KDDI, DoCoMo to cut fees, hike handset prices

Mobile phone service provider KDDI Corp. plans to offer a new subscription package for buyers of au handsets that cuts calling charges by an average of 20 percent but hikes handset prices about ¥20,000, KDDI officials said Tuesday.

The plan, which could debut in November, will reduce monthly charges by about ¥1,000, or roughly 20 percent, they said.

Industry sources said later NTT DoCoMo Inc. will cut calling charges by an average of 30 percent but raise handset prices to around ¥60,000 per unit.

The packaged handset-service plan, starting as early as November, is likely to be applied to customers buying new DoCoMo handsets, the sources said.

The move by DoCoMo, the industry leader, is aimed at countering the KDDI plan. The new plans are designed to address criticism of the mobile phone industry's rebate system, in which service providers pay retailers some ¥30,000 to ¥40,000 per handset. This allows retailers to offer customers new handsets at deep discounts, sometimes even for free, in exchange for signing a new contract.

The service providers typically recover their costs within 18 to 24 months by passing them on to customers in the form of higher monthly fees.

The practice hurts customers who hold on to their original handsets — often in the belief they are saving money — because they are virtually subsidizing the cost of new handsets purchased by frequent changers.

The system is believed to help providers reel in new subscribers who are drawn in by the latest features of each wave of new and more advanced handsets.

KDDI will use the financial resources made available by the rebate cuts in the new plan to reduce charges for calls and other mobile services, the officials said.

Consumers who sign contracts bundled with new handsets in November will be allowed to choose from various service plans, including one featuring the planned 20 percent call-charge reduction.

On Sept. 18, a panel advising the Internal Affairs and Communications Ministry recommended in a report that mobile service providers rethink the rebate system and separate the cost of handsets from communications charges.