Mobile internet coming of age: i-Mode’s 18th birthday

i-mode menu NTT docomo

The global mobile internet was born today 18 years ago, on February 22, 1999

NTT Docomo announced the start of i-Mode on February 22, 1999 at a press conference in Tokyo

Today, 18 years ago, on February 22, 1999, Mari Matsunaga, Takeshi Natsuno, and Keiichi Enoki announced the start of the world’s first successful mobile internet service to a small number of people who made it to NTT Docomo’s press conference in Tokyo.

For many years, Japan was the global hotspot for mobile internet, mobile broadband, fixed net broadband (FTTH), there is a very long list of inventions, innovation, new services and products which were successfully brought to market in Japan, and in some cases it took 10 years or longer for these same services to succeed elsewhere in the world.

Examples of services and products which saw their invention, or first successful global mass market introduction in Japan include:

Inventing the mobile internet vs capturing global value

Undoubtedly the biggest success story emerging from Japan’s pioneering mobile internet days is SoftBank

After Vodafone acquired a controlling stake in Japan Telecom, it took Vodafone at least one year to realize that instead of a far east backwater waiting for Vodafone, Japan’s mobile market was actually years ahead of Europe at that time. By the time Vodafone realized that instead of sailing into an easy market, they had actually entered the world’s most ferociously competitive market, it was too late, Vodafone sold its Japan operations to SoftBank, which turned out the failing Vodafone-Japan within a few months of intense efforts. SoftBank’s acquisition of Vodafone-Japan and the successful turn-round became the basis for SoftBank to implement Masayoshi Son’s plan to create one of the world’s most important companies.

Other Japanese success stories resulting from pioneering the mobile internet

Japan has created one of the most vibrant smart phone games eco-system, with a large number of smart phone game companies growing, many listed on the Tokyo Stock Exchange.

Beyond games, Japan has created a vibrant sector of internet and mobile ventures, founded in the wave of Japan’s mobile internet and FTTH broadband adoption. However, because of Japan’s well known Galapagos syndrome, few have made it into global success stories yet. However, its not too late.

eMoji made it into MoMa.

QR codes are all over China, however not monetized by Denso Wave, the Toyota family company which invented QR codes for automotive parts management.

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SoftBank acquires ARM Holdings plc: paradigm shift to internet of things (IoT)

eurotechnology softbank

On 18 July 2016 SoftBank announced to acquire ARM Holdings plc for £17 per share, corresponding to £24.0 billion (US$ 31.4 billion)

SoftBank acquires ARM: acquisition completed on 5 September 2016, following 10 years of “unreciprocated love” for ARM

On 18 July 2016 SoftBank announced a “Strategic Agreement”, that SoftBank plans to acquire ARM Holdings plc for £24.0 billion (US$ 31.4 billion, ¥ 3.3 trillion) paid as follows:

  • Cash on Hand: £16.7 billion (US$ 12.5 billion, ¥ 2.3 trillion)
  • Loans: £7.3 billion (US$ 9.5 billion, ¥ 1.0 trillion)
  • Total: £24.0 billion (US$ 31.4 billion, ¥ 3.3 trillion)

(excluding 20.4 million shares (1.4%) that SoftBank already owned on 18 July 2016).

Acquisition schedule:

  • 18 July 2016: Strategic agreement between SoftBank and ARM announced by SoftBank
  • 5 September 2016: effective date of Scheme of acquisition
  • 6 September 2016: ARM delisted, cancellation of listing of ARM shares
  • 12 September 2016: cancellation of listing of ARM US Depositary shares (ADS)

Straight line from SoftBank’s acquisition of Vodafone-Japan to acquisition of ARM

In a detailed interview in Nikkei on 3 September 2016, Masayoshi son explained that he was interested in ARM ever since about 1906, when saw the paradigm shift from PC to mobile, when he discussed his designs for mobile internet handsets with Steve Jobs, and when he acquired Vodafone-Japan (see: Why did Vodafone fail in Japan? … and miss an opportunity of US$ 83 billion).

SoftBank’s acquisition of Vodafone Japan is explained here: Softbank acquires Vodafone Japan with co-investment from Yahoo KK

SoftBank’s acquisition of Vodafone Japan – in combination with having developed YAHOO-Japan into the leading internet service company in Japan – enabled SoftBank to become a key global player in mobile communications.

Masayoshi Son: unreciprocated love for ARM for 10 years

In the Nikkei interview of 3 September 2016, Masayoshi Son explains that he had an “one-sided / unreciprocated love for ARM” for at least 10 years, but decided to acquire SPRINT first. After acquiring SPRINT he had to pay down debt before being able to acquire ARM now.

ARM Holdings plc

ARM was founded on 27 November 1990 as Advanced RISC Machines, however the abbreviation ARM was first used in 1983 and initially meant “Acorn RISC Machines”.

Acorn Computers Ltd was founded in 1978 in Cambridge (UK) by Hermann Hauser and Chris Curry to produce computers, and its most famous product was the BBC Micro Computer.

ARM has built an ecosystem of IC design systems and platforms which are at the core of low energy consumption ICs and CPUs for smartphones and many other electronic devices and cars. ARM may become or already is one of the core technology companies for the Internet of Things (IoT).

SoftBank’s ARM Business Department’s name changed to “New Business Department”

On 3 September 2016 SoftBank announced that the name of SoftBank’s ARM Business Department has been changed to SoftBank New Business Department.

Preview – SoftBank today and 300 year vision report:

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Japan mobile operators grow to US$ 25 billion in operating profits for FY2014 (ended March 31, 2015)

Japan mobile operators grow to $170 billion in revenues in FY2014, US$ 25 billion operating profits. Japan's mobile telecommunications continue growth

Annual revenues exceed US$ 170 billion in FY2014

Japan’s mobile telecommunications sector continues to grow

The global mobile internet and smartphone revolution started in Japan in 1999, and Japan’s mobile telecommunications market is the world’s most advanced and most vibrant. Much mobile innovation and inventions, such as camera phones, color screens for mobile phones, mobile apps (i-Appli in Japan), and mobile payments were invented and first to market in Japan.

Globally the first mobile internet started in Japan in February 1999 when NTT-Docomo brought i-Mode to market. NTT-Docomo did not succeed to develop global business based on i-Mode, however, SoftBank took the lead, and is now building a global business built on Japan’s telecommunications sector’s strengths.

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Japan mobile operators grow revenues to over US$ 170 billion in FY2014

While former monopoly operator NTT-Docomo’s business continues to shrink since its peak in 2002, KDDI is growing its predominantly domestic Japanese business slowly but steadily.

SoftBank on the other hand drives rapid growth with domestic Japanese acquisitions (Vodafone-Japan, Japan Telecom, eMobile and Willcom) and overseas acquisitions, which include US operator SPRINT, US mobile phone retailer BrightStar, Finnish game company SuperCell and many others – not to mention SoftBank’s investment in Alibaba.

Japan's top three mobile operators combined revenues grow to over US$ 170 billion
Japan’s top three mobile operators combined revenues grow to over US$ 170 billion

Operating profits rise to approx. US$ 25 billion in FY2014

Operating profits and net profits are steadily increasing for Japan’s three mobile operators combined.

Former monopoly operator NTT-Docomo’s operating profits peaked in 2002, and have been steadily decreasing since this peak.

Both challengers KDDI and SoftBank on the other hand are growing operating profits steadily: KDDI mainly domestically in Japan, with relatively small global business, while SoftBank has dramatically increased business outside Japan with a series of acquisitions and investments, including US operator Sprint, US mobile phone distributor BrightStar and Finnish game developer SuperCell.

Operating income of Japan's three mobile operators combined increases to approx. US$ 25 billion
Operating income of Japan’s three mobile operators combined increases to approx. US$ 25 billion

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SoftBank overtakes Docomo and KDDI in revenues and income and market cap

SoftBank overtakes Docomo and KDDI in revenues and income and market cap SoftBank overtakes Docomo and KDDI in all major KPIs

SoftBank overtakes Docomo and KDDI in all major KPIs

SoftBank presents annual results for the Financial Year which ended March 31, 2014 today, NTT-Docomo and KDDI presented their results a few days ago. Using projections published by SoftBank and using data found in the Japanese business press over the recent days, we have compared SoftBank, Docomo and KDDI financial results:

SoftBank overtook both Docomo and KDDI in all major KPIs: SoftBank’s annual revenues, operating profits and net after-tax profits are higher than NTT-Docomo’s and KDDIs.

To understand SoftBank, read our report about the Softbank Group, and read our report on Japan’s telecom sector.

The reason for SoftBank overtaking NTT-Docomo and KDDI are both excellent performance of SoftBank’s core businesses, mobile communications and media in Japan, and also a series of recent investments: SuperCell, GungHo, SPRINT, BrightStar, eMobile/eAccess, Willcom and more which all have been very successful investments sofa, not counting Alibaba, which of course is an amazing success story.

Going forward, of course the key questions now are the turn-round of SPRINT, and whether SoftBank can succeed with the much rumored acquisition of T-Mobile in the USA, and possibly also a major European acquisition.

We have today updated our Report on Japan’s telecommunications landscape, to include latest financial and subscriber data, and latest M&A activities: Japan’s telecommunications market is one of the world’s most active also regarding M&A and restructuring.

SoftBank overtakes Docomo and KDDI in Market cap (data for May 7, 2014):

SoftBank: ¥ 8908.9 billion (US$ 89 billion)
NTT-Docomo: ¥ 7049.5 billion (US$ 70 billion)
KDDI: ¥ 4925.2 billion (US$ 49 billion)

SoftBank overtakes Docomo and KDDI in annual revenues:

SoftBank overtakes Docomo and KDDI in annual revenues
SoftBank overtakes Docomo and KDDI in annual revenues

SoftBank overtakes Docomo and KDDI in annual operating income:

SoftBank overtakes Docomo and KDDI in annual operating income
SoftBank overtakes Docomo and KDDI in annual operating income

SoftBank overtakes Docomo and KDDI in annual net income:

SoftBank overtakes Docomo and KDDI in annual net income
SoftBank overtakes Docomo and KDDI in annual net income

Learn more about SoftBank, Masayoshi Son, and his 30/300 year vision for SoftBank

Report on “SoftBank today and 300 year vision” (approx 120 page, pdf file)
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To learn more: Japan’s telecommunications industry

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Docomo financial report for FY2013: operating income of YEN 819 billion (US$ 8.2 billion)

Docomo financial report: Kaoru Kato, CEO of NTT-Docomo

Docomo financial report for FY2013: US$8.2 billion operating profits but withdraws from India

Docomo financial report: Kaoru Kato, CEO of NTT-Docomo explaining NTT-Docomo's annual results in Tokyo on April 25, 2014
Kaoru Kato, CEO of NTT-Docomo explaining NTT-Docomo’s annual results in Tokyo on April 25, 2014

On April 25, 2014 NTT-Docomo announced annual results for FY2013 (April 1, 2013 – March 31, 2014) and explained the way forward.

Annual revenues are YEN 4461.2 billion (US$ 33.6 billion),
operating income is YEN 819.2 billion (US$ 8.19 billion),
net income is YEN 464.7 billion (US$ 4.6 billion).

These figures are of course amazing results, and Docomo remains one of the most important mobile operators globally.

Docomo financial report – technology roadmap:

Docomo is now planning to:

  • introduce VoLTE in summer 2014,
  • quad-band LTE with 150Mbps in FY2014,
  • LTE-Advanced with 225Mbps in FY2014/2015,
  • and aim for 10Gbps bandwidth beyond FY2015,

ensuring that Docomo will remain a leading edge mobile operator for the foreseeable future.

Docomo financial report – announces failure in India:

Still, there are some shadows on Docomo’s amazing success story:

  • Docomo announced withdrawal from the joint-venture with TATA-Teleservices in India, thus another of Docomo’s ventures to create growth outside Japan has failed. This is the last in a very long string of failures of NTT-Docomo outside Japan, after having lost about US$ 10 billion on investments in KPN-mobile, AT&T-Wireless, and Hutchinson, and the attempt to develop i-Mode mobile internet services in many countries.
  • NTT-Docomo has now been overtaken by SoftBank on most key performance indicators (KPIs). SoftBank has achieved higher overall subscriber numbers, higher revenues, higher operating income and higher net income than NTT-Docomo.
Docomo financial report: Kaoru Kato, CEO of NTT-Docomo, bathing the crowd and answering questions at the annual results meeting on April 25, 2014 in Tokyo
Kaoru Kato, CEO of NTT-Docomo, bathing the crowd and answering questions at the annual results meeting on April 25, 2014 in Tokyo

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Japan energy mix: Keeping the lights on in Japan – deregulation, new and renewable energy

Japan's energy sector

Japan energy mix, smart grid, electricity deregulation – briefing by The Economist Corporate Network

Economist Corporate Network held a breakfast briefing today April 24, 2014 for about 50 Japan-CEOs and executives.

Shigeki (Sean) Miwa, General Manager of SoftBank’s CEO Office, and Representative Director & CEO of Bloom Energy Japan KK, and EVP of SB Energy Corporation

Mr Shigeki (Sean) Miwa, General Manager of SoftBank’s CEO Office, and Representative Director & CEO of Bloom Energy Japan KK, and EVP of SB Energy Corporation, explained SoftBank’s and Masayoshi Son’s reasons for entering the energy business, and he explained Bloom Energy’s offering of energy sources based on very efficient fuel cells in Japan.

Gerhard Fasol, CEO of Eurotechnology-Japan

Gerhard Fasol, CEO of Eurotechnology-Japan, gave an overview of Japan’s energy situation, and an outlook into the future. Here is an interview by The Economist after the breakfast briefing:

Keynote and the interview are based on our reports:

View a shortened form of the presentation here on SlideShare:

You can find detailed data and analysis in our report on Japan’s energy sector, and on Japan’s renewable energy sector.

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SoftBank market share in Japan – many articles get it wrong. What is SoftBank’s true market share in Japan?

Softbank market share in Japan

Many press articles get SoftBank market share in Japan wrong

With SoftBank‘s acquisition of US No. 3 mobile operators Sprint and the possibility that Softbank/Sprint will also acquire No. 4 T-Mobile-USA, SoftBank and Masayoshi Son are catching global headlines.

SoftBank market share in Japan: Many media articles report wrong data, because they forget to include group companies

These articles state SoftBank’s market share in Japan’s mobile market as 25% and say that KDDI Group has more subscribers than Softbank Group in Japan, but is this really true?

What is SoftBank‘s true market share in Japan’s mobile communications markets?

Detailed subscriber data and analysis of Japan’s telecom markets in our Report on Japan’s telecom sector.

SoftBank recently acquired eMobile/eAccess, and has been the court-appointed reconstruction partner of Willcom, after Willcom’s financial failure. Therefore eMobile/eAccess and Willcom are also part of the SoftBank group, and SoftBank plans to merge both. In addition, Wireless City Planning (WCP) are also part of the SoftBank group. You will find these transactions, the logic and reasoning behind them explained in great detail in our reports on SoftBank and on eAccess/eMobile.

List of mobile operators on Japan’s market today:

We have the following mobile operators currently in Japan – subscription market shares are shown in brackets (subscriber numbers for Docomo, KDDI and Softbank are as of February 28, 2014, while for other operators the latest officially reported numbers are used):

  • NTT Docomo Group (40.8%)
  • KDDI Group (28.9%)
    • AU
    • UQ Communications
    • fixed line and other businesses
  • SoftBank Group (30.3%)
    • SoftBank
    • eMobile/eAccess (note: eMobile, eAccess and Willcom are now combined into Ymobile)
    • Willcom (now merged into Ymobile)
    • Wireless City Planning (WCP)
    • fixed line and other businesses
  • several virtual mobile operators, e.g. Japan Communications Inc. who lease communications capacity e.g. from Docomo and retail this leased capacity to their own subscribers

The SoftBank group including eAccess/eMobile, Willcom and Wireless City Planning has actually more than 30% of Japan’s mobile subscriber market – not 25% as some articles write.

For detailed market data, statistics and analysis of Japan’s highly competitive mobile communications market, read our market report on Japan’s telecom markets, which includes analysis and data for Japan’s wireless, fixed, ADSL and FTTH markets, and detailed financial data, analysis, and comparison of the financial performance of NTT, NTT Docomo, SoftBank and KDDI.
We are also preparing reports on Japan’s cloud and data center markets – contact us for details.

Softbank market share: Subscriber market shares in Japan's mobile market
Subscriber market shares in Japan’s wireless communications markets for each of the competing groups: Docomo, KDDI and SoftBank.

Learn more about SoftBank, Masayoshi Son, and his 30/300 year vision for SoftBank

Report on “SoftBank today and 300 year vision” (approx 120 page, pdf file)
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Japan Perspectives for 2014: can Abenomics succeed? Can Japan grow again? Can Japan solve the population crisis?

Japan perspectives for 2014. Will Abenomics succeed? Can Japan solve the population crisis? Can Japanese companies globalize and embrace diversity?

Will Abenomics succeed?

Stanford Economics Professor Takeo Hoshi thinks that there is a 10% chance that Abenomics will succeed to put Japan on a 2%-3% economic growth path, while the most likely outcome will be 1% economic growth. Read our notes of Professor Hoshi’s talk in detail here.

Can Japanese companies globalize?

“Globalization” of course is not an aim in itself. In Europe and USA there are plenty of companies which are very successful and not globalized. However, Japan could capture much more global value from technology and creativity by creating more global companies: the shining example is SoftBank.

When four experts including myself briefed the President of Germany about Japan, we all agreed on Japan’s extraordinary creativity. At the same time there are many difficulties for Japan to capture global value from this creativity.

Read legendary Masamoto Yashiro’s viewpoints about globalization at a recent Tokyo University brainstorming event by the President of Tokyo University (Masamoto Yashiro was Chairman of Exxon-Japan, of Citibank-Japan, and Shinsei-Bank, and Board Member of the Construction Bank of China). Masamoto Yashiro says that a change of mind-set is urgently needed.

Overseas direct investment is one way for Japanese companies to globalize. Japanese companies have been investing strongly in EU, just a few days ago Sompo Insurance/ NKSJ Holdings acquired the UK Canopius Group for about US$ 1 billion.

Other recent mergers globalizing Japan are, TowerJazz acquiring three Panasonic IC fabs, and the merger of Applied Materials and Tokyo Electron, another is GungHo and SoftBank investing in SuperCell, and GungHo has now been even floating the idea of moving corporate headquarters to Finland!

Disruption for Japan’s Energy markets

Until March 11, 2011, Japan’s energy markets were essentially frozen in the structures created in 1952, which again resulted from the war-time nationalization of Japan’s electricity sector (see our Energy Report). Japan’s electricity markets alone are worth about US$ 200 million per year – and this market is now in disruption.

Recently I was invited to brief the Energy Minister of Canada, Mr Joe Oliver, and Sweden’s Trade Minister Dr. Ewa Björling about Japan’s energy markets. My briefings are based on our analysis, which you can find in our Energy Report, and Renewable Energy Report.

The liberalization of Japan’s energy markets will create winners and losers – comparing the financial performance of Japan’s electricity companies and gas companies is an indication of things to come. Actually, only Japan’s electricity markets are being liberalized currently, liberalization of Japan’s gas markets is still for the future.

Disrupting Japan’s game sector

Japan’s game makers have essentially created the global game market, and are ripe for disruption by smart phones and tablets one would think. Indeed, just three Japanese newcomers Gree + DeNA + GungHo alone (there are many more) create more annual net income than Japan’s top 9 game makers combined! The origin of this disruption by newcomers in Japan however is not created by Western companies, and not by smart phones, but goes back to the creation of i-Mode in February 1999 (and some months later EZweb and Jsky). Recently the world is slowly waking up to the fact, that Japan’s game markets is one of the world’s biggest, if not the biggest… and hard for foreign companies to penetrate, unless done correctly…

We wish you a very Happy New Year!

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Japanese superman Masayoshi Son invests in Supercell (interview for Talouselämä, Finland’s largest business newspaper)

softbank acquires supercell

Japanese superman Masayoshi Son invests in SuperCell – interview with Finland’s largest business newspaper Talouselämä

Talouselämä (Finland’s largest business newspaper)’s news editor Mirva Heiskanen interviewed me for their article entitled “Japanese superman Masayoshi Son invests in Supercell” (Supercellin ostaja Masayoshi Son on Japanin supermies).

More interviews by Gerhard Fasol.
To understand SoftBank better, read our report on SoftBank, an analysis of SoftBank, history, current data, and the context.

Here are some of my main points:

Japanese superman Masayoshi Son invests in SuperCell – SoftBank is a very large companies, and aiming to become the world’s largest company

SoftBank is really a very large company, driven by the charismatic founder Masayoshi Son. To get a feeling for the size of SoftBank, while the investment in Supercell is a large amount of money by anybody’s standards, its about 5% of SoftBank’s acquisitions this year alone (in addition to M&A type investments, SoftBank also invests substantial sums in networking equipment and other telecom business infrastructure and data centers).

Japanese superman Masayoshi Son invests in SuperCell – SoftBank invested in about 1500 companies, the most famous currently being Alibaba

Overall SoftBank invests in about 1500 companies or more: SoftBank takes a venture capital approach to this portfolio. Overall SoftBank investments are incredibly successful. As an example, look at the currently important Alibaba case:
Softbank acquired 36.7% of Alibaba in 2000 for US$ 20 million.
Alibaba’s market cap will be determined after its IPO, but currently figures between US$ 100 billion and even up to US$ 250 billion circulate. This would value SoftBank’s 36.7% stake in Alibaba at somewhere between US$ 36.7 billion and US$ 91 billion, a return on initial investment between 1835 and 4550 times!

While SoftBank’s overall portfolio is outstandingly successful, not every single investment is successful, as is normal for a venture type investment style.

Japanese superman Masayoshi Son invests in SuperCell – this year alone, SoftBank investments and acquisitions amount to about US$ 30 billion

This year SoftBank’s direct investments and acquisitions alone are on the order of US$ 30 billion and include:

  • Sprint US$ 21.6 billion + infrastructure investments
  • Clearwire (not sure if this is included in the Sprint figures)
  • eMobile/eAccess US$ 5 billion including debt
  • GungHo increase stake US$ 1/4 billion
  • Supercell US$ 1.5 billion
  • mobile phone distributor Brightstar which is another US$ 1.26 billion

Talouselämä questions and my answers:

  • What are SoftBank’s targets? SoftBank wants to become one of the most important companies globally, has a 30 year plan and a 300 your plan
  • How does SoftBank integrate acquisitions? Case-by-case. In some cases, e.g. Vodafone-Japan KK, Softbank totally absorbed the company and its assets became much of the starting point of SoftBank Mobile, however today’s SoftBank Mobile is a dramatically different company compared to Vodafone-Japan KK, which according to Masayoshi Son in recent interviews “was going south”.
  • How important are games for Softbank? SoftBank is major investor in GungHo, which is one of the world’s most successful smartphone game companies.
  • What other businesses does SoftBank concentrate on, and what kind of goals does it have? SoftBank today focusses on mobile communications and internet, however is also active in other areas. For example, SoftBank is aggressively building an energy business, with focus on renewable energy, which includes renewable energy investments in Mongolia for example. SoftBank‘s more than 1500 investments include Alibaba and Yahoo Japan KK.

To understand SoftBank better, read our report on SoftBank, an analysis of SoftBank, history, current data, and the context.

Understand Japan’s games sector and game makers

Report “Japan game makers and markets” (pdf file, approx 400 pages, 140 figures)
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Supercell wins SoftBank and GungHo investment

softbank acquires supercell

Supercell investment by SoftBank and GungHo

Supercell investment leverages paradigm shift, time shift and market disconnects

Smartphones and the “freemium” business models are bringing a dual paradigm shift to games and create a new truly global market. To take advantage of this global paradigm shift, its necessary to overcome the cultural disconnects between markets. SoftBank and GungHo‘s investment in the Finnish smartphone/tablet game maker Supercell, announced on Oct. 15, will help to overcome the disconnect between Japan’s and other game markets for both Supercell and GungHo.

The disconnect between Japan and other countries is often surprising – when BusinessWeek in 2006 commented on rumors that SoftBank might introduce an Apple “iPod-Phone” to Japan, BusinessWeek remarked that “Apple would normally never talk to a small-fry such as SoftBank” …. at that time SoftBank’s annual revenues were about twice Apple’s, and BusinessWeek printed my correction pointing out that SoftBank even at that time was anything but a “small fry”.

One of SoftBank‘s aspects is it’s “time-shift” investment model, another is SoftBank‘s 30/300 year vision – both are important factors to understand the Supercell investment.

Supercell investment: Comparing Supercell's US$ 3 billion valuation with Japanese game companies (note that the market cap for the full SONY Group is shown here)
Comparing Supercell’s US$ 3 billion valuation with Japanese game companies (note that the market cap for the full SONY Group is shown here)

This Figure contrasts the market caps of new mobile and smartphone centric game companies (GungHo, Supercell, DeNA and GREE) with traditional console, video game and arcade game companies.

SoftBank announced that because of the majority investment, Supercell will become a subsidiary of SoftBank, and GungHo will account for Supercell’s profit/loss under the equity method.

Supercell investment: Comparing Supercell with Japanese game companies and SoftBank
Comparing Supercell with Japanese game companies and SoftBank

GungHo and Supercell both are top-ranking mobile game companies: GungHo inside Japan with “Puzzle and Dragons”, and Supercell outside Japan with “Hay Day” and “Clash of Clans”. Expect both to leverage each other’s resources.

Both GungHo and Supercell show explosive growth:
GungHo’s operating profits increased 4050% (x 40) for Jan-June 2013 compared to the same period one year earlier.
Supercell’s revenues (mainly in-game purchases) jumped 500x from EURO 151,000 in 2011 to EURO 78 million in 2012.

Culture can be an issue between Japan and other countries, however, SoftBank has invested in more than 1000 comparable companies, and many of SoftBank’s investments have been outstandingly successful including Alibaba and Yahoo.

However, investment and management support by SoftBank does not automatically guarantee success in Japan – despite SoftBank’s investment and support, Zynga closed operations in Japan earlier this year. Success in Japan will remain Supercell’s responsibility, despite SoftBank’s and GungHo’s help and investment – as Zynga can tell.

SoftBank aims for global No. 1 position: Learn more about SoftBank, Masayoshi Son, and his 30/300 year vision for SoftBank

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Rakuten vs SoftBank + Yahoo vs Amazon (Bloomberg and BusinessWeek interviews)

Hiroshi Mikitani Rakuten

Rakuten vs Softbank

Yahoo reduces e-commerce fees to compete harder with Rakuten’s online mall

Bloomberg interview and BusinessWeek interview about Yahoo KK’s aggressive reduction of ecommerce fees, a move increasing competition with Amazon.com and Rakuten.

How do you see Yahoo KK’s latest move to reduce or eliminate merchant’s fees? Do you see this as an attack by SoftBank/Yahoo on Rakuten?

SoftBank and Rakuten are clearly two very different companies – they don’t compete on the same ground. SoftBank is a telecom company with a Government spectrum license – a quasi-monopoly on a certain wavelength spectrum. Rakuten has no such monopoly, but is an internet based ecommerce company.

How do you see the future of Rakuten now?

Rakuten is clearly squeezed between SoftBank/Yahoo on one side and Amazon.com on the other side.

Amazon.com’s Jeff Bezos, SoftBank/Yahoo-KK’s Masayoshi Son and Rakuten’s Hiroshi Mikitani are clearly some of the most brilliant minds on this planet earth, so any battle between these three is phenomenal.

You ask about Hiroshi Mikitani/Rakuten – he clearly has his job cut out to compete with Masayoshi Son and Jeff Bezos – that’s not easy at all.

In particular, Amazon.com has a lot of strengths in areas, where Rakuten does not compete, e.g. AWS – Amazon Web Services, which is a very important cloud services company.

In terms of globalization, I also see challenges ahead for Rakuten. Even though Rakuten has recently decided to train staff in English conversation, its not a trivial job for an essentially Japanese company to globalize.

How do you see globalization of Rakuten and Softbank?

SoftBank clearly has taken a big step in acquiring Sprint in USA. SoftBank’s very big challenge is now to make Sprint a very big success and this will take some time.
Rakuten also has a huge challenge to globalize, and it will be interesting to see if Rakuten can become a global company

Copyright (c) 2013 ·Eurotechnology Japan KK All Rights Reserved

Masayoshi Son threatened to set himself on fire in Japan’s Postal Ministry?!

Source iPhone 3G Masayoshi Son Masaru Kamikura

Masayoshi Son threatened to set himself on fire in Japan’s Post and Telecommunications Ministry? Is it really true?

Masayoshi Son is known for his unbreakable will to achieve his business goals – rather the business goals for his companies.

Masayoshi Son threatened to set himself on fire in the Ministry?!? Spectrum allocations for KDDI and SoftBank:

Currently Masayoshi Son, Founder of Softbank, is battling for a revision of a decision by Japan’s Ministry of General Affairs (Soumu-Sho) to award a new tranche of radio wave spectrum to KDDI’s subsidiary UQ, rather than sharing the spectrum equally with SoftBank‘s subsidiary Wireless City Planning.

Masayoshi Son threatened to set himself on fire in Japan’s Post and Telecommunications Ministry? Asking Masayoshi Son directly:

For a long time, I knew of a story about Masayoshi Son threatening to set himself on fire inside Japan’s Postal and Telecommunications Ministry (now merged into Japan’s Ministry of General Affairs (Soumu-Sho) since administrative reforms some years ago) in order to underline his request for a particular telecommunications license, or access to NTT exchanges, or similar matters Masayoshi Son was applying for at the time. I was long puzzled whether this story is true or not, so some years I go I had the chance to check this story out directly with Masayoshi Son, via the Chief- Editor of BusinessWeek, Mr David Rocks.

David Rocks, Editor of BusinessWeek in 2004 came for three weeks to Japan because BusinessWeek’s technology correspondent had tragically died of illness, in order to fill the gap of reporting about Japan. On the first day of his three weeks work in Japan he had Chinese dinner with me in Hibiya. Next day around noon he phoned me for advice of which questions to ask Masayoshi Son during an interview, and one of the questions that I suggest was: “Is the story true, that you (=Masayoshi Son) threatened to set yourself on fire in the Japanese Telecommunications Ministry”. A day later David Rocks told me, that Masayoshi Son’s answer was: “Yes, the story is true, I did threaten to set myself on fire inside the Telecommunications Ministry, but I did not take any petrol along!”.

Read this story in more detail here. This story became the headline of David Rocks’ BusinessWeek article “Setting fire to the cell-phone market“, published on October 31, 2004 in Businessweek.

More about Softbank and Masayoshi Son in our report.

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More in the Japan Telecommunications industry report

(269 pages, pdf file)
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Copyright notice:

The photograph of Masayoshi Son is used under Creative Commons license according to Wikipedia.
Copyright details are:
Description English: Masayoshi Son on July 11, 2008
Date 11 July 2008, 12:11:02
Source iPhone 3G Masayoshi Son Masaru Kamikura (http://www.flickr.com/photos/kamikura/2658524938/)
Author Masaru Kamikura (http://www.flickr.com/people/20119192@N00) from Japan
This file is licensed under the Creative Commons Attribution 2.0 Generic
(https://creativecommons.org/licenses/by/2.0/deed.en) license.

Copyright(c) 2013 Eurotechnology Japan KK All Rights Reserved

FTTH Japan Europe: more FTTH broadband subscriptions in Japan than in all of EU + Norway + Switzerland + Iceland

more FTTH than in all of EU

Japan has more broadband fixed internet subscriptions than all of the European Union + Switzerland + Norway + Iceland

FTTH Japan Europe:While Japan initially was late in waking up to the commercial introduction of the Internet – Japan was fast to catch up and overtake

Japan alone currently has about 30% more FTTH optical fiber broadband subscriptions than all EU countries + Switzerland + Norway + Iceland added together.

How much broadband (ADSL, xDSL and FTTH) is installed in Japan? Find the answer and detailed statistics and market shares in our report on Japan’s telecom industry.

Japan was first to roll-out mobile internet with i-Mode in February 1999

Similarly, Japan was far in advance of other countries in laying the foundations for the mobile internet, with the introduction of the DoPa (DoCoMo Packet) packet switched network on March 28, 1997, several years before packet switched networks were introduced in EU and elsewhere. However, Japan’s electronics and telecoms industries largely failed to capture global value from this pioneering work. Essentially only Softbank with the SPRINT acquisition now has hope to capture such global value.

A very interesting point is that in EU there are many discussions and uncertainties how broadband fiber investments can be profitable. Japan has solved this problem: FTTH business in Japan is profitable. We see arbitraging opportunities in capturing value from Japan’s know-how, similar to Softbank’s “time shift” investments, arbitraging the time shift of internet roll-out in US vs Japan vs China, as explained in our Softbank-report.

FTTH Japan Europe Broadband: about 30% more FTTH subscriptions in Japan than in all of EU + Switzerland + Norway + Iceland
FTTH Japan Europe: about 30% more FTTH subscriptions in Japan than in all of EU + Switzerland + Norway + Iceland

Japan has 30% more FTTH fiber broadband subscriptions than EU + Switzerland + Norway + Iceland…

Several years ago the EU engaged our company Eurotechnology Japan KK to benchmark EU vs Japan in fixed and wireless broadband. Our summary was that broadband connections are the lifeblood of our information society, and that Japan was far ahead of EU in providing and using both fixed and wireless broadband, and broad band fiber connections were much faster and cheaper in Japan than in EU. Although both have progressed since our benchmarking work for the EU, Japan is still very far ahead of EU in terms of fast fiber broadband penetration.

Capturing global value – Japan’s Galapagos effect

However, provision of broadband fiber connections is only one side of the coin. The other side of the coin is capturing value and creating wealth for the society. The really important point is, whether Japan’s electronics, telecoms, content and service industries can capture global value from the advanced deployment of broadband infrastructure. As we discussed in detail in the “Post-Galapagos working group”, Japan is being held back by the “Galapagos effect” – and the trick will be to make the necessary changes to break out from this trap.
Read detailed analysis in our Japan-Telecommunications-Industry Report

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Growth in Japan: the SoftBank group

SoftBank and Masayoshi Son

SoftBank gaining market share in Japan

SoftBank market cap catching up with Docomo

Mobile subscription data released last week show, that the SoftBank group continues to gain market share while incumbent NTT-docomo continues to lose market share – an upward trend for SoftBank, and a downward trend for NTT-docomo essentially unbroken since SoftBank acquired Vodafone-Japan and succeeded with the turn-round.

SoftBank’s market cap has also steadily increased recently and is now close to NTT-docomo’s, exceeding it on some days:

operator || Market Cap (May 10, 2013)

  • NTT-docomo || YEN 6945 billion (US$ 68 billion)
  • SoftBank || YEN 6688 billion (US$ 66 billion)
  • KDDI || YEN 4162 billion (US$ 41 billion)
SoftBank group exceeds 40 million mobile subscriptions
SoftBank group exceeds 40 million mobile subscriptions

Bringing eMobile and PHS operator Willcom under its group umbrella, and by creating the new operator Wireless City Planning (WCP), Softbank group subscription numbers now exceed 40 million, and have overtaken KDDI

PHS operator Willcom joins the SoftBank group

PHS operator Willcom registered for bankruptcy administration essentially because of the high investments in upgrading the legacy PHS network infrastructure, and is currently in corporate reconstruction with SoftBank as the reconstruction sponsor.

Wireless City Planning (WCP) is a wireless operator owned partially by Advantage Partners and SoftBank and other investors, and representing the next generation network Willcom hoped – but could not afford – to develop.

While negotiating the SPRINT acquisition, SoftBank tricks out KDDI to take control of eMobile

While Masayoshi Son was secretly negotiating his offer for SPRINT, he discovered that KDDI was in negotiations to acquire new entrant eMobile. While continuing the SPRINT negotiations, he was a faster decision maker than KDDI, and could win the eMobile acquisition right under the eyes of KDDI.

Since a few weeks ago, iPhones on SoftBank‘s network automatically log into both SoftBank’s and eMobile‘s LTE radio networks, greatly enhancing data transmission rates and coverage.

More in our report on Japan’s telecommunications sector

Softbank and Renewable Energy

Softbank recently also entered the renewable energy business. Read more about Softbank’s renewable energy business in our Renewable energy report (our work on Japan’s energy sector is referenced in IEEE-Spectrum here).

Learn more about SoftBank, Masayoshi Son, and his 30/300 year vision for SoftBank

Report on “SoftBank today and 300 year vision” (approx 120 page, pdf file)
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Masayoshi Son: “I am a man – and I want to be Number 1”

Source iPhone 3G Masayoshi Son Masaru Kamikura

SoftBank aims for global No. 1 position…acquiring SPRINT on the way to the top

SoftBank: towards global No. 1 with a 300 year vision

To understand SoftBank, and the planned SPRINT acquisition, you need to understand Masayoshi Son – and Masayoshi Son says: “I am a man – and I want to be Number 1”. SoftBank announced FY2012 financial results a few days ago – read below and in our SoftBank-report for analysis, but lets first look at Masayoshi Son.

Yes, Masayoshi Son threatened the Japanese Telecomms and Postal Ministry to set himself on fire inside the Ministry

A few years ago, the Chief-Editor of BusinessWeek visited Japan to interview Masayoshi Son, and the night before the interview over dinner he asked me to suggest interview questions. I suggested to ask if it is true that Masayoshi Son threatened to set himself on fire inside Japan’s Government Ministry for Telecommunications if he is again refused the telecommunications license he needed to build a telecommunications business. Masayoshi Son’s answer: “yes, its true, I threatened to set myself on fire inside the Ministry – but I did not bring any fuel along into the Ministry”. This story shows Masayoshi Son’s passion and extreme determination – and my suggestion became the headline of the article in BusinessWeek – and can still be found online here.

Faced with such passion and determination, Vodafone never had a chance in Japan – can you imagine the Chairman of Vodafone coming over from London to Tokyo to threaten to set himself on fire inside Japan’s telecommunications ministry? Not to mention the demanding customers: several times I personally saw complaining Japanese customers shout down Japanese Vodafone-staffers until these burst into tears and had to be consoled by Vodafone-coworkers… unbelievable, but true.
Japan can be tough for foreign companies…

BusinessWeek: “Apple would never talk to a “small fry” like SoftBank”. Really?

Around the same time, I had to ask BusinessWeek to print a correction to BusinessWeek’s statement, that Apple would never talk to a “small fry” like SoftBank – read the correction here. Well, Apple did talk to the “small fry” SoftBank – and as a result the iPhone is the best-selling mobile phones for two years in a row, and SoftBank is on the way now to become No. 1 in Japan. Read here about a Press Conference discussing the original iPhone introduction by SoftBank to Japan.

SoftBank on the way to US$ 10 billion annual operating profits
SoftBank on the way to US$ 10 billion annual operating profits (Source: our Report on Japan’s telecom sector)

SoftBank aims for global No. 1 position: Japan’s most successful venture start-up – with a 30 year and a 300 year plan

SoftBank had already received a spectrum license and had intended to build up a mobile phone network from zero, when Masayoshi Son grasped the opportunity to acquire Vodafone’s struggling Japan operations – the former Japan-Telecom and J-Phone. Almost overnight Masayoshi Son arranged US$ 15 Billion in loans to fund the acquisition.

The acquisition was announced on Friday March 17, 2006, and the following Monday, Masayoshi Son moved all the remaining staff (minus most expatriates) from the Vodafone-Atago-office to Softbank’s offices in Shiodome, and shut down the Atago-offices to make a clear break. It took Masayoshi Son only a few months until it was clear that the turn-round will be successful. And now with the planned SPRINT acquisition, Softbank is on track to target global No. 1 position.

Softbank and Renewable Energy

Softbank recently also entered the renewable energy business. Read more about Softbank’s renewable energy business in our Renewable energy report (our work on Japan’s energy sector is referenced in IEEE-Spectrum here and here in The Economist).

SoftBank aims for global No. 1 position: Learn more about SoftBank, Masayoshi Son, and his 30/300 year vision for SoftBank

Report on “SoftBank today and 300 year vision” (approx 120 page, pdf file)
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Copyright notice:

The photograph of Masayoshi Son is used under Creative Commons license according to Wikipedia.
Copyright details are:
Description English: Masayoshi Son on July 11, 2008
Date 11 July 2008, 12:11:02
Source iPhone 3G Masayoshi Son Masaru Kamikura (http://www.flickr.com/photos/kamikura/2658524938/)
Author Masaru Kamikura (http://www.flickr.com/people/20119192@N00) from Japan
This file is licensed under the Creative Commons Attribution 2.0 Generic
(https://creativecommons.org/licenses/by/2.0/deed.en) license.

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

Japan telecom sector financial results and the Softbank-Sprint take-over battle

eurotechnology softbank

SoftBank seeks to win, where Docomo failed – taking Japan’s telecoms know-how global

Japan telecom sector financial results: very very healthy

With SoftBank and DISH battling for US mobile operator SPRINT, the eyes are on Japan’s very healthy mobile phone sector, which a few days ago announced financial results for FY 2012. Japan’s mobile operators combined achieve about US$ 120 billion in revenues and income margins are among the highest globally.

The size, success and extremely advanced state of Japan’s mobile phone sector, SoftBank’s excellence, and Masayoshi Son’s midas touch give SoftBank the strength to go for an acquisition of SPRINT – and to aim for the large scale globalization which DoCoMo tried, but could not achieve about 10 years ago.

Japan's mobile operator revenues are about US$ 120 billion and growing
Japan’s mobile operator revenues are about US$ 120 billion and growing

Japan’s mobile operators DoCoMo, KDDI and SoftBank are growing steadily

Japan’s mobile phone operators are protected by government licenses, but within this scope, there is passionate competition and there are many M&A actions. With high investments in infrastructure, Japan’s mobile phone sector is among the most advanced in the world. Japan initiated the global mobile internet revolution.

Combined, Japan’s mobile operators achieve about US$ 120 billion in sales annually

Combined, Japan’s mobile operators achieve about US$ 120 billion in sales annually, and the size of Japan’s mobile industry has been growing steadily ever since mobile phones started in Japan.

The Figure above clearly shows the growth of SoftBank from a small venture to one of the world’s largest telecom operators, and the acquisition and turn-round of Vodafone-Japan.

SoftBank aims for US$ 10 billion operating income/year
SoftBank aims for US$ 10 billion operating income/year

SoftBank is on track to achieve the target of YEN 1 Trillion operating income/year by FY 2016

FY2012 financial results announced a few days ago show that SoftBank has overtaken KDDI in terms of operating profits, is on track to overtake DoCoMo and to achieve its target of YEN 1 Trillion (US$ 10 Billion) in operating profits by 2016 – this while investing heavily in infrastructure in Japan, and paying down debt remaining from the acquisition of Vodafone-Japan.

Operator Operating income/year
China Mobile US$ 24.4 Billion
Vodafone US$ 17.4 Billion
Verizon US$ 13.2 Billion
SoftBank US$ 7.5 Billion, 2016-target: US$ 10 billion

More in our report on Japan’s telecom sector

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Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

Japan wireless industry boom driven by smartphones. Japan adds about two Finlands worth of wireless subscriptions per year.

SoftBank and Masayoshi Son

Japan wireless industry adds 11 million subscriptions/year currently

Softbank targets ¥ 1 Trillion operational income

Japan wireless industry is growing, and Japan’s mobile operators add 11 million subscriptions/year currently: Japan adds about two Finlands worth of wireless subscriptions per year.

Softbank entered the telecom arena in 2001 with Yahoo BB, Nagoya Metallic and later Osaka Metallic and Tokyo Metallic Communications. However, when Softbank announced the acquisition of the ailing Vodafone-Japan operations, few telecom professionals outside Japan had ever heard about Softbank, and major telecom equipment makers approached our company to help start business with Softbank.

Today, Softbank has acquired Japan’s eAccess/eMobile, is sponsoring the rehabilitation of Willcom, founded Wireless City Planning, and is in the processes of gaining regulatory approval to acquire the US operator SPRINT – on the way to become one of the world’s largest telecom operators.

Japan wireless industry operators have combined operating profits of US$ 24 billion/year – Softbank targets operating profits of YEN 1 Trillion (= US$ 11 Billion) for financial year 2016

Softbank targeting YEN 1 trillion operating income by FY2016
Softbank targeting YEN 1 trillion operating income by FY2016

Will Softbank overtake NTT-docomo?

NTT-docomo and Softbank could not be more different. While both are public companies, traded on the Tokyo Stock Exchange, about 21.7% of NTT-docomo’s shares are owned by Japan’s Ministry of Finance via their holding of NTT shares.
On the other hand, Masayoshi Son owns about 21.4% of Softbank shares – almost the same ratio.
One of Softbank’s targets is to achieve YEN 1 Trillion (= approx. US$ 11 Billion) in annual operating income.
Softbank recently acquired US operator SPRINT, and to stimulate cooperation between Japanese employees of Softbank, Softbank is now offering YEN 1 million (US$ 11,000) bonus to those Softbank employees clearing a certain level of English language test.

Japan's mobile subscriptions growth by 11 million/year
Japan’s mobile subscriptions growth by 11 million/year

Smartphones drive a boom in Japan’s mobile communications sector

Smartphones drive a boom in Japan’s mobile communications sector: while growth has been fading over the last 10 years, iPhone and other smart phones accelerate growth. Currently Japan adds about 11 million mobile subscriptions every year: Japan adds about two Finland’s worth of mobile subscribers per year.
Read detailed analysis in our Japan-Telecommunications-Industry Report

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Japan trends for 2013 (New Year post)

New Year trends Japan

Japan replaced nuclear electricity generation by LNG, by imported gas

Japan trends for 2013: Nuclear reactor restarts are on their way

Japan trends for 2013 Japan’s energy sector: Japan has essentially replaced the 30% of its electricity energy supply which was from nuclear power plants, by electricity produced in aging thermal power plants from urgently arranged LNG purchases at very high prices. Prime Minister Abe said that he wants to restart all nuclear power stations, which receive safety clearance by the new Nuclear Regulation Authority (NRA), and asks for these safety examinations to be completed within 3 years – however the NRA said, that 3 years is far to short to complete the safety assessment.

Given that any discussion about Japan’s energy mix, and “new” renewable energy (except for water power), liberalization and development of free energy markets were suppressed for many years in Japan, Japan now urgently needs to start innovating many components of the energy landscape including insulation and smart grids, and a new energy mix. PM Abe thinks that it will take about 10 years to settle on a new energy mix for Japan.

Japan trends for 2013: Japan is now waking up to innovation and changes of it’s energy and electricity sector

Japan’s electronics manufacturing sector is about as large as the economy of the Netherlands, but collectively showed no growth and lost money over the last 15 years, and therefore will either fade away, or very urgently needs new business models (see interview on BBC). PM Abe’s push for a lower YEN might soothe the symptoms a bit, but does not solve the fundamental problems. Hitachi’s “smart transformation” are steps in the right direction, but its really too early to tell – also “smart transformation” does not solve Japan’s traditionally low emphasis on software and other non-hard-ware-producing crafts.

Telecoms: Masayoshi Son, master of the midas touch and founder and master mind of SoftBank, acquired what was left of Vodafone-Japan and turned it around successfully within weeks, said reportedly: “I am a man – and want to be Number 1”. Now he aims to apply his midas touch to SPRINT. Expect more acquisitions by Son on the way to Number 1 in global telecoms.

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

When did qr-codes start on mobile phones? (in August 2002)

QR code applications report

qr-codes were developed by Toyota subsidiary denso-wave

First mobile phone with qr-code reader was the J-SH09 by SHARP for Japanese mobile operator J-Phone

When did qr-codes for mobile phones start in Japan?

Here is the answer: the first mobile phone with qr-code reader was the J-SH09 produced by SHARP for Japan’s J-Phone mobile operator (today’s Softbank) and came on sale in August 2002 – seven years ago.

More details and more than 100 case studies of qr-code applications in our QR-Code report

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

Potential Flu Pandemic Positive for Telcos

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·