December 3, 2021

Earn Money

Business Life

Edited Transcript of 9437.T earnings conference call or presentation 28-Apr-20 9:30am GMT

Tokyo May 12, 2020 (Thomson StreetEvents) — Edited Transcript of NTT Docomo Inc earnings conference call or presentation Tuesday, April 28, 2020 at 9:30:00am GMT

NTT DOCOMO, INC. – Senior EVP, Executive GM of Sales & Marketing Division of Global Business and Corporate and Director

NTT DOCOMO, INC. – President, CEO & Representative Director

NTT DOCOMO, INC. – Senior VP & Executive GM of Tohoku Regional Office and Director

NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director

Nomura Securities Co. Ltd., Research Division – Head of Information & Telecommunication Team, Japan & Analyst, Telecommunications Research, Japan

UBS Investment Bank, Research Division – Executive Director and Telecom & Software Analyst

Daiwa Securities Co. Ltd., Research Division – Research Analyst

Now we would like to begin NTT DOCOMO 2019 Results Presentation. Ladies and gentlemen, thank you very much for taking your precious time for our meeting. I will be serving as emcee for today’s meeting. My name is Okubo, Head of Investor Relations at NTT DOCOMO. Please be advised that this session is broadcast live via NTT DOCOMO’s IR information site, and the recorded video or a recorded audio will be provided through on-demand distribution later.

Before we begin, we have 3 pieces of information to share with you. First of all, I would like to introduce the participants for today. We have 3 representative directors: President and CEO, Mr. Yoshizawa; Senior Executive Vice President and Executive General Manager of Sales and Marketing Division, Mr. Tsujigami; Senior Executive Vice President, Mr. Maruyama. And we also have 3 members of the Board and Executive Vice Presidents: General Manager of our Accounts and Finance Department, Mr. Hirokado; Executive General Manager of Smart Life Business Division, Mr. Mori; and General Manager of Corporate Strategy and Planning Department, Mr. Fujiwara.

Now the schedule for today. At the outset, President Yoshizawa will make a presentation on the results using the presentation slides and then we’ll be entertaining your questions. We expect to finish the meeting at around 7:30 p.m. And finally, I would like to inform you of the documents to be used for today’s presentation. The presentation slides, together with the financial data book and other related information, are posted on NTT DOCOMO’s IR information site. For the notes pertaining to forward-looking statements, including the statements made during the Q&A session, please refer to the final page of the presentation deck.

Now we would like to move on to the presentation. Mr. Yoshizawa, the floor is yours.

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [2]

Good afternoon. I am Yoshizawa. Before I begin the presentation of the results, I would like to express my heartfelt sympathy to those who contracted the new virus, coronavirus, COVID-19, or otherwise affected by the spread of the disease. I pray for the earliest recovery of those who fell ill, and I hope that the spread of the infections in many regions around the world will come to an end as soon as possible. As for DOCOMO’s response to COVID-19, I will explain them during the course of the presentation. Now without further ado, I’d like to move on to the results presentation for the fiscal year ended March 2020 or fiscal 2019.

On Page 1, as you can see, this will be divided into 2 parts. In part 1, I will talk about results highlights. In the second section, I would like to talk about the key actions for our fiscal 2020.

Page 2. This is the results highlights. Operating revenues decreased by JPY 189.6 billion year-on-year to JPY 4,651.3 billion. Operating profit decreased by JPY 159 billion to JPY 854.7 billion. The profit attributable to shareholders of NTT DOCOMO decreased by JPY 72.1 billion to JPY 591.5 billion. Adjusted free cash flow, due to the impact of the transfer of our shares in Sumitomo Mitsui Card Company, increased by JPY 179.2 billion to JPY 798.6 billion. Due to the impact of customer return measures, including new rate plans, Gigaho and Gigalight, we recorded a decrease in both revenues and profit. However, operating profit came in higher than our initial guidance of JPY 830 billion.

Next page, please, the results by segment. In telecommunications business, operating revenues decreased by JPY 290.1 billion to 900 — excuse me, JPY 290.1 billion. Operating profit decreased by JPY 159.8 billion. As for the Smart Life business and other businesses combined, operating revenues increased by JPY 108.2 billion and then operating profit increased by JPY 0.8 billion. For Smart Life business, in particular, due to the consolidation of NTT Plala as a wholly owned subsidiary, operating revenues increased by JPY 95.5 billion. But on the other hand, operating profit decreased by JPY 36.7 billion due to the proactive sales promotion of d Payment service and other video services.

Page 4. This is the key factors behind the year-on-year changes in operating profit. As you can see on the left-hand side, operating revenues decreased by JPY 189.6 billion. The key factors behind this include: the mobile telecommunications service revenues decline of JPY 86.6 billion due to the expanded impact of the customer return measures; optical fiber broadband service revenues increased by JPY 50.2 billion; other operating revenues increased by JPY 83 billion due to the consolidation of NTT Plala; and selling revenues decreased by JPY 236.2 billion due to the decrease in the number of handsets sold. Operating expenses on the right-hand side, due to the proactive sales promotion of Smart Life services, which resulted in expense growth, because of the cost of equipment saw a decrease, the operating expenses altogether decreased by JPY 30.6 billion. And consequently, operating profit decreased by JPY 159 billion to JPY 854.7 billion.

Next slide, on Page 5, some operational results. And this is the d POINT membership. d POINT CLUB members exceeded 75 million and reached 75.09 million, up 7% year-on-year, of which the number of d POINT CARD registrants, who are the number of users who can use and earn d POINTs at participating stores, increased by 28% year-on-year to 43.26 million.

Next page, Page 6, telecommunications operations results. The number of mobile telecommunications service subscriptions exceeded 80 million and reached 80.33 million, up 2% year-on-year. On the right-hand side, the churn rate, excluding MVNOs, was 0.54%. And the handset churn rate, in particular, despite the changes in the competitive environment, because of the promotion of subscribers and the new rate plans and the migration of subscribers to smartphones, we maintained the handset churn rate at a very low level of 0.44%.

Next page, Page 7, the total number of smartphones and tablet users. This increased by 4% to 42.04 million. With the Hajimete smartphone purchase support for our first-time smartphone users and the promotion of various measures, we will continue to accelerate the migration from feature phones to smartphones. On the right-hand side, docomo Hikari subscriptions. This increased by 13% year-on-year to 6.49 million.

Next page, Page 8, the new rate plans. The new rate plans are continuing to enjoy great reviews from customers. And the total number of applications amounted to 16.51 million as of the end of March. And on the 17th of April, the number topped 17 million. We fell short of that number as of the end of March. But by and large, we are very close to that number. And toward further reinforcement of our customer base, we will continue to aggressively migrate subscribers to the new rate plans.

Next page, Page 9, ARPU. On the far right, you see rate plans. The ARPU recorded a decrease of JPY 10 compared to the same period of the last fiscal year, as you can see on the far right, down JPY 10 year-on-year.

Next, Page 10, network effective speed. This is the comparison with other companies. In accordance with the guidelines of the MIC, the effective speed measured by each companies are listed here. As you can see here, for both downloads and uploads, we delivered the fastest speed in Japan. We will continue to construct a network that is comfortable for our customers.

Page 11. Cost efficiency improvement. In the fourth quarter alone, we achieved cost efficiency improvement totaling JPY 56 billion. And for the cumulative period of fiscal ’19, JPY 130 billion was achieved. So we delivered the number as planned. And in fiscal 2020, we’ll continue to address further cost efficiency improvement.

Page 12. The operating profit from Smart Life and other businesses. As I mentioned earlier, because of the aggressive promotion of d Payment and video services and also from other factors, we fell slightly short of the full year guidance of JPY 160 billion. The operating profit was JPY 148 billion. And the contribution of each category was as follows. As you can see on the right-hand side, dTV, DAZN for docomo and other content and lifestyle services accounted for approximately 15%. And below that, d CARD, d Payment and other finance and payment services accounted for roughly 5%. For other business, mobile device protection service and piece-of-mind support services accounted for 60% approximately and enterprise solutions and others accounted for roughly 20%.

Next page, finance and payment services. The total amount of transactions handled with our finance and payment offerings, as you can see on the left-hand side, increased by JPY 1.410 trillion year-on-year to JPY 5.320 trillion, of which the d CARD transactions, the dark red part, increased by JPY 1.1 trillion (sic) [JPY 1.01 trillion] year-on-year to JPY 4.150 trillion. Throughout the year, we executed various campaigns. And from October last year, we joined the government’s cashless point award campaigns. And therefore, as a result of that, the total amount of transactions increased to more than JPY 5 trillion, a significant increase compared to the previous fiscal year. The d CARD members increased by 14% year-on-year to 12.97 million, of which the d CARD GOLD members continued to increase at a favorable pace, up 30% year-on-year to 6.85 million as of the end of March.

Next page, d Payment service. The total amount of d Payment transactions increased by 3.2-fold compared to the previous fiscal year to JPY 399 billion, a significant increase. Throughout the year, we have executed a lot of d POINT campaigns to expand the number of users. And as a result, the total number of d Payment users increased to over 25 million, more than doubling compared to a year ago to 25.26 million. We have also expanded the place where d Payment can be used, including Uniqlo and Yoshinoya so that total number of partners increased steadily. And locations where the payment and point services can be used, on the right-hand side, increased by 63% year-on-year to 1.71 million locations. We will continue to expand the number of partners and improve the service offerings so that we can further proliferate and expand the usage of cashless payment service.

Next is d POINT service. The d POINT used increased by 23% year-on-year to approximately 200 billion points, 198.9 billion (sic) [199.8 billion] points to be more precise. So this made this program one of the largest common point program in Japan. And the — as a result of our continued efforts to expand the number of d POINT merchants, as you can see on the right — left-hand side, actually close to 60%, i.e., 121 billion points are used at the partner stores. And so 60% of the points of the 200 billion points are used with our partner stores. And on the right-hand side, you see the number of d POINT partners. This grew by 1.8-fold year-on-year to 752 partners, continuing to increase at a favorable pace.

And then on Page 16, this shows the number of +d program partners, which increased by 1.5-fold to 12 point — 1,250 companies. We will continue to accelerate the +d co-creation activities together with our partners.

Next, Page 10 — Page 17, correction. Let me talk about some of the actions taken in the context of medium-term strategy, Declaration beyond. Let me start with activities in relation to value and excitement to customers, declaration 1 through declaration 3. So declaration 1, this is the major one. This is the launch of the 5G commercial service. Declaration 2 concluded top partner agreement with T. LEAGUE. And in declaration 3, we have reinforced disaster preparednesss of docomo Shops by rolling out photovoltaic power generation systems and also deployed anti-inundation sandbags at docomo Shops.

Next page, Page 18. So let me now talk about value co-creation with partners, covering declaration 4 through declaration 6. Declaration 4 is to start providing DOCOMO Open Innovation Cloud. Declaration 5, joint creation of wide variety of 5G-enabled solutions with partners. And declaration 6, we started collaboration with Cisco for a cloud-based telephone system. Other than the actions that we introduced today, we are implementing the various other actions as well. And also, we will implement Declaration beyond, and we’ll accelerate actions to achieve a rich future.

So next page, please, Page 19. These are the principal actions undertaken in fiscal year 2019. In the context of Declaration beyond, this is self-explanatory. So efforts to evolve customer touch point and also launch of 5G services and preparation thereof, we have made steadfast implementation all the way from declaration 1 through declaration 6.

Page — next page, ESG evaluation. So starting from the top, Nikkei Smart Work survey. In the Nikkei Smart Work survey, we were awarded the highest 5-star rating for the third straight year. And we also won Nikkei Smart Work Grand Prize 2020, technology utilization award. Also, our efforts in the context of workstyle reform is also highly appreciated. So as a result, in the context of 2020 health and productivity management, we were certified as a White 500 company by — for the fourth straight year. And also in relation to PRIDE Index 2019, which relates to LGBT-related activities, we were awarded gold rating for the fourth straight year. So that is the assessment and evaluation which we have received.

Next page, Page 21. This relates to share repurchase. We have completed share repurchase of JPY 300 billion or 106.6 million shares to date. And the repurchased shares were all canceled on April 2. We’ll continue to pursue management that drives balance sheet efficiency going forward.

Next page, Page 22. This shows you the actual track record for the medium-term operation indicators, which we announced when we announced the second quarter results of fiscal year 2018. And they are as follows. I will not cover the details, but we’re making steadfast progress toward the goals.

Next, Page 23. Let me talk about the fiscal year 2019 summary. This covers the substance which I’ve already covered in my presentation and the page is self-explanatory.

Next, let me go on to part 2 and talk about some of the fiscal year 2020 principal actions from this point onwards. So fiscal year 2020. And this is on Page 25. This is start year for growth in a new era. This is what we — how we characterize it. So 2020 is the start year for the growth as a new era. And so the 3 actions indicated on this page and also the structural reform that underpin these activities will make a robust activity response. For these 4 items, I would like to explain on the next page, turn to the next page.

So please turn to Page 26. First, therefore, let me start with the top, the further reinforcement of customer base. Further reinforcement of customer base on top of further refining customers’ experience at shopfront and online, we want to expand the partners that can be used on a daily basis, such as partnership with Recruit and Mercari. We want to enhance the attractiveness of the member program through such activities.

Point two, business foundation centered on our membership base. We will build a stronger customer touch point through apps and media used by customers on a daily basis and to make an optimal approach to customers through digital marketing in an effort to garner usage of our and our partner’s services, leading to an expansion of our solution business.

Point three, new value co-creation for the 5G era. We will accelerate new solutions creation through co-creation with partners. We would look for client details for the 5G going forward. With regard to structural reform, underpinning these efforts, this is on the bottom, we want to improve operational process through digital transformation. And by changing how we work, we will reallocate resources to growth areas. And so in order to achieve sustainable growth for the 2020 through the 4 points that I just alluded to, we want to go on, on a new start.

So next page. Let me talk about some of our 5G-related activities. This is on Page 27. From March 25, we launched 5G commercial service. With the spread of the COVID-19, a novel coronavirus infection, our social and industrial structure is likely to significantly change as a result. And that is envisaged. So DOCOMO would like to promote creation of new values and social issues solution through the 5G by squarely facing some of the situation. So some the actions for the future are indicated on the right-hand side, planned actions for fiscal year 2020. So if you want to work through solutions, we have covered all these items.

So let me start with the network portion. We will start with the deployment of millimeter wave and we’ll also promote O-RAN for open and intelligent wireless network. We want to actively promote this initiative. In relation to device, which is point number two, with the spread of 5G penetration, not only flagship model, but we also want to expand the lineup for our standard models as well.

And number three, related services. We’ve already launched 7 new services. And with 5G, we will realize new type of experience, such as new sensory live performance experience and multi-angle viewing of sports. And by doing so, we want to contribute to COVID-19 countermeasures as well. And last but not least relates to solutions. In terms of solution, by leveraging the features of 5G, we want to contribute to change in social structure that is by shifting to remote basis by expanding remote diagnosis, remote studies and expansion of online work in the manufacturing sector as well. So that is the explanation of our efforts to promote 5G service. So that is our thinking behind 5G service promotion.

Next, this is on Page 28. Let me now talk about our efforts to expand the subscriber as well as area construction. As far as subscriber growth is concerned, we’re aiming to achieve 2.5 million by fiscal year 2020. And also in 2023, as we have already announced in the previous sessions, we’re aiming for 20 million subscriptions before the end of fiscal 2022. In terms of 5G area construction, we’ll aggressively build out 5G coverage. And in March 2021, at the end of this fiscal year, we want to cover 500 cities, including all government-designated cities. And 1 year later, in March 2022, we’re aiming to have to 10,000 — 20,000 base stations by the end of March 2022.

So next page. As I mentioned at the outset, this is our response to COVID-19 at DOCOMO. With the opportunity of the situation, we will fulfill our social responsibility as a telecom operator and we’ll endeavor to deliver stable telecommunication services. This is a given. Also, as you see on this page, we’re implementing various activities that are in response to COVID-19, specifically, extension of payment due for mobile phone charges and also regranting of expired d POINTs. And also in order to secure telecommunication environment for students related to remote classes, we are implementing some support for customers under the age of 25. And we also announced that the period for the support will be extended until end of June. This was announced yesterday.

And also the fourth point on the bottom, and so that health-related inquiries could be directed to doctors, consultation chat service, in the context of d Healthcare, that is available on a 24-hour basis, is provided free of charge. So anyone with d Account can avail themselves of the service. And also for enterprise customers, we’re providing services to enable smooth implementation of telework and working from home. And also on the bottom, by using Mobile Spatial Statistics, we analyze population dynamics in the major areas before and after the declaration of the state of emergency. And we’re providing them to government and the media, and we’re contributing to building awareness to people so that they can stay at home. Also at docomo Shop, the call centers throughout Japan, we are reducing our operations. And we are aware that we’re causing if any inconvenience on the part of our customers. But in order to prevent the further spread of COVID-19, we hope that the customers will actively utilize web-based contractual procedure. And this — we are advertising this through commercials on televisions as well.

Next page. So that being the case, these are some of the principal impacts we envision from COVID-19. We anticipate that there will be impact of various aspects. So these are some of the principal impacts that we’re envisaging from COVID-19 today. And there could be others outside of what we are indicating on this page, so the impact is not just limited to what you see on this page. But these are some of the principal impacts. For example, on the top, mobile communication traffic, it is likely that we will experience a drop in international roaming from decrease in the number of outbound and inbound travelers. So we are anticipating a significant drop and impact.

And number two, decrease in the number of shop visitors is likely to lead to decrease in device and service sales. And also, as for Smart Life, in several other areas, we’re likely to see a slightly up or slightly increase and decrease. And also on the bottom, in relation to capital expenditures, slower progress in capital expenditure, due to delay in supply of network equipment, is also anticipated. So these are some of the impacts that we envisage. So various impacts are being envisioned.

So under such circumstances, turning to Page 31, we just move to the next page. With regard to the fiscal year 2020 guidance, due to the aforementioned impact of COVID-19 and given the difficulty of making reasonable estimates of our financial results, we decided not to make any disclosures of fiscal 2020 guidance at this juncture. After carefully assessing the impact of — on our financial performance, we’ll make a prompt announcement once it becomes possible to make a reasonable estimate. On the other hand, annual cash dividend per share for fiscal year 2020 is planned to be kept unchanged from the previous fiscal year at JPY 120. So the level of the previous year will be maintained.

So lastly, the outbreak of COVID-19 represents a major trepidation and challenge for the world, Japan and for our company as well. The company will unite as one in overcoming this difficult challenge. We will work to fulfill our mission as a telecommunication operator and we will provide several operations to the telecommunication services. And we’ll consider the role that DOCOMO should play — role that only DOCOMO can play and endeavor to prevent the further spread of COVID-19 and as well respond to the changes in social structure that is shifting to remote work society. And we will aim to work to create new value and to resolve social challenges.

That is all for my presentation. Thank you very much.

——————————————————————————–

Naoto Okubo, [3]

——————————————————————————–

Now we would like to entertain your questions. We would like to take as many questions from as many participants as possible. (Operator Instructions) We appreciate your understanding. (Operator Instructions) For the way to apply for your questions, the operator will give an explanation.

================================================================================

Questions and Answers

——————————————————————————–

Operator [1]

——————————————————————————–

(Operator Instructions) The first question will be from SMBC Nikko, Mr. Kikuchi.

——————————————————————————–

Satoru Kikuchi, SMBC Nikko Securities Inc., Research Division – Senior Analyst [2]

——————————————————————————–

This is Kikuchi. I have two questions. The first question is about your plan for this fiscal year. Although there are uncertainties, and you said that there are uncertainties, you’re not going to disclose any guidance at this point. But I do believe that there are things that you are already able to foresee and things that you are not able to predict at this point of time.

And you always talk about the mobile telecommunications service revenues and the impact of the new rate plans, the impact of the Monthly Support program and some details pertaining to up-sells and so forth. So there are things that I think you are already predicting to some extent. So of course, I would appreciate if you can’t give us some detailed numbers. But even without the numbers, can you just give us an indication as to what would be the impact of these different factors to your business this fiscal year, including cost efficiency improvement?

——————————————————————————–

Osamu Hirokado, NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director [3]

——————————————————————————–

I am Hirokado, CFO. For the mobile telecommunications service revenues trend, actually I would like to talk about this without the impact of COVID-19 included. There are negative impact from Gigaho and Gigalight. But basically, otherwise, I think the fiscal 2019 performance was quite favorable. And in the second quarter, we made an upward revision of JPY 40 billion. But on top of that, there was an incremental JPY 30 billion contribution improvement in the mobile telecommunications service revenues. And the ARPU, after the impact of Monthly Support, from third quarter to fourth quarter, was already stable. So it didn’t really — was not negatively affected. So we believe the similar trend will continue into fiscal 2020.

But on the other hand, the subscriptions, the total number of subscriptions has been declining effectively. So even without the COVID impact, the mobile communications service revenues will not decline as much in fiscal 2020 — as much as in 2019. But I think we have to continue to expect the downtrend, a general downtrend in mobile communication service revenues. Because for one thing, on top of that, because of COVID-19, the international roaming revenues is going to decline. And in last fiscal year, we were expecting an impact of an uptrend in ARPU, but we’re not really sure about that anymore. So that’s a factor of uncertainty.

And for the cost efficiency improvement, in fiscal 2019, we achieved JPY 130 billion of improvement. And in fiscal 2020, we plan to achieve efficiency improvement of tens of billions of yen. And so not that level, but we would like to go for hundreds of billions of yen or close to JPY 100 billion of cost efficiency improvement. That is our aim, at least. And then we’ll come back to the details once the business plan is fixed. In fiscal 2019, JPY 130 billion cost efficiency improvement, a much big portion of that came from the marketing spend, the Direct Wari savings. But that is not going to be so much in fiscal 2020. But in April and May, there will be a full year impact, so we can expect some contribution from that.

And then in terms of the commissions payable to the distributors, because the shops and because we are going to introduce digital transformation with RFID for investment inventory control, so for shops and also for DOCOMO, are going to implement those measures in order to improve efficiency, both for DOCOMO and also for the shops. And also for the network side, we are going to integrate equipments and we will utilize some of our assets. So in fiscal 2019, the Direct Wari was the big driver for cost efficiency improvement. And that, in a way, the cost efficiency was skewed towards Direct Wari, but will be more well balanced and more distributed in terms of the areas where we can reduce cost in fiscal 2020. That’s the plan.

——————————————————————————–

Satoru Kikuchi, SMBC Nikko Securities Inc., Research Division – Senior Analyst [4]

——————————————————————————–

All right. And as for the other breakdown, Smart Life contribution, can you talk about that? So for the fiscal year ended, the d Payment campaigns, I don’t think you are so much promoting d Payment campaign at this moment. But as a follow-up question on my first question, what is the ups and down factors for — in the Smart Life-related business?

——————————————————————————–

Osamu Hirokado, NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director [5]

——————————————————————————–

In Smart Life and other businesses, in fiscal 2019, OP plan was JPY 160 billion for fiscal ’19. However, the overall profit was 800 — because the plan was JPY 800 billion and we had some leeway and also because of the competitive reasons, we had a very aggressive campaign planned for fiscal 2019. We cultivated new partner stores. So we sacrificed the fiscal 2019 profits because of these initiatives. But in fiscal 2020, JPY 160 billion OP profit was the plan for fiscal 2019. We would like to achieve and recover to that level in 2020. And of course, the benefits of expanded partner network will kick in, in fiscal 2020, I believe. We cannot come up with concrete numbers today. But we are expecting a certain degree of profit increase from Smart Life-related business in fiscal 2020. So all in all, compared to 6 months or 3 months ago, there’s no significant difference according to what I hear.

——————————————————————————–

Satoru Kikuchi, SMBC Nikko Securities Inc., Research Division – Senior Analyst [6]

——————————————————————————–

So the COVID-19 impact, maybe there might be some impact as you summarized in that table. But other than that, the general trend remains basically unchanged. So you are expecting a profit increase in fiscal 2020. Is that correct?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [7]

——————————————————————————–

This is Yoshizawa. We are talking about the general trends in our previous conversation right now. But one thing that is not really foreseeable at this point of time is how long will this pandemic continue? Is this going to be a 6-month thing? Or is this going to last for 1 year or more? That’s something that’s unforeseeable. The state of emergency was declared. And the docomo Shop hours, opening hours is shortened. The activities that we are currently providing at the shops are quite limited. And on Sunday last week, the total number of visitors was limited to only 30% on a year-on-year level, meaning a 70% decline year-on-year. So if this is going to continue for a long time, what is going to happen? Of course, this is going to have a significant impact on the number of handsets sold, I believe. So because of this, as Mr. Hirokado mentioned, in terms of revenues, there would be a certain degree of impact. And that is going to decline, I think, on a year-on-year basis on the revenue side.

But then on the expense side, there are — could be some other repercussions. So we have to assess the changes, and we have to, of course, capture the potential changes beforehand. So — and as we talked about the cost efficiency improvement, JPY 130 billion was the track record last fiscal year. But of course, we would like to further explore possibilities for cost reduction in every aspect of our business. And so our ambition at this point of time is that the OP level of the last fiscal year, the 2019 level, is definitely what we would like to explore and achieve. At least that is our ambition today. But in terms of absolute numbers in terms of revenues, in terms of the cost efficiency, the breakdown of these factors is something that we cannot fix at this point of time. Of course, there are many ways to get there, I believe, but that is the basic ambition we have.

——————————————————————————–

Satoru Kikuchi, SMBC Nikko Securities Inc., Research Division – Senior Analyst [8]

——————————————————————————–

So sorry for this my lengthy question. My second question is about the reason why — because you have not disclosed your — despite not disclosing your outlook, you are not going to decrease your dividend. So I believe you are going to maintain your dividend policy — dividend level. But then NTT, the liquidation of receivables and the credit card receivables liquidation, you are going to move ahead with that as well as NTT. And I think the use of that, of course, there are — the holding company has many ways of plans to utilize those proceeds.

But I think, in your case, the main usage would be the dividend payment. And you’re not — you have not declared any share repurchase plan this time around, but you have named — declared that you are going to maintain your dividend for fiscal ’20 unchanged from last fiscal year. So once the business plan and the guidance becomes available and once you announce that, the consideration for the shareholder returns, is there any possibility that we can expect something out of you?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [9]

——————————————————————————–

Well, this time around, the guidance is not disclosed, but we just presented our ideas for the dividend payment. I’m so sorry that we have not provided any potential for dividend hike this year. But I just wanted to make sure that we are not really dismayed with respect to the dividend payment. And the JPY 120 dividend, in order to pay for that, we have to secure JPY 390 billion. And we already had that level of cash at the end of March already, slightly over that level. And we are not going to expect any negative free cash flow this fiscal year. We are going to have incremental cash flow this year. So are certain that we’ll be able to pay out at least the level of last year, so we can do that, we can commit to that.

For the share repurchase, as you mentioned, the liquidation of receivables, combined with that, in the public tender offer, if it’s a one-shot share repurchase, we don’t have to declare it at this point of time. So without the guidance, we didn’t intentionally declare that at this point. But the installment receivables liquidation is not really planned out yet. So there’s a possibility that we may do something at the end of the second quarter, and we made no comments regarding the share repurchase because of that.

——————————————————————————–

Operator [10]

——————————————————————————–

Next question from Nomura Securities, Mr. Masuno.

——————————————————————————–

Daisaku Masuno, Nomura Securities Co. Ltd., Research Division – Head of Information & Telecommunication Team, Japan & Analyst, Telecommunications Research, Japan [11]

——————————————————————————–

I would like to ask two questions. My first question relates to mobile communications service revenue. Excluding the impact from COVID-19, I would like to revisit the core trend. In terms of subscription, you have those numbers. But in relation to ARPU, according to your explanation earlier, from third quarter to fourth quarter, there was a reversal. So can you elaborate on what you see as the trend? And also as far as the fundamental mechanism is concerned for this fiscal year, because of the slow migration to the new rate plans, at the same time, the narrowing down of Monthly Support is also slowing down.

So therefore, at this — and also, there will be some migration to the new rate plan for this fiscal year. But the impact of the Monthly Support plan and the impact of the new rate plans, they will come into the picture, I would imagine. So against the backdrop, you’re trying — you also see slow progress in migration as well as up-sell. So all of these variables will be mixed in the total picture. So inclusive of the narrowing down of the Monthly Support impact, the ARPU trend, how do you see that for the fiscal year? Can we revisit what you see as a trend for ARPU this fiscal year? Let me confirm that once again.

——————————————————————————–

Osamu Hirokado, NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director [12]

——————————————————————————–

Thank you. Hirokado here. I would like to continue to respond to your question. So with regard to mobile ARPU and mobile app after the application of discount, I mentioned that there’s a sustained reversal of trend. The third quarter of fiscal year 2019 was probably the bottom. And from the point onwards, we’re likely to see some upward trend, although there are some impact from the season. Now on a year-on-year basis, it was still negative territory. But as we get into the second quarter or at the latest by third quarter of fiscal year 2020, we’ll likely be in the positive territory. And on a full year basis, mobile ARPU, after the application of discount, is likely to be higher than 2019. That was our expectation. That was prior to COVID-19. And also optical — optic broadband ARPU is also going to be positive because of the increase in subscriptions for optical fiber broadband service contracts.

So mobile service revenue, I mentioned this is going to be decreasing. But this due primarily to the decline in the subscription. So therefore, we anticipate a reversal upward trend in the ARPU. At the risk of repeating myself, as far as ARPU is concerned, with the migration, we were actually hoping to get JPY 100 impact from promotion of migration. If it’s only 50% progress, then there would be JPY 50 at the end of the day. We’re hoping that is not the case. And also the roaming service revenue, roaming revenue is likely to be 0. That’s a possibility. So that has got an impact of several tens of yen. And if we include the impact of all of these factors, we cannot be overly optimistic.

——————————————————————————–

Daisaku Masuno, Nomura Securities Co. Ltd., Research Division – Head of Information & Telecommunication Team, Japan & Analyst, Telecommunications Research, Japan [13]

——————————————————————————–

Yes. As far as the impact of COVID-19 is concerned, a slow progress in migration, also declining roaming, we anticipate that as well. But prior to this, from second quarter to third quarter, I think there was a JPY 4 increase in ARPU. So that’s a full year positive, right? So what was the premise behind this? And for example, the data — for example, discount for pricing for MVNO or voice service revenue for MVNO will be also discounted. That was some of the discussion we had in the previous sessions. But even with this, are you saying that second quarter, third quarter would show that increase? So for example, so wholesale voice service revenue impact from MVNOs, how do you see the impact from MVNO contracts in this outlook?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [14]

——————————————————————————–

Yes. We do not reflect the impact on COVID-19 naturally. But with regard to risk pertaining to response to regulatory framework and also countermeasures against competition, that is a plus every single year. So that is reflected.

——————————————————————————–

Daisaku Masuno, Nomura Securities Co. Ltd., Research Division – Head of Information & Telecommunication Team, Japan & Analyst, Telecommunications Research, Japan [15]

——————————————————————————–

So I take comfort from your response. Then my second question, with regard to cash flow, earlier, you mentioned that you’re not fully prepared for liquidation of installment receivables. Once you’re fully prepared, do you intend to embark on this? Or are you saying that because of various factors that have taken place this year, you’re going to take away this year — added for this fiscal year? I’d like to confirm what you intend to do about liquidation of receivables.

——————————————————————————–

Osamu Hirokado, NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director [16]

——————————————————————————–

Thank you. Hirokado here. Let me respond to your question. Unless some major investment is on the horizon, for the time being, we believe the cash on hand and free cash flow from our business operation will allow us to sufficiently cover our business operations. So liquid — so carrying out liquidation of some receivables probably translate to share repurchase, I would imagine. But where do we do this? We’ll probably finish the preparation toward the second quarter.

And also, we had the liquidation credit card receivables last year — in the fourth quarter. And this was counted in off-balance sheet. And also this — so we were successful in doing that. So it’s simply a business procedure. But I believe second quarter, by second quarter, we will be in a position to fully prepare. Will we do this? I think this to have to go hand-in-hand. Will we do this definitely? We cannot give you — we cannot commit to this, inclusive of the schedule and the timeline.

——————————————————————————–

Daisaku Masuno, Nomura Securities Co. Ltd., Research Division – Head of Information & Telecommunication Team, Japan & Analyst, Telecommunications Research, Japan [17]

——————————————————————————–

Well, because of the financial environment, if you want to do this, it could be that there might not be takers of your shares. Is that the case, do you think?

——————————————————————————–

Osamu Hirokado, NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director [18]

——————————————————————————–

Well, inclusive of that, yes, we are eyeing this situation. But unless — but we — unless something unexpected happens, I think we should be fine because we have no problems pertaining to the liquidity and the creditworthiness of our debt. Thank you very much. That is all from my side.

——————————————————————————–

Operator [19]

——————————————————————————–

The next question is from Merrill Lynch, Mr. Kinoshita.

——————————————————————————–

Yoshiyuki Kinoshita, BofA Merrill Lynch, Research Division – Research Analyst [20]

——————————————————————————–

This is Kinoshita. I have two questions. I’ll go one-by-one. The first is about the impact of COVID-19, which is summarized on Page 30 of the presentation deck. Relatively, I think you have summarized the revenue-related impact. But in regards to your expenses and cost, are there any areas where COVID-19 could come into play and have an impact? So can you elaborate the COVID-19 impact, if any, on the cost side? That’s my first question.

——————————————————————————–

Osamu Hirokado, NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director [21]

——————————————————————————–

This is Hirokado. On the cost side, for example, if the number of sales comes down, then the distribution — the commissions payable to the agent resellers will come down and also the various measures maybe get delayed. And generally, the expenses will also be postponed and its incurred will be postponed. And of course, if CapEx is delayed, the depreciation also comes down. But most of the cost that I mentioned is not really effective cost reduction. This is just about a postponement into the years after 2020 or the subsequent period. So it’s not going to be a broad — a real cost reduction in the real sense. So that’s the reason why I have not really identified them in the chart. But those are the potential impact.

——————————————————————————–

Yoshiyuki Kinoshita, BofA Merrill Lynch, Research Division – Research Analyst [22]

——————————————————————————–

So no potential impact of cost increase because of COVID-19, is that the right way to understand that? Is that correct?

——————————————————————————–

Osamu Hirokado, NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director [23]

——————————————————————————–

The incremental cost from COVID-19 for the time being, there’s nothing that I can think of at this point of time.

——————————————————————————–

Yoshiyuki Kinoshita, BofA Merrill Lynch, Research Division – Research Analyst [24]

——————————————————————————–

Okay. My second question is about 5G. The total number of subscriptions, illustrative, 2.5 million in 2020 and 20 million by the end of 2023. If you divide between individuals and enterprises, what is the breakdown of individuals versus enterprises? If you have — if enterprises are not included, please let me know. Please indicate if that’s separate or not. So I just wanted to confirm that point.

——————————————————————————–

Michio Fujiwara, NTT DOCOMO, INC. – Senior VP & Executive GM of Tohoku Regional Office and Director [25]

——————————————————————————–

This is Fujiwara from corporate strategy and planning. Enterprise accounts are already included in that number. So the 20 million includes enterprise accounts. And out of the 2.5 million for this fiscal year, currently we have 40,000 subscribers already on the 5G service. And at this point of time, from the second half onwards, because of the release of the standard models, we expect that 2.5 million will be the number that we can aim for. But due to the impact of COVID-19, we may have to revisit that number.

——————————————————————————–

Yoshiyuki Kinoshita, BofA Merrill Lynch, Research Division – Research Analyst [26]

——————————————————————————–

But 20 million and 2.5 million, modules, are they going to — are they included in that number? Maybe modules will not be available in the first phase.

——————————————————————————–

Michio Fujiwara, NTT DOCOMO, INC. – Senior VP & Executive GM of Tohoku Regional Office and Director [27]

——————————————————————————–

Yes, that’s inclusive of modules. But of course, how we utilize that will have to be reviewed from time to time as we increase the number of solutions.

——————————————————————————–

Operator [28]

——————————————————————————–

Next from Daiwa Securities, Mr. Ando.

——————————————————————————–

Yoshio Ando, Daiwa Securities Co. Ltd., Research Division – Research Analyst [29]

——————————————————————————–

Can you hear my voice?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [30]

——————————————————————————–

Yes, we hear you. But your voice is a bit faint. If you could please speak up. Yes. Thank you. It’s all right now.

——————————————————————————–

Yoshio Ando, Daiwa Securities Co. Ltd., Research Division – Research Analyst [31]

——————————————————————————–

I would like to ask two questions. My first relates to the impact from COVID-19. So traffic after April, what is the level of increasing traffic since the month of April, especially data communication? And also with regard to mobile communication service impact, what is the impact you see on mobile service communication revenue you are thinking behind this? And also the impact on the competitive landscape pertaining to number portability, I would appreciate your thoughts.

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [32]

——————————————————————————–

Thank you. Yoshizawa here. So I did cover this when we talked about the impact from COVID-19 and also we talked about communication traffic and also voice and data. Well, this month, April, the declaration of this state of emergency. So that was the assumption behind this page that mentions principal impacts from COVID-19. As far as voice concerned, from March, we see an increase of 5% to 6% in voice on a year-on-year basis. Naturally, people are working from home. And also in terms of business, there’s a pickup in the direct voice communication as a result. So that is what we imagine. Now against this backdrop though, for example, when it comes to flat rate services, Kake-hodai, for example, in the case of Kake-hodai plan, do we see an increase in this plan? I’m afraid that is not the case. So therefore, we have not seen very clear-cut impact, if you will, in terms of revenue per se. In the case of flat rate plan, with the Kake-hodai, with the parameters of the Kake-hodai plan, the traffic is probably increasing.

As far as data is concerned, you see the impact of slightly up, slight increase. From the end of March through April, as a matter of fact, what happened is this. Well, actually, from January 1, we provided an increase in the data packets for Gigaho. And so therefore, that being the case on a year-on-year basis, we have seen increasing of 5% on a year-on-year basis. And naturally, we take into consideration the capacity and the network to accommodate this. Then what about March — end of March through April, do we see the similar rate of increase? That is not the case. So that’s why we described the — pertaining to data as being slightly up. So this is what we capture on this page. So as far as the impact on mobile communication is concerned, do we see exponential increase in the traffic? That is not the case. We do not see increase on increase. That is not what we see.

And also with regard to MNP, mobile number portability, well, with the telecommunication business law amendment in October of last year, from that point onwards, the sales or marketing of handsets, we have been very creative since then. And in terms of — as for the number, the outflow — inflow and outflow of the absolute numbers, we are seeing significant drop in both inflow and the outflow. As far as the net is concerned, I think we do see some clear trends. So that being the case, I don’t think this is going to serve to reinvigorate the number portability.

——————————————————————————–

Yoshio Ando, Daiwa Securities Co. Ltd., Research Division – Research Analyst [33]

——————————————————————————–

My second question, Rakuten has launched its services. And at that juncture, roaming — the change to roaming from 2 giga to 5 giga. So how do you see the impact from the launch of Rakuten services, inclusive of their increase in the data bucket? And also by changing their plan to 5 gigabyte, have you changed your position towards Rakuten’s methods?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [34]

——————————————————————————–

Thank you. Yoshizawa here. Well, version 2 was announced on the date of their launch, which is April 8. And I think they’ve — 5 giga. And also beyond 5 giga, limiting the traffic — limiting the speed for increments of 1 giga. I was quite surprised that they would go that far. But then subsequently, because of the impact of COVID-19, well, inclusive of all these factors and also in terms of porting out of DOCOMO in the context of mobile number portability and also in terms of their lineup of handsets on the part of Rakuten and also launch of 5G services from June, which has been whispered, so we’re — we need to continue to just monitor all these aforementioned elements and variables. But do we see significant impact from Rakuten at this juncture? That is not the case. As far as we’re concerned, we will continue to work on what we have done. For example, new rate plans and also service support in supporting our network. We will continue to robustly implement these measures. So for the time being, I believe that we’ll be able to counter whatever Rakuten does. I hope that I have answered your question.

——————————————————————————–

Operator [35]

——————————————————————————–

The next question will be from UBS Securities, Mr. Takahashi.

——————————————————————————–

Kei Takahashi, UBS Investment Bank, Research Division – Executive Director and Telecom & Software Analyst [36]

——————————————————————————–

This is Takahashi from UBS Securities. I have two questions. The first, in your presentation, Mr. Yoshizawa, you mentioned that this is the start year toward a growth in a new era. And according to your previous explanation, you’re expecting — you have an ambition to achieve profit growth from this fiscal year onwards. But now is there any change in the directions this time around for this fiscal year? Rather than profit increase, are you going to prioritize investment for the growth in a new era? Is there any change in the basic policy or direction that you’re foreseeing?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [37]

——————————————————————————–

In that regard, what we mean by growth is that in terms of profit, last year, was supposed to be the bottom and we were aiming for recovery this fiscal year. And there’s no change to that basic policy in that regard. But of course, there are some uncertainties due to COVID-19. And that is the reason why we used this expression in the guidance for this fiscal year. What we mean towards growth in the new era is that in the 2020s, this is the start year of the 2020. So in that regard, this year, it’s going to be a milestone here in many aspects. So as I mentioned before, in terms of the finance and payment services, we would like to expand the number of members who will utilize our service, and we have already achieved a growth in those members.

So leveraging this strong membership, we would like to monetize through digital marketing and other means. So we have to take concrete actions for monetization and thereby achieve further growth now that 5G is now available. So we would like to aim for growth this fiscal year. And that’s the reason why we position 2020 as the year — the start year for our growth. And on top of that, the profit recovery has — that we have reiterated for many times, that is the ambition and that remains unchanged. So that is what we mean by growth. So we are going to aim for growth in that 2 different dimensions.

——————————————————————————–

Kei Takahashi, UBS Investment Bank, Research Division – Executive Director and Telecom & Software Analyst [38]

——————————————————————————–

Okay. My second question is about your adjusted free cash flow achieved a significant recovery in fiscal 2019 and working capital achieved a significant improvement. Can you explain the background? Of course, including the liquidation of receivables, can you explain the background why you are able to achieve this recovery in free cash flow?

——————————————————————————–

Osamu Hirokado, NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director [39]

——————————————————————————–

This is Hirokado. In fiscal ’19, free cash flow for fiscal ’19, the plan was JPY 530 billion, a significant decrease compared to 2018. But there was — we achieved a significant improvement. SMCC sales of shares of Sumitomo Mitsui credit card was already factored in. So the incremental came from the receivables. The installment receivables for 2019 decrease, of course, we were anticipating a decrease. But the decrease was much more larger compared to our initial projection, like JPY 50 billion discrepancy compared to initial plan.

In addition to that, the liquidation of the receivables was not really factored in, and we — that contributed by another JPY 50 billion. So for the working capital, there was a significant improvement. And for the working capital, in particular, the compression of inventory asset was a big factor. Intentionally, together with the procurement department, we shrunk the size of inventory. And because of the COVID-19, the supply was delayed. So because of these 2 different factors, the inventory level came down significantly.

——————————————————————————–

Kei Takahashi, UBS Investment Bank, Research Division – Executive Director and Telecom & Software Analyst [40]

——————————————————————————–

And for the installment receivables, depending — of course, this will be affected by your sales progress. But do you have also plans for this fiscal year to liquidate your credit card receivables and call down further in your inventory level? Can you talk about the prospects for this fiscal year?

——————————————————————————–

Osamu Hirokado, NTT DOCOMO, INC. – Executive VP, CFO, GM of Accounts & Finance Department and Director [41]

——————————————————————————–

For the inventory asset, we don’t have any plans, of course, to further — to achieve further reduction in inventory. That is going — that sounds very difficult. For the installment receivables, there might be a slight decline further, but we won’t be able to achieve a reduction in the magnitude of fiscal ’19. For the credit card receivables, because this is on uptrend, a growth trend, liquidation of the credit card receivables. And for installment receivables, probably this will come in tandem with the share repurchase.

So depending on the size of share repurchase, the installment receivables and credit card receivables, liquidation will be done in combination with the share repurchase. That’s a potential scenario that we may choose to take. So once we announce the guidance for this fiscal year, we will announce the fiscal year guidance at that point of time. But we may not be able to predict that possibility at that point of time.

——————————————————————————–

Operator [42]

——————————————————————————–

Next from JPMorgan, Mr. Tanabe.

——————————————————————————–

Jun Tanabe, JP Morgan Chase & Co, Research Division – Analyst [43]

——————————————————————————–

Tanabe from JPMorgan. Two quick questions. At the outset, you shared with us a quantitative — a qualitative outlook. If we look at CapEx, at this juncture, well, how much were you envisioning in terms of CapEx? And also — so lack of supply. And also you talked about a slow pace in CapEx. Is it because of the lack of supply that you’re not able to pursue CapEx? Is it both? So once COVID-19 is settled and is over, I think CapEx, you mentioned flat for CapEx, flat trend for CapEx. But do you — are you going to accelerate your CapEx once the COVID-19 crisis is over? I would appreciate your thoughts on this matter.

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [44]

——————————————————————————–

Thank you. Yoshizawa here. With regard to capital investment, the capital expenditure, we don’t see very — we don’t see very significant delay because of COVID-19, but with some difficulties in getting supply. Same also with regard to construction because general contractors, they’re trying to reduce the number of personnel as they pursue their construction work. So there’s going to be some impact from that situation going forward. So JPY 570 billion for the previous year, I think that was it.

But right now, if the COVID-19 impact continues going forward, especially the second half of the year, with regard to construction base stations, each one-by-one, there could be some slowdown, which means that there may be some impact on CapEx in the order of several tens of billions of yen. That is our assumption at this moment. I’m sorry, I cannot be any concrete — any more concrete on this. But so far, JPY 570 billion. At the end of the day, we might actually end up being at a lower level than the JPY 570 billion at the end of the year. But once the situation becomes clear, I will come back to you and give you a clear response.

——————————————————————————–

Jun Tanabe, JP Morgan Chase & Co, Research Division – Analyst [45]

——————————————————————————–

Point of confirm, so once COVID-19 — the question is are you going to accelerate your investment? That is the case?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [46]

——————————————————————————–

Yes. That is the case. But is it going to be 6 months from now? The impact — if there’s still impact from COVID at that juncture, can we really make a rebound? We’re not sure. But yes, what you say is correct.

——————————————————————————–

Jun Tanabe, JP Morgan Chase & Co, Research Division – Analyst [47]

——————————————————————————–

I see. My second question is this. You say the data communication is increasing. But then Wi-Fi — offloading through Wi-Fi, that’s probably the picture as well. So with regard to the optical fiber broadband subscription, what about your inquiries? Is it increasing? Can you share with us that situation, please?

——————————————————————————–

Hiroshi Tsujigami, NTT DOCOMO, INC. – Senior EVP, Executive GM of Sales & Marketing Division of Global Business and Corporate and Director [48]

——————————————————————————–

Thank you. It’s Tsujigami here. Well, the traffic on fixed, we’re not able to grasp the absolute picture on fixed line traffic. But if you listen to NTT, it seems that data traffic is increasing, when we ask our brethren, brother companies within the NTT group. Having said that, does that translate into actual sales? Because of the operations at docomo Shops have been reduced, we see even greater impact from reduced operations at our shops.

——————————————————————————–

Jun Tanabe, JP Morgan Chase & Co, Research Division – Analyst [49]

——————————————————————————–

So how long will COVID-19 impact continue? And how — what about the depth of this impact?

——————————————————————————–

Hiroshi Tsujigami, NTT DOCOMO, INC. – Senior EVP, Executive GM of Sales & Marketing Division of Global Business and Corporate and Director [50]

——————————————————————————–

Depending on that situation, the outcome will change. So right now, with regard to sales, I think the impact is probably going to have a downward impact. Thank you. That is all.

——————————————————————————–

Operator [51]

——————————————————————————–

So this will be the last question for today. SBI, Mr. Moriyuki. I’m sorry. Mr. Moriyuki, we cannot hear you. All right.

(technical difficulty)

Thank you very much for your patience. Can you begin your question?

——————————————————————————–

Shinji Moriyuki, SBI Securities Co., Ltd., Research Division – Analyst [52]

——————————————————————————–

I was also curious about the Wi-Fi offload. So with everybody staying home, I was just wondering if there was any potential for you to achieve data traffic reduction because of people staying at home. But a slight increase in data communication was reported by you. So what is the secret behind that? Is this because of enterprise demand? And also, because of the restraint from people going out, is there any impact on the traffic? Can you elaborate on that point?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [53]

——————————————————————————–

This is Yoshizawa. The — we are looking at the overall traffic. And we just gave you the trend information, analyzing the overall traffic. It’s very difficult for us to divide between individuals versus the enterprises. But of course, now people are teleworking and enterprise customers are bringing their PCs back to home and working from home, of course. And in addition, we have been launching this Zouryou campaign, the Gigaho Zouryou campaign. And for under 25 — for students, we have been providing this 50 gigabyte free-of-charge campaigns. So because of these campaigns, I think that’s the reason why we achieved an increase in the data traffic. But we don’t have any data that can indicate any division between the enterprise and individuals.

——————————————————————————–

Shinji Moriyuki, SBI Securities Co., Ltd., Research Division – Analyst [54]

——————————————————————————–

I’m not — I was not talking about the recent changes. But now with VPN increasing and telework increasing, I was just talking about the inquiries for the future. Have you’ve seen any increase in the inquiries of docomo Hikari subscriptions? Have you noticed any changes in the behavior from enterprises?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [55]

——————————————————————————–

The enterprises, as we mentioned earlier, the teleworking system, the conferencing systems, many people are trying out and have started using them. Some of them are immediately available. So in our response to the requirements for teleworking and remote working, there are products available. And we are receiving increasing number of inquiries for these products. But the actual account managers will have to go to the customer site and SE has to go there to build a system. But now given the restraint, we cannot go and visit the customer site in order to build the systems. But the inquiries are increasing, including VPNs.

If you try to respond to all these demands, for VPN, a particular equipment may be needed and we may not be able to prepare for that. And even though it’s possible, we have to incent people to install the equipment. And that’s facing shortage. So it’s not only DOCOMO, but everybody else is having the sharing the same problem. So depending on how these things unfold in the future, we may be able to increase our responses and solve the problem and be able to respond to the needs in the future. That was a general trend that we are seeing right now. I would appreciate if you could understand with my comment.

——————————————————————————–

Shinji Moriyuki, SBI Securities Co., Ltd., Research Division – Analyst [56]

——————————————————————————–

So is it right to consider that the demand from the enterprises are rising?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [57]

——————————————————————————–

We — your voice quality is very poor. So we were not able to listen to your question.

——————————————————————————–

Shinji Moriyuki, SBI Securities Co., Ltd., Research Division – Analyst [58]

——————————————————————————–

I thought that the smartphone utilization by enterprises was lagging behind. But is this recovering in that regard? The smartphone utilization rate by the enterprise, does this start recovering?

——————————————————————————–

Kazuhiro Yoshizawa, NTT DOCOMO, INC. – President, CEO & Representative Director [59]

——————————————————————————–

The conversion into smartphones by enterprise accounts, yes, in that regard, yes. So many things, many capabilities is already realized by the smartphones and also tablets. So in that regard, yes, we see that the trend of conversion into smartphones and tablets, that’s sure happening. And also, local governments, because of the remote education classes, telestudy requirement is already becoming increasing, not only for the university students, but also elementary schools and high school kids. Tablets are now in demand. People are wanting to have tablet systems. So in that regard, we see that trend noticeably.

——————————————————————————–

Naoto Okubo, [60]

——————————————————————————–

Thank you very much, ladies and gentlemen. With this, we would like to finish this session for today in which we announced the results for fiscal 2019. Thank you very much for bearing with us for a long time. Thank you. Good evening, ladies and gentlemen. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Source Article