanto NTT DoCoMo KDDI Tokai NTT DoCoMo Tokai (Tu-Ka KDDI Kinki NTT DoCoMo Kansai brand) (au brand) SoftBank Mobile Hokuriku NTT DoCoMo Hokuriku Chugoku NTT DoCoMo Chugoku Shikoku NTT DoCoMo Shikoku Kyushu NTT DoCoMo Kyushu Okinawa Okinawa Cellular Phone Source: InfoCom Research, Inc.

16 Fig. 23. Fixed-Line Phone Industry NTT Group NTT East NTT West FY2005 sales: 4,467.3 bil (-2.7%) Operating income: bil (-29.9%) Note: Results for these two regional firms only KDDI Group KDDI (Merged in 2000) KDD DDI IDO FY2005 sales: billion yen (+3.9%) Operating income: bil ( bil) SoftBank Group SoftBank Telecom Japan Telecom (affiliated with Vodafone) Ripplewood Holdings (Acquired in 2003) (Name changed in Oct. 2006) SoftBank (Acquired in 2004) FY2005 sales: bil yen (+5.3%) Operating income: 20.9 bil ( bil) Note: Japan Telecom results 1. Figures in parentheses are year-on-year changes. 2. Figures are fiscal year ended March Source: Various materials. Fig. 24. Mobile Phone Industry NTT Group KDDI Group Kyocera P H S WillCom DDI Pocket NTT DoCoMo (Name change in 2005) (Established in 2004) Carlyle (Capital) au KDDI (Merger in 2001) Tu-Ka (Merger in 2005) FY2005 sales: 4,765.9 bil (-1.6%) Operating income: bil (+6.2%) Subscribers: mil (+4.7%) FY2005 sales: 2,510.4 bil (+8.0%) Operating income: bil (+21.6%) Subscribers: mil (+10.0%) SoftBank Group SoftBank Mobile 2006 Vodafone Vodafone Holdings (Name change in 2004) (Name change in 2003) Japan Telecom Holdings FY2005 sales: 1,467.6 bil (-0.2%) Operating income: 76.3 bil (-51.7%) Subscribers: mil (+2.1%) (Sept. 06) 1. Figures in parentheses are year-on-year changes. 2. Unless otherwise specified, figures are for fiscal year ended March Source: Produced from various materials.