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If Softbank enters US mobile market, expect price war and talking dogs

The Japanese company already offers cheaper prices at home than potential partner Sprint in the U.S., despite the strong yen

By Jay Alabaster, IDG News Service
October 12, 2012 10:26 AM ET

IDG News Service - If Japan's Softbank barges its way into the U.S. mobile market, expect contract prices to fall.

BACKGROUND: Japan's Softbank negotiating to buy Sprint

The company, mostly unknown outside of Japan, is in negotiations to acquire a large chunk in U.S. operator Sprint Nextel, and possible the smaller MetroPCS Wireless. If successful it is likely to pursue two strategies that have worked well at home: undercutting rivals, and oddball advertising.

When Softbank cut into the Japanese mobile market in 2006, it was also a newcomer to the business, but went on the offensive immediately with a host of new plans under a "Beyond Expectations" slogan, and a promise to offer the lowest prices in the industry. When rivals responded by dropping their prices, Softbank often responded within hours with a cheaper option.

"Softbank is likely to drop prices, as it has in the past" if a deal goes through, said Hideyuki Yokoya, a mobile analyst at MM Research Institute in Tokyo. "It is then good at communicating with consumers in a way that is easy to understand."

The company has a reputation in Japan for over-the-top advertising. It hired Brad Pitt and Cameron Diaz to star in commercials announcing its arrival as a mobile operator and used talking cats to explain its early pricing options. The company's current, long-running campaign features a mostly Japanese human family whose father is somehow a surly white dog, now a minor celebrity in the country.

Softbank Mobile, its cellular arm, already offers prices in Japan that are lower than those at Sprint. A 16GB iPhone 5 on an unlimited-data, two-year contract costs a total of about US$2,200 over the length of the contract at Sprint, compared to about US$2,000 at Softbank, though voice prices vary. This is despite the yen hovering at near-record highs against the dollar, which inflates Japan prices as viewed from the U.S.: The newest iPad is about 10 percent more expensive in Japan in dollar terms.

In Japan, main rivals NTT DoCoMo and KDDI have often had no recourse but to match Softbank. The company's no-frills "White Plan" offered basic services for 980 yen (US$12.50) in 2007, a then-unheard-of price in the industry, and 10 million subscribers had signed up less than a year later. Now all three carriers offer 980-yen plans.

"The company finds a few specific points to focus on and engages competitors on those, including price," said Hironori Amano.

In fashion-conscious Japan phones are often seen as accessories, and many operators have long sold their handsets in a variety of colors. Not to be outdone, Softbank once launched a mobile phone in 20 different colors at the same time.

Prior to entering the mobile market, Softbank employed a similar strategy in fixed-line Internet, undercutting rivals and waging aggressive campaigns with piles of free modems for new subscribers in front of busy stations. In addition to its mobile and fixed-line Internet firms, the company runs host of Internet properties including Yahoo Japan, Ustream, and a major investment website -- and its own baseball team.

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