Japanese mobile phone service provider NTT DoCoMo
For the year, the company saw its revenue increase by 0.5% to 4,788 billion yen ($40 billion) and operating income decline by 7.1% to 773.5 billion yen ($6.5 billion). Net income, which declined by nearly 25%, isn't a reliable comparison year-over-year, because of gains on investment sales in the previous year. That said, DoCoMo did see its operating margins fall by 1.3% as handset costs increased more quickly than revenues. The company expects to reverse this trend next year by simplifying portions of its handset lineup.
Starting in September, number portability allowed customers to move their existing phone numbers to other carriers. This brought net additions of new subscribers down below 20% of all new subscribers for a few months, but the net subscriber numbers have once again turned positive. Number portability also caused churn to creep up from approximately 0.7%, but this metric still sits below 1%.
The key for DoCoMo and other carriers in saturated markets is to add additional revenue-generating services and features that entice subscribers to spend more money. DoCoMo has had some success in this area with data and music plans, though au, a competitor owned by KDDI (OTC BB: KDDIF.PK), has had more success with music. Going forward, DoCoMo has a few new ideas to roll out, and it also appears to be taking ideas from the playbooks of Google
Since October of last year, DoCoMo has seen search requests increase by 150%. The company plans to start selling ads based on search queries to capitalize on this search activity. This is logical and could work out well, as browsers on customers' phones are set to start on DoCoMo's menu pages. The company is also adding games that rely less on buttons and more on customers moving the phone -- and themselves -- as part of game play. While I doubt this is as full-featured as what Nintendo does with the Wii, it is essentially the same premise.
In its new credit card business, the company finished the year with a little more than 2 million subscribers and about 150,000 payment terminals in convenience stores, fast-food restaurants, and other shops. By the end of next March, the company is targeting 4 million subscribers and 250,000 terminals. DoCoMo owns a stake in the network that processes and clears the transactions, so as this service gains size and scale, it is another potential revenue generator for the company.
DoCoMo also continues to return cash flow to shareholders through dividends and repurchases. The company plans to increase its dividend by 20% to 4,800 yen ($40.17) per share in the next fiscal year, which works out to approximately $0.40 per ADR and a 2.3% yield at current prices. On the share repurchase front, the company plans to repurchase up to 1 million shares in the coming year, which comes on top of the 5 million shares repurchased over the past three years. All things considered, that's not a bad combination from a business that generates plenty of cash and has a number of avenues for future revenue growth in the pipeline.
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At the time of publication, Nathan Parmelee owned shares in NTT DoCoMo, but had no financial position in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.
