Here are how the three main Japanese carriers fared during the month of September:
NTT DOCOMO lost 66,800 subscribers, au/KDDI gained 232,700 and SoftBank 270,700.
DOCOMO loses market share again, SoftBank is the top carrier in terms of subscribers gain for 21 months in a row1 and au/KDDI continues the nice streak started a year ago, fending off SoftBank’s attempt to becoming #2.
Let’s stress the fact that DOCOMO is still by far and large the biggest carrier in the country: it has 22 million more subscribers than its closest competitor.
Right after the release of those numbers last week, dozens of articles—often parroting each other—went on about how the iPhone was a failure at DOCOMO. I refrained from writing immediately, waiting for the noise to dwindle down. Because it’s more complicated than that.
What’s in a full month
First and foremost, the numbers do cover the entire month of September. You know, a full month, like 30 days. The iPhone 5s/5c were released on September 20. Like a third of that full month.
This is barely the fault of analysts getting too excited, as DOCOMO itself has blamed limited iPhone stocks for the drop in its subscriber base.
A simple look at the numbers tells you that this is not the case. DOCOMO had 27.5% share of iPhone 5s market in its first week of sales—the last week of the month that we’re interested in. au/KDDI had 30%2.
So, with similar sales share, au/KDDI won more than 200k customers thanks to the iPhone launch and DOCOMO lost more than 50k because of the same exact launch? And stocks would have been much more limited on DOCOMO than its competitors?
Let’s be serious.
In a nutshell, why the subscriber loss? The iPhone 5 and DOCOMO itself .
The iPhone 5
If you look at the sales numbers for the launch week-end and the week immediately following it, it’s not difficult to witness that one of the factors in the iPhone domination is the very strong sale of the previous model, the iPhone 5.
This isn’t new and has been clear at every iPhone launch: there’s always a massive uplift by the sale of the previous iPhone model in Japan .
au/KDDI and SoftBank are heavily discounting the iPhone 5, making it basically “free”. It was not only expected by customers, but also advertised before the release of the new model. This is a weapon that DOCOMO doesn’t have: no discounted iPhone 5, no fall-back stock and offers.
This is why I had suggested that DOCOMO could have been better at marketing the 5c pushing it more heavily than its counterparts. Truth to be told, it could have meant a cutthroat price war—the three operators react to each other’s pricing like symphonies—that would have not created any real winners in the end (beside the customer), though I’m not certain that SoftBank or au/KDDI would have wanted a situation where there was basically no differentiation between the 5 and the 5c.
The other important factor, an unknown one, is the terms signed with Apple. There might be some limitations in the freedom the carriers can have, restricting the ability to actually even think about a full-blown price war.
DOCOMO’s other problem
It remains that reading the loss of subscribers only with the iPhone in mind is both biased and naive. I’ve said it repeatedly, here and elsewhere, one cannot read what the iPhone will do to DOCOMO at this stage. You have frontloaded sales for early adopters, likely to already have switched to au/KDDI and especially SoftBank in the past years and just trading their phone (with contract). You have price-sensitive customers appealed by the heavily previous model that DOCOMO doesn’t carry. You have limited stock for everyone on the flagship models.
DOCOMO’s problems have started way before this. The carrier somewhat suffers from an image problem and from a complex price structure problem. iPhone or no iPhone, it has repeatedly shown an inability to counter the two challengers, and this for more than 5 years now5.
If you look at the market share of the the carrier in 2006 and compared it with the graphic at the top of this post, you’ll immediately understand:
The loss of subscribers during the month of September has been heavy. Almost a record, yes. But, again, let’s not pretend this is new, the carrier has had a bad year, losing customers in four of the last twelve months.
It’s DOCOMO’s strategy that it is at fault here. While it keeps innovating in infrastructure technologies, it still behaves like it were in a world where it’s the market-definer, the untouchable leader that sets the standards for the others6. It’s a mindset conundrum.
Accepting the iPhone on its network was the first step7 and early signs in October show that DOCOMO is faring very good, taking the top spots in mobile phone sales in Japan with the 5s, confirming what I thought: the iPhone was needed.
It’s the first time we have a standardized device on all three carriers in Japan. SoftBank and au/KDDI cannot differentiate between “we have it and you don’t” anymore. The iPhone 5c will take off8 in a second cycle of—more conservative—customers. The 5s is a flagship phone that flies off the shelves.
If DOCOMO ends up not making any in-roads with a device that is so adored in Japan, it will have only itself to blame.
41 months out of 43! ↩
The 5c breakdown was similar—while only counting for a fifth of the sales. ↩
the customer gets to keep its number, carriers often offer special deals for those ↩
The differential, or about 65,000, are new customers. It’s impossible to know how many of those got on-board for the iPhone 5s/c, the full month of October will show us a better overall picture of the dynamic between the three carriers ↩
and contrary to some reports, DOCOMO has seen a worse loss of subscribers: in December 2006 ↩
the “benevolent dictator” theory, that brought such innovation as NFC or mobile internet earlier in Japan than anywhere else ↩
though I’m sure it also got a better deal by signing now that Apple needs growth rather than 5 years ago. ↩
I don’t read too much in the recent reports of supply chain production cuts by Apple ↩