|Fiber Home Turns Profitable in Japan|
|Written by Dave Burstein|
|Sunday, 21 August 2011 17:50|
Kei Takahashi at Merrill Lynch Japan has a buy on incumbent NTT, a company struggling since 2002. Takahashi believes “growth in IP services such as FTTH are offsetting the decline in legacy services such as telephone revenue.” He sees FTTH revenues as stable and is optimistic about the company in both the short and intermediate term.
Masayoshi Son shocked NTT a decade ago with low priced DSL, coming in at $20 when NTT was at $40 and soon adding inexpensive VOIP calls. I've reported Son took millions of customers and set a model which was confirmed by the incredible success of Free in France. NTT’s first response was to cut prices just to stay in the game while they built the world’s most extensive fiber network.
The Japanese regulator allowed NTT very favorable pricing on fiber unbundling, leaving minimal margin for broadband competitors. Over time, customers have been abandoning DSL for the faster fiber despite higher prices. NTT has a dominant position in fiber and also captures most of the value added in fiber resold to competitors.
Son’s Softbank has done very well in wireless as the first with the iPhone in Japan. Takahashi reports “Growth is slowing [as] earnings continue to decline in the broadband and infrastructure divisions due to a decline in ADSL subscribers.” He rates the other Japanese giant, KDDI, underperform.
The Japanese paradox is why some of the lowest prices in the world yirld only an average take rate. Remarkable early growth leveled off years ago. Today, fewer in Japan take DSL, fiber, or cable than in many Western countries. NTT Docomo was early with wireless data, but that’s only a partial explanation.