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A tale of two businesses: NTT and McDonald’s release results

Earlier today, NTT announced that its net profit had fallen 20.5% in the first quarter (April-June) of 2010, to a total of about 139.6 billion yen. At the ame time, operating income fell 12.4% to 325.8 billion yen.

Without question, NTT is operating in a hostile, competitive environment, especially with regards to its mobile unit, NTT DoCoMo. Last week, DoCoMo announced that first quarter profit had slid 15.1% to 147.4 billion yen. It is now obvious that DoCoMo is becoming a burden on the NTT group. In March 2008, DoCoMo’s share of Japan’s mobile phone market fell below 50% for the first time since 1998, as rivals AU and Softbank have chipped away at their customer base. How did DoCoMo fight back? They offered free calls between family members, released a line of new handsets and rolled out a new logo.

Those measures seem to have done little to help DoCoMo regain market share or reverse its downward sales trend. Of course, DoCoMo is not fully to blame for its woes in the midst of negative economic conditions in Japan. And, as the firm points out in its own statement, the mobile phone market in Japan is pretty much saturated:

…[W]ith the market reaching saturation due to the increased penetration rate, the competition among carriers to acquire customers and enhance services is becoming increasingly fierce.

How does DoCoMo intend to reverse its downward trend in sales? According to the press release, it has released 13 new handsets this summer, supports Google’s Android operating system on one of its phones, has created a streaming video channel for mobile phones and has lowered the charges for unlimited monthly data transfer.

It should be noted that during the April-June quarter, NTT gained 263,000 subscribers, an increase of 0.5%. On the other hand, NTT Communications added 659,000 subscribers, or 5.9%, to its ISP customer base, while the firm saw a 561,000 (7.0%) subscriber increase to its IP phone services.

While NTT DoCoMo has seemed slow to react and almost stolid in its marketing and corporate communications, McDonald’s Japan continues to post impressive numbers. Earlier today, the firm announced that group operating profit in the first half of 2009 rose 33% against last year year to 9.6 billion yen. McDonald’s did take a 9% hit in sales, as 41 shops were closed in the first half of 2009 against 31 openings.

A closer look at the figures shows same store sales rising slightly, while pretax profit increased 31% to 9 billion yen and net profit fell 19% to 5 billion yen in the first half.

Unlike DoCoMo, McDonald’s is making active efforts to connect with its customers, recently setting up network hotspots so that Nintendo DS players can use their consoles in its shops. And, it has teamed up with Square Enix to offer a downloadable mini version of the popular Dragon Quest series at its shops. Although the game can only be played once a day, five plays earns you a free hamburger. This promotion runs until September 1, and it will be very interesting to see if McDonald’s sees an increase in either foot traffic or spending per customer during this time.

The merging of retail and the Internet/online gaming appears to offer firms a space within which to expand its customer base. While McDonald’s, Nintendo and Square Enix team up, Nintendo is also snuggling up to Facebook, and will allow users to download new software that will upload photos directly from their DS consoles to Facebook. More on these team efforts is sure to come.

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