Japanese mobile operator NTT Docomo will introduce a new line of low-priced 5G smartphones by the end of the year as it tries to attract more subscribers, a top company official revealed Thursday.
The new smartphones are expected to be priced between 50,000 yen ($470) and 80,000 yen. Currently available 5G phones go for more than 100,000 yen ($940).
NTT Docomo President and CEO Kazuhiro Yoshizawa disclosed the plan for the new smartphones in an interview with Nikkei. The company hopes that subscribers will help it recoup its huge investment in 5G base stations over the next three years.
The mobile network operator began offering 5G service in late March. It plans to spend more 1 trillion yen by March 2023 to set up base stations and other infrastructure. "We want to achieve profitability in three years' time through mobile fee revenues alone," Yoshizawa said.
For NTT Docomo to cover its investment costs and generate a profit, it must lift subscriber numbers. The company currently has 170,000 5G subscribers, less than 10% of the approximately 2.5 million it hoped to have by the financial year ending in March 2021.
It hopes to have 20 million 5G subscribers by the year ending in March 2023, but the fact that "device prices are high" poses a challenge to the company, Yoshizawa said.
The list prices of 5G smartphones all exceed 100,000 yen at present. NTT Docomo will introduce a new device priced between 50,000 yen and 80,000 yen during the second half of this year, the company says.
Limited geographic coverage for 5G is another bottleneck, which makes putting up more base stations crucial. In early spring, NTT Docomo's procurement of parts for base stations was delayed by the novel coronavirus outbreak. But the situation "returned to normal in June," Yoshizawa said.
At a news conference in April to discuss the company's earnings, Yoshizawa said the target of building 10,000 base stations was "difficult." But during the recent interview with Nikkei, he said it could be achieved.
But NTT Docomo's cut-price 5G smartphone will still count as a premium product. Rakuten's 4G Mini sells for less than 20,000 yen and is winning over customers, while Y! mobile, SoftBank's low-cost brand, had 5 million contracts as of March.
NTT Docomo is falling behind rivals at the low end of the market and faces an uphill battle for subscribers. NTT Docomo had 70.89 million contracts, including those for smartphones, as of the end of March, slightly down from a year earlier.
NTT Docomo's stock price has fallen by just over 10% since the end of March and the price is lower than KDDI's or SoftBank's.
Seiichiro Iwamoto of Asset Management One said: "NTT Docomo's capital investment per contract is higher than that of other companies and it is difficult for NTT Docomo to create a (low-cost) sub-brand" like its rivals.
NTT Docomo continues to face market skeptics. Its 5G push is aimed at answering them.