“We cannot change and contribute to a society simply by means of M&A. We endeavour to contribute to the customers of that country and help develop the society as a whole through our high-quality telecoms services, technology and expertise,” says Hidehiko Tajima, CEO, global business, KDDI. “Our utmost goal is to provide services which give pleasure and value to our customers.”
This is the philosophy driving KDDI’s ambitious global expansion, which has seen the company experience success in some of the most challenging markets in the world. The international arm of the Japanese operator has a presence in more than 60 cities in 27 countries and regions with more than 600 partnerships, and supports its wholesale, enterprise and consumer customers globally.
It has been operating in the wholesale market since 1998, when the parent company was formed following a merger between DDI, KDD and IDO. Tajima describes the company’s wholesale unit as an “irreplaceable asset”, which forms the “basic ground” for the rest of the global business.
It is the company’s Global ICT Business, which serves the enterprise segment, which he views as the springboard for sustained growth, however. The entity is supported by KDDI subsidiary Telehouse, which operates data centres in 43 locations in 24 cities across 13 countries and regions.
The parent company has invested significantly in Telehouse this year, adding a new 73,000 sq m facility to its London Docklands site in the UK. “When Japanese prime minister Shinzo Abe visited London in May this year to meet Sir Roger Gifford (Lord Mayor of the City of London), he mentioned that 70% of internet traffic in the UK passes through KDDI Telehouse in London. It was a moment of honour for us,” comments Tajima.
Tajima says Telehouse is a brand that goes “beyond country borders, like telecommunications itself”. He believes the synergy between the network and data centre is vital for serving enterprise customers.
“If we use an analogy of the human body to explain the enterprise functions, then the data centre is our brain and the network is our nervous system. Both the brain and nervous system have to be there to sustain the enterprise,” he says.
Smart thinking
In April, the start of the Japanese fiscal year, KDDI embarked on its latest strategy designed to expand its customer base and increase revenues, called ID x ARPU. Subsequently the carrier launched a mobile money solution named au WALLET, enabling customers to use a range of debit card services in conjunction with their mobile phones.
Within the first few months of commercial launch, it attracted more than five million subscribers. The product sits within KDDI’s Smart Value portfolio, which aims at providing savings for KDDI’s mobile and fixed-line customers. “It gives our customers unlimited access to various types of content, which have helped increase our mobile ARPU,” says Tajima.
On the wholesale side, Tajima views carrier partnerships as essential for preventing the further decline of traditional revenue streams. He says there is a shared concern among the carrier community regarding the impact of OTT players on the market, but he has seen encouraging ideas and proposals from carriers which suggest they can together get through this “tough phase”.
“Wholesale is not something you can do on your own. Long-cherished partnerships are something the new kids in town cannot easily build. I am confident that collaboration with our partners who struggle in the same environment will lead us towards a new era of innovation,” he says.
Regional collaboration is also paramount, with the carrier community in Asia making important strides in 2014 to bolster connectivity. Tajima feels the boom in subsea cable activity reflects growing demand in the region, as well as a desire to reduce latency and increase redundancy.
“Most of the new cables have ‘fish-bone’ configurations, in other words a single trunk, and therefore while large, they also complement existing cables,” he notes.
KDDI has invested considerably in subsea cable capacity in the region and is part of the South-East Asian Japan Cable system, which became operational in 2013, as well as the Unity cable project, which set an industry benchmark for the consortium model when it went live in 2010.
This year it became part of a new $300 million trans-Pacific cable linking the west coast of the US to two landing stations in Japan. The project is also backed by SingTel, China Mobile International, China Telecom Global, Global Transit and Google, and is scheduled for completion in the second quarter of 2016.
The six-fibre-pair cable boasts an initial design capacity of 60Tbps. “It will cater to the growing demand for data on the trans-Pacific data route, as well as further position Asia as a hub,” says Tajima.
Tajima’s career began in the automobile industry when he joined Toyota Motor Corporation in 1978. Rising through the ranks over some 25 years, he eventually became president of the company’s business in Texas, US. He clearly retains strong affection for the company, listing one of his passions outside work as driving a Toyota-built Lexus.
One of Toyota’s philosophies – “Genchi Genbutsu”, which roughly translates to “Go and See” – is also still close to Tajima’s heart. “The same applies to business at KDDI. We have a successful history in overseas business, but we have also experienced bitter results. With ‘Genchi Genbutsu’ in our mind, I continue to find out what customers in other Asian counties want, and if I am confident we can meet their needs, then I give the go-ahead and put out resources into the challenge,” he says.
Over the years KDDI has done just that, investing with considerable success into a range of emerging and mature markets across the globe. In 1996, it invested in Mongolian mobile operator MobiCom. With a population of over 2.8 million and a mobile penetration rate of 123%, KDDI has played a pivotal role in the development of the Mongolian telecoms infrastructure.
“We have worked with MobiCom in Mongolia to provide Mongolian people with high-quality mobile services, by making use of our technology, know-how and experience. MobiCom is the largest mobile operator in Mongolia,” he says.
In 2010, KDDI expanded its presence in the US market by investing $41.14 million in two MVNOs; Locus Telecommunications and Total Call International. The two companies offer affordable mobile services targeting the steadily increasing US immigrant population, particularly from Latin America.
“In the US, our subsidiary companies have seen a huge growth in business by employing KDDI-nurtured Japanese standard service levels and quality,” Tajima says.
This year KDDI embarked on arguably its biggest challenge yet when it entered the Myanmar market. The operator – along with trading firm Sumitomo Corp – partnered with Myanmar’s state-owned telecoms company Myanmar Post and Telecommunications (MPT) to invest approximately $2 billion in the market over the next decade.
KDDI previously attempted to gain entry into Myanmar in 2013, but was one of 10 shortlisted companies that failed to acquire a full-service operator licence.
“With the initiative of the Myanmar government, KDDI and Sumitomo Corporation were given a chance to work with MPT to enhance the telecoms environment in Myanmar. Our experience in Mongolia, where we also worked with Sumitomo, taught us that the best way of contributing to the development of a country and the happiness of its people is with a better quality of service,” he says. “That attitude is shared by MPT, but we initially found there were differences in the way we do business, because MPT has never faced competition before. But once you agree to achieve the same goal, you become one team. No matter whether you are Burmese or Japanese.”
KDDI and MPT will certainly have their work cut out. The mobile penetration rate in Myanmar is presently approximately 10%, with the government ambitiously targeting increasing this to 80% by the end of 2016.
“It is a very challenging target, but we believe that is an achievable target,” Tajima adds. “We know many carriers have made inroads in various Asian countries. But we also know not everyone is enjoying business as anticipated. Growth potential is always there, but it does not come easy because you have to face many unexpected realities along the way.”
Tajima is confident, however, that blending KDDI’s technology and experience with MPT’s longstanding presence in the Myanmar market – which it has served for more than 100 years – will lead to success.
“After we started to work with MPT, the changes we have made and the responses we have received from customers are already very positive, much more than I expected. Connectivity of mobile services has improved, and that fact is reflected in the sharp increase in number of subscribers,” he says. “People in Myanmar have been waiting for this change to happen and I am very happy to find that we can bring them happiness.”
So which emerging market is next on KDDI’s radar? “The country I have on my mind now is…” says Tajima, leaning in, “… top secret!”
