(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
Version 17 of May 19, 2014	

by Ger...
(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
EXECUTIVE SUMMARY
• Japan is the wo...
(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
KDDI
3
Version Date Revision and co...
(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
KDDI
4
Subscribe to this report, an...
(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
LICENSE
5
Thank you for purchasing ...
(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
AGENDA (LIST OF CONTENTS)
• KDDI’s ...
(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
UNDERSTANDING KDDI
7
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KDDI’S MAIN BUSINESSES
• KDDI - Cor...
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KDDI’S GROWTH STRATEGIES
13
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JAPAN-DOMESTIC: 3M STRATEGY
• Multi...
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GLOBAL GROWTH STRATEGY
• first conso...
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KDDI’S FINANCIALS
16
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NET INCOME
• KDDI’s net income has ...
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QUARTERLY FINANCIAL RESULTS
(REVENU...
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CHANGE OF OPERATORS’ BUSINESS
MODEL...
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QUARTERLY NET (AFTER-TAX) PROFITS
2...
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NET MARGIN
27
2000 2002 2004 2006 2...
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NEW BUSINESS

UQ COMMUNICATIONS

WI...
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WIMAX
• In October 2007, KDDI has a...
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UQ COMMUNICATIONS INC CAPITAL STRUC...
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INVESTMENTS IN UQ COMMUNICATIONS
• ...
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NEW BUSINESS: JIBUN BANK
36
more ab...
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JIBUN BANK
• Jibun Bank (Jibun =one...
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“KDDI -THE CARD” -> “AU JIBUN CARD”...
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“CUSTOMER SATISFACTION”-KDDI’S
STRA...
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KDDI’S “CUSTOMER SATISFACTION” CAMP...
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KDDI’S POSITION IN JAPAN’S 

TELECO...
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THETOYOTA CONNECTION
53
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KDDI’S WIRELESS BUSINESSES:



AU 
...
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STRENGTHENINGTHE BRAND:AU BY KDDI
•...
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SPECTRUM LICENSES AND
BASE STATIONS...
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HOW MANY BASE STATIONS DOES KDDI/AU...
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AU’S MARKET POSITION
68
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KDDI AND SOFTBANK WIN FROM NUMBER P...
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AU’S SETTINGTHE AGENDA



NEW BUSIN...
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IMPACT OF FLAT RATE MOBILE
INTERNET...
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AU’S WINNING STRATEGY
COCKTAIL
83
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STRATEGICTOOL: STUDENT DISCOUNT (“G...
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“INFOBAR”
• Infobar is KDDI’s first ...
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INFOBAR2 - ON SALE FROM NOVEMBER 20...
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KDDI DESIGNING STUDIO 

IN HARAJUKU...
(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
KDDI DESIGNING STUDIO IN HARAJUKU
•...
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KDDI DESIGNING STUDIO IN HARAJUKU
•...
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KDDI DESIGNING STUDIO IN HARAJUKU
9...
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KDDI DESIGNING STUDIO IN HARAJUKU
•...
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KDDI DESIGNING STUDIO IN HARAJUKU
•...
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AU COMPETITIVE MOBILE
PHONE DESIGN
...
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SWEETS FORTHETEEN SCHOOLGIRL MARKET...
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EZWEB: MOBILE INTERNET
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MOBILE SEARCH

AND GOOGLE
113
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MOBILE SEARCH
• AltaVista was the fi...
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GOOGLE-KDDI/AU PARTNERSHIP
• GOOGLE...
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MOBILE MUSIC AS A COMPETITIVE
ADVAN...
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LISMO!
• LISMO! Is KDDI’s answer to...
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EZ.FM

“ON-AIR CHECK APPLI”
141
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EZ.FM “ON-AIR CHECK APPLI”
• Select...
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EZCHANNEL
147
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AU’S LOCATION BASED SERVICES:

EZNA...
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GPS AND EZ-NAVIWALK
• Subscribe and...
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LOCATION BASED EMERGENCY SERVICES
1...
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EZBOOK LAND
169
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EBOOKS FOR 

MOBILE PHONES
172
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EZGAMESTREET
• More on Japan’s game...
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EZGAMESTREET
• ezGameStreet is KDDI...
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AU’S EZWEB STRATEGY:
• From:	

• Co...
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MOBILETV ANDVIDEO
• More aboutTerre...
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FROM DUOGATE,AU-MY-PAGE AND DIONTO ...
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AU-MYPAGE -> AU.ONE.NET
• A wall de...
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FIXED LINE MARKETS
202
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FTTH MARKETS
204
• for analysis of ...
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FTTH MARKET SHARES (MANSIONTYPE, MA...
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BASIC IP PHONE SERVICE

“METAL PLUS...
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KDDI’S BROAD BAND
BUSINESS AND STRA...
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KDDI ASTHE CHALLENGER IN
FTTH
218
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SUMMARY
221
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SUMMARY
• Through a sequence of mer...
(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
MORE INFORMATION:
• Blogs:	

• http...
(c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014
CONTACT
• Eurotechnology Japan KK	
...
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KDDI

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KDDI is one of the three leading Japanese mobile and fixed line (FTTH) telecommunications operators, competing with SoftBank and NTT-Docomo.
This report helps understand KDDI - KDDI's origins, strategy, networks, financial data, market shares and subscriber numbers, and of course also products and services, and KDDI's position and trajectory in Japan's telecom markets.

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  1. 1. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 Version 17 of May 19, 2014 by Gerhard Fasol PhD, Eurotechnology Japan KK http://www.eurotechnology.com/ fasol@eurotechnology.com free trial report with a few selected pages, download full version here: http://www.eurotechnology.com/store/kddi/ 1 KDDI
  2. 2. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 EXECUTIVE SUMMARY • Japan is the world’s most advanced telecommunications market and KDDI is it’s second largest player, and now with the rise of SoftBank, Japan’s third largest telecommunication group. • Over the last years, since 2003, KDDI/AU has consistently won mobile market share against both DoCoMo and often also compared to SoftBank/Vodafone, and has also consistently increased profits. KDDI/AU also was the clear winner in the initial phase after the introduction of mobile number portability. • KDDI initially resisted the introduction of “smart phones” (such as iPhone and Android based phones), because KDDI feared reduced operator control of content and services, and KDDI introduced the iPhone much later than SoftBank. • KDDI emerged from KDD, the former monopoly operator for Japan’s external telecommunications, but today’s “company DNA” has benefited from major shareholders KYOCERA andTOYOTA. • KDDI, through several acquisitions and mergers, and development of an excellent strategy, managed a magnificent turn- round from monopoly operator KDD (which quite a few people saw as doomed), into one of the world’s most advanced integrated telecom operators combining highly profitable mobile services under the AU brand, with loss- making fixed line services including “triple play” broadband fixed line, a national optical IP network and “Metal Plus” IP services over unbundled copper lines leased from NTT. 80% of revenue is from mobile services. • “au” is arguably one of the world’s most advanced mobile operator. Recently KDDI/au decided to switch radio technology from Qualcomm’s CDMA2000 path to LTE. • New Businesses: JIBUN-Bank and other financial services and UQ Communications WiMax business 2
  3. 3. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI 3 Version Date Revision and comments 1 2 3 4 5 6 October 6, 2007 7 November 13, 2007 8 August 31, 2008 9 January 19, 2009 10 January 23, 2009 Subscribe to this report, and we will regularly send you the latest versions. ! subscription, monthly payment, you can end the subscription any time (no refunds): ! subscription, annual payment, you can end the subscription any time (no refunds):
  4. 4. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI 4 Subscribe to this report, and we will regularly send you the latest versions. ! subscription, monthly payment, you can end the subscription any time (no refunds): ! subscription, annual payment, you can end the subscription any time (no refunds): Version Date Revision and comments 11 February 13, 2009 12 May 18, 2009 13 June 1, 2009 14 July 21, 2009 15 December 13, 2010 16 January 6, 2011 17 May 19, 2014 18 19 20
  5. 5. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 LICENSE 5 Thank you for purchasing licenses to our reports, and for your cooperation with our licensing conditions. Only through your purchases can we continue to produce high-quality market reports from Japan ! INTHE CASE OF SINGLE LICENSE: If you have purchased a single copy license of this report, you are not permitted to copy this report except for a single back-up copy ! INTHE CASE OF CORPORATE LICENSE: in the case that your company has purchased a corporate license, you may distribute this report inside your company including protected corporate information servers locked to the outside, but you cannot distribute this report outside your company ! ANNUAL SUBSCRIPTION: we offer annual subscriptions for a particular report, and also for all our reports in one single transaction at a great discount - please contact us for details. Corporations subscribing will receive all updates at the time of publication, so that you can be sure to have the latest up-to-date information ! This research report comes without any warranty of any kind.The authors and Eurotechnology Japan K. K. do not warrant that the information in this report is without error, nor that the information serves any particular purpose. For legal advice please consult properly licensed legal professionals, for investment advice please consult properly licensed financial advisors.Trademarks mentioned are the property of their owners.
 Eurotechnology is a trademark or registered trademark in Japan and other countries.
  6. 6. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 AGENDA (LIST OF CONTENTS) • KDDI’s profile: structure and history • Financials: revenue, net income and investment capital expenditure • KDDI’s strategies sandwiched between the NTT and SoftBank groups • KDDI’s position in Japan’s telecom markets • Fixed line markets • Basic phone serivices:“Metal-Plus” • TheToyota connection • Fixed line markets and broad band:“Hikari-One”, Metal-Plus and “Triple-play” • KDDI’s wireless business - AU • AU’s market position • AU setting the agenda • AU’s winning strategies • Handset design, the AU Design Project • KDDI Designing Studio • Ezweb • Mobile search and GOOGLE • Mobile Music, Chaku Uta Full, LISMO, the AU Music Port and LISMO Music Store • EZ.FM On-air Check Appli • Ezchannel • GPS, Ez-Naviwalk, 3D-Navi and location based services • eBooks • EZ-gamestreet • EZ-shopping and auctions • Prepaid phones • Mobile payments and KDDI credit card • MobileTV and video • Duo-Gate and AU-My-Page • Summary 6
  7. 7. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 UNDERSTANDING KDDI 7
  8. 8. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI’S MAIN BUSINESSES • KDDI - Core businesses • Mobile:“au” (30 million subscribers) • Telephone: domestic, international • Internet ISP:AUone.net (was:“DION”) • Copper line local access:“Metal Plus” • FTTH:“Hikari Plus”, now:“Hikari-One” • Data Centers • KDDI’s 70 Affiliate companies • Mobile:Willcom (10% ownership, formerly: DDI-Pocket) • Broad Band Communications and Solutions, KCOM, K Solution, JPI, and more • Overseas: • KDDI America, KDDI Europe, KDDI Hong Kong, and more • MobileVirtual Network Operator (MVNO) in USA 8
  9. 9. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI’S GROWTH STRATEGIES 13
  10. 10. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 JAPAN-DOMESTIC: 3M STRATEGY • Multi-use • customers can use applications and content on many devices, wireless and fixed/FTTH internet • Camera, music-player, movies, games, radio &TV, books, money • Multi-network • FTTH • CATV • Mobile: 3G, LTE,WiMAX (UQ),WiFi • Multi-device • mobile phones, smart phones, tablets, e-books, PCs,TV-sets, FTTH-CATV 14
  11. 11. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 GLOBAL GROWTH STRATEGY • first consolidate strength in Asia, then move into key markets globally • Global ICT business • Cloud/SI: DMX • networks • date centers:TELEHOUSE • Global consumer business • business in emerging markets • KDDI-mobile • LOCUS • Total Call 15
  12. 12. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI’S FINANCIALS 16
  13. 13. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 NET INCOME • KDDI’s net income has increased steadily since recovering from net losses around FY1999/2000. 19 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 200 0 200 400 600 800 annualnet incomeyearYENBillion Annual net income of Japan's mobile operators in YEN Billion DoCoMo KDDI SoftBankVodafone Japan US$ 2 Bill US$ 4 Bill US$ 6 Bill US$ 8 Bill iPhone SoftBank July 11, 2008 iPhone 4S KDDI Oct 14, 2011 i Mode Feb 22, 1999 iPhone 5 Softbank KDDI Sept 21, 2012SoftBank acquires Vodafone KK March 17, 2006 c2014EurotechnologyJapanKK www.eurotechnology.com
  14. 14. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 QUARTERLY FINANCIAL RESULTS (REVENUE, OPERATIONAL INCOME AND NET INCOME) FOR JAPAN’STOPTHREE MOBILE OPERATORS 21
  15. 15. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 CHANGE OF OPERATORS’ BUSINESS MODEL FROM HANDSET SUBSIDYTO INSTALLMENT PLANS • The jump in operating profits in the April-June 2008 quarter is to a change of Japan’s mobile operators’ business model: • In the past subsidized the sale of each mobile phone with an amount on the order ofYEN 30,000 (US$ 300).This subsidy was recovered by operators through monthly billing as part of voice and data charges. • From spring 2008, this subsidy was dramatically reduced. Instead of a straight sale at a subsidized price, operators started to sell handsets under a installment purchase contract, where customers pay for a much higher handset price in 12 or 24 monthly installments. • As a result operators’ profits jumped. • Softbank was first to introduce the installment plan modes, and KDDI was last 22
  16. 16. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 QUARTERLY NET (AFTER-TAX) PROFITS 25 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 100 0 100 200 300netincomequarterYENBillion iPhone SoftBank July 11, 2008 iPhone 4S KDDI Oct 14, 2011 Quarterly net income loss of Japan's mobile operators DoCoMo KDDI SoftBank Vodafone Japan US$ 1 Billion US$ 2 Billion c2014EurotechnologyJapanKK www.eurotechnology.com iPhone 5 Softbank KDDI Sept 21, 2012 SoftBank acquires Vodafone KK March 17, 2006
  17. 17. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 NET MARGIN 27 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 5 0 5 10 15 20 netmargin net margins of Japan's mobile operators DoCoMo KDDI SoftBank Vodafone Japan c2014EurotechnologyJapanKK www.eurotechnology.com iPhone SoftBank July 11, 2008 iPhone 4S KDDI Oct 14, 2011 iPhone 5 Softbank KDDI Sept 21, 2012SoftBank acquires Vodafone KK March 17, 2006 • While KDDI’s net margins have been steady since the successful turnaround around 2003, KDDI’s net margins are now the lowest compared to SoftBank and Docomo
  18. 18. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 NEW BUSINESS
 UQ COMMUNICATIONS
 WIMAX 28
  19. 19. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 WIMAX • In October 2007, KDDI has applied for a WiMax license in the 2GHz spectrum band. • There will be two licenses awarded and there are four applicants: • ACCA-Networks (backed by DoCoMo and a consortium including internet service providers) • KDDI (and a consortium including Intel Capital) • A consortium of SoftBank and eMobile/eAccess • Willcom • since there are four applications for two spectrum licenses it is not assured that the consortium including KDDI will be awarded a license 29
  20. 20. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 UQ COMMUNICATIONS INC CAPITAL STRUCTURE 30 Investors Voting rights Percent Capital (YEN) Aug. 29, 2007 US$ (approx.) Aug. 29, 2007 Capital (YEN) From May 21, 2009 US$ (approx) After May 21, 2009 KDDI 32.26% YEN 5.48 Billion US$ 61 million YEN 20.71 Billion US$ 213 million Intel Capital Corp. 17.65% YEN 3.005 Billion US$ 33.5 million YEN 7.15 Billion US$ 73 million JR-East 17.65% YEN 3.005 Billion US$ 33.5 million YEN 7.15 Billion US$ 73 million Kyocera 17.65% YEN 3.005 Billion US$ 33.5 million YEN 7.15 Billion US$ 73 million Daiwa Securities 9.80% YEN 1.666 Billion US$ 18.6 million YEN 3.97 Billion US$ 41 million Tokyo Mitsubishi UFJ Bank 5.00% YEN 0.85 Billion US$ 9.5 million YEN 0.85 Billion US$ 9 million Total 100 % YEN 17.0 Billion US$ 190 million YEN 47.0 Billion US$ 482 million Under the spectrum licensing rules by the Japanese Government, established incumbent operators were not allowed to own 33% or more in the new WiMax operators. For this reason, KDDI is forced to own less than 33% in the new WiMax operator “UQ Communications)
  21. 21. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 INVESTMENTS IN UQ COMMUNICATIONS • On May 21, 2009 investments in UQ Communications were increased by the original investors to around US$ 500 million. Further investments will be necessary for additional network build-out. 31
  22. 22. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 NEW BUSINESS: JIBUN BANK 36 more about mobile payments, mobile banking and e-money in Japan: http://www.eurotechnology.com/store/mobilepay/
  23. 23. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 JIBUN BANK • Jibun Bank (Jibun =oneself) is a joint venture between KDDI andTokyo-Mitsubishi-UFJ-Bank focus on banking via the mobile phone. • A mobile phone site allows most banking transactions directly • KDDI offers Jibun-Bank to subscribers of competitor DoCoMo as well, and we expect in the future offering to all Japanese mobile provider’s customers 37
  24. 24. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 “KDDI -THE CARD” -> “AU JIBUN CARD” • In response to DoCoMo’s DCMX credit card, KDDI created “KDDIThe Card” - a KDDI branded credit card. • In Autumn 2008,“KDDI-The Card” was merged into the Jibun-Bank and became the “au JIBUN Card” 41
  25. 25. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 “CUSTOMER SATISFACTION”-KDDI’S STRATEGIES 45
  26. 26. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI’S “CUSTOMER SATISFACTION” CAMPAIGN • KDDI’s campaign during the introduction of number portability focused on “customer satisfaction” - KDDI argues that KDDI’s customers are more satisfied than the customers of their competitors DoCoMo and SoftBank. 46
  27. 27. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI’S POSITION IN JAPAN’S 
 TELECOM MARKETS 49
  28. 28. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 THETOYOTA CONNECTION 53
  29. 29. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI’S WIRELESS BUSINESSES:
 
 AU 
 
 (TUKA - SHUT DOWN IN MARCH 2008)
 (DDI-POCKET - SPUN-OUT,WILLCOM, UNDER CONTROL OF SOFTBANK) 57
  30. 30. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 STRENGTHENINGTHE BRAND:AU BY KDDI • AU consistently has the strongest profit growth and the strongest net subscriber growth in the industry • AU is the big winner following the introduction of mobile number portability 58
  31. 31. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 SPECTRUM LICENSES AND BASE STATIONS 61 • we are periodically updating this section, subscribe to this report to receive latest versions
  32. 32. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 HOW MANY BASE STATIONS DOES KDDI/AU INSTALL PER MONTH? • KDDI acquires between 200-1000 new base stations per month. Currently the increase is about 1000-1200 base stations / month. • In addition, KDDI has repeaters and booster stations (for a full discussion of base stations and for comparison with base station numbers of other operators see our J-COMM report: http:// www.eurotechnology.com/store/jcomm/ ) 67 2005 2006 2007 2008 2009 2010 2011 2012 0 200 400 600 800 1000 1200 1400 1600 1800 changeinnumberofbasestationsmonth Growth month of number of KDDI AU's basestations c2010EurotechnologyJapanKK www.eurotechnology.com
  33. 33. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 AU’S MARKET POSITION 68
  34. 34. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI AND SOFTBANK WIN FROM NUMBER PORTABILITY,
 HOWEVER RECENTLY KDDI HAS BEEN LOOSING STEAM • Japan’s mobile market is not saturated, as sometimes can be read, but is growing by approximately 400,000 subscribers/ month • KDDI was the clear winner in the first months after introduction of number portability (on October 24, 2006), and was overtaken during 2007 by SoftBank, and recently is losing market share as the latecomer to smart-phones 72 Net growth month of subscriptions DoCoMo KDDI SoftBank eMobile Willcom UQ WCP iPhone 4S SoftBank KDDI Oct 14, 2011 iPhone 5 Softbank KDDI Sept 21, 2012 c2014EurotechnologyJapanKK www.eurotechnology.com Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 100000 0 100000 200000 300000 400000 500000 600000 700000 netgrowthmonth
  35. 35. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 AU’S SETTINGTHE AGENDA
 
 NEW BUSINESS MODELSVS COMPETITION ON PRICE 74
  36. 36. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 IMPACT OF FLAT RATE MOBILE INTERNET ACCESS
 (INTRODUCED BY KDDI/AU) 79
  37. 37. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 AU’S WINNING STRATEGY COCKTAIL 83
  38. 38. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 STRATEGICTOOL: STUDENT DISCOUNT (“GAKU WARI”) • As the only operator KDDI/AU offers 50% (half price) discount (“Gaku Wari”) for students for the basic fee, C-mail and communication charges • KDDI/AU thus has a great price advantage for the student segment in Japan • The image shows a display of a Japanese high school boy’s uniform promoting the student discount. 85
  39. 39. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 “INFOBAR” • Infobar is KDDI’s first phone in the “Design Series”, and was a huge success. • In autumn 2006 KDDI introduced Infobar-2 as a prototype, collected customer response, and we believe Infobar-2 will come on the market in 2007 88
  40. 40. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 INFOBAR2 - ON SALE FROM NOVEMBER 2007 • Infobar2- main characteristics: • OLED display • One-Seg mobileTV (see: http:// www.eurotechnology.com/ store/mobile-tv/ ) • GPS and navigation • Mobile FeliCa mobile wallet services • Full LISMO music services 90
  41. 41. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI DESIGNING STUDIO 
 IN HARAJUKU 94
  42. 42. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI DESIGNING STUDIO IN HARAJUKU • On March 4, 2005 KDDI opened the “KDDI Designing Studio” inTokyo’s fashionable Harajuku area • The purpose of the “KDDI Designing Studio” is: • Promote the KDDI brand • Collect customer feedback 95
  43. 43. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI DESIGNING STUDIO IN HARAJUKU • 1st Floor: Communication Studio • Reception area • Stage for events and Performance • Shop for phone accessories,T-shirts etc, but no phones for sale • Displays and events • 2nd Floor: Presentation Studio • au-wall: mobile phones to touch and try • “the selection”: mobile phone exhibits • “Contents card maker”: cards with info on mobile content • “My message maker”: make messages and send to your friends (viral marketing effect) • Electronic Commerce (EC) Corner: au-auctions and au-okaimono • 3rd Floor: Creation Studio • Display area (at the moment displays Aichi-Banpaku terminal) • Display of cooperation project by KDDI with Universities and research labs • Future lab • FTTH content demonstration • SECOM- security application of location based services • 4th Floor: Collaboration Studio • conference and workshop space or special exhibitions • 5th Floor: Relaxation Studio • Wired Café with 360 degree views onTokyo 96
  44. 44. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI DESIGNING STUDIO IN HARAJUKU 97 Infobar talby penck
  45. 45. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI DESIGNING STUDIO IN HARAJUKU • The KDDI Designing Studio does not sell KDDI products - but instead is part of the general marketing efforts 98
  46. 46. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI DESIGNING STUDIO IN HARAJUKU • Visitors can borrow working mobile phones for some hours and take the mobile phones out of the Studio on the road for testing • In Japan, visitors reliably return the mobile phones 99
  47. 47. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 AU COMPETITIVE MOBILE PHONE DESIGN 100
  48. 48. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 SWEETS FORTHETEEN SCHOOLGIRL MARKET 105
  49. 49. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 EZWEB: MOBILE INTERNET 106
  50. 50. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 MOBILE SEARCH
 AND GOOGLE 113
  51. 51. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 MOBILE SEARCH • AltaVista was the first successful commercial search engine on the internet.AltaVista was launched on December 15, 1995, initially to showcase the power of DEC computers, and was soon later overtaken by GOOGLE. • While the commercial mobile internet started with I-Mode, Ezweb and Jsky in 1999, commercial mobile search in Japan did not come of age until summer 2006, when: • KDDI/AU announced a partnership with GOOGLE, whereby GOOGLE mobile search appears on the top page of Ezweb • DoCoMo a few weeks after the announcement of the GOOGLE/KDDI partnership, announced a more complex search solution for I-Mode which includes several different search services for the open internet, as well as an internal search service which searches I-Mode official sites only • SoftBank announced thatYAHOO-Keitai will replace Vodafone-Live!, and of courseYAHOO includes mobile search 114
  52. 52. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 GOOGLE-KDDI/AU PARTNERSHIP • GOOGLE search is positioned at the top of the EZ-top menue 115
  53. 53. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 MOBILE MUSIC AS A COMPETITIVE ADVANTAGE FOR KDDI/AU 116
  54. 54. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014130
  55. 55. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 LISMO! • LISMO! Is KDDI’s answer to iTunes and iPod and directly competes with both, however expanding the reach of a PC based online system with mobile phones • LISMO! Provides an integrated music system with PC based internet online music shop (starting April 2006) very similar to the I-Tunes Music Store, and a mobile phone based music shop, where payment for music is via the mobile phone billing system 131
  56. 56. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 EZ.FM
 “ON-AIR CHECK APPLI” 141
  57. 57. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 EZ.FM “ON-AIR CHECK APPLI” • SelectingTokyo-FM at 80.0MHz moving signage shows the songs playing now 145
  58. 58. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 EZCHANNEL 147
  59. 59. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 AU’S LOCATION BASED SERVICES:
 EZNAVIWALK • More on location based mobile services in Japan: • http://www.eurotechnology.com/store/location/ 153
  60. 60. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 GPS AND EZ-NAVIWALK • Subscribe and un- subscribe • Subscribe / changes / un- subscribe • Contract, conditions of use • Check the subscription status • Privacy policy 161
  61. 61. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 LOCATION BASED EMERGENCY SERVICES 167
  62. 62. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 EZBOOK LAND 169
  63. 63. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 EBOOKS FOR 
 MOBILE PHONES 172
  64. 64. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 EZGAMESTREET • More on Japan’s game industries: • http://www.eurotechnology.com/store/jgames/ 177
  65. 65. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 EZGAMESTREET • ezGameStreet is KDDI/AU’s portal to BREW based JAVA games sold through a range of official online stores 178
  66. 66. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 AU’S EZWEB STRATEGY: • From: • Commissions for Content • to: • M-Commerce Portal Portfolio 179
  67. 67. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 MOBILETV ANDVIDEO • More aboutTerrestrial DigitalTV for mobile phones (“OneSeg”): • http://www.eurotechnology.com/store/mobiletv/ 190
  68. 68. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 FROM DUOGATE,AU-MY-PAGE AND DIONTO 
 
 AU.ONE.NET • For our overview of Japan’s telecom markets: • http://www.eurotechnology.com/store/jcomm/ 197
  69. 69. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 AU-MYPAGE -> AU.ONE.NET • A wall dedicated to AU-Mypage at the KDDI Designing Studio in Harajuku explains the many uses of AU-Mypage to customers • Each board on this wall explains one function of Au-mypage, and gives details on specifications, instructions and explanations • To our knowledge neither DoCoMo nor SoftBank offers a similar service to customers at this point. 201
  70. 70. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 FIXED LINE MARKETS 202
  71. 71. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 FTTH MARKETS 204 • for analysis of Japan’s fixed, FTTH and DSL markets, see our JCOMM report on Japan’s telecom sector: http://www.eurotechnology.com/store/jcomm/
  72. 72. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 FTTH MARKET SHARES (MANSIONTYPE, MAINLY APARTMENT COMPLEXES) 208 Source: http://www.eurotechnology.com/store/jcomm/ Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 0 10 20 30 40 50 60 70 80 90 100 mansiontypeFTTHmarketshares mansion type FTTH market shares in Japan NTT East 44.7 NTT West 26.8 UCOM 5.3 KDDI 9.6 Electricity Companies 5.4 Other 8.1 c2012EurotechnologyJapanKK www.eurotechnology.com
  73. 73. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 BASIC IP PHONE SERVICE
 “METAL PLUS” 209
  74. 74. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI’S BROAD BAND BUSINESS AND STRATEGY 214
  75. 75. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 KDDI ASTHE CHALLENGER IN FTTH 218
  76. 76. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 SUMMARY 221
  77. 77. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 SUMMARY • Through a sequence of mergers and acquisitions, KDDI emerged from the former overseas monopoly carrier KDD, as one of the most advanced integrated telecommunication operators globally. • About 75% of KDDI’s business are highly profitable mobile services under the AU brand, while 25% are loss making fixed line services, data centers and other business. • Profit-making Mobile services • 75% of KDDI’s income is from mobile communications, operated under the “au” brand.Willcom (PHS services) has been largely divested to an investor consortium including Carlyle, KDDI retains a 10% stake. • “au” is arguably one of the world’s most advanced mobile operators.“au” offers 2.4Mbps CDMA2000 1x-EVDO Rev A wireless data services since 2003, and has converted all subscribers to 3G or higher.“au” has consistently pioneered many services, such as CDMA2000 1X-EVDO, chaku-uta and chaku-uta-full mobile music services, and flat rate data services. au contributes most of KDDI’s income. • KDDI/AU is transitioning to LTE network technology • Loss-making fixed line copper and FTTH broad band services • KDDI was one of the first operators globally to have full converted to IP (internet protocol) over a national optical fiber network. • KDDI offers “triple play” (telephone, broadband internet andTV) over FTTH under the “Hikari Plus” brand, and telephone + ADSL internet over leased “dry copper” under the brand “Metal Plus” • With Jibun Bank KDDI pioneers mobile banking. Jibun Bank is a bank focused on offering banking services via the mobile phone. • In 2009 UQ Communications starts WiMax services 222
  78. 78. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 MORE INFORMATION: • Blogs: • http://fasol.com/blog/ • http://eurotechnology.com/blog/ • Reports: • http://www.eurotechnology.com/store/ 223
  79. 79. (c) 2014 Eurotechnology Japan KK www.eurotechnology.com KDDI (Version 17) May 19, 2014 CONTACT • Eurotechnology Japan KK • http://www.eurotechnology.com/ ! • CEO: Gerhard Fasol PHD • Fasol@eurotechnology.com • Mobile: +81-90-8594-6291 224
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