KDDI Corp., Japan's No.2 telecom firm, said on Thursday it had agreed a deal with Google Inc. enabling users of its Internet services via "au" mobile phones to use Google's Web search engine.
The first adoption of the world's most popular search service in Japan, starting in July, will make Internet searches easier while enabling direct access to information sought by users, the company said.
Users will also be able to view content aimed not only at mobile phones but also at PCs through the new search service, the first of its kind in Japan, and also text advertisements which meet the needs of users based on search terms, KDDI said.
The announcement comes at a time when Japan's $78 billion mobile phone market is preparing for a possible increase in competition as a new government rule this autumn will make it easier for customers to switch services by letting them keep their existing phone numbers.
The industry also faces a challenge from Softbank Corp., which recently bought Vodafone Group Plc's Japan operations, allowing the aggressive high-speed Internet provider to offer a combination of fixed-line, broadband and mobile services.
Softbank unveiled a new strategic move on Thursday as it said it would set up a mobile phone handset and content joint venture with Vodafone to buy phones at lower costs and offer innovative services to users.
But KDDI sees little direct impact from the new service on its earnings, a company spokesman said.
"Our main target from this is to improve usefulness of services to our existing users," he said.
KDDI declined to comment on further details, including the value or period of the contract.
Last month KDDI forecast its group operating profit to rise 7 percent in the year to March, 2007, slightly above market expectations.
But KDDI said operating profit at its mobile phone business, which contributes 82 percent of total sales, would be flat this year as it sees the unit's average revenue per user drop and the percentage of customers leaving the service rise.
au is KDDI's main mobile phone brand with over 20 million subscribers, tracking behind that of NTT DoCoMo Inc., Japan's No. 1 mobile phone operator.
It has enjoyed strong demand in recent years thanks to aggressive pricing plans, attractive phones and innovative services such as music downloads.
The news, announced on Thursday afternoon, helped KDDI shares rise 4 percent to 731,000 yen, compared with a 0.14 percent fall in the information and telecommunications sector subindex.
Copyright 2006 Reuters Limited.
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