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The Japanese Market and KDDI: Characteristics of the Domestic Market

The Japanese Market and KDDI

Market Conditions for Mobile Communications Business

As of March 31, 2019, cumulative mobile communications subscriptions in Japan totaled 177.73 million, [1] up 4.5% year on year. The mobile market continues to grow, driven by the spread of smartphones and further advances in the trend of single users owning multiple devices.
There has also been continued growth in the number of service contracts for MVNO, [2] up 13.8% from a year earlier to 20.94 million.
The Japanese market for mobile communications is entering a new phase with the anticipated entry of a fourth communications carrier in autumn 2019, along with revisions to the Telecommunications Business Act and reduced prospects for sales of mobile handsets on the overall market due to the planned consumption tax hike.
As the domestic telecommunications business transitions to a stable growth period, mobile communications carriers have stepped up efforts to expand earnings in non-telecommunications business domains in a bid to secure new sources of earnings by leveraging their customer bases in the domestic telecommunications business. Meanwhile, companies from other sectors are entering the telecommunications business, heating up competition across sector boundaries.
Against this backdrop, the Japanese government has set a target for increasing the ratio of cashless payments to 40% by 2025, and is ramping up efforts to encourage and spread cashless payments as a measure to boost the economy when the consumption tax rate is raised, including such measures as awarding points to consumers who use cashless payments during a limited period.
Smartphone payments are a new form of settlement likely to catch on at small-scale retail stores due to the low initial investment required on the part of retailers. Viewing this as a business opportunity, many companies have focused on expanding their smartphone payment businesses.

Share of Mobile Communications Subscribers [3] (As of March 31, 2019)

Source:

KDDI, based on data from Telecommunications Carriers Association

Ratio of Cashless Payments by Country (2015)

Source:

Ministry of Economy, Trade and Industry's Cashless Vision (Condensed Version)
April 2018 Consumer Affairs, Distribution and Retail Industry Division, Commerce and Service Industry Policy Group

Market Conditions for Fixed-Line Broadband Business

As of March 31, 2019, the number of fixed-line broadband subscriptions was up 1.5% year on year to 40.25 million. [1]
Although fixed-line broadband service penetration has reached around 70%, [5] the market continues to expand gradually, driven by sales of discount bundled mobile and fixed-line services and the opening of new markets by new operators using the wholesaling fiber access service of NTT East and NTT West.

Share of FTTH Subscriptions (As of March 31, 2019)

Source:

KDDI, based on data from Ministry of Internal Affairs and Communication

Number of Fixed-Line Broadband Subscriptions [1]

[1]

Source: Official Announcement of Quarterly Data on the Number of Telecommunications Service Subscriptions and Market Shares (FY2018 Q4 (End of March 2019)), Ministry of Internal Affairs and Communications
[2]

MVNO: Mobile Virtual Network Operator Procure networks from mobile network operators (MNOs) to provide mobile services
[3]

Shares of NTT DOCOMO,INC., SoftBank Corporation,KDDI + Okinawa Cellular Telephone Company (au)
[4]

KDDI + ctc + Okinawa Cellular Telephone Company + BIGLOBE
[5]

Source: KDDI, based on data from Ministry of Internal Affairs and Communications Ministry of Internal Affairs and Communications' Population, Population Trends, and Number of Households based on Residents Register: 58.53 million households (as of January 1, 2019)

Market Conditions for IoT Business

In the IoT field for connecting a wide variety of things with the internet, low power wide area (LPWA) specifications have been established to enable wide-area communications with low power consumption using LTE networks, and the use of IoT is ramping up across a variety of product and service fields.
Projections call for IoT to create a market worth ¥14 trillion annually in Japan and ¥247 trillion worldwide by 2020 while driving growth in the mobile communications market.

Outlook for Demand on CPS/IoT Market in Japan and Worldwide

Source:

KDDI, based on data from JEITA's Survey of Trends in Emerging Fields 2017

Increase in Mobile Traffic and Frequency Allocated to Each Telecommunications Company

Due to the proliferation of smartphones and tablets, and the increased performance of such devices, along with increasingly diverse mobile content services and evolution of telecommunications technologies, mobile traffic in Japan continues to grow, with both average monthly traffic and peak traffic rising by about 20% in the most recent year.
This has become an important issue for mobile telecommunications companies as they work to efficiently absorb this ongoing increase in mobile traffic and maintain stable network operations.

Total Mobile Traffic in Japan (Monthly)

Source:

"The State of Mobile Communications Traffic in Japan," Ministry of Internal Affairs and Communications (March 2019)

Allocation of Bandwidth among Japan's Mobile Telecommunications Operators (As of April 10, 2019)

[6]

au 3G services using 800MHz and 2.1GHz will shut down on March 31, 2022
[7]

Newly allocated by the Ministry of Internal Affairs and Communications on April 9, 2018
[8]

Only in Tokyo, Nagoya, and Osaka
[9]

Currently, a 40MHz section is used for WiMAX 2+ (TD-LTE) and a 10MHz section is used for WiMAX.
[10]

UQ WiMAX services will shut down on March 31, 2020.
[11]

Of this 80MHz, 40MHz was newly allocated by the Ministry of Internal Affairs and Communications on April 9, 2018
[12]

Newly allocated by the Ministry of Internal Affairs and Communications on April 10, 2019