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Mixed Reception as NTT Swoops on Free-spirited Docomo

The Yomiuri Shimbun file photo
NTT Docomo’s i-mode mobile service, seen here on a phone in Osaka in 2000, took the domestic market by storm.

Revelations in late September that Japanese telecom giant NTT Corp. would make its mobile carrier NTT Docomo, Inc. a wholly owned subsidiary sent reverberations through the unit used to doing things unfettered by its parent company.

Some NTT Docomo employees welcomed the move. “We won’t be able to beat huge IT companies from the United States and China if we stay the way we are,” one employee said. However, the prevailing view was that differences in their corporate cultures could become a major sticking point.

“In the mobile phone industry, you need to be able to make something out of nothing,” a midranking NTT Docomo employee said. “Such a concept is completely foreign to NTT, which carefully moves ahead through coordination with the government.”

That such starkly different corporate cultures have developed between these two companies in the NTT Group stems from the early days of Docomo.

Docomo was established in 1992 as NTT spun off its mobile communications unit. At that time, most phones were landlines and very few people had mobile phones. Within NTT, employees dispatched to Docomo were dubbed “radio guys” and considered to have taken a step down. Hiroshige Seko, secretary general for the ruling Liberal Democratic Party in the House of Councillors, started working at NTT in 1986, the year after the company was privatized. “When a colleague who joined the company at the same time as me was transferred to Docomo, I thought, ‘Oh, poor him,’” Seko recalled.

Despite this, the employees powering Docomo during the early days were proud to devote themselves to the operations of a completely new company. Docomo’s first president, Koji Oboshi, even bluntly showed his rivalry for the parent company by suggesting “NTT” be dropped from the company’s name. In Docomo’s free and open-minded atmosphere, the employees threw themselves into creating services for the approaching mobile phone era.

Docomo’s use of human resources from outside the company also was unthinkable at NTT. In 1999, Docomo launched i-mode, the world’s first full-fledged internet service for mobile phones. At the time, key posts were held by Mari Matsunaga, who had joined Docomo from Recruit Holdings, and Takeshi Natsuno, who had learned about online business in the United States. Natsuno, who now is president of video streaming company Dwango Co., recalled how Docomo essentially charted its own course. “When we started i-mode, we didn’t even give an explanation to NTT’s top executives,” Natsuno said.

The i-mode services revolutionized mobile phones, which had been a gadget simply for making person-to-person calls. Now users could send messages containing small images and symbols, and check train schedules. Phones became a tool essential in everyday life.

The popularity of i-mode resulted in Docomo gobbling up more than 50% of the domestic market. In fact, the company even considered how to stop its share from growing too large. “If we reached 60%, we would have faced stricter regulations,” one Docomo source explained.

This success ended up working against Docomo. In the early 2000s, Docomo accelerated moves to enter foreign markets such as by investing in a major U.S. mobile carrier, as it pursued the global expansion of i-mode. These moves all fell flat. Docomo racked up more than ¥1 trillion in losses, and an increasingly concerned NTT seized this opportunity to start strengthening its involvement such as through appointments of senior personnel.

The mobile phone number portability (MNP) system launched in 2006, which significantly lowered the hurdles customers faced to switch mobile carriers, also tightened the squeeze on Docomo. In 2008, SoftBank Corp., headed by Masayoshi Son, started domestic sales of iPhone smartphones produced by U.S. company Apple Inc. Docomo was slow to shift to smartphones, and its customers were easily peeled away through the MNP system. “We couldn’t quite wean ourselves off the success of i-mode,” a Docomo executive admitted.

Docomo continues to seek out new businesses aside from communications. The Docomo Koza electronic payment service attracted many users despite having inadequate security measures, which resulted in some customers having money illegally withdrawn from their bank accounts. It appears Docomo’s haste to catch up in the e-money payment sector was behind this failure.

Docomo still holds the largest share of Japan’s domestic mobile carrier market. However, in the business year ending in March 2020, it trailed KDDI Corp. and SoftBank in operating profit, a measure of profitability of its main line of business.

Cutting phone charges in line with a demand by the government and NTT was another factor behind the decline in Docomo’s profit levels. NTT plans to tighten its grip on Docomo and push ahead with further cuts to its charges, but whether this will turn around Docomo’s fortunes remains unclear.

New Docomo President Motoyuki Ii is determined to get the company moving forward. “Thoroughly rebuilding the company will be my first job,” Ii said.