Mobile Services in JapanYoji Ishihara, Innovation Norway Tokyo

March 30, 2009

Why 3G iPhone Headed Towards Failure in Japan?

3G iPhone was lunched on July 11, 2008

Projected to sell one million units in Japan

Only sold 200,000 units at the most

Softbank has already adjusted 3G iPhone pricing plans lower in an attempt to boost sales

Nokia pullout from Japanese market

Galapagos Syndrome ?

The Japanese cellphone market developed in a quite unique way, just like unique animals in Galapagos Islands.

Is Japan so isolated that you have nothing to learn from Japan?

In Japan, you may find what will happen in the future.

Japanese Operators at a glance

49%

28%

18%1% 4%

Subscribers: 110,643,200 (as of Jan 2009)Source: Telecommunications Carriers Association

MVNO: 33 operators (as of Sep 2008)

Mobile Phone Manufacturers

42.22 million units in 2008

Decrease by 18.1%

Sharp (<10 mil in Japan)

Nokia (>430 mil global)

23.2%

16.3%

13.0%10.5%

9.0%

27.9%

SharpPanasonicNECFujitsuToshibaOthers

Source: IDC Japan

0.0

20.0

40.0

60.0

80.0

100.0

120.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

0.0

20.0

40.0

60.0

80.0

100.0

120.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Quick Adaptation

Access to Internet started

3G service started

Internet subscribers: 86%

Unit: million

3G phone users: 89%

Source: TCA

Internet Access and 3G are standard features

Faster and Faster…

Currently 3.5G (download speed: 2.4 – 7.2Mbps)

While almost all other countries keep 2G networks running

Japan will end all 2G mobile networks around Dec 2009

From 2010, Super-3G (3.9G)

What do you want to do with the fast down/upload speed?

More data communication

0

5

1015

20

25

30

3540

45

50

Japan US UK Germany Russia China Brazil India0%

5%

10%

15%

20%

25%

30%

verbal communication data communication DC ratio

ARPU

Unit: USD/month

Data communication for what ?

Source: Weekly Diamond, Nov 25, 2006

Mobile Business Market is Expanding

8,965

5,965

10,665

8,545

13,015

12,965

15,750

20,370

18,305

28,120

21,165

36,155

0

10,000

20,000

30,000

40,000

50,000

60,000

2002 2003 2004 2005 2006 2007

mobile contents mobile commerce

Unit: million NOK

Source: MIC

NOK = JPY 20

What services are mobile contents and mobile commerce?

Mobile Contents Markets

4,785

1,005

770

2,050

5,505

1,350

945

2,290

5,835

1,005

2,060

1,125

2,460

5,240

2,810

2,945

1,180

2,880

4,215

3,795

3,740

790

1,240

4,180

2,795

5,370

4,240

1,105

910

1,135

5,610

0

5,000

10,000

15,000

20,000

25,000

2002 2003 2004 2005 2006 2007

polyphonic ringing tones

music download

games electronic books

fortune-telling

wallpaper others

Unit: million NOK

Source: MIC

NOK = JPY 20

Music and games are popular contents

e-book

Mobile Commerce Market

1,720

4,045

200

2,705

4,650

1,190

4,845

5,915

2,205

7,710

8,230

4,430

12,915

9,640

5,565

16,460

13,540

6,155

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2002 2003 2004 2005 2006 2007

sell overthe Internet

services transaction

Unit: million NOK

tickets, traveling, airplanes, railways

auction, stock markets, horse

races, boat races, motorbike races,

bicycle races

Source: MIC

NOK = JPY 20

Buy wherever, whenever convenient with your mobile phone

High-end market

What features ?

Standard Features

Web browsing

Mails

Personal info manager

Music download

Book download

Camera

Audio/video recorder/player

QR code reader

GPS navigation

Video phone

Games

Infrared communication

Mobile wallet (FeliCa)

Public transportation pass

1 seg TV

Decoration mail

GPS/Location Based Service

Security Navi

If a child pulls the security buzzer or turn off his/her mobile phone:

The camera automatically takes a photo.

A call is automatically placed to a family member's phone.

The photo and a URL for tracking the child's movement is sent to a family member's phone.

Your child's movements can be tracked with a phone or computer using maps that are updated approximately every five minutes (minute-by-minute location marks with your child's whereabouts are displayed on the map).

Push Talk

Allows a group of up to five people to talk to each other at once.

This service is convenient for group members to find each other when meeting up and to easily convey messages.

QR Code

• QR codes are ubiquitous in Japan and link mobile phones to information in daily life

• Matrix code developed by DENSO (1994) to manage car parts

• Most popular type of 2 dimensional code in Japan

• Killer application for camera phones

• Do not have to be in boring black and white

Osaifu Keitai (Wallet Phone)

Mobile phones equipped with a transmitting card (FeliCa), which can be used as electronic money, credit cards, electronic tickets, membership cards, airline tickets, and more.

Osaifu Keitai allows you to check your credit balance, point totals and purchase history on the mobile phone screen

Osaifu Keitai uses Internet network to add e-money credit, download tickets, or pay for products/services.

Decoration Mail

Allows the user to decorate mails by changing their background and/or font color

and by attaching to them images

and even animations,

on top of the melodies.

1seg Broadcast Service

Digital terrestrial TV to mobile phones (mobile TV) started in Japan on April 1, 2006

More than 40 million phones with digital TV have been shipped

Broadcast/telecom convergence

- Purchase items on the spot using links on datacast while watching TV shopping programs

- therefore opens a new mobile commerce sector with many new opportunities. Source: Euro Technology Japan

3D Games

Program size: up to 1MBytes

SD binding support: to store Game data up to 20MBytes with encryption

OpenGL ES (API for full-function 2D and 3D graphics): to use graphic processing unit for high quality 3D graphics

LISMO

LISMO is an online music service provided by au. This system provides the following functions.

• Listen to music on a mobile phone and/or a personal computer.

• Download and share music on a mobile phone and/or a personal computer.

• Copy music from a CD to a mobile phone.

• Share play lists with other LISMO users.

• Use downloaded music as a ringtone

• Backup address book data etc. to a personal computer

Run & Walk

・“au Smart Sports”, a sports support service that allows users to check their running or jogging courses or calories consumed, etc., using their au mobile phone.

Your running/jogging records are saved

Favorite running/jogging courses can be downloaded

Music instrument

11 different music instruments

Touch screen

Motion sensor

More features (1/3)Solar Panel Mobile Phone – just like satellite

au Voyage

More features (2/3)Separate Mobile Phone

10-key and display communicate by Bluetooth

Talk on the phone while checking e-mails

Release in 2 years?

Projector Mobile Phone

Release in 3 years?

Why 3G iPhone Headed Towards Failure in Japan?

3G iPhone was lunched on July 11, 2008

Projected to sell one million units in Japan

Only sold 200,000 units at the most

Softbank has already adjusted 3G iPhone pricing plans lower in an attempt to boost sales

iPhone’s features are not new in Japan

You can't sell the phone by marketing it as a 3G when all phones in Japan are 3G.

You can't sell the phone by marketing music, photos, and Internet access, GPS services because almost *ALL* Japanese phones have this as a standard feature.

The lack of features found in most Japanese cell phones appear to be holding back the iPhone from succeeding in Japan

• No Wallet phone services

• No 1seg TV

• No decoration mails

Unlike the US where cell phone use was typically limited to textmessages and voice calls, the ability to access the internet andlisten to music using a cell phone was not a new feature for theJapanese market.

Where is Japan heading for?

From Communication Infrastructureto Lifestyle Infrastructure

Life with mobile phone

What you need in your daily life is just your mobile phone.

-100%

-50%

0%

50%

100%

150%

1Q 2Q 3Q

How economic crisis affect Japanese companies?

Mobile phones are insperarable from people’s daily lives even if there is an economic crisis

The young have i-pod. Some may have iPhone. What about the elderly?

Zojirushi is offering a way to monitor the elderly. (MVNO)

Aimed at the elderly who live alone, the i-Pot not only boils water (for tea or soup) but it also records the times when that elderly person pushes the button to dispense the water.

A wireless communication device at the bottom of the i-pot sends a signal to a server.

You can see recent records of i-pot usage on a Web site.

In addition, twice a day the server e-mails the most recent three usage times to a designated recipient.

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