Oct. 24 (Bloomberg) -- KDDI Corp. shares had their biggest drop in almost four years, pacing declines by Japan's three biggest mobile phone operators after Softbank Corp. said it will undercut prices in the country's $76 billion wireless market.

Shares of KDDI, Japan's second-largest carrier, tumbled 7.1 percent, their biggest decline since Nov. 11, 2002. DoCoMo, the biggest wireless operator, dropped 2.1 percent as of the 3 p.m. close in Tokyo. Shares in Tokyo-based Softbank, the third largest, fell 1.1 percent.

Softbank, which in April bought Vodafone Group Plc's struggling Japan affiliate, yesterday lowered prices to woo customers as subscribers can switch carriers without changing phone numbers starting today. Softbank will also undercut counteroffers within 24 hours, keeping monthly charges 200 yen cheaper than those of rivals, Chief Executive Officer Masayoshi Son, 49, said yesterday.

``Softbank doesn't have much leeway for price cuts, so Son wants to create as much of a sentimental impact on the market as possible,'' said Yoji Takeda, who helps manage $900 million in Asian stocks for RBC Investment (Asia) Ltd. in Hong Kong. ``Son's tactic to gain attention and announce his offensive for market share'' is positive for Softbank.''

`Always Cheaper'

Softbank introduced 18 new subscription plans to take effect from Oct. 26. Three will allow subscribers to call and send short messages to each other for free at certain times of the day. The ``Gold Plan'' will be offered at 2,880 yen a month, a 70 percent discount to the regular 9,600 yen price, until Jan. 15, Softbank said.

``If our competitors cut prices, we will cut ours even further,'' Son said yesterday at a Tokyo press briefing. ``Our services will always be cheaper than others.''

Son is also accelerating investment in the company's network, aiming to double the number of base stations nationwide to 46,000 by March 2007. The company has also said it will introduce 15 new handsets this year.

``The network Softbank inherited from Vodafone had not been competitive in handsets or coverage,'' said Kieran Calder, a senior analyst at CLSA Asia-Pacific Markets in Tokyo who has a ``sell'' rating on KDDI and DoCoMo shares. ``Now Softbank is solving those problems, so the price becomes more relevant.''

Defense Spending

Mobile number portability is being introduced today after Japan last year opened its wireless market to new entrants for the first time in 12 years. Softbank, eAccess Ltd., Japan's third-largest high-speed Internet access provider, and IPMobile Inc. received wireless licenses.

DoCoMo and KDDI are seeking to retain their leadership in Japan's mobile phone market by offering more handsets that play music and download songs and other data quickly. The companies today said they may consider discounts to retain customers.

``We must wait for reactions from the users before deciding on a response,'' said Masanori Goto, a spokesman for DoCoMo. ``We are seriously considering all options, including pricing and handsets.''

DoCoMo's centerfold two-page color advertisements in the Yomiuri newspaper, Japan's largest, and the Nihon Keizai business daily today showed celebrities explaining why they choose the company's service over rivals. KDDI had one-page color ads in the papers.

Price War?

``All possible options are under consideration,'' KDDI spokesman Karl Iwamatsu said, declining to elaborate.

The announcement by Softbank is probably the first in a series of moves by the carriers, Takeda said. ``It could trigger a price war, which would be negative for the whole industry.''

In South Korea, number portability was introduced in 2004, driving up marketing spending by the country's three mobile operators to a record portion of sales that year, eroding profits.

Combined marketing costs increased to a record 3.38 trillion won ($3.52 billion), or 20 percent of sales, in 2004, according to a tally of financial statements by SK Telecom Co., KT Freetel Co. and LG Telecom Ltd., the country's top three carriers.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

Last Updated: October 24, 2006 03:58 EDT