Mitsubishi Electric to exit mobile phone ops

By Kiyoshi Takenaka

TOKYO (Reuters) - Mitsubishi Electric Corp (6503.T: Quote, Profile, Research, Stock Buzz) said it planned to exit its loss-making mobile phone business, becoming the latest Japanese electronics maker to withdraw from a market dominated by overseas giants such as Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz).

In the face of tough competition from Nokia, Samsung Electronics Co Ltd (005930.KS: Quote, Profile, Research, Stock Buzz) and other global suppliers that enjoy economies of scale, many Japanese cellphone makers have withdrawn to the domestic market in recent years.

Sanyo Electric Co Ltd (6764.T: Quote, Profile, Research, Stock Buzz) said in January that it would sell its loss-making cellphone business to Kyocera Corp (6971.T: Quote, Profile, Research, Stock Buzz) for 40-50 billion yen.

"This is a logical step for Mitsubishi Electric after having been unable to launch a hit model for a while," IDC analyst Michito Kimura said. "But the withdrawal of these two Japanese cellphone makers is not going to make things better for those still in the industry."

With mobile phone demand stagnant at home, more Japanese makers are likely to pull out or merge, analysts said.

Mobile phone service operators such as NTT DoCoMo Inc (9437.T: Quote, Profile, Research, Stock Buzz) are cutting subsidies to retailers to keep cellphone prices low and are instead reducing their monthly rates, discouraging handset users from replacing their handsets frequently.

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Mitsubishi Electric said on Monday it expected a one-off loss of about 17 billion yen ($164 million) on a pretax level for the year ending on March 31 due to the withdrawal. The Tokyo-based company said, however, that the loss is likely to be offset by improved operational efficiency in other businesses.