March 31 (Bloomberg) -- NTT DoCoMo Inc. and KDDI Corp., Japan's biggest wireless operators, will make free digital television available on cell phones from tomorrow, offering content that may draw users away from fee-based services such as mobile Internet surfing and e-mail.

The introduction of phones that receive the ``one-seg'' broadcasts shows operators may sacrifice revenue to retain market share before a regulation amendment allowing users to switch providers without changing their phone number later this year.

``The service doesn't generate profit for carriers, but it can help them secure market share before number portability,'' said Makio Inui, a telecom analyst at UBS AG's brokerage unit in Tokyo. ``Just like when cameras were first introduced on cell phones, this is a new feature that can attract consumers.''

Carriers are racing to add new functions such as music players and digital TV to retain users amid rising competition in Japan's 8.5 trillion yen ($72.4 billion) cell-phone market. New operators such as Softbank Corp. and eAccess Ltd. will try to win users from DoCoMo and KDDI, which together control 83 percent of the nation's 90 million wireless users.

DoCoMo and KDDI have given no estimates on how many digital TV-enabled handsets they expect to ship. The receivers will pick up signals sent by networks, including state-run NHK and Fuji Television Network Inc., under a plan to convert all of the nation's TVs to digital formats by 2011.

DoCoMo began selling a ``one-seg'' phone this month made by Matsushita Electric Industrial Co. for about 35,000 yen. KDDI also began selling two models with the function, one from Hitachi Ltd., and Sanyo Electric Co., in February and December.

The broadcasts are called ``one-seg'' for one segment, because each digital channel is split into 13 segments. The broadcasters will use 12 of the slices for conventional digital television and one for mobile phones, car navigation systems and other portable devices. Digital television programs for portable devices were first offered in South Korea in November 2005.

Price

``There is quite a lot of demand from many male customers aged between 20 and 40,'' said Yasuhiro Oki, a sales employee at electronics retailer Bic Camera in Tokyo. ``Many people want to watch news and sports during their commute to work.''

The handsets are priced about 10,000 yen more than the latest models without the technology, said Michito Kimura, an analyst at researcher IDC Japan in Tokyo.

DoCoMo's one-segment phones are selling faster than expected, said Junji Kanegawa, a spokesman at the Matsushita's mobile-phone unit. Consumers currently have to place an order and wait for the phone at major retailers, he said.

``We were worried about the price, but we realized that many consumers were eagerly waiting for a phone like this,'' Kanegawa said. ``If more makers decide to make such phones, parts prices will come down and we can benefit from economies of scale.''

Wireless operators are reluctant to put the technology on more models while procurement costs are still high and they have yet to find ways to profit from the service, said IDC's Kimura.

Programs available on handsets will be the same as those broadcast for conventional digital TV until 2008, when broadcasters expect to have content available exclusively to mobile phones. TV networks will also use the bottom half of the screen to transmit advertisements and information with clickable links to the operators' Internet services.

Business Model

Operators themselves have expressed doubt about whether the free programming will prompt users to purchase music or video downloads by clicking on links to their Internet sites. That has not prevented operators from allying with the networks to develop services using digital broadcasts.

``There is no business model or specific merits because the phones are just television sets,'' said DoCoMo President Masao on March 30. ``We have to wait and see the consumer's reaction.''

DoCoMo on Dec. 21 said it will spend 20.7 billion yen for a 2.6 percent stake in Fuji Television Network Inc., Japan's biggest network, to develop services for digital TV programs. Tokyo-based DoCoMo also agreed with Nippon Television Network Corp. to each invest 5 billion yen in a partnership to produce content for mobile phones.

KDDI and TV Asahi Corp. said March 23 they will offer a trial service that lets consumers shop at websites on KDDI's ''au'' mobile phones for goods introduced on the television network's shopping programs.

```One-seg' doesn't generate much revenue for the operators,'' said KDDI's President Tadashi Onodera at a press conference on March 15. Onodera said he aims to link the TV programs with downloads and shopping sites, a formula KDDI already uses for radio broadcasts.

Vodafone Group Plc's Japanese unit, which will soon be acquired by Softbank and is the nation's No. 3 mobile phone service, is still developing a digital TV compatible handset with Sharp Corp. for a possible sale in June.

To contact the reporter on this story: Aiko Wakao in Tokyo at awakao@bloomberg.net.

Last Updated: March 30, 2006 23:28 EST