KDDI maintains faith in fixed-line

Mike Galbraith
17 May 2010

KDDI is predicting that its fixed-line business will post its first profit in years in the current fiscal year.

The company believes that reductions in network operating costs and profitability in its growing FTTH business will transform a loss of more than 44 billion yen ($468 million) in FY2010 to a profit of nearly 11 billion yen in this coming year.

Such a turnaround will be timely, especially since the firm's fixed-line business has been a bottomless pit for years.

In response to NTT's growing FTTH lock on Japan's local loop, KDDI has made four huge investments since 2006 in companies that have their own networks, the last of which was the controversial purchase of a 31.1% share in JCOM in February. The move into profitability of another of these, Nagoya-based CTC, is partly the reason for KDDI's optimism.

On the surface, KDDI is profitable and its performance is steady, and a flat operating profit of 445 billion yen is not a bad result in these times. However, rival Softbank has been doing much better on the back of its iPhone success and aggressive marketing. The Softbank group's operating profit this year ominously exceeded KDDI's for the first time.

There are signs, too, that KDDI's mobile cash cow may have seen its best days.

Although mobile subs and handset sales grew in FY2010, they trailed the performance of its rivals, and operating revenue fell 2.5% and operating profits 3.5%.


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