NTT Docomo Inc. and other mobile phone companies are rushing to diversify their businesses into such sectors as telemedicine and autonomous driving. With the topping of mobile phone subscribers and intensified competition to lower rates, it is becoming difficult to profit from their core business.
The diversification will center on the 5G high-speed, high-capacity communications standard, but it is expected to take five to 10 years to monetize the businesses.
-- Solving social issues
On April 16, NTT Docomo announced that it had successfully performed a remote simulation surgery using a 5G-compatible medical robot in collaboration with Kobe University and others. The aim is to someday enable top surgeons to perform advanced surgeries on patients living in rural areas via remote control. 5G, with a line speed 100 times faster than the currently available 4G, is suitable for transmitting large volumes of data such as high-resolution videos, and has less communication delay.
NTT Docomo plans to shore up its "Smart life businesses," which include finance and contents, by increasing its staff in that sector to at least 2,500 employees in fiscal 2023. "5G will integrate with various technologies to solve social issues and create new businesses," NTT Docomo Chief Technology Officer Naoki Tani said in expressing expectations.
5G is also expected to be utilized in the field of autonomous driving. In March, a joint venture firm led by Softbank Corp. and Toyota Motor Corp. conducted a demonstration test of a self-driving vehicle in Hiroshima Prefecture. As autonomous driving requires the instant processing of huge amounts of data including that from the global positioning system (GPS), maps and numerous sensors, the 5G network is considered indispensable for its practical application.
-- Pressure to cut rates
The Internal Affairs and Communications Ministry forecasts an economic impact of 46.8 trillion yen from the spread of 5G. With the increase of 5G usage, NTT Docomo and Softbank expect to obtain line contracts for uses other than mobile phones from business operators. As the volume of communication in such usages exponentially exceeds that required for phone calls, e-mails and social media, the revenue per contract is highly likely to increase.
Even so, the day of prevalent remote surgery and autonomous driving is still likely more than 10 years away. "For the time being, it will be difficult to make 5G-based services a main source of revenues," said Yoichi Sawada of Mizuho Bank's industry research department. "However, there is great potential for future growth,"
Behind these moves is the shrinking mobile phone business, which has accounted for 70-80% of operating profits. The Cabinet of Prime Minister Yoshihide Suga has stepped up pressure to lower mobile phone rates since its formation last autumn, and NTT Docomo expects to take a 100 billion yen hit in revenue from the introduction of cheap rate plans.
"From now, it will be difficult to see growth in the mobile phone sector," said Hideaki Tanaka, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. Mobile phone carriers are being forced to break away from their business strategy of focusing on mobile phones alone.
-- Finance, online shopping
Each of the major carriers has initiated diversification efforts into such fields as cashless payments and retail power supply. KDDI Corp. has established itself in the housing loan business, and SoftBank likewise in online shopping.
Looking at the April-December period in 2020, operating income from "non-mobile phone" businesses increased 10-30% for each company from the same period in the previous year.
Still, such businesses accounted for only 20% of NTT Docomo's total operating income, for instance, meaning they are still at an inadequate level.
An industry source also noted that mobile phone companies have been unable to differentiate themselves in the other businesses, particularly in the financing sector.
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