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i-Mode Background

Introduction

Due to the success of i-Mode, DoCoMo is Japan's largest company , undisputed leader in wireless Internet access and largest Internet provider. Additionally, it is the world's number two mobile phone company after Vodafone AirTouch Plc.

Market

I-mode's success has been nothing short of meteoric. It has attracted nearly 15.6 million subscribers since February, 1999 and is gaining new customers at the rate of more than 50,000 - 60,000 a day! In fact, 81% of the world's mobile Internet users are in Japan! And DoCoMo has about three-fifths of Japan's booming mobile phone market. (To see a graphical comparison of DoCoMo's wireless internet market to the US cellcos click here.)

Technology

Currently, DoCoMo's data-transfer speeds are quite slow, making the service suitable only for text and simple graphics. But in May 2001, it expects to introduce the world's first 3G (third generation) network based on the latest W-CDMA (Wideband Code Division Multiple Access) technology, which will speed data rates 40 times - to 2Mbps(!) - and allow high-quality streaming video and audio. It's winning advantage (over their western and European counterparts) is that NTT DoCoMo built an Internet-style packet-switched network alongside its existing digital circuit-switched network in the beginning, and equipped its handsets with a micro- browser that understands cHTML a subset of HTML. Europe is only now beginning to build packet-switched (GPRS) networks.

Financials

NTT DoCoMo's net profit surged 23% to $2.37 billion in the last business year and its market value has tripled to $370 million.

Business Strategy

Low Pricing is the key to building demand for the service - service is only $2.70/ month and then only .0026 USD/packet. The longest allowed email is 500 bytes which would therefore cost $.01 or 1 cent max. and a weather report 5 cents. Users can also download services from vendors - such as the popular Bandai cartoon screensavers - for $.85-$2.00/month (of which DoCoMo earns a 9% commision), resulting in an average monthly bill of only $13. Additionally, DoCoMo makes commissions from it's content providers. It works like this: As a portal site, I-Mode has first tier content providers that users can access directly from its menu bar (about 500). Then DoCoMo reaps a commission for the services rendered by this first tier . Everyone else is encouraged to code their Web pages for i-mode as well and there are currently about 12,000 of these second-tier sites accessible by entering the site's URL

Although DoCoMo only started investing abroad recently, it has quickly bought into a in a range of foreign mobile providers, aiming to deploy next generation technology Asia, Europe and now the US and spreading its W-CDMA (Wideband Code Division Multiple Access) technology as the world 3G standard.

Its expansion strategy is to buy minority stakes of 15 to 20 % in order to be involved in the management of companies that would employ DoCoMo technology. DoCoMo aims to establish a global services network prior to the launch of the 3G cellular phones next May! And it wants its W-CDMA system the de facto worldwide standard 3G mobile phones. Keiji Tachikawa, NTTDoCoMo's CEO stated in a 1/12/2001 Time Europe interview: "We would like to promote W-CDMA to establish compatibility in every country. That way we can establish our dream: that one terminal can be used throughout the world."

To put in place their vision of an I-Mode wireless world, they have quietly but aggressively bought a minority stake in the following companies around the world:

• Hutchison Whampoa - Hong Kong. In December 1999, DoCoMo acquired a 19% stake and in May 2000 Hong Kong became the 2nd place in the world where i-Mode is available.
• Dutch KPN Mobile - May 2000, NTT DoCoMo bought a 15% stake and they will be setting up Europe's first I-Mode service.
• Telecom Italia Mobile (TIM) - Italy. TIM has had a joint alliance with NTTDoCoMo since 1997 (with no exchange of equity), exchanging engineers.
• AT&T Wireless- United States. November 2000, they bought a 20% stake for $9.8 Billion and have their sites on establishing the first 3G I-Mode networks here in 2003-4
• SK Telekom - South Korea's biggest mobile provider - in July 2000, DoCoMo purchased a 10% stake for $3 Billion.
• KG Telecom Taiwan - NTT DoCoMo Acquires 20% Stake in KG Telecom Firms to jointly provide wireless broadband services in Taiwan - 11/30/2000.
• Tele Sudeste Celular Participacoes - Brazil, in September 1998 they acquired a 7% stake.

Lessons Learned from WAP

• WAP is a " created demand" - I-Mode exists and is so successful because it is in demand by the public.
• Price and services should be positioned to maximize consumer take up - prices are very low - with an average user bill of $13/month.
• Do not position the WAP phone as Internet phone, but rather something like DoCoMo's "different mobile experience", that way you do not raise customer expectation of receiving online quality images and pictures.
• Network should be completely open unlike WAP which is a "walled garden" in which each provider only provides a limited number of WAP sites.
• Packetization is essential. A packet-based network means the device is always on and there is no need to dial up call to access content. You only pay for packets received.

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