Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

KDDI has announced consumer 5G plans including additional content alliances with Amazon and DAZN supported by unlimited data use. There is evidence of industry pricing pressure as introductory offers for unlimited data packs that include streaming video are priced under ¥4,000/month whilst student discount offers are less than ¥2,500. This is a partial answer to NTT DoCoMo’s regulatory-driven price cuts (20 GB for ¥2,980/month) although it has yet to unveil pricing for a 20GB plan at the Au main brand. Rakuten is under the most pressure to address pricing now so KDDI (and Softbank) may wait for that announcement before making their own.

KDDI has announced consumer 5G plans including additional content alliances with Amazon and DAZN supported by unlimited data use. There is evidence of industry pricing pressure as introductory offers for unlimited data packs that include streaming video are priced under ¥4,000/month whilst student discount offers are less than ¥2,500. This is a partial answer to NTT DoCoMo’s regulatory-driven price cuts (20 GB for ¥2,980/month) although it has yet to unveil pricing for a 20GB plan at the Au main brand. Rakuten is under the most pressure to address pricing now so KDDI (and Softbank) may wait for that announcement before making their own.   

KDDI Corp - 5G Consumer Service Plans Indirectly Affected by DoCoMo Price Reduction

Thematic (Sector/Industry)

A new era in the Japanese telecom sector has arrived. If the Abe era was defined by better corporate governance and improved returns to shareholders, with Prime Minister Suga the focus may be shifting to national industrial policy. Reports from the <a href="https://www.nikkei.com/article/DGXMZO66833950Q0A131C2MM8000" target="_blank" rel="noopener">Nikkei</a> that DoCoMo will cut prices for high end plans by c. 50% are disruptive and deliver a political win for the current government just as NTT prepares to argue in front of the Ministry of Internal Affairs and Communications (MIC, the regulator) for deeper integration of its mobile and ICT businesses. Accelerated concerns from competitors in the wake of NTT’s acquisition of DoCoMo minorities makes a lot more sense now as the possibility that the MIC could decide cooperation with NTT to lower mobile prices is as effective as support for MVNOs and Rakuten. Winners include the government, NEC and (possibly) Apple whilst mobile operators get the short end of the stick. In particular, Rakuten looks fragile as its disruptive ¥2,980/month price point has been matched by Japan’s largest mobile operator less than a year after it launched service.

A new era in the Japanese telecom sector has arrived. If the Abe era was defined by better corporate governance and improved returns to shareholders, with Prime Minister Suga the focus may be shifting to national industrial policy. Reports from the Nikkei that DoCoMo will cut prices for high end plans by c. 50% are disruptive and deliver a political win for the current government just as NTT prepares to argue in front of the Ministry of Internal Affairs and Communications (MIC, the regulator) for deeper integration of its mobile and ICT businesses. Accelerated concerns from competitors in the wake of NTT’s acquisition of DoCoMo minorities makes a lot more sense now as the possibility that the MIC could decide cooperation with NTT to lower mobile prices is as effective as support for MVNOs and Rakuten. Winners include the government, NEC and (possibly) Apple whilst mobile operators get the short end of the stick. In particular, Rakuten looks fragile as its disruptive ¥2,980/month price point has been matched by Japan’s largest mobile operator less than a year after it launched service. 

Japan Telecom Sector: DoCoMo Move Is More than a Price Reduction

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

<a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> has seen an upward shift in ownership among active Global fund managers.  The percentage of funds invested in <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a>  is at record levels, with weights and overweights continuing to rise. Sony is also moving from being an Aggressive Growth play to a stock more appealing to a wider group of Growth, Value and GARP investors.  Our data also shows that this switch has further to run, with many investors with previous knowledge and exposure to <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> remaining on the sidelines, or at lower levels of exposure, for now. For this reason, we would expect ownership among Global investors to be well supported, which, given the relationship between fund ownership and price, should be supportive of returns going forwards.

Sony Corp (6758 JP) has seen an upward shift in ownership among active Global fund managers.  The percentage of funds invested in Sony Corp (6758 JP)  is at record levels, with weights and overweights continuing to rise. Sony is also moving from being an Aggressive Growth play to a stock more appealing to a wider group of Growth, Value and GARP investors.  Our data also shows that this switch has further to run, with many investors with previous knowledge and exposure to Sony Corp (6758 JP) remaining on the sidelines, or at lower levels of exposure, for now. For this reason, we would expect ownership among Global investors to be well supported, which, given the relationship between fund ownership and price, should be supportive of returns going forwards.

Sony Corp:  Momentum Strong as Global Funds Continue to Add.

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Japan’s #2 e-commerce company, <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a>, is the latest challenger for <a href="https://www.smartkarma.com/entities/ntt-docomo-inc" target="_blank" data-smartkarma-citation="entities:1089:1" rel="noopener">NTT Docomo Inc (9437 JP)</a>, <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a>, and <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> in the Japanese MNO (mobile network operator) space. Rakuten has been offering MNO services through the networks of other operators for some time, but in April 2020, the company launched its own mobile network. Since the launch, Rakuten has sought to an aggressive pricing strategy backed by extensive network virtualisation.In this note, we take a deep dive into Rakuten’s Mobile business.

Japan’s #2 e-commerce company, Rakuten Inc (4755 JP), is the latest challenger for NTT Docomo Inc (9437 JP), KDDI Corp (9433 JP), and Softbank Corp (9434 JP) in the Japanese MNO (mobile network operator) space. Rakuten has been offering MNO services through the networks of other operators for some time, but in April 2020, the company launched its own mobile network. Since the launch, Rakuten has sought to an aggressive pricing strategy backed by extensive network virtualisation.In this note, we take a deep dive into Rakuten’s Mobile business.

Rakuten Mobile: Affordability Overshadowed by Poor Coverage

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Today during the lunch session, there were reports across the newswires of <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> and other companies (including both <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> and Rakuten Mobile) sending a letter to the Telecommunications Ministry (It was, in fact, addressed to the Ministry of Internal Affairs and Communications). The headlines were...<div><div>*KDDI: NTT TAKEOVER OF DOCOMO WOULD HURT MARKET DEVELOPMENT *KDDI, SOFTBANK AMONG FIRMS SEEKING REVIEW OF NTT DOCOMO DEAL</div></div>This caused NTT Docomo shares to fall sharply on the PM session open, briefly falling as much as 75bp to ¥3861 (vs the ¥3900 Tender Offer Price) before the shares settled around ¥10 down on the day near ¥3876-3884/share for most of the rest of the day.<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/170/780/original/Screenshot%202020-11-11%20at%202.54.24%20PM.png?1605077689" class="editor-image img-responsive" data-smartkarma-image-id="170780"></figure></section>The media said that the letter called on Japan’s Telecommunications Ministry "to ensure a fair market environment amid NTT’s planned takeover of Docomo, arguing the deal could inhibit fair competition and development of the telecom market." (Bloomberg). 
The letter, it turns out, is on KDDI's home page in Japanese (<a href="https://news.kddi.com/kddi/corporate/newsrelease/2020/11/11/4779.html" target="_blank" rel="noopener">link</a>).
There are interesting comments within the letter but I am surprised it took this long to produce. This really looks like it is KDDI and others setting the stage to be able to pursue a campaign of harassment against NTT if necessary going forward. Complain about it in general terms before the deal goes through, in order to give yourself room to complain about specifics later. 
It is what I would do if I were in their shoes. 
What was surprising to me was the reaction on NTT Docomo shares. Given the nature of the document, the nature of JFTC and MIC purview on the transaction, and what must have been reasonably explicit "approval" to get the NTT deal for Docomo done in the first place, if this letter means something about the future competitiveness of the NTT/Docomo/East/West/Com grouping, the stock which should have been negatively impacted was <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone-corporation" target="_blank" data-smartkarma-citation="entities:623:1" rel="noopener">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a>. Indeed, NTT shares ended up "only" 1.4% on the day after starting the day higher, but this was stronger than KDDI on the day.
More commentary about NTT Docomo, NTT, and KDDI below the fold.  

</section>

Today during the lunch session, there were reports across the newswires of KDDI Corp (9433 JP) and other companies (including both Softbank Corp (9434 JP) and Rakuten Mobile) sending a letter to the Telecommunications Ministry (It was, in fact, addressed to the Ministry of Internal Affairs and Communications). The headlines were...*KDDI: NTT TAKEOVER OF DOCOMO WOULD HURT MARKET DEVELOPMENT *KDDI, SOFTBANK AMONG FIRMS SEEKING REVIEW OF NTT DOCOMO DEALThis caused NTT Docomo shares to fall sharply on the PM session open, briefly falling as much as 75bp to ¥3861 (vs the ¥3900 Tender Offer Price) before the shares settled around ¥10 down on the day near ¥3876-3884/share for most of the rest of the day.The media said that the letter called on Japan’s Telecommunications Ministry "to ensure a fair market environment amid NTT’s planned takeover of Docomo, arguing the deal could inhibit fair competition and development of the telecom market." (Bloomberg). 
The letter, it turns out, is on KDDI's home page in Japanese (link).
There are interesting comments within the letter but I am surprised it took this long to produce. This really looks like it is KDDI and others setting the stage to be able to pursue a campaign of harassment against NTT if necessary going forward. Complain about it in general terms before the deal goes through, in order to give yourself room to complain about specifics later. 
It is what I would do if I were in their shoes. 
What was surprising to me was the reaction on NTT Docomo shares. Given the nature of the document, the nature of JFTC and MIC purview on the transaction, and what must have been reasonably explicit "approval" to get the NTT deal for Docomo done in the first place, if this letter means something about the future competitiveness of the NTT/Docomo/East/West/Com grouping, the stock which should have been negatively impacted was NTT (Nippon Telegraph &amp; Telephone) (9432 JP). Indeed, NTT shares ended up "only" 1.4% on the day after starting the day higher, but this was stronger than KDDI on the day.
More commentary about NTT Docomo, NTT, and KDDI below the fold.  



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)

KDDI Corp - 5G Consumer Service Plans Indirectly Affected by DoCoMo Price Reduction

KDDI introduced consumer 5G plans that include alliances with Amazon (Prime) and DAZN. The impact of DoCoMo price reductions are evident as...

Kirk Boodry

Japan Telecom Sector: DoCoMo Move Is More than a Price Reduction

If the Abe era for telcos was defined by better corporate governance and improved returns to shareholders, with Prime Minister Suga the focus may...

Kirk Boodry

Sony Corp: Momentum Strong as Global Funds Continue to Add.

Sony Corp (6758 JP) has seen an upward shift in ownership among active Global fund managers, but is far from over owned...

Steven Holden

Rakuten Mobile: Affordability Overshadowed by Poor Coverage

In this note, we take a deep dive into Rakuten’s Mobile business, which is the latest challenger for NTT, KDDI, and Softbank in the Japanese MNO...

Supun Walpola

NTT/Docomo - The KDDI Quibble

KDDI and two dozen other telecom operators today revealed a letter protesting future NTT/Docomo market dominance. This isn't an attempt to block...

Travis Lundy

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