KDDI Corp., Japan's second-biggest mobile-phone operator, reported profit rose 24 percent in the second quarter because of lower payments for handset subsidies.

Net income increased to 78.7 billion yen ($790 million) in the three months ended Sept. 30, from 63.3 billion yen a year earlier, the company said today. Sales fell 1.5 percent to 876.8 billion yen.

KDDI's installment-payment plan, started in June, helped the company reduce costs for handset subsidies and cope with lower revenue after cutting service charges to lure users from market leader NTT DoCoMo Inc. and Softbank Corp. The Tokyo-based carrier maintained its forecasts from April for profit and sales revenue to rise this fiscal year.

Second-quarter operating profit, or sales minus the cost of goods sold and administrative expenses, rose 27 percent to 138.5 billion yen.

KDDI dropped 5.9 percent to close at 525,000 yen on the Tokyo Stock Exchange, before earnings were reported.

The operator forecast net income will climb 15 percent to 250 billion yen in the year ending March 31, sales will rise 2.9 percent to 3.7 trillion yen, and operating profit will gain 11 percent to 443 billion yen.

The company will probably report full-year net income of 267.5 billion yen, sales of 3.58 trillion yen, and operating profit of 455.7 billion yen, Mitsubishi UFJ Financial Group Inc. said in a report on Oct. 17.

Lower Handset Sales

KDDI's mobile-phone sales in the second quarter fell to 2.7 million handsets from 4.08 million a year earlier. The company maintained its outlook for handset sales to fall 9 percent to 14.4 million units this fiscal year.

``The drop in handset sales is not limited to KDDI, but is an industrywide phenomenon,'' President Tadashi Onodera said at a briefing in Tokyo. ``We are making efforts to bolster sales in the second half but cannot give specifics, as it is a matter of business strategy.''

Profit at the mobile business climbed 22% to 148.8 billion yen, while revenue fell 3.6% to 680.9 billion yen, because of the installment plan.

Separately, the company said it will spend about 206.8 billion yen in cash to buy back trust beneficiary rights for four of its buildings. KDDI sold the right to collect rent from the property to a real estate company in 2001 for 187.4 billion yen to pay off debt.

Source:Bloomberg