Willcom, the fourth-larget mobile phone operator in Japan has just announced it’s filing for insolvency protection, in what looks like to be the biggest bankruptcy in Japan’s telecommunication industry’s history.

Insolvency

Reuters reports that Willcom is JPY 206bn in debt has been in talks with its creditors to reschedule its debt payments since September 2009 but has failed to find any agreement outside the courts.

If the current rumored agreement is reached, Willcom will be cut in two, its capital written off and will receive a fresh line of credit to revive its business, with the help of SoftBank, the third larget mobile operator in Japan.

Uncompetitive

The operator was unable to expand its subscriber base in a saturated market: its market share fell more than 6% since its peak in July 2007, while SoftBank, for instance, gained more than 1.6m customers in the same period.

While Willcom’s use of an older wireless technology, the Personal Handy-phone system (PHS) is obviously troublesome, its use of boosted cell stations had allowed it to partially solve the limited signal range it suffered in comparison of GSM. The introduction of a flat rate plan had also allowed it to maintain face in a fierce market.

It seems however that its inability to upgrade its data speeds, failing way behind its three main competitors, namely NTT DoCoMo, SoftBank and KDDI, might have played an important role in its demise (where’s the EDGE data techonology available since mid 2007 that could have offer faster speeds than DoCoMo W-CDMA 3G ?)

PHS Technology

PHS services are mainly found in Asia, in particular China, Taiwan and Japan. The technology, which bores similarities with the DECT cordless telephony system, offers less cell range than GSM but also induces costs of only a fifth in deployment, which makes it attractive for developing countries.

DoCoMo, not seeing any future in the technology, stopped enrolling new customers since 2005 and is slowly shutting it down. It seems China Telecom is not investing in it anymore either.

Service maintained

Willcom, which started as a subsidiary of KDDI in 1994 specifically to deploy the PHS service before being bought out by Carlyle and Kyocera in 2004, has 4.4 million subscribers.Willcom said its current financial trouble wouldn’t interfere with service operations.