November 1, 2018 / 2:58 AM / 13 days ago

Nikkei falls as Docomo sparks telecom earnings fears

* NTT Docomo drags down KDDI, SoftBank

* Zozo sinks after it abandons Zozo suit

* Panasonic, Yamaha Motor among Thursday losers

By Ayai Tomisawa

TOKYO, Nov 1 (Reuters) - Japan's Nikkei fell on Thursday, pulled down by large cap mobile phone companies after NTT Docomo said lower service fees will start hitting its earnings from the next fiscal year, stoking concerns about the profit outlook for the sector.

The Nikkei share average dropped 0.8 percent to 21,749.78 at the midday break. The Nikkei dropped 9.1 percent in October to post the biggest monthly decline since June 2016.

The communications sector tanked 6.8 percent and was the worst performer on the board.

NTT Docomo Inc said that it would reduce service fees by 20-40 percent in the April-June period that would affect its earnings from the next fiscal year. Its shares nosedived over 11 percent to 2,530 yen, a level not seen since Sept. 2017.

KDDI Corp plunged 16 percent to a four-year low of 2,358.5 yen, while SoftBank Group Corp plummeted 7.5 percent as the news put pressure on the technology conglomerate before its planned initial public offering of its mobile-phone unit in December.

Japanese stocks were hit by a rout in global stocks last month as well as a sharp sell-off in U.S. tech shares which led the gains in Wall Street this year. Concerns about an impact from Sino-U.S. trade war to curb global demand also hit investor sentiment.

"What the market was worried about last month, mainly the impact from the trade war on Japanese companies' earnings, is now being focused," said Takuya Takahashi, a strategist at Daiwa Securities.

Takahashi said that earnings reports have been mixed so far and investors will likely remain cautious for a while.

Panasonic Corp tumbled 7 percent after its operating profit fell 15 percent in July-September hit by rising costs at the battery plant it jointly runs with U.S. electric vehicle maker Tesla Inc.

Yamaha Motor stumbled 14 percent after it cut its annual operating profit forecast hit by poor motorcycle sales in emerging markets.

On the other hand, Murata Manufacturing, which makes smartphone parts, jumped 12 percent after the company raised its annual operating profit outlook.

Financial firms, which hunt for high-yielding products, attracted buying after U.S. yields rose overnight. Dai-ichi Life Holdings surged 1.7 percent and T&D Holdings gained 1.3 percent.

Elsewhere, Zozo Inc fell around 6 percent after the fashion company reported falling profits, production delays and the phasing out of its Zozosuit.

Zozo Chief Executive Yusaku Maezawa said on Wednesday that instead of the polka-dot bodysuit, a basic set of measurements provided by users crunched with Zozo's data would be enough to produce custom-made clothes.

The broader Topix shed 0.7 percent to 1,634.55. (Editing by Kim Coghill)

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