Will Docomo win battle for wireless supremacy?

In January, DoCoMo, Japan's largest wireless operator, added a net 7,000 mobile phone users which was less than 5 percent of the additions at rivals, after Softbank lowered basic monthly fees.

DoCoMo said it now has 52.2 million users, about 55 percent of the market. A month after a government rule change made it easier for users to switch carriers; the Tokyo-based company in November suffered its first net loss of subscribers. DoCoMo and rivals KDDI and Softbank are investing in network coverage and new phone models to entice users to their services after number portability increased competition in the $74 billion wireless industry. Softbank, controlled by Japanese billionaire Masayoshi Son, has promised to undercut competitors' monthly fees and set a 980 yen ($8) basic monthly rate.

"The trend of customers switching from DoCoMo to its competitors is increasingly clear," said Haruo Sato, a Tokyo-based analyst at a research unit of Tokai Tokyo Securities. He said DoCoMo may implement price cuts or other steps to combat the loss of subscriber growth. He didn't elaborate. Softbank added a net 164,000 users in January, bringing its total to 15.7 million. On Jan. 16, the company cut its basic monthly fee to 980 yen. This lured about 500,000 users, including 100,000 new subscribers, Softbank's Son said on Jan. 25.

KDDI, which controls about 29 percent of the market, added 208,400 users in January. Its "au" brand service added a net 432,000 users in January, while it's slower "Tu-ka" brand network lost a net 223,600. DoCoMo may increase its handset subsidies to try to lure users. Handset subsidies at DoCoMo increased by 1,000 yen to 38,000 yen per unit in the three months ended Dec. 31, while Softbank, which will announce its third-quarter earnings, averaged 43,800 yen in per handset subsidies in the second quarter. KDDI cut its incentive payments by 2,000 yen to 35,000 yen.

KDDI added a net 2.5 million subscribers last year which surpasses DoCoMo's 1.8 million in net additions. Softbank added a net 379,800 users, Telecommunications Carrier Association figures show. As a result, it said it may increase spending on its mobile network to a seven-year high to tackle a subscriber increase. KDDI had a 450 billion yen projection for this fiscal year but expects to invest as much as 500 billion yen ($4.2 billion) in the 12 months to March 2008.

In an attempt to win over users from competitors, Japan's wireless operators are introducing handsets that can play music, receive TV broadcasting and listen to digital radio. Profit margins may be narrowed if there is an Increase in new subscribers as the companies absorb costs for subsidizing new handsets.