Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

<ul>
<li>Japanese auto makers have agreed to pay patent fees for mobile technology in connected cars, a win for equipment vendors</li>
<li>It is also positive for NTT's DoCoMo, which is a global leader in network technology R&amp;D (fourth overall and largest in Japan) despite being a network operator</li>
<li>KDDI also benefits as it already generates meaningful IoT revenue supported in part by automobile connectivity</li>
</ul>


Japanese auto makers have agreed to pay patent fees for mobile technology in connected cars, a win for equipment vendors
It is also positive for NTT's DoCoMo, which is a global leader in network technology R&amp;D (fourth overall and largest in Japan) despite being a network operator
KDDI also benefits as it already generates meaningful IoT revenue supported in part by automobile connectivity


Japan Telecoms - Agreement on Telecom Patent Fees Also Good for DoCoMo, KDDI

<ul>
<li>5G-Capable devices now account for 25% of total devices in Japan. So far, 5G take-up appears to be quicker than 4G although that doesn't translate into higher revenue</li>
<li>MVNO subscriptions continue to grow despite former leader Rakuten moving users to its own network. IIJ remains the segment leader</li>
<li>Rakuten Mobile's subscriber woes have been well-flagged but another issue may be ahead as the migration of MVNO subs to the MNO platform has slowed in recent quarters.</li>
</ul>


5G-Capable devices now account for 25% of total devices in Japan. So far, 5G take-up appears to be quicker than 4G although that doesn't translate into higher revenue
MVNO subscriptions continue to grow despite former leader Rakuten moving users to its own network. IIJ remains the segment leader
Rakuten Mobile's subscriber woes have been well-flagged but another issue may be ahead as the migration of MVNO subs to the MNO platform has slowed in recent quarters.


Japan Telecoms - MIC Reports Telecom Subscription Data Including a Key 5G Milestone

<ul>
<li>The Ministry of Industry Affairs and Communications (MIC) has issued a progress report on its mobile spectrum allocations through 2025</li>
<li>There is no change to previous allocation targets of c. 16 GHz but it is worth highlighting again how huge that is versus current industry holdings of 3 GHz</li>
<li>In general, more spectrum is a positive for Japanese mobile operators, especially as airwaves are allocated not auctioned</li>
</ul>


The Ministry of Industry Affairs and Communications (MIC) has issued a progress report on its mobile spectrum allocations through 2025
There is no change to previous allocation targets of c. 16 GHz but it is worth highlighting again how huge that is versus current industry holdings of 3 GHz
In general, more spectrum is a positive for Japanese mobile operators, especially as airwaves are allocated not auctioned


Japan Telecoms - A Reminder on the Regulator’s Spectrum Plans Through FY25

<ul>
<li>MIC data provides further support that regulatory pressure was successful in driving down industry prices with 40mn users on discount plans that are among the cheapest globally</li>
<li>That has led to ¥230-250bn in service revenue erosion for both FY21 and FY22e but evidence of a solid win for regulators reassures that further action isn't needed</li>
<li>Handset pricing is on the rise as 5G proliferates, which is good news for incumbents that can lock users in through instalment payment plans</li>
</ul>


MIC data provides further support that regulatory pressure was successful in driving down industry prices with 40mn users on discount plans that are among the cheapest globally
That has led to ¥230-250bn in service revenue erosion for both FY21 and FY22e but evidence of a solid win for regulators reassures that further action isn't needed
Handset pricing is on the rise as 5G proliferates, which is good news for incumbents that can lock users in through instalment payment plans


Japan Telecoms - Update from Regulators’ Competition Working Group

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>Bain/<a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a> revised their <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> offer to JPY3,520 (JPY3,640 if KDDI agrees to share buyback), a 2.0% premium to EQT/<a href="https://www.smartkarma.com/entities/digital-garage-inc" target="_blank" data-smartkarma-citation="entities:13747:1" rel="noopener">Digital Garage (4819 JP)</a>’s JPY3,450 offer.</li>
<li>The latest Bain/LY offer mirrors the EQT/DG offer by gaming the competing offer clauses. Crucially, the new disclosure of Bain/LY IFA’s valuation range points to headroom for further increases.</li>
<li>EQT/DG can match Bain/LY’s JPY3,520 offer with a modest 2.0% increase to the effective cost of its 17 July offer. If it matches Bain/LY's effective cost, EQT can offer JPY3,790.</li>
</ul>


Bain/LY (4689 JP) revised their Kakaku.com Inc (2371 JP) offer to JPY3,520 (JPY3,640 if KDDI agrees to share buyback), a 2.0% premium to EQT/Digital Garage (4819 JP)’s JPY3,450 offer.
The latest Bain/LY offer mirrors the EQT/DG offer by gaming the competing offer clauses. Crucially, the new disclosure of Bain/LY IFA’s valuation range points to headroom for further increases.
EQT/DG can match Bain/LY’s JPY3,520 offer with a modest 2.0% increase to the effective cost of its 17 July offer. If it matches Bain/LY's effective cost, EQT can offer JPY3,790.


Kakaku.com (2371 JP): More to Go as Bain/LY Return with a Revised Offer

Japan

KDDI CORPORATION provides mobile communication services and sells mobile devices.  The Company also is a broadband provider.

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KDDI Corp (9433 JP)

Japan Telecoms - Agreement on Telecom Patent Fees Also Good for DoCoMo, KDDI

JP car makers have agreed to pay patent fees for mobile technology. That is good for equipment vendors but also DoCoMo, a global leader in network...

Kirk Boodry

Japan Telecoms - MIC Reports Telecom Subscription Data Including a Key 5G Milestone

MIC data highlights the rapid proliferation of 5G as capable devices exceed 25% two years after launch. The latest also reiterates mobile strength...

Kirk Boodry

Japan Telecoms - A Reminder on the Regulator’s Spectrum Plans Through FY25

The MIC has published a draft report on its progress towards FY25 spectrum allocations. In general, more spectrum is good for the industry...

Kirk Boodry

Japan Telecoms - Update from Regulators’ Competition Working Group

Further evidence that price reductions have met expectations as regulator working group prepares its final report on the competition. NTT remains...

Kirk Boodry

Kakaku.com (2371 JP): More to Go as Bain/LY Return with a Revised Offer

The latest Bain/LY offer mirrors the EQT/DG offer by gaming the competing offer clauses. Crucially, the new disclosure of Bain/LY IFA’s valuation...

Arun George

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