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Softbank faces setback in Japan iPhone 5 shakeup
September 22, 2011 / 2:30 AM / in 6 years

Softbank faces setback in Japan iPhone 5 shakeup

TOKYO (Reuters) - Softbank Corp’s (9984.T) lucrative gig as the sole iPhone vendor in Japan faces trouble as rival KDDI (9433.T) hammers out a deal with Apple, a source familiar with the matter said on Thursday, while worries of lost sales sent Softbank shares sliding 12 percent.

The deal could be a boon to Apple (AAPL.O), whose customers would end up with a better network, but is expected to trigger a huge shake-up in the domestic mobile phone market over the next six to 12 months.

“Softbank may cut prices to prevent users who are unhappy about its network quality from fleeing to bigger KDDI, which could in turn lower rates,” said Michito Kimura, a senior market analyst at IDC Japan.

A new price war would likely embroil NTT DoCoMo (9437.T), which commands half of Japan’s cellphone market and has the potential to squeeze profits at handset makers.

The source said KDDI is working on a deal with Apple to sell the iPhone 5 in Japan. The online version of the Nikkei Business magazine had reported earlier that KDDI would begin sales of the iPhone 5 in Japan around November.

That report prompted investors to dump shares in Softbank, wiping out 354.5 billion yen ($4.6 billion) in market value. The 12 percent slide to a one-year low was the stock’s biggest single-day percentage drop since November 2008.

Spokesmen for KDDI and Softbank declined to comment, but Softbank said there was no clause in its contract with Apple that would prevent another carrier from offering the iPhone.

Analysts said KDDI’s success in wooing users away from Softbank, which has outpaced its competitors for the past 17 months in new signups, depended on pricing and how dissatisfied iPhone users were with Softbank’s network.

Softbank’s profits have ballooned since it introduced the iPhone in 2008, upsetting a market that had long been dominated by domestic handset makers.

Operating profit at the company, which bought Vodafone’s Japan business in 2006, rose to a record 629 billion yen ($8.2 billion) in the year ended in March 2011.

But many iPhone users in Japan have complained about the patchy network, stirring speculation that Apple would eventually allow other carriers to distribute its phones in Japan, a strategy it is already pursuing in the United States.

Expectations grew after media reported Apple was using a Qualcomm (QCOM.O) CDMA chipset for the iPhone 5, opening up the way for CDMA2000 network users such as KDDI to sell the popular gadget.

Apple has already expanded its vendors in the United States to Verizon Wireless, a venture of Verizon Communications (VZ.N), which also uses the CDMA200 network.

Shares of KDDI, which have risen more than 20 percent since mid-August, ended down 0.8 percent after gaining as much as 6 percent, while DoCoMo fell 3.2 percent.

“Selling the iPhone will bring more users to KDDI, but could also mean higher sales and maintenance costs,” one market participant at a securities firm said.

KDDI would likely need to adjust its network to support the iPhone, and this could mean that Softbank will begin selling the iPhone 5 before KDDI can.

Attention now is on whether NTT DoCoMo will also supply the iPhone in the future, said Hideyuki Ishiguro, a strategist at Okasan Securities, adding that this possibility was weighing on KDDI and Softbank shares.

DoCoMo’s smartphone lineup now includes handsets made by Samsung Electronics (005930.KS), Sharp (6753.T), Sony Ericsson and Toshiba (6502.T).

($1 = 76.420 Japanese Yen)

Additional reporting by Hirotoshi Sugiyama, Isabel Reynolds, Lisa Twaronite and Natalia Konstantinovskaya; Editing by Edwina Gibbs

Our Standards:The Thomson Reuters Trust Principles.
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