SoftBank’s Gold Plan – Zero Yen?

SoftBank acquired Vodafone KK for about US$ 15 billion, essentially with a very large loan. Thus SoftBank is under enormous pressure to succeed in Japan’s very competitive mobile phone market, where Number Portability was introduced on October 24, 2006.

Recent subscriber number statistics and our observations indicate that SoftBank looks likely to succeed in turning round the mobile phone company they acquired from Vodafone and renamed Softbank Mobile.

During the week of October 24, 2006, when number portability was introduced, Masayoshi Son introduced a firework of new pricing plans – on the surface these pricing plans all advertise “Zero Yen”, ie nominally the price of buying mobile phones from SoftBank appears to be ZERO.

Of course, with a consortium of lenders anxious to be repaid, SoftBank has no possibility of giving away mobile phones for free. In actual fact, our analysis shows that SoftBank at the end of the day actually increased prices slightly. SoftBank introduced a series of pricing plans, where customers essentially purchase the mobile phone handsets under an installment plan running over variable periods, but typically 48 months, with zero down payment at the time of initial purchase. So in fact, the terminals are not sold for ZERO YEN at all – this issue led to an investigation by Japan’s Fair Trade Commission.

As is usual practice in Japan, the Fair Trade Commission did not single out Softbank, but critized each one of the major mobile operators for different unfair advertising practices, and encouraged each mobile operator to be more accurate in advertising discount plans.

SoftBank got away lightly – the image below shows on the left hand side the initial ZERO YEN announcement, which a few days later was hidden by a more careful explanation… (the Zero Yen poster can still be seen shining through the paper above…)

SoftBank’s “zero yen campaign” offering mobile phones at the price of zero yen. Japan’s Fair Trade Office prohibited this campaign – and on the right hand side therefore the “0 yen” signs are covered up

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