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Mizuho 1038 telecom Mizuho 1038 telecom Document Transcript

  • Japan Industry Outlook / 38 2012 No.1 Table of Contents1, Comprehensive Industry - Japan 15, Broadcasting (Japanese only)2, Iron and Steel - Japan 16, Marine Shipping (Japanese only)3, Non-ferrous Metals - Japan 17, Logistics - Japan4, Paper and Pulp (Japanese only) 18, Electric Power - Japan5, Cement - Japan 19, City Gas (Japanese only)6, Chemicals - Japan 20, Retail - Japan7, Pharmaceuticals - Japan 21, Food and Beverage - Japan8, Petroleum - Japan 22, Food Service Industry - Japan9, Automobiles - Japan 23, Construction (Japanese only)10, Shipbuilding (Japanese only) 24, Real Estate and Housing - Japan11, General Machinery (Japanese only) 25, Travel and Tourism - Japan12, Electronics - Japan 26, Nonbank (Credit Cards & Credit) (Japanese13, IT Services - Japan only)14, Telecommunications - Japan 27, HR Service Industry (Japanese only) Contact: Industry Research Division Mizuho Corporate Bank, Ltd. mizuho.ird@mizuho-cb.co.jp
  • FY2012 Japan Industry Outlook (Telecommunications) Telecommunications Summary ■ Industry trends: (1) Mobile: The number of mobile subscribers is expected to increase significantly in FY2011 and FY2012. Although the unit price continued falling in FY2011, the increase in the number of subscribers covered the fall in the unit price and in mobile phone income in the overall industry. (2) Fixed-line: The growth in the number of broadband subscribers has slowed down due to market saturation. The net increase is thus expected to slow down both in FY2011 and FY2012. ■ Corporate earnings: (1) Consolidated: As was the case in FY2010, both revenues and profits are expected to increase in FY2011 and FY2012. While sales in the fixed-line segment are decreasing, the mobile segment leads the industry in sales. In addition to the increase in profits in the mobile segment, improved earnings in the fixed-line segment contribute to expanding operating profits. (2) Mobile: Sales are expected to increase both in FY2011 and FY2012, as mobile phone income is expected to grow and as handset turnover is likely to increase, accompanying the spread of such new devices as smartphones. In addition to the abovementioned increase in mobile phone income, the suppression of sales promotion fees accompanying the spread of long-term contracts is predicted to contribute to the increase in operating income in FY2011 and FY2012. (3) Fixed: Even though sales are expected to decrease both in FY2011 and FY2012, operating income is expected to increase in FY2011 and FY2012 owing to improved FTTH earnings. (4) Capital expenditures: An overall increase of 5.8% is expected for FY2011 because of the increase in the fixed-line segment as a result of the earthquake as well as the LTE and network strengthening in the mobile segment. With regard to FY2012, an overall increase of 3.3% is expected, as the expected increase in the mobile segment exceeds the expected decrease in the fixed-line segment. ■ TOPICS: Consideration of business areas that seem promising in the medium-term perspective: Companies in the telecommunications industry are facing the necessity to explore new business areas because of the saturation in the domestic telecommunications market. Three potential areas of expansion are: (1) geographical expansion (globalization), (2) expansion into different industries (expansion of the areas to be combined with telecommunications and other industries), and (3) expansion of the business areas in the upper layer of the ICT segment.I. INDUSTRY TRENDS1. Mobile telecommunications: While unit prices will continue falling, the net increase ofsubscribers in FY2011 will cover their slump, allowing telecommunications sales to startrising. The net increase The total number of subscribers in the mobile phone/PHS market increased of subscribers is significantly to reach 123.29 million in FY2010 (as of the end of March 2011, forecast to expand up 6.99 million year-on-year), thanks to: (1) increased demand for secondary significantly in lines along with the spread of smartphones, (2) demand for new devices such as FY2011 and data cards, tablet PCs, and wi-fi routers, and (3) the growth of the demand for FY2012. communication module lines including digital photo frames (see Figure 14-1 (1) 1 Mizuho Corporate Bank, Industry Research Division
  • FY2012 Japan Industry Outlook (Telecommunications) and Figure 14-1 (2)). Tha smartphone market expanded in FY2011 as well with the contribution made by Android-equipped phones with an ever-improving lineup of features, along with other smartphones including the iPhone 4S released not only by SoftBank but also by KDDI. Furthermore, additional increase is expected in the number of subscribers for pre-paid contracts (the number of pre-paid contracts with NTT Docomo in December 2011 was up 192,000) of a new mobile game device (PlayStation Vita), which was released in December 2011. Thus, the total number of subscribers is expected to reach 132.56 million (an increased of 9.27 million, up 7.5% year-on-year). The total number of subscribers in FY2012 is expected to be 140.69 million (an increase of 8.14 million, up 6.1% year-on-year), as there wil be less people who own more than one device because of the improved functions of smartphones, resulting in a slowdown of growth. Figure 14-1: Mobile phone/PHS subscriber trends(1) Mobile phone/PHS subscribers (left axis: totalsubscriptions; right axis: net increase) (2) Module subscriber additions (by carrier) Total subscribers Net increases 7,000,000 (10,000) (10,000) 14,069 1,200 Docomo au/tuka Softbank 14,000 13,256 6,000,000 12,329 1,012 1,000 12,000 11,630 927 5,000,000 11,205 10,734 807 10,170 9,648 4,000,000 10,000 9,147 800 8,706 814 8,141 8,000 7,505 3,000,000 636 699 6,698 564 600 565 2,000,000 6,000 501 521 471 400 442 425 1,000,000 4,000 200 0 2,000 09/4 09/6 09/8 09/10 09/12 10/2 10/4 10/6 10/8 10/10 10/12 11/2 11/4 11/6 11/8 11/10 11/12 0 0 11e 12e 00 01 02 03 04 05 06 07 08 09 10 (end FY) (4) Net increase of mobile communications (3) Net increase of mobile communications subscribers (by carrier, annually) subscribers (by carrier, monthly) Net increases (10,000) (net increase) 1,100 NTT DoCoMo KDDI Softbank 450,000 Emobile Willcom DoCoMo PHS Other Softbank 800 350,000 250,000 Docomo 500 150,000 KDDI 50,000 200 EM -50,000 Willcom -100 -150,000 00 01 02 03 04 05 06 07 08 09 10 11e 12e 10/10 10/12 11/10 11/12 10/4 10/6 10/8 11/2 11/4 11/6 11/8 (FY) 2 Mizuho Corporate Bank, Industry Research Division
  • FY2012 Japan Industry Outlook (Telecommunications) Source: Compiled by MHCB Industry Research Division based on the material of the Telecommunications Carriers Association (TCCA). Although the fall In terms of unit price, the increase in data ARPU (up 114 yen) in FY2010 was in unit prices is unable to compensate for the drop in voice ARPU 1 (down 392 yen), and slowing down, therefore, the total ARPU continued falling with the total ARPU of the three the downward trend remains. major carriers settling at 4,843 yen (a decrease of 279 yen, down 5.4% year-on-year) (see Figure 14-2 and Figure 14-3) in FY2010. With regard to FY2011, while voice ARPU is to slow its rate of decrease, as transfers to the basic charge discount plan peak out, the spread of smartphones is anticipated to lead data ARPU growth, including the migration from feature phones, bringing total ARPU down to JPY4,622 (a decrease of 221 yen, down 4.6% year-on-year). With regard to FY2012, while the spread of smartphones is expected to continue contributing to the data ARPU growth, the total ARPU is forecast to be 4,416 yen (a dcrease of 206 yen, down 4.5% year-on-year) without a stop in falling, as telecommunication carriers are offering discount plans for smartphone users and as there are new factors for the decrease in voice ARPU such as the decrease in MOU charges to smartphone users who use the voice communication function less, compared to the users of feature phones. There are KDDI announced its new pricing, “au smart value,” in January 2012. This further risks of service offers a discount of the maximim of 1,480 yen per month charged for the ARPU decrease. usage of an au smartphone for two years (the monthly charge from the third year will be 980 yen), if the user subscribes to both fixed-line communication (FTTH and CATV) and a smartphone. Such “tied” pricing plans between fixed-line and mobile communications may cause a change in the upward trend of data ARPU in the overall industry, if competitors follow the trend by providing competing plans in the time ahead—although they are not unlikely to directly cause a decrease in data ARPU for mobile communications. Furthermore, it is worth pointing out that ARPU may fall further, as the spread of Long-term Evolution (LTE) and the increasing use of VoIP 2 such as Skype may lower the MOUs 3 that are to be charged. Telecommunicatio Thus, while net increase saw a significant rise, unit prices continued falling. As n service sales are a result, telecommunications service sales saw a slight decrease at 6.5749 expected to rise in trillion yen (down 0.9% year-on-year) in FY2010. In FY2011, while ARPU is FY2011. expected to continue decreasing, sales are forecast to increase to 6.6711 trillion yen (up 1.5% year-on-year), thanks to the steady growth in the net increase. In FY2012 as well, sales are forecast to increase to 6.7620 trillion yen (up 1.4% year-on-year).1 ARPU (Average Revenue per User/Unit): Average monthly revenue per contract2 VoIP: Transmission technique for the delivery of voice communications over Internet Protocol3 MOU (Minutes of Use): Monthly average call time per contract 3 Mizuho Corporate Bank, Industry Research Division
  • FY2012 Japan Industry Outlook (Telecommunications) Figure 14-2: Communication service sales trends Figure 14-3: ARPU (monthly fees) trends of of the three major carrier groups the three major carrier groups(JPY billions) (Yen/Month) 8,000 8,000 Data Voice Data Voice 6,000 6,000 2,676.8 2,970.5 3,292.2 5,119.9 4,744.0 4,039.3 3,649.6 4,000 4,527 3,964 4,000 3,224 2,817 2,425 2,058 1,748 2,000 4,085.2 3,700.5 2,000 3,282.7 2,753.5 2,985.1 2,448.4 2,668 2,130.8 2,304 2,418 2,564 2,046 2,198 1,884 0 0 06 07 08 09 10 11e 12e (FY) 06 07 08 09 10 11e 12e(FY) Source: Figure 14-2 and Figure 14-3 were compiled by MHCB Industry Research Division based on IR material from each company (and in conjunction with MHCB Industry Research Division projections). Note: The “Big Three” are NTT DoCoMo, KDDI (au + the former tuka), and SoftBank Mobile.2. Fixed-line telecommunications: While carriers have been more active in their salespromotion, the net increase in broadband subscribers continues slowing down. 固定ブロードバンド Net increase is While the growth rate of fixed-line broadband subscriptions (the total of FTTH, の加入数は 20 forecast to slow ADSL, and CATV) continues to weaken owing to market saturation, FTTH led down both in FY2011 and the market, and the total number of subscribers reached 34.11 million (an FY2012. increase of 1.24 million, up 3.8% year-on-year) at the end of FY2010 (see Figure 14-4). The total number of subscribers is forecast to reach 35.07 million (an increase of 0.98 million, up 2.9% year-on-year) in FY2011. Carriers have become active in sales promotion to gain more subscribers, as can be seen in the fact that NTT East introduced a new pricing plan for light users of the Internet, “Flet’s Hikari Light” in June 2011, as well as that KDDI expanded the area covered by its “au Hikari Home.” Moreover, net increase was expected to grow due to the last-minute demand to prepare for the switch to digital terrestrial television carried out nationally except for some regions on July 24. However, the net increase in the first half of FY2011 was not more than 1.205 million (while it was 1.304 million in the first half of FY2010), suggesting that the trend of slow growth has not changed due to the market saturation. Such trends are expected to continue in FY2012, and the total number of subscribers is forecast to be 35.97 million (an increase of 0.91 million, up 2.6%). 4 Mizuho Corporate Bank, Industry Research Division
  • FY2012 Japan Industry Outlook (Telecommunications) Figure 14-4: Number of fixed broadband lines 4,000 (10,000) 3,597 3,507 total 3,409 3,500 3,285 Source: Compiled by MHCB CATV 3,032 Industry Research Division based 3,000 ADSL 2,874 on Ministry of Internal Affairs and FTTH 2,643 Communications materials 2,500 2,329 Note: Concerning CATV Internet, as certain carriers modified their 1,953 2,000 past aggregation methods for their number of contracts, there is a 1,492 1,500 discontinuity between post-FY2009 contracts and the 1,000 940 previous fiscal year (alteration of the late-March FY2009 number of 386 subscribers + 962,000). 500 22 85 0 99 00 01 02 03 04 05 06 07 08 09 10 11e 12e In terms of services, more carriers are engaged in providing additional services other than line services, such as the service to distribute discount coupons to the subscribers of Flet’s Hikari as well as the service to visualize the electricity used by home electric appliances provided by NTT East. Although it is likely to take a long time for such services to start leading the growth of the industry, this suggests that the focus of the competition is gradually shifting from the conventional race to gain new subscribers (of their lines) to the improvement of ARPU and managing existing subscribers (preventing cancellations), as the broadband market has been matured. With regard to regulations, there have been debates at the Ministry of Internal Affairs and Communications over the system to lend optical fiber (the so-called “one-branch system” 4 ) by NTT East and NTT West. If this method becomes institutionalized, communications carriers would be able to borrow optical fiber from NTT East or NTT West for a much lower price than the current price. Thus, this would mean cheaper prices for users and a call for communication carriers to examine the necessity to own facilities by comparing the cost of owning such and the cost of borrowing such from NTT East or NTT West.II. CORPORATE EARNINGS(1) Consolidated Concerning the FY2010 earnings of the three major carriers (consolidated),earnings: Both sales rose 2.4% year-on-year to 16.0848 trillion yen, and operating profits roserevenues and 15.4% over the previous fiscal year to 2.1325 trillion yen, with an increase inprofits are both revenues and profis. Revenues and profits are expected to also increase inexpected toincrease in FY2011 FY2011 and FY2012 (see Figure 14-5).and FY20124 The system in which telecommunication carriers lend or borrow optical fiber necessary for one end-user 5 Mizuho Corporate Bank, Industry Research Division
  • FY2012 Japan Industry Outlook (Telecommunications)(2) Mobile: The Concerning the mobile sector, FY2010 sales rose 1.4% year-on-year to 8.7596appearance of new trillion yen. In FY2011, while ARPU continues falling, the increase in thedevices such as number of subscribers compensates the fall in unit prices. Thus,smartphones is telecommunication sales (mobile phone revenues) are expected to start rising.expected to leadgrowth. Furthermore, demand to switch from a feature phone to a smartphone is expected to keep handset turnover high, and handset sales (additional sales) are also likely to contribute to the increase in sales. As value-added services, such as content services, are also expected to increase the overall sales as a new growth driver, sales are expected to reach 9.1201 trillion yen (up 4.1% year-on-year) in FY2011. As telecommunication sales are expected to continue steadily expanding in FY2012 as well, sales are expected to reach 9.3486 trillion yen (up 2.5% year-on-year). Operating profits are expected to increase by 3.4% year-on-year in FY2011 and by 4.5% year-on-year in FY2012. This is because of the fact that profitability has been improved along with the increase in mobile phone profits mentioned above, as well as that the liquidity of customers has remained low as a result of the spread of long-term binding contracts, which lowered the costs to advertise for new subscriptions and the costs related to networks as estimated by each carrier. (3) Fixed-lines: Among dwindling profits in the fixed-line segment, NTT East has seen the While revenues increase of its IP subscribers offset the drop in subscribed telephones, signaling decrease, a a transformation in its income structure from subscribed telephones to IP surplus is maintained. subscribers. FY2010 saw the income level off, with a slight increase of 0.5% year-on-year to 6.0459 trillion yen. While the net incease in FTTH is expected to slow down in FY2011 and FY2012, not being able to compensate for the decrease in voice services, sales are expected to drop. Operating profits increased significantly by 98.8% year-on-year in FY2010, as the payment burden for FTTH has become smaller and as the earnings of the subsidiaries of KDDI have been robust. Operating profits are expected to increase in FY2011 and FY2012 as well, as investment in optical fiber has slowed down and as payment burden is expected to shrink further. Figure 14-5: Summary of the business performance of the three major carrier groups【Actual】 Consolidated Moble Fixed FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12 Unit (Actual) (Estimate) (Forecast) (Actual) (Estimate) (Forecast) (Actual) (Estimate) (Forecast)Sales JPN billions 16,084.8 16,323.2 16,495.7 8,759.6 9,120.1 9,348.4 6,045.9 5,923.8 5,868.1Operating profit JPN billions 2,132.5 2,206.7 2,312.8 1,686.0 1,744.1 1,822.1 287.5 303.7 331.8【Rate of Increase and Decrease】Consolidated Moble Fixed FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12 Unit (Actual) (Estimate) (Forecast) (Actual) (Estimate) (Forecast) (Actual) (Estimate) (Forecast)Sales % 2.4% 1.5% 1.1% 1.4% 4.1% 2.5% 0.5% -2.0% -0.9%Operating Profit % 15.4% 3.5% 4.8% 6.8% 3.4% 4.5% 98.8% 5.6% 9.2% Source: Compiled by MHCB Industry Research Division based on IR material from each company (figures for FY2011 and FY2012 based on MHCB Industry Research Division estimates) Note: “Consolidated” refers to the grand total of the NTT Group, KDDI Group, SoftBank Mobile, and SBTM. “Mobile” refers to the grand total of DoCoMo, KDDI, and SoftBank Mobile. “Fixed-line” refers to the grand total of NTT East & West, COM, KDDI fixed-line, and SBTM. NTT Group and DoCoMo are based on U.S. standards, the rest are based on Japanese standards. 6 Mizuho Corporate Bank, Industry Research Division
  • FY2012 Japan Industry Outlook (Telecommunications) The total for fixed-line and mobile capital expenditures rose 1.0% year-on-year (4) Capital expenditures: The to 2.4899 trillion yen in FY2010. In FY2011, they are expected to increase by strengthening of 5.8% year-on-year to 2.635 trillion yen, and increase by 3.3% year-on-year to facilities to cope with 2.721 trillion yen in FY2012 (see Figure 14-6). the increased traffic in mobile Total fixed-line capital expenditures for FY2010 fell 6.3% year-on-year to telecommunications 1.0909 trillion yen. Investments in broadband access are falling off and boosts the overall expenditures. decreasing in the medium-to-long term, along with the fall in the net increase of new subscribers. Additionally, cut-off errors following the Great East Japan Earthquake also made decreases worse in FY2010. Total FY2011 capital expenditures are expected to rise to 1.129 trillion yen, an increase of 38.1 billion yen, up 3.5% year-on-year. While capital expenditures are expected to remain on a downwrd trend, they are forecast to see positive year-on-year growth because of expenditures from FY2010 accumulated due to the cut-off error as well as the special demand related to the earthquake. Capital expenditures are forecast to return to a downward trend in FY2012 to 1.41 trillion yen (a decrease of 88 billion yen, down 7.8% year-on-year), as there will be less demand related to the earthquake. As for the mobile segment, 3G-related investments have slowed, and the industry has entered the interim period before next-generation (3.9G) related investments come into full swing. The capital expenditures of the three major carriers rose to 1.399 trillion yen (a increase of 97.5 billion yen, up 7.5% year-on-year), led by increased capital expenditures in FY2010 by SoftBank conducted in order to strengthen its network (up 136.7 billion year-on-year to 351.5 billion yen). Capital expenditures are forecast to reach 1.506 trillion yen (an increase of 107 billion yen, up 7.6% year-on-year) in FY2011, as capital expenditures are likely to increase due to the fact that SoftBank is expected to make an investment of around 400 billion yen, as was seen in FY2010, and that Docomo is expected to decentralize its important facilities and increase investment for the expansion of areas covered by the Xi (a LTE service). Capital expenditures are forecast to reach 1.68 trillion yen (an increase of 174 billion yen, up 11.6% year-on-year) in FY2012, due to the increase in investment at SoftBank. Figure 14-6: CAPEX of the three (JPN billions)3,000 major carrier groups2,500 Source: Compiled by MHCB Industry Research Division based on IR material2,000 from each company (and in part on MHCB Mobile1,500 Industry Research Division projections) Note: “Mobile” refers to the grand total of1,000 DoCoMo, KDDI (au + tuka), SoftBank Fixed-line Mobile Network Operator, and E-Mobile. 500 “Fixed-line” refers to the grand total of NTT holding company, East & West, COM, 0 02 03 04 05 06 07 08 09 10 11e 12e KDDI (fixed-line division), and SBTM. (FY) 7 Mizuho Corporate Bank, Industry Research Division
  • FY2012 Japan Industry Outlook (Telecommunications)III. TOPICS: Consideration of business areas that seem promising in the medium-termperspective – the telecommunications industry Expansion can Telecommunications carriers are facing the necessity to explore new business be in three areas outside of the existing framework—as the domestic telecommunication directions: (1) geographical indiustry, their main focus, has been saturated. Potential areas to expand to expansion, (2) include: (1) geographical expansion (globalization), (2) expansion into different expansion into industries (expansion of the areas that combine with telecommunications and different other industries, and (3) expansion of the business area into “upper layers” in industries, and (3) expansion the ICT segment. Different carriers would focus on the different areas into upper mentioned above (1)–(3), as each carrier has strength in different areas of layers. business. However, in principle, they are likely to accelerate their actions to carry out expansion in all of the above areas using their strong financial abilities. First of all, with regard to (1) globalization, companies are expected to make significant efforts in exloring global markets due to the market saturation in Japan. In the individual market, the focus is likely to be on Asia because of the following points: (1) geographical proximity, (2) cultural similarities, and (3) the potentials of market growth. On the other hand, in the market targeting corporations, including the line market and data centers, it would be necessary to expand not only to Asia but also to wider regions including Central and South America, as well as Middle East and Africa, by securing business hubs in developed countries. This is because of the importance to expand coverage globally for Japanese customers taking business abroad as well as to attract local customers in the growing regions. Secondly, in order to expand (2) business areas to combine telecommunications and other industries, potential industries to collaborate with include those involved in: the “environment,” “finance and settlement,” “e-commerce,” and “safety and security,” based on possibile compatibility with and utilization possibility of the characteristics of telecommunication services, such as “realtime and bidirectional” and “ubiqitous.” Additionally, there has been a growing need for a smart power network after the earthquake, and thus it is possible for alliances to be made in the fields of terminal communication networks and home ICT. Finally, with regard to (3) expansion to “upper layers” in the ICT segment, it can be pointed out that communication services have been increasingly “commoditized,” while there is horizontal separation surrounding mobile devices. In order to challenge such a trend, carriers are expected to expand their business into the “platform” field such as authentification and settlement, as well as in the upper fields of content and applications. Masahiko Ogawa/ masahiko.ogawa@mizuho-cb.co.jp 8 Mizuho Corporate Bank, Industry Research Division
  • FY2012 Japan Industry Outlook (Telecommunications) Takeshi Onishi takeshi.ohnishi@mizuho-cb.co.jp IT Services & Telecom Team Industry Research Division Mizuho Corporate Bank, Ltd.9 Mizuho Corporate Bank, Industry Research Division