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NTT Docomo to follow KDDI in reviewing smartphone contracts

NTT Docomo Inc. President Kazuhiro Yoshizawa speaks at a press conference in Tokyo, on Aug. 2, 2018. (Kyodo)

TOKYO (Kyodo) -- Mobile carrier NTT Docomo Inc. said Thursday it plans to review its two-year smartphone contracts by next March, a day after rival KDDI Corp. pledged to change its contracts in response to government warnings.

For customers receiving discounts on monthly fees under the two-year contracts, Japan's three major carriers including SoftBank Corp. currently require subscribers to pay penalties if contracts are canceled before maturity or charges for extra one-month periods to end contracts shortly after 24 months.

While two-year contracts are automatically renewed, subscribers can terminate them without penalty fees or extra charges during the 25th and 26th months.

The top carriers have been using such sales tactics to retain subscribers, but the internal affairs ministry urged the three carriers in June to review their two-year rules.

Also in June, the Japan Fair Trade Commission warned that four-year installment payment plans provided by some carriers poses antitrust problems.

NTT Docomo President Kazuhiro Yoshizawa said at a press conference that the carrier will allow customers to end their two-year contracts without cancellation fees also in the 24th month.

All three carriers "should respond to the issue in the same manner," Yoshizawa said.

He added his company will maintain cancellation fees for ending contracts before maturity.

KDDI said Wednesday it would revise its two-year and four-year contracts. SoftBank is also considering reviewing its binding smartphone deals, according to people familiar with the matter.

The four-year plans allow customers who agreed to pay for handsets such as iPhones over 48 months to switch to newer phones after two years and get remaining payments for the older handsets waived as long as they sign new four-year payment plans.

The antitrust watchdog said in its market review report that by discouraging subscribers from changing carriers, such contracts could "effectively deprive consumers of the right to choose" while giving "an impression to consumers that they can purchase devices at half price."

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