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M&A Mobile

Nokia No. 1 in Japan! – Panasonic to sell mobile phone base station division to Nokia

Nokia strengthens No. 1 market position in Japan’s mobile phone base station market!

Japan’s mobile phone base station market

Japan’s mobile phone base station market is about US$ 2.6 billion/year and for European companies Ericsson and Nokia the most important market globally, although certainly also the most difficult one.

Nokia is No. 1 with a 26% market share, and Panasonic is No. 5 with 9% market share.

European investments in Japan

Nokia acquiring Panasonic’s network division is one of many investments and acquisitions in Japan by European companies. For more details, see the EU-Japan M&A register.

Panasonic to focus on core business, Nokia to expand market share in Japan

Panasonic, after years of weak financial performance, is focusing on core business. Nikkei reports that Panasonic is planning to sell the base station division, Panasonic System Networks, to Nokia.

Succeeding in Japan at the second try, learning from initial failure:

We see a pattern here: after failing spectacularly trying to build a mobile phone business in Japan for almost 20 years without success, Nokia is now winning the second time round.

It can be hard for foreign companies to build a business in Japan, and many fail. Interestingly, there is a long list of famous companies that succeed on their second attempt after initial failure, this list includes:

  • IKEA: failed first time in 1974, succeeds now
  • DAIMLER: failed spectacularly first time with Mitsubishi Motors, now successful with Mitsubishi Fuso trucks – read the time line here
  • NOKIA: failed first time after trying for 20 years (1989-2008) to sell mobile phones in Japan, now successful with mobile phone base stations and network infrastructure

Read a detailed timeline in The EU-Japan Investment Register.

Nokia expands No. 1 position in Japan

Our analysis of Japan’s mobile phone base station market shows, that Nokia became No. 1 in Japan’s base station market with the acquisition of Motorola’s base station division. Acquisition of Panasonic System Networks will expand Nokia’s NSN to expand market leadership in Japan’s mobile phone base station market.

I believe without success in Japan’s mobile phone base station market, there is a big chance Nokia as a company, or at least Nokia’s NSN division would not exist any more at all today.

With a market share of 26%, approx. US$ 700 annual sales in Japan, Nokia is No. 1 market leader in Japan followed by Ericsson on 2nd position. With the acquisition of Panasonic’s base station division, Nokia should be able to expand its market share beyond 26%+9% = 35% and expand its leadership, especially via Panasonic’s deep relationship with Docomo.

Because Docomo with its very deep pockets, is traditionally the first globally to develop and bring to market the most advanced radio technologies, a deeper relationship with Docomo will also help Nokia to develop and bring to market new communication and radio technologies. Thus I believe the impact on Nokia will be far more than an increase of the market share in Japan from 26% to 35%.

Panasonic System Networks

Panasonic System Network’s market share is estimated at around 9% of Japan’s mobile phone base station market, while international sales are essentially non-existent. Thus Panasonic System Network’s global market share is negligible, giving Panasonic little possibility for the scale necessary to operate a stable profitable longterm base station business.

Japan’s mobile phone handset makers and base station makers have for many years focused on serving Japan’s internal market only, and in particular have focused on Japan’s No. 1 mobile phone operators NTT Docomo. This gave Japan’s mobile phone base station makers a temporary home advantage, however with the value shift from hardware to software, they lack scale, and are subsequently uncompetitive globally. More about Japan’s Galapagos effect here.

Over the last 15 years since 1998, Panasonic has shown no growth in revenues, and average net losses of YEN 85 billion (US$ 0.85 billion) per year, as typical for most of Japan’s top 8 electronics companies and as we analyze in detail in our report on Japan’s Electronics Industries.

Panasonic is on 5th rank with about 9% market share in Japan’s mobile phone base station markets, and has little chance and not the capital to scale its base station and mobile phone businesses globally. For Panasonic in it’s current very limited financial situation, focus on core business areas is very prudent.

The context: EU investments in Japan

While Japanese investments in Europe are booming, recently European investments in Japan have been stagnating after Vodafone’s withdrawal from Japan, and there are very few new European investments in Japan. Could it be that Nokia’s investment in Japan starts a new trend of renewed European investments in Japan?

Understand Japan’s telecommunications markets

Report on Japan’s telecommunications industry
(approx. 270 pages, pdf file)

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Categories
Mobile

8 years since commercial start of location based services (LBS) in Japan in July 2001

It will soon be 8 years since DoCoMo started commercial location based services (LBS) for mobile phones in Japan in July 2001. During these 8 years, Japan’s mobile LBS industry has grown and a range of differentiated mobile LBS services has emerged – indicative of how the LBS industry might develop in other countries in the next few years (Read our LBS-FAQ here, and our mobile LBS report here).

NOKIA’s recent acquisition of Navteq for US$ 8.1 Billion has drawn much attention to LBS for mobile phones.

The world’s first commercial location based service (LBS) for mobile phones – “i-Area” – was rolled out by DoCoMo in Japan in July 2001 – eight years ago! – is still going strong, and for some time also includes location dependent mobile search: you type “ramen” into the search box and back comes a list of ramen noodle restaurants for the neighborhood near you. “i-Area” is a pre-GPS service – no GPS is necessary. Like so much about Japan’s mobile internet eco-system, i-Area has a non-obvious complex business model fine-tuned over 8 years now.

GPS came later – KDDI introduced the first GPS phone in December 2001 – a little more than seven years ago – and today about 1/2 of all mobile phones have GPS in Japan. Japan’s Government requires all cellphones to have GPS built in. Therefore, within a few years, as users replace their older phones, 100% of Japan’s cellphones will have GPS, giving a boost to the mobile LBS industry.

Interesting companies? An undisputed leader is Navitime – offering “total navigation” to about 2 million subscribers – almost 2% of the population of Japan. Many people in Japan, including the author of this newsletter, cannot live without total navigation….

Bombarding subscribers with mobile discount coupons by SMS for shops in the neighborhood is often mentioned in western blogs about mobile LBS. I have not yet received a single one during the last 8 years of mobile LBS in Japan – although these do exist if you want them.

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Categories
electronics component makers Japan's electronics multinationals Mobile

ICT trends for Japan for 2009

Smartphones, European exits from Japan, and M&A

ICT trends for Japan: Ericsson and Nokia Siemens Networks (NSN) remain engaged in Japan’s ICT sector

by Gerhard Fasol

One of the Embassies here in Tokyo asked me to write a report about ICT trends for Japan…

ICT trends for Japan: Mobile phone sector

Pushed by the Government the mobile operators changed the business model for mobile phone sales from a straight subsidy model to an installment payment system. As a consequence the mobile phone sales collapsed, creating huge difficulties for Japan’s mobile phone makers, but greatly improving the financial results of mobile operators.

Smart phones grow market share in Japan

An interesting trend is the growth of the “smart-phone” market (Blackberry, HTC-Windows-Mobile phones, iPhone etc.) and mini-PCs, which can be acquired for YEN 1 with subsidy from eMobile.

In this context the Japanese telecom equipment makers association invited me to give a presentation, which was booked out 2-3 weeks ahead – about 100 Japanese telecom equipment maker managers attended! The General Affairs Vice-Minister / Secretary of State attended…

Nokia terminates mobile phone business in Japan

On November 27th, 2008, global press announcements announced that NOKIA will stop making mobile phones for Japan’s mobile operators with immediate effect. DoCoMo and SoftBank had NOKIA phones in preparation and had already started marketing efforts – these were cancelled a few days after NOKIA’s press announcement.

NOKIA had founded the Japan subsidiary on March 3rd, 1989, almost exactly 20 years ago, thus NOKIA has given up entering Japan’s mobile phone market after 20 years of efforts. NOKIA will not totally shut down in Japan, NOKIA announced that R&D and procurement will continue, and VERTU announced to enter Japan’s market with a mobile vertual network operator (MVNO) model renting network capacity from DoCoMo, and opening own shops.- However the opening of these direct VERTU stores keep being postponed.

NOKIA joins the row of European telecom companies which have given up operations in Japan: Vodafone, Cable & Wireless.

Nokia Siemens Networks (SNS) is continuing business in Japan as well, so NOKIA will not be entirely gone from Japan.

M&A

European company’s acquisitions in Japan are currently at low levels, including the ICT sector. By far the largest acquisition in Japan by a company from the European/Mediterranian area was not by an EU company, but by the Israeli company Iscar which acquired the Japanese company Tungaloy for around US$ 1 Billion. However, this acquisition was driven by US capital. Read details in our blog here.

In the opposite direction, Japanese acquisitions in EU and elsewhere, there is a boom of acquisitions by Japanese companies abroad. For example, TDK acquired the German company EPCOS, Fujitsu acquired the outstanding 1/2 of Fujitsu-Siemens, NTT-Data acquired 72.9% of Cirquent which was a 98% subsidiary of BMW before. SONY acquired the outstanding 1/2 of the SONY-Bertelsmann Music Group from Bertelsmann.

The current trend is definitely a strengthening of Japanese acquisitions in Europe.

The most important issue however are not the acquisition transactions themselves, but the crucial issue will be whether these acquisitions create or destroy value. In many cases the difficulties to overcome “cross-cultural” issues are enormous. Many huge wrecks line the road: Vodafone-Japan, Cable-Wireless-Japan, NOKIA’s mobile phone business in Japan, or DoCoMo’s overseas acquisitions. There are also many success stories – the most impressive and famous one Nissan-Renault, however there are many more. An interesting case in progress is Nippon-Sheet-Glass (now NSG Group)’s acquisition of Pilkington Glass (read about a presentation by NSG’s CEO here in our blog).

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Categories
Mobile

NOKIA quits Japan – for now…

NOKIA’s Japan subsidiary was founded on April 3, 1989 – almost 20 years ago. On November 27, 2008 NOKIA announced to terminate selling mobile phones to Japan’s mobile operators, effectively withdrawing from Japan (except for purchasing, R&D and VERTU).

NOKIA’s sales figures in Japan were a well kept secret until last week when several Japanese newspapers wrote that NOKIA sold 200,000 phones during FY 2007: thus NOKIA’s market share was 0.39% – after 20 years of market entry efforts.

Considering the disastrous collapse of mobile phone handset sales in Japan, NOKIA’s move to quit sales in Japan actually makes a lot of sense. Nothing prevents NOKIA from re-entering Japan again in the future.

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Categories
Mobile

Nokia & Sony Ericsson Results Likely to Disappoint (CNBC TV interview)

More in our J-ELECTRIC report: http://www.eurotechnology.com/store/j_electric/

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Categories
Mobile

Market caps of companies in mobile: global vs local

Google, Apple, Nokia, HTC, Vodafone and are winning the driver’s seat of the global internet revolution. DoCoMo, KDDI and SoftBank essentially stay inside Japan for now – limiting their growth prospects and leaving global opportunities to others.

Market caps of Japan's telecom operators compared to global telecom and internet companies
Market caps of Japan’s telecom operators compared to global telecom and internet companies

GOOGLE with Android and APPLE with iPhone are reaching for the driver’s seat of the global mobile data revolution. Global companies including GOOGLE, Vodafone, Apple and NOKIA grow to US$ 100s Billion valuations, while local companies NTT, DoCoMo, KDDI and SoftBank remain essentially limited to Japan’s market for now. Smartphone maker HTC increases impact – including in Japan.

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Categories
Mobile telecommunications

"Help – my mobile phone does not work!" – Why Japan’s mobile phone sector is so different from Europe’s

Presentation at the Lunch meeting of the Finnish Chamber of Commerce in Japan (FCCJ) on March 16, 2007 at the Westin Hotel, Tokyo.

Find the summary and photos of the meeting here

The presentation is not available any longer on the FCCJ website however you can download our report about Japan’s telecom sector. An abbreviated version is shown below via SlideShare. If you need the full FCCJ presentation PowerPoints e.g. for prior art or other business, please contact us.

From the Announcement:

In his presentation, Dr. Fasol will explain the essentials of Japan’s mobile phone market, why and how it is so different to Europe’s. He will also talk about some of the reasons why it is so difficult for European companies to succeed and uncover opportunities and the keys to success for European companies in this important market.

More in our report about Japan’s telecom sector.

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

Categories
Mobile

Finland-Japan Ubiquitous Society Conference

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
Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference

Panel discussion with TeliaSonera CEO Juho Lipsanen and KDDI-Chairman Murakami.

Finland Japan Ubiquitous society meeting
Finland Japan Ubiquitous society meeting

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Categories
Mobile mobile payment telecommunications

Briefing TeliaSonera top management

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
Nokia CTO Tero Ojanpera talking at the Finland Japan Ubiquitous Society Conference

Panel discussion with TeliaSonera CEO Juho Lipsanen and KDDI-Chairman Murakami.

Finland Japan Ubiquitous society meeting
Finland Japan Ubiquitous society meeting

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

Categories
Japan's electronics multinationals Mobile

SANYO – NOKIA CDMA2000 JV (Interview for CNBC)

Was interviewed today about the announced JV between SANYO and Nokia for CDMA2000 phone handsets (I added some corrections here):

[Q1] How will SANYO benefit from this, since they are the ones who have the technology, what do they hope to gain from working with Nokia? Or is this merely a way to reduce costs for the company, since it’s struggling to remain profitable?

It is clear to me that NOKIA will benefit, since NOKIA needs 3G know-how from Japan because all markets where NOKIA is dominating are behind compared to Japan in 3G development, and also NOKIA needs a lot of other advanced technology from SANYO.

Of course who benefits depends both on the contract conditions and the relative strengths of the parties.

It’s clear that financially NOKIA is the much stronger of the two. NOKIA is financially very strong, while SANYO is in a very weak position, so it’s a very clever move for NOKIA.

[Q2] Is it already too late for Nokia to make such a move in the CDMA 2000 market, with strong players like Samsung, LG and Motorola already entrenched in the market?

I don’t think it’s too late – both Motorola and NOKIA demonstrated rebounds recently with new design initiatives such as Motorola’s RAZR and NOKIA did a successsful turn-round by introducing clam-shell phones a trend which NOKIA had missed by not being linked sufficiently into Japan before.

To succeed you need to make spectactular phones which match consumer needs, and you need the financial and manufacturing power as well as the brand. The combination of SANYO‘s technology with NOKIA’s financial strength and brand, as well as NOKIA’s efficient supply chain are a good basis.

[Q3] When would you expect to see the benefits of such a move to emerge?

I think one should not underestimate the cultural risks. NOKIA and SANYO have extremely different corporate cultures, and we have seen many cases where corporate cultures lead to great difficulties.

I think the key will be to manage the difference in corporate cultures of two very proud companies. Locating the JV in the USA might help.

SONY-Ericsson has demonstrated that such a JV can be successful. In the case of SONY-Ericsson it has taken several years for the JV to succeed. If one takes SONY-Ericsson as a measure, then it might take a couple of years (3-4 years) for this JV to succeed. If it’s faster than that it will be a positive surprise.

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

Categories
games Mobile

Tokyo Game Show TGS2004 (Sept 24-26, 2004): breakthrough for native mobile games

Mobile phone games at the center of TGS2004

by Gerhard Fasol

Docomo at the center of attention with JAVA native mobile games for i-Mode

The annual “Tokyo Game Show” sets trends and is a must for game professionals and fans. More than 100 companies exhibit.

This years highlight is the SONY “PlayStation Portable” – PSP – to be introduced towards the end of 2004. SONY prepared a huge arena with an gigantic models of a PSP hanging overhead where visitors to the show could try out advance models of the PSP.

SONY also displayed the new “Gran Turismo 4” game, the release is scheduled for Dec 3, 2004. “Gran Turismo 4” was not the only car racing game at the show, we counted at least three more in this hugely popular category.

Japan game market report (398 pages, pdf-file):

Docomo dominates Tokyo Game Show TGS2004 with JAVA native mobile games for i-Mode

The DoCoMo pavillion highlighted 15 of the most important i-Mode game partners. These 15 were selected from over 4000 i-mode content partners. Games are one of the most important sectors on the i-mode menu – many customers are driven by games to buy the next handset upgrade. Therefore DoCoMo has a great interest in mobile games. DoCoMos focus at the game show were games for the 900i FOMA/3G series.

SONY previews PSP – Playstation Portable:

SONY PSP mock up for Tokyo Game Show TGS2004
SONY PSP mock up for Tokyo Game Show TGS2004

In a stunning arena around a gigantic hyper-real model of the PSP PlayStation Portable (PSP), visitors try out the PSP. PSP is announced to be released towards the end of 2004.

SONY PSP arena previewing the PSP at Tokyo Game Show TGS2004
SONY PSP arena previewing the PSP at Tokyo Game Show TGS2004

SONY offered a preview of “Gran Turismo 4” representing the enormously popular segmet of car racing games with realistic landscapes and surroundings.

SONY's Gran Tourismo at Tokyo Game Show TGS2004
SONY’s Gran Tourismo at Tokyo Game Show TGS2004

DoCoMo presented an intense show of 15 key i-mode partners focusing on games. The map immediately below shows the lay-out of DoCoMos exhibition area, together with small pictures of the main display of each of the 15 DoCoMo partners

NTT DoCoMo exhibit at Tokyo Game Show TGS2004
NTT DoCoMo exhibit at Tokyo Game Show TGS2004

One of the most important DoCoMo game partners is Square Enix with the best selling Final Fantasy series. Final Fantasy is a “role playing game” where the player joins a group of fighters. This photograph shows the Square Enix presentation in the DoCoMo display. Square Enix also had its own presentation area – complete with models, preview area, shows etc.

SquareEnix at DoCoMo's exhibit at Tokyo Game Show TGS2004
SquareEnix at DoCoMo’s exhibit at Tokyo Game Show TGS2004

“Rumble rose” is the most spectacular representative game of sexy games – Rumble Rose is about women wrestling…

Rumble Rose at Tokyo Game Show TGS2004
Rumble Rose at Tokyo Game Show TGS2004

ATLUS shows stunning color and illumination effects.

ATLUS at Tokyo Game Show TGS2004
ATLUS at Tokyo Game Show TGS2004
ATARI at Tokyo Game Show TGS2004
ATARI at Tokyo Game Show TGS2004
ATI at Tokyo Game Show TGS2004
ATI at Tokyo Game Show TGS2004

Japan game market report (398 pages, pdf-file):

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