KDDI is unique among mobile operators in creating value from design for phones with the “au design project”. Read more about KDDI in our KDDI report.
Creating value for which consumers are willing to pay premium prices is a key to success in the rapidly growing global US$ 150 Billion mobile phone business.
INFOBAR was a big success for KDDI. Industrial designer Fukawasa Naoto recently created INFOBAR-2, and introduced it at a show at the KDDI Designing Center in Tokyo:
“au design project”: INFOBAR-2 by Fukawasa Naoto“au design project”: INFOBAR-2 by Fukawasa Naoto
Eurotechnology’s CEO was invited to attend Ericsson’s Strategy & Technology Summit in Tokyo on November 15, 2006.
Ericsson’s CEO, Carl-Henric Svanberg, Ericsson CSO – Chief of Strategy, Japan-CEO Rory Buckley and other Ericsson top management presented Ericsson’s strategy and vision. About 100 investors and investment bank analysts were invited to attend.
I was given the opportunity to share the lunch table with CEO Carl-Henric Svanberg and had a fascinating discussion (some of his comments flowed into our company’s project report to the European Union on benchmarking Japan’s vs EU’s fixed and mobile telecommunications and broadband sectors).
With some of the largest and most advanced mobile investments, Japan’s mobile market is one of the most important markets globally for Ericsson. Recently Ericsson won major contracts from SoftBank and eMobile.
Ericsson CEO Carl-Henric Svanberg speaking at the Ericsson Technology Summit in Tokyo
Mobile operators expand into mobile payments and mobile credit
Mobile phones use qr codes for payments
Japan’s mobile operators DoCoMo, KDDI/AU and SoftBank are expanding their business into mobile payment and mobile credit, traditionally the realm of banks, credit card companies, financial institutions and cash. With the bubble/post-bubble bad loans problem largely resolved and the mega-mergers completed, Japan’s banks are now ready again to develop new business.
Customer’s camera phone reads the barcode or QR-code on an utility bill or mailorder invoice, and forwards secure payment instructions to the customer’s bank account.
What is the expected impact?
Expect positive impact on Mizuho’s earnings
Today such payments are typically made by walking to the nearest convenience store: expect negative impact on convenience stores which handle much of the barcode based bill payments today
Expect additional competitors with alternative methods to compete with Mizuho in the domain of mobile phone based bill payments
Mobile number portability was a major factor forcing Vodafone out of Japan
MNP is the first challenge for SoftBank Mobile – read how SoftBank approaches the MNP battle
Mobile number portability (MNP) was introduced in Japan on October 24, 2006. Mobile number portability means that Japanese cell-phone subscribers (excluding PHS subscribers) can move their subscriptions between DoCoMo, KDDI/AU and Softbank while keeping the same phone number. However, number portability does not mean email portability, or portability of purchased content which in Japan is normally subject to strict digital rights management and normally cannot be transfered from one subscription to another.
SoftBank went into the MNP battle with fireworks of campaigns
The “Zero YEN” campaign plays with the fire of a price war. As shown in the photograph below, from October 24, 2006, SoftBank stores prominently displayed “Zero Yen” prices for all handsets and many different services, creating the superficial impression that suddenly all SoftBank handsets and services are free of charge, which of course is not the case. This advertising trick led to an enquiry by Japan’s fair trade commission. The fair trade commission later admonished SoftBank saying that some aspects of the campaign were misleading – however the fair trade commission at the same time admonished all other cell phone operators and PHS operator WILLCOM for different types of misleading advertising. SoftBank came away quite lightly – however the photograph below shows, that the ZERO YEN signs were covered up (and are still visible below the hastily applied cover sheet of paper).
The “unexpected campaign”: Softbank introduced an “unexpected” Gold Plan, which offers essentially flat fee voice calls under certain conditions, but restricted in time and length, and also restricted to calls between SoftBank subscribers only. Since SoftBank only represents about 15% of Japan’s mobile phone market, it is much easier for SoftBank to offere flat on-network plans, than for DoCoMo, since for DoCoMo a much larger ratio of calls would fall under the on-network plan. DoCoMo and KDDI therefore did not respond with any flat voice on-network plans.
SoftBank’s computer systems were either overloaded, or broke down under the load of MNP, leading to irritated complaints by KDDI and DoCoMo, and some damage to the new SoftBank brand.
SoftBank Zero Yen campaign
This photograph shows SoftBank’s Zero Yen Campaign (left photograph). AFter a few days Japan’s Fair Trade Commission started to investigate SoftBank (and all other mobile operators) and admonished them for misleading advertising practices – as a consequences the original Zero Yen poster is covered up (right hand photograph):
Mobile number portability in Japan: SoftBank’s Zero YEN campaign
Preview – SoftBank today and 300 year vision report:
October 27, 2006 the Finland-Japan Ubiquitous Society Conference was held in Tokyo.
Tero Ojanpera, Exec VP and CTO of NOKIA, gave an overview of NOKIA’s vision of communications, other speakers and panelists included Juho Lipsanen, Finland CEO of TeliaSonera, KDDI Chairman Murakami.
The day before I briefed and had a long discussion with the top management team of TeliaSonera-Finland.
Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference
Panel discussion with TeliaSonera CEO Juho Lipsanen and KDDI-Chairman Murakami.
Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference
The day before the Finland-Japan Ubiquitous Society Conference in Tokyo, I briefed the top-management (CEO, CTO and other top managers) of TeliaSonera, on October 26, 2006.
The next day, October 27, 2006, the Finland-Japan Ubiquitous Society Conference was held. Tero Ojanpera, Exec VP and CTO of NOKIA, gave an overview of NOKIA’s vision of communications, other speakers and panelists included Juho Lipsanen, Finland CEO of TeliaSonera, KDDI Chairman Murakami.
Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference
Panel discussion with TeliaSonera CEO Juho Lipsanen and KDDI-Chairman Murakami.
Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference
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
Contrary to SoftBank‘s “Zero YEN” campaign, which plays with the fire of a price war, KDDI centered AU’s number portability campaign on “customer satisfaction” emphasizing services. The “customer satisfaction campaign” uses a symbolic customer as the campaign theme:
SoftBank replaced Vodafone-Live! by Yahoo!-Keitai. SoftBank phones have a “Y!”-button which links to Yahoo!-keitai. Yahoo-Keitai! offers a list of official sites, new services (e.g. a new communicator service), and also access to free mobile internet sites through the YAHOO directory, as well as access to YAHOO services, such as YAHOO-auctions.
SoftBank replaces Vodafone-Life by Yahoo!-keitai as part of the acquisition of Vodafone-Japan
YAHOO!-keitai is a fresh start to revive the mobile internet service, previously known as Vodafone-Live!, and which had been losing market share to competitors i-Mode and EZweb for about 4 years. Previous to the Vodafone-Live! period, Jsky had been successful in gaining market share both from i-Mode and EZweb.
Market share in Japan’s mobile internet market: Vodafone-Life was continuously losing market share before it was acquired by SoftBank, while KDDI’s EZweb was winning market share over several years
Understand Softbank: our report: “SoftBank today and 300 year vision”
Toru Arakawa, CEO and Founder of ACCESS, gave a keynote speech at this years CEATEC show in Makuhari on October 6, 2006, outlining ACCESS strategies.
ACCESS is the maker of NetFront browsers and other software at the core of DoCoMo’s i-mode. ACCESS acquired PalmSource and is developing the Access Linux Platform (ALP) based on the PalmSource acquisition.
With ALP, ACCESS is planning to deliver a full software stack for mobile phones based on Linux. In his speach Toru Arakawa outlined company strategy also beyond mobile phones to multimedia home centers.
Looks to me like ACCESS is shaping itself to compete with APPLE and Microsoft both in the mobile phone and the home entertainment markets.
On September 29, 2006, a few days before the official name change from Vodafone KK to SoftBank Mobile, SoftBank opened the rebranded Shibuya flagship store:
Rebranding the flagship store in Shibuya from Vodafone to SoftBank after SoftBank acquired Vodafone KK and changed the name to SoftBank Mobile
Because of the crowded streets in Shibuya most of the building work was done during the night:
Rebranding the flagship store in Shibuya from Vodafone to SoftBank after SoftBank acquired Vodafone KK and changed the name to SoftBank Mobile
u-Japan follows i-Japan and e-Japan to take Japan to the forefront of global IT developments
Presentation at the EU-Japan Center for Industrial Cooperation, 12 October 2006
Title: “Japan’s Mobile Phone Industry and u-Japan”
Date and Time: Thursday, 12th October 2006, 17:00-19:00
Location (tentative, please check closer to the date for changes):
Main Conference Room 4F, EU-Japan Centre for Industrial Cooperation, Tokyo
Agenda: u-Japan and Japan as the mobile internet pioneer
Japan’s mobile phone and broad-band markets are about 3-6 years ahead of Europe: new services are typically invented or first brought to market in Japan, 3-6 years earlier than in Europe. Internet in Japan is generally much faster and much cheaper than in Europe. For this reason and because of it’s size, Japan’s telecom markets are full of opportunities for European companies with the right products and the right strategy, and for investors with the necessary knowledge.
Japan’s mobile phone industry is notoriously difficult to understand for Europeans because it’s market logic is very different from Europe’s, and because the pace of innovation and structural change is much faster, and because of the language barriers.
This talk will explain the driving forces behind recent dramatic changes in Japan’s mobile telecom sector, and will explain new changes that the “ubiquitous-Japan” (“u-Japan”) policy will bring in the near future.
Do you need to know what Europe’s mobile phone and internet markets will look like in 2010 or 2015? – Come to this talk and you will get a good look into Europe’s IT future about 5 years ahead, as well as Japan’s telecom markets today.
Background: Japan – the mobile internet pioneer, and Vodafone’s departure from Japan
The EU Technology Attaches were particularly interested in the impact on Europe by the termination of by far the biggest ever European investment in Japan. Clearly it is also important to determine, what other European companies can learn from Vodafone’s experience.
Eurotechnology Japan KK has been awarded a contract by the European Union to benchmark Japan’s telecom sector vs EU and make recommendations.
More about Japan’s telecom sector
Read our report on Japan’s telecommunications markets
Why did Vodafone quit Japan and sell Vodafone-Japan to Softbank?
Following Vodafone’s decision to end business in Japan and the announcement of the sale of Vodafone-Japan to SoftBank, this author has been asked to brief the Technology Attaches of the 25 EU Embassies in Tokyo on Japan’s mobile phone and telecom sector, mobile internet and broadband.
The EU Technology Attaches were particularly interested in the impact on Europe by the termination of by far the biggest ever European investment in Japan. Clearly it is also important to determine, what other European companies can learn from Vodafone’s experience.
European Union awards project contract to Eurotechnology Japan KK to compare EU and Japan in wireless and fix-net broadband, and to prepare recommendations for EU what can be learnt from Japan
Eurotechnology Japan KK has been awarded a contract by the European Union to benchmark Japan’s telecom sector vs EU, particularly in broadband and make recommendations to the EU how EU can learn from Japan in the telecommunications sector.
Business decisions unrelated to market realities are a prime reason for failure of foreign companies in Japan
In a quest to reduce market research costs, Japan market research is often outsourced to India, Philippines, Indonesia etc
With shock and surprise we recently found out that a very famous telecom and IT industry market research and strategy consulting firm with a globally famous brand apparently outsources market research of Japan’s mobile phone and telecom sector to India. The Indian employees apparently are diligently studying the Japanese language in evening classes, so that in a few years time, they will be able to read a little of the Japanese mobile market information which can be found on the internet, we assume.
We believe that this explains why so much information about Japan’s telecom and mobile phone markets circulating outside Japan is incomplete, or in many cases even wrong. As a consequence companies like Vodafone then take management decisions in Japan, which were totally unrelated to Japan’s market realities.
This fact also contributes we believe to the fact, that some of the most famous global companies in the telecommunications sector find it so difficult to succeed in Japan – not that Vodafone, Nokia (mobile phones and VERTU – except networks which are a great success), Cable & Wireless, Deutsche Telekom all withdrew from Japan – outsourcing market intelligence to low-cost countries such as China, India, Philippines etc. is certainly one of the contributing factors.
Indeed similar to Vodafone’s departure from Japan, famous global telecom consultancies have also closed shop in Japan, due to the very high costs and the continuous high investments necessary to achieve and maintain leadership in understanding Japan’s telecommunication markets.
We can assure our newsletter subscribers and our customers that our original Eurotechnology market reports and our strategy consulting is hand crafted in Tokyo/Japan. Our team members working on Japan market research and strategy consulting, all live in Japan, are mostly Japanese, and work daily with Japanese CEOs, telecom managers, and most importantly of all, daily interview and discuss with real-life Japanese mobile phones users: face-to-face here in Japan – not across one or more oceans.
Mobile Number Portability (MNP) started in Japan on October 24, 2006
Mobile Number Portability increased competition between mobile operators and forced Vodafone to give up in Japan and sell to SoftBank
On October 24, 2006 Japan’s government regulators order the mobile phone operators to introduce number portability (MNP).
KDDI/AU seems to be the winner in the MNP race
The consensus has emerged in our community that KDDI/AU will probably be the winner when MNP is introduced.
We believe that KDDI/AU is certainly the most successful company globally in the 3G (=UMTS) sector.
Interestingly, KDDI/AU uses the CDMA2000 3G/UMTS standard, which has been excluded from Europe. European telecom manufacturers have mostly abandoned the CDMA2000 standard for 3G/UMTS, as our company has recently studied and analyzed in detail in a project contract for the Government of the European Union, and outlined to the 25 EU Technology Attaches in Japan.
Mobile Number Portability (MNP) in detail
From Oct 24, 2006 Japanese mobile phone operators are required to enable their customers to change mobile phone operator while keeping the same mobile phone number.
Number portability – not email address portability
While GSM countries use SMS for messaging, subscribers in Japan use almost exclusively mobile email and not SMS. (As we have recently explained to the 25 EU technology attaches, mobile email is much more advanced, much more convenient, much cheaper, has much more functionality and is much more open than SMS, which is generally used outside Japan). However, mobile email addresses in Japan are of the format [user selected artificial name]@[name of mobile operator].ne.jp, and therefore specific to the operator. Government does not require mobile email portability.
Mobile digital rights management (mobile-DRM)
for content in Japan is relatively strict and in general music, JAVA applications and other digital content, and many other services are not portable between mobile operators.
The process of changing from one operator to another has been made very smooth for consumers. The termination fee is generally YEN 2000 (about US$ 17) and is refunded by the operator welcoming a moving subscriber, at least during temporary MNP campaigns.
Impact of MNP sector by sector:
Mobile operators
The consensus is that KDDI/AU will be the winner in attracting subscribers both from DoCoMo and SoftBank – and correspondingly KDDI’s share price has increased recently substantially, while DoCoMo’s share price has fallen over the last two years, as shown in our JCOMM report.
Masayoshi Son has of course won many battles in his life, and we expect Son’s SoftBank-Mobile to be a “wild card” in the MNP game. One of Son’s strategies recently is to partner with famous brands including SHARP/AQUO, and iPod. For example SoftBank has announced an iPod phone in cooperation with Apple Computer, and recently offered a discounted mobile phone/iPod package when a subscriber purchases a 2 year subscription.
Handset makers
In Japan mobile phone handsets are locked to the mobile operator. It is not possible in Japan to use the mobile phone of one operator on a different network. Increased churn due to MNP therefore is good news for handset manufacturers, and we expect handset sales to increase.
Mobile content
Our recent Mobile Payment and Keitai Credit report also covers mobile content and mobile commerce, and shows that mobile commerce has recently exceeded mobile content. Generally, we expect a negative impact of MNP on mobile content (not mobile commerce). The reason is that many mobile content subscriptions are “dormant”. For example, mobile music in Japan is sold in monthly subscriptions. Our mobile music report estimates in detail the ratio of mobile music consumers in Japan pay for, and the (substantially smaller) amount of mobile music actually downloaded. We have deduced this ratio by detailed analysis of Japanese mobile music industry data. When a subscriber changes from one mobile operator to another, the content subscription does not move along to the new operator, but the subscriber has to actively subscribe fresh again. We expect that subscribers will at this point take the opportunity not to freshly subscribe to those content programs where they were “dormant” subscribers, i.e. those where they paid US$ 3 or US$ 5 per month without actually downloading any content. This negative effect may be balanced by a smaller amount of additional purchases of music and content, which has expired due to digital content management conditions, which do not allow purchased content to be moved to a different handset (although the mobile phone number is the same).
On 5 September 1906 Ludwig Boltzmann died in Duano, Italy
Ludwig Boltzmann: 20 February 1844 – 5 September 1906
Ludwig Boltzmann (20 February 1844 – 5 September 1906) is our company’s founder’s great grandfather – and one of our company’s great inspiration. We are working hard to continue his tradition of innovation and excellence and diligent work.
Ludwig Boltzmann died exactly 100 years ago today, on September 5, 1906.
On the 170th Anniversary day of Ludwig Boltzmann’s birth, on February 20, 2014, a ceremony was held at the “Ples” Building (Duino no. 76), the building in which Boltzmann passed away on September 5, 1906, to unveil a commemorative plate. See details of the ceremony here.
Ludwig Boltzmann worked in many different areas and found the first explanations for many phenomena. He did not just create one single invention, but he created very many.
Boltzmann is best known for his work in gas theory: using complex mathematical tools, many of which he had developed himself, Boltbmann linked the macroscopic “Entropy” of gases with the microscopic forces between atoms and molecules in gases. “Entropy” was initially just a useful macroscopic concept similar to temperature and pressure of a gas developed during the early days of industrialization in England to optimize steam engines. Boltzmann showed that Entropy is a much much deeper fundamental concept, and showed how Entropy is related to the collissions between atoms and molecules in a gas and that Entropy expresses the probability that a body is found in a certain state.
In Boltzmann’s days, it was not generally accepted that atoms and molecules exist. Actually, in Vienna in those days, in order to survive socially, Boltzmann had to use very careful words: he usually did not say directly that he is convinced that atoms and molecules exist: he said that they are just a useful concept, whether they exist or not.
Ludwig Boltzmann was the last great classical physicist. He knew of several unexplained puzzles: Brown’s motion, the discrete spectra of atoms, curvature of space, but he could not explain them with the classical methods he mastered. Today Boltzmann’s methods, the Boltzmann constant, the Boltzmann Equation and much of his work is used every day in telecoms, information technology, electronics, chemical industry and many other areas.
Vodafone Japan turn around under SoftBank – Interview for Red Herring
Helped RedHerring with an interview on the recent SoftBank accounting adjustment. The article is entitled “Softbank Falls on Lehman Cut” and appeared on the RedHerring website on August 28, 2006. Our company also recently advised a major global financial institution on related issues and risk issues.
Here a short summary of what I said
Essentially Vodafone-Japan is a company which has been going downhill in many ways for the last 4 years, they lost a lot of subscribers, and there has not been enough investment in equipment and staff, etc. For that reason and other reasons Vodafone sold the Japan operations this March to Softbank (read our report on SoftBank here).
Japan’s mobile market is really difficult, and there is tough competition. There is much trust in the entrepreneurial skill of Softbank Chairman and founder Masayoshi Son – only through his reputation and track record could Softbank attract US$ 15 billion in bank loans to acquire Vodafone Japan KK. Personally I have a very high opinion about Masayoshi Son’s abilities – and I think there is a high chance that he will succeed to turn round this company. Many people feel so, otherwise Son would not have been able to obtain the finance for the deal. Masayoshi Son has built not just one, but many successful companies, and he is maybe the strongest driving fource behind Japan’s internet revolution.
I think for the turnround to be successful will take quite some time, and probably the shares of Softbank will go up and down many times before the company is turned round. I am not a share holder of Softbank, but my thought would be that this is really an investment for the longterm, unless you are playing on shortterm fluctuations which some investors also do. But then you have to understand exactly what you are doing and live with the risk.
Regarding the revaluation of the plant (mainly base stations, antennas, backhaul, computer systems etc) of the company, I am not an accountant so I cannot comment on the accounting issues and regulatory issues here.
However keep in mind that Vodafone has last year written off about US$ 50 billion mainly for the Mannesmann acquisition. Softbank has not written off anything as far as I understand it, they converted plant into good will which as far as I know increases the period of write off from 10 to 20 years. But was I said, I am not an accountant.
SoftBank did not lose a moment to start turning Vodafone KK around, within a few days Vodafone’s former headquarters were moved to SoftBank’s headquarters in Shiodome, and most Vodafone expatriates were sent back to Europe. If you are interested to know why Vodafone decided to sell Japan operations to SoftBank and quit Japan, you can read many details here.
Yesterday (August 26, 2006) SoftBank opened the new Roppongi flagship store. SoftBank’s white/silver/grey colorscheme replaces Vodafone’s bright red:
Rebranding Vodafone KK’s former Roppongi flagship store to the SoftBank brand, after acquisition of Vodafone KK by SoftBankRebranding Vodafone KK’s former Roppongi flagship store to the SoftBank brand, after acquisition of Vodafone KK by SoftBank
Understand Softbank: our report: “SoftBank today and 300 year vision”
Japan is a couple of years ahead of Europe and US in mobile communications by most measures
What are GOOGLE and YAHOO doing in Japan’s mobile sector?
GOOGLE started mobile operations in Japan by partnering with KDDI (Japan’s No. 2 mobile operator with about 25 million mobile subscribers) to develop mobile search.
YAHOO-Japan made a large step forward when SoftBank acquired Vodafone’s Japan operations in March this year
Following the acquisition of Vodafone-Japan, SoftBank quickly turns round the company
Today, August 26, 2006, SoftBank (read our report on SoftBank here) opened the remodeled and rebranded Roppongi flagship store. The SoftBank Roppongi store is designed in light colors using a color scheme including mainly white, silver and grey, replacing Vodafone’s red. While Vodafone focussed on cost-cutting in Japan, SoftBank is now investing heavily, creating new stores and hiring store managers and assistants to revive and expand the chain of SoftBank stores.
“Flagship” stores are a concept which Vodafone introduced into Japan’s mobile industry – before Vodafone’s entrance to Japan, DoCoMo, J-Phone and KDDI/AU did not have specific flagship stores. Vodafone opened a flagship store in Shibuya, and shortly afterwards KDDI opened the KDDI Designing Studio in response. Because Vodafone’s initial Shibuya flagship store is in the middle of Shibuya’s entertainment district, the Roppongi-store, which was newly acquired by Vodafone, took a flagship role.
Vodafone recently decided to terminate business in Japan, and sold all Japan operations to SoftBank – Vodafone’s investment in Japan was the largest investment ever by any European company in Japan, about 7 times larger than Renault’s initial investment in Nissan…
This picture shows the flagship store in the new SoftBank dress, which opened on August 26, 2006
SoftBank transforms former Vodafone Roppongi flagship store
This picture shows the flagship Roppongi store before (left hand picture) and after (right hand picture) the brand change from Vodafone to SoftBank. The SoftBank branded store opened on August 26, 2006:
Vodafone’s former Roppongi flagship store rebranded as SoftBank store after SoftBank acquired Vodafone-Japan
An elegant color scheme based on silver/white/grey replaces Vodafone’s red:
odafone’s x-Roppongi flagship store rebranded as SoftBank store after SoftBank acquired Vodafone Japan
SoftBank’s white/grey/silver color scheme replaces Vodafone’s previous bright red dress – the “YAHOO-Cafe” (there is no coffee…) represents SoftBank’s strong cooperation with YAHOO-Japan – SoftBank is largest shareholder of YAHOO-Japan:
SoftBank Roppongi storeSoftBank Roppongi store
SoftBank’s 705SH mobile phone by SHARP includes a YAHOO-Button for direct access to YAHOO-Japan mobile content and services.
Yahoo! button on SoftBank phones
SoftBank’s flagship store includes a YAHOO spot – at the moment the YAHOO-spot is an empty place holder. The YAHOO-Spot is labelled YAHOO-Cafe – but there is no coffee…
Yahoo! Cafe inside the SoftBank store
SoftBank’s phones are presented on surfboards:
SoftBank mobile phone display
Understand Softbank – our report: “SoftBank today and 300 year vision”
There is a lot of discussions about whether Steve jobs is going to announce an iPhone or iPod-Phone at the Apple Computer Developer’s Conference in SF – according to the headline report on Saturday May 13th, 2006 in Nihon Keizai Shinbun ( the world’s largest business daily ) it’s already known since May this year that Apple and SoftBank are developing such a joint mobile phone with iPod and iTunes functions.
On March 17 SoftBank announced the full acquisition of Vodafone’s Japan subsidiary – the former J-Phone – jointly with YAHOO-Japan as a co-investor – so with about 15 million mobile subscribers in the world’s most advanced mobile market (Japan), SoftBank/Apple will have the firepower to make such a phone a success, provided it’s tuned to Japanese consumers’ needs and dreams – my guess is that it probably will be.
By pure coincidence, the Apple/SoftBank headlines appeared one or two days after DoCoMo and Microsoft announced a music cooperation.
Apple/SoftBank iPod mobile phones coupled to iTunes could have quite a lot of impact on Japan’s music industry: about 20% of Japan’s music sales are to mobile phones. Of all music downloads in Japan about 6% are fixed line internet downloads, and 94% are music downloads to mobile phones: internet music downloads are almost neglibile in comparison to mobile phone music downloads.
Therefore even if iTunes has a huge market share in the fixed line internet world, iTunes cannot have much impact in Japan overall if limited to fixed line internet downloads. iTunes downloads to mobile phones will change the business models of Japan’s music industry – at the moment music downloads to mobile phones cost a lot more than iTunes downloads. An iPod/iTunes music store could reshape the mobile music market in Japan.
” title=”Eurotechnology report on mobile payments and mobile commerce” target=”_blank”>Mobile commerce (the mobile phone equivalent of mailorder) exceeded mobile content (music, weather, news, etc) first in 2004 in Japan and is on the way to reach US$ 100 billion in the not too distant future. Read more about Japan’s m-commerce sector below.
mobile commerce and mobile content in Japan
US$ 0.5 Billion killer application for m-commerce?
We estimate that m-commerce (the mobile equivalent of mail order, or instant purchase of goods and services) has reached approximately US$ 10 billion per year in Japan, and most likely exceeds this mark already. Mobile phones are used in Japan to purchase many different types of products from music, to train tickets, air tickets, event tickets, books, and even cars. In our work for our customers we analyzed in detail a “killer application” for mobile commerce, where in Japan a single mobile website achieves about US$ 0.5 billion in annual sales.
In my 20 years of business and work between US/Japan and EU/Japan, I am often surprised how Western executives underestimate economic size and strength of Japan and it’s companies – here is another example: BusinessWeek writes about the SoftBank/iPod phone, and writes that former Apple executives says that Apple’s CEO Steve Jobs wouldn’t normally tie up with a “small fry” like SoftBank…
BusinessWeek took note of my letter and published corrections on May 21, 2006, which you can find
Softbank + Softbank-Mobile (former Vodafone KK) combined have substantially higher revenues than Apple Computer for financial years 2005 and 2006 – so clearly Softbank is no ‘small fry’ at all compared to Apple Computer
Revenues of SoftBank + SoftBank Mobile (x-Vodafone KK) were on the order of YEN 2500 Billion (US$ 22 Billion) for the financial year that ended March 31, 2006. Revenues of Apple Computer were US$ 13.9 Billion for the year ended Sept 24, 2005. – So in terms of revenue the new SoftBank Group (including the recently acquired x-Vodafone KK) is almost twice as large as Apple Computer.
SoftBank a small fry? Apple vs SoftBank market capitalization
On May 19, 2006, market cap of SoftBank and SoftBank Mobile combined was about 20% less than Apple’s market cap
Market capitalization of Apple Computer was US$ 54.9 Billion on May 19, 2006. Market capitalization of SoftBank (US$ 28 Billion) plus SoftBank Mobile Corp (US$ 15 Billion) was on the order of US$ 43 Billion.
BusinessWeek took note of my letter and published a correction on May 21, 2006, which you can find
When the iPhone was actually introduced to Japan by SoftBank in 2008, Mr Tetsuzo Matsumoto, CTO and Board Member of SoftBank-Mobile and myself were invited by the Foreign Correspondents Club to hold a Press Conference to comment on the iPhone introduction to Japan – you can find the records here.
When BusinessWeek interviewed me for an article about SHARP in October 2004, the journalist interviewing me was very surprised that I was talking to him on a SHARP mobile phone.
While NEC and Matsushita are merging their mobile phone development, SHARP has leveraged the power to make the best displays into market leadership in Japan’s mobile phone market. While NOKIA leads outside Japan, in Japan’s market, NOKIA has a market share of around 0.5% and SHARP is No. 1.
Yesterday (July 25, 2006) SHARP announced quarterly results:
One year-on-year basis, sales for the April-June 2006 quarter have increased 13% to YEN 693.7 Billion (US$ 6 Billion), and revenues from mobile phones have increased 24% to YEN 131.6 Billion (US$ 1.1 Billion). Net profit increased 23% to YEN 23.8 Billion (US$ 0.2 Billion) for the April-June quarter.
SHARP focuses on the high quality top end of the market: while store prices of LCD TV’s have fallen by 30%, SHARP’s prices/unit have only fallen by 4%.
At the Wireless Japan Exhibition, DoCoMo showed two types of Motorola’s RAZR phone for 3G:
one RAZR purely for 3G, including i-Mode, for DoCoMo’s FOMA 3G service. This phone has similar dimensions as the standard US version of RAZR (shown on the left hand side of the image below)
a second, much thicker version of RAZR for international roaming (shown on the right hand side of the image below), which includes a FOMA/3G/wCDMA/UMTS modem and a GSM modem
Motorola’s RAZR for NTT docomoMotorola’s RAZR for NTT docomo’s 3G network
DoCoMo has upgraded radio networks to 3.6 Mbps in the Tokyo region, and NEC’s N902iX handsets will be released very shortly.
DoCoMo has upgraded 3G networks in the Tokyo region to 3.6 Mbps (data download) in the Tokyo region using HSDPA technology (HSDPA = High-Speed Downlink Packet Access), and will soon sell NEC’s N902iX handsets. HSDPA upgrades will come to the Kansai (Osaka/Kyoto/Kobe) region from autumn 2006.
DoCoMo announced that during 2007 the data uplink (sending data from mobile phones) will be upgraded to 1 to 2 Mbps, which is a substantial improvement to FOMA’s present 64 kbps upload speed.
DoCoMo/FOMA download speed: 3.6 Mbps (summer 2006 in the Tokyo region, Osaka/Kansai and other regions to follow)
DoCoMo/FOMA upload speed: 1 … 2 Mbps (from 2007)
NEC mobile phone handset N902iX for NTT docomo’s HSDPA network
Vodafone quits business in Japan having sold all operations to SoftBank
Photographs below show the world famous Vodafone board on Tokyo-Shibuya’s Hachiko-square being replaced by the SoftBank advertisement from June 14, 2006.
SoftBank acquired Vodafone-Japan and rebranded to SoftBank mobile on June 14, 2006
Cheese phones anyone?… Vodafone “cheese phone” and “car tire phone” posters replaced by SoftBank posters on Tokyo’s Yamanote Line
Vodafone had difficulties to manage the relationships with Japanese mobile phone manufacturers, and as a consequence Vodafone’s pipeline of new mobile phone models dried up, while competitors KDDI and Docomo of course continued to introduce seasonal spring, summer, autumn and winter collections of attractive 3G phones which many special functions such as location services, GPS, color screens, autofocus cameras – functions which at that time were only available in Japan and nowhere else globally.
Since Vodafone had few attractive phones, Vodafone switched to covering old models with cheese, mint ice cream and car tire plastic covers to give them a new outside make-up. Of course this course contributed to the exodus of subscribers from Vodafone to competing customers, which eventually led to the sale of Vodafone-Japan to SoftBank, which turned around the former Vodafone-Japan company within a few months.
Swiss Emmentaler cheese covered phone for Japan???
Rebranding advertisement boards along Tokyo’s Yamanote ring line. Noteworthy are the cheese, cow, car tire and ice cream bar shaped mobile phone covers, which Vodafone offered because it was short of new phone models, and which did not help to improve Vodafone’s brand in Japan – cheese phones anyone?
Understand Softbank: our report: “SoftBank today and 300 year vision”
NTT Docomo CEO: Japanese leadership in the Wall Street Journal
Wall Street Journal, in the section “Leadership Question of the Week”, on Monday June 12, 2006 on page 31, published an article I wrote about a very extraordinary experience I had several years ago at the German Embassy here in Tokyo, with Dr. Keiji Tachikawa (立川敬二) – then CEO of NTT-DoCoMo (Dr. Keiji Tachikawa has since then moved on to become the head of Japan’s Space Agency JAXA).
Please find the unedited manuscript here (the actual published version was shortened a bit).
Leading in Asia:
What was the best business advice you received and who gave it to you?
The best business advice I received in Japan was from the former NTT Docomo CEO, Dr. Tachikawa – he taught me that when two parties do business, both parties have to profit/benefit – not just one party. He also taught me to go straight to the point, not waste time with irrelevant things.
Here the story in more details:
I had met Dr. Tachikawa at a reception at the German Embassy – purpose of the reception was to bring together German and Japanese leaders in telecommunications and mobile phones.
I noticed that Dr. Tachikawa, then NTT Docomo CEO, was standing for quite some time at the window, looking out into the beautiful garden of the Embassy with no one to talk to.
Why was Dr Tachikawa standing alone with no-one to talk to? My explanation was that the Japanese CEOs at this reception were mainly from DoCoMo’s suppliers, and therefore probably too shy to talk to Dr Tachikawa since Japanese business customs places these suppliers on a lower social ranking than their major customer DoCoMo. On the other hand, the German CEOs who had come from Germany, probably did not know who it was who was standing lonely at the window.
So I approached Dr Tachikawa and we talked quite a while – all in Japanese.
His first question after the initial introduction was very surprising – Dr Tachikawa asked me, how our company makes money, where our income comes from.
Having been CEO of our Tokyo based company for the last 10 years, I am very often asked where our company’s offices are located, how big our office is, how many people we employ and other irrelevant conversational detail., Dr. Tachikawa did not ask any of these irrelevant things – he went straight to the point: how do we make money. In my almost 10 years as CEO in 1000s of conversations, Dr Tachikawa was almost the only manager (Western and Japanese) who went straight to the point not losing time over irrelevant details.
A few days later I received an email from Dr Tachikawa inviting me to his office at DoCoMo’s headquarters to discuss possibilities of cooperation between NTT-DoCoMo and our very small company Eurotechnology Japan KK which I had founded about 10 years ago here in Tokyo.
I was amazed by Dr Tachikawa’s kindness. A few days later I spent about one hour in his office at the top floor of Sanno-Tower at DoCoMo’s headquarters, right next to the Prime Minister’s Office.
I had prepared four proposals and towards the end of our conversation I showed these four proposals to Dr. Tachikawa. He rejected three of them, and decided that DoCoMo was interested in one of my proposal.
I learn a lot from his way of action – he immediately took three decisions about the one proposal he was interested in:
he said that we must now find a way that both our company profit from this plan
he decided who within DoCoMo would be responsible to carry this project out with our company, and
he decided where the source of the budget for this project should be
I have been working 20 years with Japan now – and Dr. Keiji Tachikawa is certainly the Japanese manager I learnt most from, in the meetings I was lucky enough to have with him.
Speed of the essence: SoftBank loses no time to turn around Vodafone-Japan
Vodafone’s withdrawal also shows, that the values of cross-cultural management skills are often underestimated
by Gerhard Fasol
SoftBank rebrands Vodafone Japan: Saturday June 10, 2006 was the first time we saw SoftBank replacing the Vodafone brand in Japan – bringing a formal end to Europe’s largest ever investment in Japan.
Vodafone’s withdrawal from Japan is a turning point in more ways than one and has wider implications for Europe (read below).
Rebranding from Vodafone to SoftBank after SoftBank acquired Vodafone Japan
Upper image shows the world-famous Vodafone board on Shibuya’s hachiko square, which has appeared in many movies and TV shows. It will soon be replaced.
Lower image shows one of the first SoftBank advertisements in Tokyo’s busiest commuter railstation Shinjuku showing Sharp’s mobile-TV handset.
Implications for Europe of Vodafone’s withdrawal from Japan
As a European myself, I am looking at the wider implications for Europe of Vodafone’s withdrawal from Japan – and our company was recently awarded a contract by the European Union Government on exactly these issues – as well as others.
Vodafone’s investment was by far the largest European investment in Japan. What is maybe less well known is that Vodafone was dispatching a relatively large stream of managers between several continents (Europe, Australia etc) and Japan. Several times when visiting the KDDI Designing Center for example I could meet young German Vodafone managers who had just arrived for a management position at Vodafone-Japan, and who were studying the mobile phone handsets in KDDI’s showroom. These expatriates all left within a few weeks of SoftBank taking control of the company.
As a result of these interactions, Vodafone could bring J-Phone’s J-Sky mobile internet service to Europe, which was adapted for European conditions and rebranded “Vodafone Live!”. There would be no “Vodafone Live!” in Europe without Vodafone’s acquisition of J-Phone (including JSky). Vodafone also brought SHARP and Toshiba mobile handsets to Europe.
Apart from the immediate impact on Vodafone as a Corporation, we expect also a more general longterm impact from the strong reduction of Europe-Japan technology exchanges due to Vodafone’s withdrawal from Japan.
Vodafone’s withdrawal from Japan also shows how difficult it is for European telecom firms to succeed in Japan – and for Japanese firms in the telecom sector to succeed in Europe. Our company knows this first-hand from our work for NTT-Communications, and some other Japanese companies. – Read our presentation to Japanese industry associations here (in Japanese language).
Underestimating the importance of cross-cultural management skills and the associated perils
While large US corporations, including INTEL, General Motors, and Motorola have been forced by confrontation with Japan’s competition to completely reshape themselves, this has not yet happened to any large European corporation because of the larger perceived separation between EU and Japan.
