Cell phone price wars in Japan bode ill for the US

There is an "all out" price war among the three big cellular service providers in Japan which may give companies like Verizon Wireless and Sprint (NYSE: S) some ideas about how to steal one another's customers.

NTT Docomo (NYSE: DCM), the largest cell company in the Japan, lost almost 23,000 customers in August. Rival KDDI picked up over 158,000, and up-start Softbank added almost 189,000.

Reuters reports that switching providers has become easier "after a rule change allowed subscribers to keep their phone numbers when changing service providers, speeding up price competition in a saturated mobile market."

Docomo, which has just over half of the $78 billion mobile market in Japan, is preparing to cut its basic rates in half to stay competitive with its two rivals.

Saturated is the key word. In the US, the three largest cell service providers, AT&T (NYSE: T) Wireless, Verizon Wireless, and Sprint, have nearly 180 million subscribers. T-Mobile runs in fourth place. In a country with 300 million people, many of whom are not old enough to use a phone, the big growth years are probably over.

Cellular division are the most profitable operations at AT&T and Verizon (NYSE: VZ). Their landline businesses are being taken from them by cable VoIP offerings. If the US mirrors Japan, and price wars come to the US, profits at big telecoms are in for a slide.

Douglas A. McIntyre is a partner at 24/7 Wall St.