Coverage of NTT DoCoMo's Earnings Release (DCM)

by: Steven Towns

NTT DoCoMo (ticker: DCM), Japan's premier mobile communications company, released earnings for the first-half of its fiscal year (April 1, 2005 to Sept. 30, 2005) on Friday after the close of the Tokyo Stock Exchange and before the open of U.S. exchanges. The key results figure was a solid 14.9% increase in net income over the same period in the prior year. DoCoMo credits various measures it enacted over the period that allowed it to maintain record low level cellular churn rate and also sustain higher ARPU (average monthly revenue per unit) levels than expected.

Other major results from first-half operations include: a 3.2% decrease in operating revenues against a 4.8% decrease in operating expenses for a 2.4% increase in operating income, compared to the same period in the year prior.

In its earnings release under the section: Comments from Masao Nakamura, President and CEO, the reasons for the 14.9% increase in net income were: enhanced overall service offerings through strategic rate revisions, enrichment of handset lineup, and further improvement of network quality and reinforcement of after-sales support.

Based on its first-half performance, DoCoMo revised its full-year operating income forecast to 830 billion yen (US$ 7.22 billion at Y115/US$1), up 20 billion yen (US$ 174 million) from initial guidance. Also, President Nakamura said the company recognizes the importance of network quality enhancement in order to strengthen competitiveness, so DoCoMo has revised upwards its capital expenditures for the full-year by 23 billion yen (US$ 200 million) to 871 billion yen (US$7.57 billion).

Nakamura's closing comments were, "While the competitive environment is expected to become harsher, we will continue to operate our business from a customer-centric viewpoint and endeavor to respond adequately to the needs of users to achieve a sustainable growth toward the future."

DoCoMo's strongest segments were in its FOMA (Freedom of Mobile multimedia Access -- 3G based on W-CDMA) services in both voice and packet communications, in which revenues were up 170.2% to 319.1 billion yen and 168.5% to 162.3 billion yen, respectively. Its weakest segments were in its PHS services, down 26.4% and in equipment sales, down 22.8%. DoCoMo has stopped accepting PHS subscribers since the end of April.

DoCoMo's ADRs ended the week up 3.3%, closing Friday at $17.31.

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