NTT DoCoMo CEO Discusses F3Q2011 Results - Earnings Call Transcript

| About: NTT DoCoMo, (DCM)


F3Q2011 (03/31/11) Earnings Conference Call

January 28, 2011 3:00 AM ET


Osamu Hirokado – IR

Ryuji Yamada – President and CEO

Kiyoyuki Tsujimura – SVP

Masatoshi Suzuki – SVP


Tetsuro Tsusaka – Barclays Capital

Atsuo Takahashi – Mizuho Securities

Hitoshi Hayakawa – Credit Suisse

Daisaku Masuno – Nomura Securities

Hisataka Soejima – AllianceBernstein

Shinji Moriyuki – Nikko Cordial Securities

Daisuke Oshidari – JP Morgan

Osamu Hirokado

Ladies and gentlemen thank you very much for sharing your precious time to attend this meeting. We would now like to start this Analyst Presentation announcing the results for the first three quarters of the fiscal year ending March 2011. I am Hirokado, Managing Director of the IR Department. And I’ll be serving as NC [ph] for this meeting. Please be advised that this session is broadcast via live on FOMA network and also over the Internet. And a recorded video of this meeting will be provided on DoCoMo’s website on an on-demand basis. Please be advised of this.

Now we would like to start. I would like to introduce the participants from NTT DoCoMo. First we have Mr. Ryuji Yamada, President and CEO; Mr. Kiyoyuki Tsujimura, Senior Executive Vice President; Mr. Masatoshi Suzuki, Senior Executive Vice President; Mr. Bunya Kumagai, Executive Vice President, Responsible for Consumers; Mr. Kazuto Tsubouchi, Managing Director of Finance and Accounts Department and CFO; and also Mr. Kaoru Kato, Managing Director for Corporate Strategy & Planning Department.

Let me confirm the documents to be used for this meeting. We have the earnings release. We also have the presentation slides. And two pieces of press releases. One entitled DoCoMo to Offer Flat-rate Data Billing for Smartphones and Tablet PCs. The other one entitled NTT DoCoMo Announces 10-year Green Vision. So these four sets of documents are distributed to you. Please confirm that you have them all.

Now for today’s meeting we will start with a presentation from Mr. Yamada, followed by a Q&A session. We intend to finish the meeting at 6 o’clock sharp. Please also be advised that this – that there might be risk pertaining to forward-looking information. Please refer to the presentation for the risks pertaining to forward-looking statements.

Ryuji Yamada

Good afternoon. I am Yamada of NTT DoCoMo. Thank you very much for sparing your precious time to attend this meeting. I would also like to take this opportunity to express my gratitude for your continued patronage to the company. Now without further ado, I would like to the presentation for the results of the first nine months of the fiscal year ending March 2011. We have a quite a bulky documents. So I would just like to focus on the highlights.

I’ll begin from page three. The financial results for the first three quarters of fiscal year ending March 2011. For the first three quarters, operating revenues dropped by 1% and reached 3,209.1 billion yen. Operating income increased by 7.9% and reached 758.5 billion yen. So operating income revenues decreased by income increased. Because of the changes of the estimation method of the loyalty program allowances in the first half, the operating incomes progressed to full-year focus was 90.3%, a very favorable progress.

In the fourth quarter, due to the brisk sales of smartphones, we are expecting an increase in commissions and therefore we have not decide – we have decided not to change the operating incomes full-year forecast. Next page regarding the highlights of the results. Especially if you look at here growth, service level improvement, and cost control. We were able to simultaneously achieve these different challenges.

First about the smartphone sales. On a cumulative basis, this fiscal year we sold 1.26 million units as of the end of December. Packet revenues increased by 76.6 billion yen or 6.5% year-on-year. The revenues from new businesses which is represented by other revenues. Other revenues increased by 54.6 billion yen. So as you see here, these efforts for additional growth have delivered tangible results. The maintenance and improvement of service level, actually I’ll come back to this topic later but we were able to receive the number one rating in customer satisfaction. We maintained our churn rate low at a very low level. And we launched the Xi service.

Proper cost control. Well despite the increase of smartphone sales and resultant increase in data traffic, we were able to save equipment sales expenses as well as capital expenditures. So as I said, we were able to simultaneously achieve these three different challenges. Number five. Now this chart compares to year-on-year changes in operating income compare – year-on-year changes in operating income, as you see there, our operating income increased by 55.8 billion yen year-on-year.

Now first let me talk about the reduction of operating income, our operating revenues of 33.2 billion yen. Among that, voice revenues decreased by 140.5 billion yen, due to the expanded uptick of Value Plan and the reduction of billable MOU. On the other hand, packet revenues increased by 76.6 billion yen. Other revenues also increased by 54.6 billion yen. As I said earlier, this is the revenues from the new businesses. As we cultivated these new opportunities, we were able to generate additional revenues.

Equipment sales revenues, this dropped, so this is a reduction. Equipment sales revenues decreased by 23.9 billion yen. I’ll come back to this topic later but total handset sales, total number of handsets sold increased but because we were able to reduce the cost of equipment, we were able to – the total handset sales revenues decreased by 23.9 billion yen. So that was about the revenue side. Now let me talk about the expense side. The operating expenses decreased due to the decrease of equipment sales expenses which decreased by 42.4 billion yen. Because we were able to curb the procurement costs and saved commission fee, we were able to reduce the equipment sales expenses by up to 42.4 billion yen year-on-year.

Also network costs decreased by 43 – 45.3 billion yen due to a reduction in depreciation and amortization. Other expenses also decreased by 1.3 billion yen. The subsidiary related expenses and other expenses that are linked to other revenues increased however because we changed the loyalty program allowances estimation method. The reduction was limited to 1.3 billion yen. So all-in-all, we were able to achieve 758.5 billion yen in operating income which increased by 55.8 billion year-on-year.

Now slide number six. I think you already are aware of these, so just briefly. The MAX 50 Discount service. Now 80% -- more than 80% of the total subscribers have joined one of these discount packages. So its revenue – negative revenue impact is already minimized. On the other hand the Value Plan subscription reached a 68% of our total subscriber base. And the growth is already slowing. So I think in one year’s time or so this impact will become nothing.

Now page number seven, cellular ARPU. I just want to explain the comparison between the third quarter of this fiscal year and the third quarter of last fiscal year. As you see there, the third quarter ARPU for this fiscal year decreased by 440 yen this fiscal year to 5,130 yen. But if you look into it, voice ARPU decreased by 440 yen. The aggregate ARPU decreased by 340 yen and voice ARPU alone decreased by 440 yen. But you have to consider the irregular factor. In the voice ARPU of last fiscal year’s third quarter, included the 110 yen increased impact from the revision of the allowances estimation method from the two month carry-over service.

So therefore the actual reduction is limited to 330 yen if this impact was excluded, of which the expanded uptick of Value Plan had negative impact of 150 yen and the impact from the reduction of billable MOU was approximately 150 yen. On the other hand packet ARPU increased by 100 yen year-on-year. So we are still short of our full-year target to raise the packet ARPU by 110 yen, but in fact in the first quarter the packet ARPU increased by 80 yen, second quarter 90 yen, and the third quarter we achieved a 100 yen impact. So this is a steadfast growth and I hope you understand this.

We are committed to raising the packet ARPU by all means and we are now strengthening our measures to decent. Total handsets sales on page eight. The total number of handsets sold during the first three quarters increased 4.4% year-on-year and reached 13.59 million units. Of course this is a reserve of the past trend because in the past we’ve been decreasing our total handset sales in the same quarter of last fiscal year but we were able to turn it around this year.

Well after the enrichment of our smartphone lineup, we are now seeing an explosive growth of smartphones and I’ll come back to this topic later. But because of this factor we were able to achieve a year-on-year increase in total handset sales. Churn rate, I think this is self-explanatory. We’ve been able to keep it very low. That’s all that I wanted to say. Actually customer satisfaction improvement has a direct reputation on churn rate. So we are determined to keep it at very low levels.

Number 10, slide number 10, the number of net additions. The total number of net additions increased by 35% year-on-year and reached 1.13 million. Having said that however, we are still number two in the market share of net additions. So inclusive of the number portability customers, there are many challenges that we have to overcome. But 1.13 million net additions for the first nine months was still a very favorable number. And we were able to secure that.

Slide number 11, the migration of subscribers to FOMA and Xi. The total number of migrations for the first three quarters reached 1.06 million. This is the cumulative number for the first three quarters. So we still have 1.64 million remaining on the second generation network which account for 2.9% of our total subscribers and we have got more than one year left. So I believe we are making a steadfast progress for the completion of the migration.

Now let me talk about the primary actions and the results. These are the primary actions taken so far and their results. These are the major challenges or the major goals that we’ve been working on this fiscal year. And I believe we are making a steadfast progress towards its completion or achievement. So what are the major action items, customer satisfaction improvement, take-off of smartphone market, increase of packet ARPU, the smooth launch of LTE and the expansion of new businesses. As far as customer satisfaction is concerned, we received the number one rating because the people in the field strived a lot and now the people, sales people are quite invigorated and they are quite confident.

Smartphone market. Beyond our expectations, customers are now buying handsets or smartphones. This is a result of the expanded product lineup, I think that triggered a lot of sales but sales are expanding beyond our expectations. Packet ARPU. Actually on the total packet revenues for the first three quarters increased by 6.5% year-on-year. In the first quarter ARPU increased by 80 yen, second quarter 90 yen and the third quarter 100 yen. LTE as planned, we launched the Xi service on the 24th of December. And for the new businesses, we launched the Electronic Book service and now we are making preparations for the multimedia broadcasting service.

Slide number 14, customer satisfaction. Again I mentioned many times here with in front of you that under the change in challenge program, we were – where we’ve been working very hard to receive the number one rating in three years’ time. This was determined two years ago in 2008. And at last in November, we were given the number one score for the consumer sector as well. So it was very worthwhile for our all efforts to uniting the forces of the whole company, and the customers are beginning to appreciate this. So we received a very good reputation from customers nowadays. So we will continue this effort going forward.

And now that the whole market is shifting towards smartphones, we would also work so that we can receive the number one rating for the smartphone business as well. This is again the new goal that we set for our smartphone business going forward. Next slide number 15, our customer satisfaction efforts for the enterprise sector and data services. We received the number one rating in these two sectors for two straight years again. Now number 16, the expansion of packet ARPU. The chart on the left shows that year-on-year increase of packet ARPU, as you see there, we are achieving a steadfast growth which is indicated by the blue curve.

The right hand side is number of subscribers and the subscription rate of packet flat-rate services. Now 60% of our total subscribers have already subscribed to the flat-rate service and we are making good progress towards our full-year target to raise the subscription rate to 63%. Slide 17, packet revenues, historical growth. As you can see there in the historical growth, compared against the first three quarters of last fiscal year, this fiscal year we achieved an increase because in – the number for last fiscal year was 1,165.2 billion yen. This fiscal year the number increased by 76.6 billion or 6.5% and reached 1,261.8 billion yen.

Now let me give you analysis of the breakdown that contributed to this growth. For the first three quarters on a cumulative basis for the first nine months, i-mode accounted for the bulk. This made the biggest contribution to this growth of 76.6 billion yen. Of course smartphone and PC data devices also made contribution. But now if you single out the third quarter alone, the three months period then smartphone contributions became larger because we sold 700,000 units of smartphones in the third quarter alone. So smartphone was the biggest factor for the last three months followed by i-mode.

Slide number 18. This is about the smartphones. We increased the number of models including the release of GALAXY S, REGZA Phone and LYNX 3D and GALAXY Tab is also enjoying a very good popularity. We also made some function upgrades to the models. On January 19th, we provided some functional upgrades to Xperia and we plan to also offer some upgrades to LYNX and REGZA phones in March to May timeframe.

Now let me talk about the number of smartphone sales here on page 19. As you see there on the chart on the left. For the first I think the – if you compare the performance for the quarters, the third quarter sales was quite significant. On a cumulative basis for the first nine months, we sold 1.26 million units. Now if you look at the performance for the single month of December, according to the GfK Japan survey, DoCoMo acquired the largest market share in smartphone sales for December.

If you can look at the right hand side of the page. Right now, what’s the number? As of the end of the last Sunday or as of 23rd of January we sold 1.5 million units of smartphones on a cumulative basis this fiscal year. So for the full-year from now until the end of this fiscal year, we would like to add another one million units to our total smartphone sales. Sorry for this repeated revision of the smartphone sales projection. We started from one million units for the full-year, was revised to 1.3 million as when we announced the first half results but because after adding the models available with the winter lineup, we are now seeing stronger demand for smartphones. So we believe, we’ll be able to sell approximately 2.5 million units for the total of this fiscal year. So that’s our new target.

Now, next about the content and services for smartphones. Just briefly in the interest of time. This is about i-mode contents being transferred to smartphones. We are already doing this like BeeTV and other original contents are now installed on smartphones. And also the i-mode services like DoCoMo map navi. These are also transplanted to smartphones. We will like to offer many good i-mode services and content also on smartphones and we would like to do this expeditiously.

Page 21. This is a new billing plan for or a new scheme to induce the purchase of smartphones which is called Monthly Support. This Monthly Support program will be applied only for the purchase of smartphones. In order to make it easier for our customers to purchase the smartphones, we introduced this new scheme and this would be launched from the 15th of March. Well under the current scheme as you see on the left, we only offer a one-time discount upon the purchase of the handset, but under the new Monthly Support scheme customers will have to pay the full price for the handsets but instead they will be able to enjoy discounts to their basic monthly charges or the communication charges to their monthly bills. And if they do not change their model for – in the meantime, they will be able to enjoy this discount for up to 24 months.

Next, let me talk about the new packet flat-rate services for smartphones. This will also be launched from March 15th and two different services will be rolled out. On the right hand side on the top, you’ll find this so called new packet flat-rate service. It’s a full flat-rate service. This means that the ceiling will be 525 yen cheaper compared against the ceiling or the upper limit for the existing packet flat-rate service. So people who use a lot of smart packet rather will probably be satisfied with this new full flat-rate service.

Another service is called the new two-tiered flat-rate called Pake-hodail double 2. The upper limit will be same, however compared against the current scheme, the number of packets allowed until you reach the upper limit will be much more. So therefore people who do not reach the upper limit that soon will find this new two-tier flat-rate service much more reasonable. So therefore with this new billing plan, we hope to further expand another take-off of smartphones.

Page 23. This talks about Ouen Student Discount campaign. It’s a promotional campaign for students. As you know from February the spring season – spring sale season will begin and as was the case with the previous year. We will also cover family members of students as well. And we will be reducing basic monthly charge by as much as 390 yen per month for three years at most. And another service which we’ll be launching relates to packet flat-rate service for smartphones. From junior high school to high school students, we find that there is strong appetite for smartphones. We carried various questionnaires of surveys as part of our marketing. And we find that a very large percentage of students are interested in owning smartphones.

So that being the case, comparing this to i-mode, the charge for smartphones is considered to be expensive. So that’s why we want to introduce this new campaign called Ouen Student Discount campaign. And in order to make prices more accessible, we are going to lower the upper limit for the smartphone packet flat-rate service by 525 yen. So what this chart means is that the grey part, this will be from February 1st until March 14th and the other part will be from March 15th onwards. Now this campaign will begin to accept applications from January 28th and will last until May 31st. so that’s the period for accepting the application for this campaign. So with this campaign, we hope to further expand new subscription during the spring campaign period.

We want to further expand. We want to bring impetus to the expansion of smartphone take-off. Next, let me talk about data communication. I believe this is self-explanatory as far as customer satisfaction is concerned. We have again won number one ranking for two years in a row. So in terms of quality and services, I believe that DoCoMo’s service has been very well received, and we want to continue. I’m afraid I’m around being out of time. We’ll further speed up. Data communications, inclusive of Wi-Fi routers, we have various devices available and we’re offering campaign pricing.

Now in the case of Wi-Fi router, we hope that as soon as possible in spring of 2011, we hope to offer LTE enabled Wi-Fi router as well. We hope to do that as soon as possible. In other words for the Wi-Fi routers for 3G and LTE is enabled. Next, let me talk about the page 26. On this page, I’d like to talk about some of our i-mode based services. So let me first talk about i-mode packet usage expansion. We have a group called EveryStar. And EveryStar subscribers are expanding. Again I’ll skip some parts in the interest of time.

Next, let me talk about i-concier. Subscription has now topped 5.8 million and in line with the number of contents, again subscriptions continues to expand. And we’re further evolving and expanding i-concier function. This is very well received by the customers. Page 28. Let me talk about DoCoMo market for i-mode. As we talked about in the previous session, i-mode phones, I think for i-mode phones we also need to create an open environment so that various applications can be enjoyed by i-mode based customers.

So App store, Music store, and Book store. We have all these stores. And more than one million downloads of over 500,000 downloads, above 1.5 million downloads are being carried out into these different categories. So we are seeing steadfast increase in the take-off of this service. Page 29, here we talk about LTE. Again at the risk of repeating myself of rather I do not want to repeat myself but as of December 24, under these service brand of Xi, we launched LTE. And page 30 talks about some of the services launched and this is ceremony, so I’ll pass that.

Page 31 talks about the timetable for the LTE service development. This is well known to you. We hope to have 1,000 base stations at the end of fiscal year 2011. We have already 730 base stations in place. So we’re on our way to achieve 1,000 base stations at the end of this fiscal year. Page 32 talks about the billing for LTE. This was explained in the previous session, LTE billing. And also we want to achieve 15 million subs by fiscal year 2014.

33, here we talk about E-Book service. 2Dfacto, Inc., as of January 24 – January 12th a correction, launched this service. We started with approximately 20,000 titles but by spring we want to increase the number of titles to approximately 100,000. And I use this service when I ever travel abroad. And the new E-Book service is very comfortable to use. Six models of smartphones and one model of Bookreader are compatible devices for the E-Book service. I think it may be the tablet who has the best device to actually use to read the E-Book.

Next page 34, talks about multimedia broadcasting service for our mobile devices. Last summer, well as you know DoCoMo and KDDI has series of discussions with Multimedia Broadcasting Inc., or MMBI was awarded this licenses. And it started from January 11 of this year and commissioned broadcasting business company was established. The name is JAPAN MOBILECASTING. This is commissioned broadcasting business operating company. And also a company that creates programs. Another commissioned broadcasting business operating company is scheduled to be launched. So therefore we’re hoping that MMBI will evolve to this commissioned broadcasting business operating company. And these are some of the base station roll-out plan.

Next, let me talk about our global expansion especially in India. In the case of TTSL, subscriptions already top 82.6 million and the market share has reached 11.3%. We were awarded licenses for 3G network, 3G services in nine circles and we intent to launch or we have launched rather a service -- 3G service in all these nine circles. The feature is as is indicated on this page. Data communication has now been enhanced. We are able to introduce rate plans to build subscribers for use of data. So if this could be further expanded, we’re hoping that ARPU will further increase. Right now, it’s about 100 rupee or certainly lower than that. On a monthly basis, its equivalent to roughly 200 yen per month.

However if data communication is further utilized for the customers then the ARPU is expected to pick up. So therefore inclusive of our services, we hope to further aggressively launch 3G. Page 36, here we talk about Northeast Asia in terms of our global expansion. On January 18, well obviously Beijing and I was involved in this ceremony in Beijing. We are going to be – we signed an agreement that we’ll pursue closer cooperation with China Mobile and KT.

So we now have a 3-party business collaboration. And the areas of business cooperation are as follows, international roaming, enterprise services, LTE and other network technologies, smartphones and common service platform. So these are some of the areas which we envision cooperation to take place. In particular in Northeast Asia what we want to do is to aim to enhance customer convenience and expand mobile communications market in the fast growing Northeast Asian countries that have close exchanges with one other.

Page 37, preparations for SIM unlock. From April 1st, a correction, we are making preparations in progress to install the function that can disable SIM lock in the new handsets to be released after April 1st of this year. So therefore if there is an obligation by the customer at DoCoMo shop to disable a SIM lock, and there we will explain some of the important issues related to the unlocking of SIM function. Only then we will disable the SIM lock.

And these are three items to be considered for unlocking or disabling SIM lock. For example, if there is let's say a repair required, let's say that a customer uses a different SIM lock. We have to distinguish between which of the operator should be responsible for accommodating the repair. So these are some of the discussions which we’re having among the different operators. Page 38 takes about corporate social responsibility and page 39 talks about some of the initiatives under CSR. This is up to 2010. And I believe that we have indeed achieved our target in relation to corporate social responsibility so far.

So on page 39 we talk about the new initiative, a new corporate social responsibility program for DoCoMo. Please refer to the press release for the details in relation to this new initiative. So I spoke very fast. But if I were to sum up the financial results for the third quarter, I believe this was a quarter whereby we have indeed been able to achieve the major targets. From fourth quarter onwards and also towards fiscal year 2011, we will continue to emphasize further sales of smartphones. To do that in terms of marketing and in terms of the call centers at the front-end as well as the back office, we need to consider perhaps a change in these organizational structure within the group.

We will expeditiously tackle this particular issue. Then, last but not least I do that you continue to expect DoCoMo’s growth going forward. So thank you for your attention. This was a very lengthy presentation, I do apologize. That is all.

Question-and-Answer Session

Osamu Hirokado

Thank you very much Mr. Yamada. Now we will like to entertain your questions. Please raise your hand, and wait for the microphone to be given to you. And before you start your question, I would appreciate if you can identify your name and affiliation. Now any questions? Yes, I see a hand over here in the third row.

Tetsuro Tsusaka – Barclays Capital

Barclays. My name is Tsusaka. Regarding next fiscal year smart plan – smartphone plan, and I think you are now developing the plan and I saw a media report that it will be about 6 million units or may be one-third of your total device sales. Is that the right number that we should anticipate? That's my first question. The second question, you talked about the ARPU increase and the analysis. When I look into those numbers, if you reverse calculate that, the smartphone data ARPU should be about 5,400 yen or a 5,500 yen or so. But can you give us some analysis before and after the migration of what happened to the ARPU before and after migration? That’s my second question. And the third question, Wi-Fi routers, smartphones in these broad area you are now – you’ve already achieved customer satisfaction number one ranking and I think you are very confident about network quality therefore. I am not sure how users will use smartphones, but my smartphones themself, can they become a Wi-Fi router by software modification you can do anything but you have closed that opportunity by functionality. So I’m not sure if you’re really going to open up the network. So when you look at the smartphones that are made – marketed globally, are you going to offer smartphones that can do anything or are you going to insist on i-mode like smartphones going forward?

Ryuji Yamada

Can I talk like this here, or is the microphone on? Yes, it is on. Now I would like to answer the first two questions. And Mr. Tsujimura will answer the third one. Regarding the smartphone sales target for next fiscal year. Yes, as I said this fiscal year, the full-year target was revised to 2.5 million units. So in the remaining days of January and February and March, we will achieve one million units in sales roughly speaking. So next fiscal year target is not finalized yet, because we have to see the sales performance in the months of February, March. So we wait for the numbers to come out and factor them in the plan for next fiscal year.

But right now as we speak today, 2.5 million is the number for this fiscal year. We would like to double or more than double that as we speak today for next fiscal year. So probably around 6 million, that’s roughly speaking. It’s a very ballpark number but that’s what we would like to achieve next fiscal year. It may be surprising but that’s what we’d like to do as we speak today. Now the ARPU impact. As far as Xperia users are concerned, we received some – we did some survey and received some data. So those customers who switched to smartphones from May to September before the migration it was – the ARPU was 3,400 yen on average. After the migration, the ARPU rose to 5,500 yen. This represents a 2,100 yen increase. So smartphones has this boosting effect of ARPU.

Kiyoyuki Tsujimura

Now I would like to answer the third question. Regarding smartphones, basically we offer the global version, be it the Japanese manufacturers or our overseas manufacturers and I believe the availability of models from Japanese manufacturers were increased. And they were developing devices in view of the global market. So when they supplied the products to us as you see with the REGZA product, REGZA Phone, there are some Japanese unique functions like Ferica [ph], one segment broadcasting or more approved casings. When these are available we see that there are strong demand among those customers, among the Japanese customers. So customizations suited for DoCoMo customers will be to some extent required and as Mr. Yamada mentioned earlier, many of the i-mode features will be transplanted one after another to smartphones.

So in order to make it easier for today’s i-mode users to switch to smartphones like i-concier, i-channel, they will be transplanted to smartphones as quickly as possible.

Tetsuro Tsusaka – Barclays Capital

Then if I can follow-up to that one, this is a very small thing may be but for example GALAXY S, or reason they should be able to support tethering but in the DoCoMo GALAXY S models, you are disabling that because of your inconvenience maybe, but in that regard, I don’t really understand which direction you are headed for, because if you are able to tether support tethering with GALAXY S, you can differentiate yourself. When it comes to Wi-Fi router functions you mentioned and the in camera are also disabled?

Ryuji Yamada

We would like to eliminate those restrictions going forward. So we would like to follow the global trend. Of course these are for future study but these are the basic directions.

Osamu Hirokado

Next question please. The person in the second row, please.

Atsuo Takahashi – Mizuho Securities

Takahashi from Mizuho Securities. I wanted to ask about CapEx. First, in the third quarter, inclusive of LTE what’s the progress to forecast for CapEx? Can you give us an update on progress to full-year forecast? I have a feeling that may be you might be behind. But what about the full-year projection and what about the CapEx trend for the next fiscal year? And how much will LTE account for that? That’s my first question. And if CapEx continues to decline beyond the next fiscal year then do you believe that at the level of CapEx, you’ll be able to cover data traffic and data traffic in relation to your smartphones and LTE. In other words in conjunction with the decline in your CapEx, I have a feeling that your subscriber base will continue to expand. But to what extent will be able accommodate increase your subscriber base in line with your current plan? What’s the rental subscriber base you’ll be able to accommodate under the current CapEx plan? That’s my question.

Ryuji Yamada

Thank you. As far as CapEx is concerned in principle we are contemplating 675 billion yen for this fiscal year. Now LTE investment for next fiscal year, we are anticipating 100 billion yen or there about. And I think that will remain flat, 670 billion yen should remain flat for the next fiscal year, and so that’s our anticipation even with this LTE investment. Now as far as the traffic is concerned, it’s being growing by 1.6 fold every year. So traffic grows by 1.6 fold every year. But to observe this increase in traffic, I think level of investment or CapEx it would be required. Now how much capacity increase can we accommodate? We’ve S plus one, we talk about 1.6 fold increase in data. So we should be able to accommodate data traffic increase of 1.6 fold or more every year. So I guess maybe we’ll be able to accommodate doubling of the traffic ever year. Now the progress to full-year forecast, I think you shared your concerns but let me share some numbers. At third quarter, its 468 billion yen worth of CapEx. This represents roughly 70% or 69% or certainly below in terms of progress to full-year forecast. I wish we could average this up but in 2009, we had a progress to full-year forecast of 70% and we did reach the full-year target of 670 billion yen.

So I do not believe that we are behind in terms of full-year – of progress to full-year forecast in terms of CapEx. We have sort of said 18 billion yen if you will for LTE. So I think we’re also on track in terms of LTE investment.

Atsuo Takahashi – Mizuho Securities

I see, let me add to this question. I think you’re going to try to continue CapEx going forward but also broadband subscriber base will be expanding which will have an impact to boost your revenue base, that’s the possibility. Then that being the case I think based on the guidance your operating income target was about 100 billion yen. That’s the operating margin of roughly 20%. I think that’s the projection you had as a way of operating margin. But what about the margin, with the very rapid increase since smartphone take-off, are you bearish or bullish in terms of your outlook for operating margin going forward?

Ryuji Yamada

That’s a very difficult question. We are neither bullish nor bearish when it comes to the outlook for operating margin. You can see in the case of smartphones, we are going to be offering monthly support for buyers of smartphones. We are still in the growth phase for our smartphones. So that’s why we want to introduce monthly support so that our smartphones will be able to successfully gain advantage in the marketplace, because it’s a very competitive landscape. And there is a very strong requirement for second handsets, for example GALAXY Tab and so forth. So again we’re going to be launching Monthly Support.

And the impact of the discount will be felt toward the later stage if you will. So the smartphones will sell in large numbers. But then the traffic will increase. So there is a tradeoff between the two. Again in the initial phase, we have to win the competition, we have to be competitive in our billing plan. So how will this play out. We have to really monitor that. So it’s very difficult to make a general statement.

If you have large sales of smartphones, will this push up 100 billion yen operating income target but will that decline that’s another case either. We would certainly take measures to prevent any decline in the operating income. I know this is not a direct response to your question, I do apologize. Maybe at a separate juncture, we hope I’ll be able to receive your high response.

Osamu Hirokado

Are there any other questions. Yes, I see a hand towards the right hand side of the room in the front row.

Hitoshi Hayakawa – Credit Suisse

My name is Hayakawa from Credit Suisse. In relation to the previous question regarding your roadmap to the 900 billion operating income target after 848 billion yen this fiscal year, perhaps the next fiscal year, you may have to achieve 870 billion yen. With the introduction of Monthly Support and you are going to stimulate the sales of smartphones. The more you sell, the more profitable you’ll be next fiscal year I guess. But how it appears on the statement? Actually next fiscal year if you sell a lot of smartphones next fiscal year, the discount impact will appear the following fiscal year. So how it will appear, of course you didn’t make a very clear-cut statement regarding the 900 billion yen projection but what is your view on the next fiscal year’s financials, based on the assumption that you’ll be selling 6 million units of smartphones?

Ryuji Yamada

Well I am very sorry that this is a very commonsense kind of statement but 900 billion yen is the target that we have already set. And from 814 billion yen to 900 billion yen how we achieve that, as a management – as for the management we have to set the target first and how to reach there has to be hammered out. And from 840 billion yen to 900 billion yen, we have to set an interim target. And we will have to employ various initiatives to achieve that. And by promoting these initiatives then we will have to calculate the impact from Monthly Support and then we will have to look into the other factors that may affect the results.

So we have to take a look of the entire picture. In the meantime, we are promoting the efficiency improvement of our costs. And these results will be determined by how fast we try to achieve that the level of acceleration also has an impact.

Hitoshi Hayakawa – Credit Suisse

Then again another question, regarding your Monthly Support program, actually the data package is monthly upper limit was reduced as well. So perhaps this represents your intention, your eagerness to expand this market. So do you foresee any risks of not succeeding in the smartphone business next fiscal year, for example the procurement of devices or perhaps you might see that 6 million might be very easy target as long as you do proper marketing. So on the contrary, if there is any risk of not meeting the 6 million target, what kind of risk do you foresee? Because unless you have some solid background or confidence 6 million sounds like a very big number, which is a good news for us, but should you not be able to achieve that number? What kind of factors do we have to anticipate?

Ryuji Yamada

Well if there is any reason for us to feel it will be the availability of attractive smartphones. If we are not able to provide a good lineup of smartphones, then we may not be able to achieve that number. And of course that’s a very big foundation. And of course the other factors would be how to compete with other carriers, but attractive devices is the first and foremost most important. And also the introduction of new services like i-concier in smartphones, and many DoCoMo unique services available on smartphones will be key. So next fiscal year, we believe the percentage of smartphones and featured phones including both the summer and winter models altogether, we would like to achieve 50% of our sales from smartphones.

When it comes to i-mode feature phones, the STYLE series are the most popular, stylish, good designs, but limited functions, I mean standard functions, design collaborated functions though smart handsets are the most popular among the i-mode features. I saw this is the source of popularity for i-mode devices. On the contrary when it comes to the PRIME handset, the many of the PRIME users I believe are more likely to migrate to smartphones. So today although we have four lineups the PRIME and PRO and STYLE and so forth, we would like to review this handset category next fiscal year.

So the number of smartphone models available will also be increased to let's say half of the total models that we released next fiscal year. But saying this is very easy. In action we have to work on many fronts including the development team. We have to shift our human resources from i-mode to the development of smartphones and services and functions. So we would like to shift that focus drastically to smartphones going forward. And if I can add another comment, the disadvantage if you will of smartphones compared to iPhone – i-mode for example is the battery life I think.

Today’s i-mode phones can last for three or four years without charging. But if you try to use smartphones, the battery lasts for only one day at maximum. So we will have to come up with contents and application that will be more than offset the disadvantage of battery life. This is one of the challenges that we have to work on going forward. Did we answer? Okay, thanks.

Osamu Hirokado

Next question. The gentlemen seated right next to the previous questioner.

Daisaku Masuno – Nomura Securities

Masuno from Nomura Securities. I wanted to ask about smartphones and tablets and also some financial results for the question as well. Well operating income has increased in the third quarter. However in terms of full-year plan, I suppose from January through March, you’re anticipating substantial decline on a year-on-year basis. You are anticipating some downward trend in your operating income in the fourth quarter. So what are the reasons for that? You will be selling some one million smartphones, is that the reason or and you’ll be reducing your interconnection charges? Is that the driver for the decline in the operating income in the fourth quarter? So can you talk about the drivers, why is it that you foreseeing that from January through March you’re anticipating such downward trend in your operating income? And also when it comes to Monthly Support, how much expenditure will this mean on a monthly basis?

Ryuji Yamada

Thank you. I know the progress to full-year forecast is already 90% as of third quarter. So what about the remaining fourth quarter? I suppose that is your question. Yes, smartphones, we want to sell more than one million units of smartphones from February through March. So that means that some commissions will come into play. And also yes, we did lower our interconnection charges or access charge by as much as 35%. Well DoCoMo lowered its access charge by 35%. And if other operators reduced their access charge then it will be offset but we’re not sure how the other operators will act in terms of their interconnection charges. So that’s the other element.

And also the lapse if you will of loyalty points – loyalty program points. The loyalty program has been extended from two years to three years. So there is not expiration of points for this fiscal year. So in the past this would have meant reduction in expense, but since there is no lapse for expiration of points for this fiscal year, this could have some impact on the expense. So that's where we – since we’re not certain about the outcome we decided to leave intact the full-year projection at this juncture, I think we need to further study this.

Now Monthly Support, this will be from March 15th. Its only 15 days. So this will not have much impact for this fiscal year.

Daisaku Masuno – Nomura Securities

Now as far Monthly Support is concerned, how much support are you envisioning? Is it 500 yen or 1,000 yen? How much are you taking with the level discount for handset?

Ryuji Yamada

Well in principle as far as the discount is concerned, in the case of GALAXY S, it’s been sold about 30,000 yen. And well the pricing is about 20,000 yen or 30,000 yen per handset. This will be divided over 24 months. So that’s the purpose of what we’re talking about. Again there will be variance from model to model. So the level support render will vary from model to model.

I see then interconnection charges, this could be an upside if other operators reduced their access charge, is that the case? Again, we’re not sure to what extent they will lower the interconnection charge.

Daisaku Masuno – Nomura Securities

Now in terms of your marketing and sales, will the – I know that you’ve been talking about the target about for smartphone sales but what about the tablet? For the next fiscal year, to what extent do you want to expand sales of your tablet devices? Now in the case of procurement of smartphones well based on newspaper report I know, I think there is a talk about the launch of new Xperia. In the REGZA there was talk about the lack of shortage of supplies. So are you certain that there will be supply available?

Ryuji Yamada

Let me turn to the tablet. Tablet is for consumers. Well I have a tablet myself, a GALAXY Tab. Well and the GALAXY Tab or tablet machines are very popular among the consumers, retail customers, but the corporate customers are also very, have shown a very strong response to the tablet. So for example these tablet devices can be utilized saying a [ph] solution for our customers. So we’ve been aggressively marketing the corporate customers for the usage of tablet. And we’re trying to gather their response.

We hope that we’ll be able to sell several hundred thousands of tablets. In March a new type of tablet is scheduled to be launched. So it’s very difficult to pinpoint a very specific number as far as the sales of tablet devices are concerned. Now procurement. This is a question which we have repeatedly received and we have repeatedly made this comment. As far as the permitting [ph] is concerned we will try to identify to what extent sales can be achieved and based on that outlook, we will be placing orders to our vendors.

So the vendors who have created this smartphones, it’s very difficult for them to have a very large scale production line at the initial phase. So I think we really have to consult closely with the vendors. But as much as possible, we will try to avoid any shortage of supply.

We are going to achieve 6 million units of sales, then it means that we need to procure a very large number per model. So yes, we will do our best. Thank you.

Osamu Hirokado

Are there any other questions? Yes, I see a hand but we are now approaching the set limit for our time allotted for this meeting. So we have – I see three hands now. So these would be the last three questions. Okay, towards the right hand side of the room to begin.

Hisataka Soejima – AllianceBernstein

My name is Soejima. I have three questions. First, regarding your last comment, regarding the reinforcement of smartphones. You said that you will have to reinforce your internal organizational structure and that you will be shifting your human resources for the development of smartphone related activities. Can you also comment on what you are going to do to reorganize your distribution for example? And the second question is about the data ARPU. You see that usage is expanding after the migration and that’s understandable. On the other hand, the data usage, the data traffic is quite significantly increasing. So you will have to spare some efforts to reinforce your network. So if you consider this balance what kind of impact will this have on your financials? Will there be much more burden or will it generate more profits? Can you comment on that one, that’s my first – that’s my second question. And my last question is about that you are seeing a huge increase of smartphone demand and you are making a fairly good progress in your business, that’s my impression but if you look into five, 10 years from now looking into overseas opportunities, you have to generate profits from overseas investees otherwise of course you’ll be able to I think attain the 900 billion yen target. But above that it will be very difficult unless you take opportunities and generate revenues from overseas. So at which point of time do you think you will start collecting you investments from your overseas investments. Can you give us some benchmark, can you comment on that?

Ryuji Yamada

I would like to answer the first two questions and maybe the last question can be answered by Mr. Suzuki. First about the internal structure, how we are making our transition for putting more emphasis on the smartphones. I talked about the development team. Also there is a team responsible for our content development. These teams we have two different teams for i-mode contents and smartphone contents. We will integrate them so that we can spare more resources for our smartphone contents. That’s about the content team. We also have call centers. Call centers, I know that we are causing a lot of inconveniences but the efficiency of handling the questions are not really high at this point. So we will have to reinforce our call center staff who can handle smartphone inquiries.

Even if the smartphone sales increases, we don’t want to increase the number of smartphone capable call center staff in proportion. So those call center staff who are now handling i-mode related questions, should be shifted to smartphones, that’s our basic philosophy because that’s the most efficient way. So of course they will have to learn a lot. So that’s one thing that we have to work on for the call center activities.

And the other thing is about DoCoMo shops. At the DoCoMo shops, those staff – well these staff will have to accommodate and respond to customers especially when it comes to smartphones. We will have to have a solid structure in place so that they can have the proper skills and ability to handle those smartphone related questions and inquiries. So of course we are happy that we were able to receive the number one rating in customer satisfaction in our scores but we should be not content here. We have to find out what we have to do next. And what is most important is that in view of this major shift to smartphones going forward, we will also have to offer proper response, the number one response for customer for smartphone related enquiries on the all fronts. The faster we are, I think the more likely we are to receive that number one customer rating even for a smartphone business. So those are the areas that we would like to tackle going forward.

Second, regarding the load on the network and the balance with the revenue increase, right? As far as the network burden is concerned, because we’ve been so far working quite heavily for the reinforcement of network and also with the introduction of LTE because of its three times higher spectra efficiency and because of very efficient capital expenditures plan. Even if smartphone uptick increases, I don’t think it will have a significant burden on our financials. We also employ what is called the dynamic traffic control and the Wi-Fi offloading. Of course now LTE is the number one solution. The second one is the dynamic control. And we would like to of course, the dynamic control is a technology that reduces the speed of super heavy users. And should be not be able to accommodate everything with that then we will resort to Wi-Fi offloading.

So put it the other way. Even if smartphone increases and we would like to avoid the situation in which that it will have a significant impact on our financials or negative impact on our financials.

Masatoshi Suzuki

In the case of NTT DoCoMo today, we are looking into returns of 100 billion yen in revenues and we are committed to increasing this as much as possible. So it won't shrink from the current level. But of course the global picture is changing quite dramatically, voice and network related investments with the voice and the penetration rate now, the world is shifting towards data services. That means we are entering to the world of value-added services which offers additional value. And of course the migration to smartphone is another global trend. So joint procurement and joint deployment of smartphones will become much easier than ever.

So of course we are now seeing a huge transition right now. So our direction that we should follow is how to take advantage of our data superiority. And when it comes to India, we will have to leverage our know how our superiority in the Indian market as well. So those are the opportunities that we can seek for the India and the broader Asian markets. And in the meantime, we should also look into the applications or upper layer businesses like we did with net mobile.

So how to increase our value in these areas is what we have to work on and now we are sowing the seeds if you will in these areas. And we are beginning to see the results. So as Mr. Yamada mentioned, we’ve entered into a tri-party agreement between China, Japan and Korea. And for the next five years by working on these things, I think we can gradually grow the business. And we will form our alliances. So we are now shifting gradually from the only to Japanese market to other areas in the road. And in the Philippines and in India, we are now distributing applications. This is a very small business today and I am not sure, if this is going to grow significantly in the future. But by working on these upper layer opportunities, like applications and information distribution, there is an opportunity for us to utilize the network and expand into new opportunities of new fields. So that’s the general direction.

But for the specifics, we will have to show tangible results, otherwise even if I elaborate then try to drag on today, you won't be able to believe it. So we will have to show tangible results. So value-added services, added value are the areas that we will have to address. Of course we have not disclosed any concrete targets but we have some goals internally.

Osamu Hirokado

Next question please. The gentlemen seated in the second row.

Shinji Moriyuki – Nikko Cordial Securities

Thank you. Moriyuki from Nikko Cordial Securities. Thank you. Another questioner asked of what are the risks of you’re not being able to achieve 6 million units. I actually have a totally opposite view. I understand that elderly couples are now beginning to ask very seriously about smartphones inside DoCoMo shops. And then you could have very old model smartphones going forward. If that’s the case, then I think this was snowball [ph] into a very strong demand potential demand for smartphones. But then again there is a problem with supply you have shortage of supply this fiscal year. So it’s not so much that demand may not reach 6 million units. What level of demand can you really accommodate? Again, you can't of course forgo maintenance for your existing phones. So what are number of units of smartphones that you’ll be able to accommodate?

Ryuji Yamada

That's a very difficult question. I know that is it that you want to double your sales of smartphones so year-by-year. And if more easier to use smartphones from our accessible smartphone appear than people might feel that this maybe a very good buy. So I have a feeling that a very virtuous cycle is about to begin. Well if we are have 10 models of smartphones, 6 million which means therefore each model we are contemplating 600,000 units of sales. And they will have to be very popular. But I think the vendors will probably be able to accommodate up to 600,000 of sales per model per year.

So it really is up to how many popular models we’re able to launch. If we only have one popular model, we’re not going to reach 6 million units. So that’s where we have to have a very strong lineup of smartphones. And it’s important that the customer would be able to choose. We need at least five or six different models so that the customers will be incentivized to buy smartphones. So if we have may be five strong models than this might reach one million units.

Shinji Moriyuki – Nikko Cordial Securities

So you are not envisioning upside on top of 6 million units? Is that what you’re saying?

Ryuji Yamada

Again if we have very large number of popular models, then we could exceed 6 million but it’s very difficult to reach 6 million per model. No, that’s not what I am envisioning but if you introduce Japanese unique models then again it’s a matter of how many popular models we’re able to garner. As far as supply and demand situation is concerned if there is an upside to demand to what extent can we supply? There so is the challenge. But it’s a matter of projecting the sales per model. How accurately can we set the projection be at the GALAXY, Xperia or REGZA. We have shortage of supply. Is that so much components shortage? You see our initial projection was wrong.

We simply were not prepared to make the correct order placement at the initial phase. But as we get more experience on launching different models, I think we’re able to enhance our accuracy in order placement.

Shinji Moriyuki – Nikko Cordial Securities

So if you do that then do you believe that you can have upside on top of 6 million?

Ryuji Yamada

Well 10 models, 600,000 units that’s 60 million units. So I think we can go there. And I think there is upside potential. But our interest is not so much sales but trying to strike the right balance between supply and demand.

Shinji Moriyuki – Nikko Cordial Securities

If I could further add, in the case of i-mode featured phones to smartphones, when will smartphones overtake i-mode phones? I think in the previous session we’ve set 2013 but may be smartphones could overtake i-mode phone sales in 2012. So that’s where we need to set internal organization. We need to have a structure in place so that we could accommodate a situation where smartphones overtake i-mode featured phones sales in 2012. Well maybe you’re little bit of cautious so may be, be earlier in achieving this target. Let me come to my second question, I think you made a very conscious comment about your outlook for the financial results for 2011. You’re going to be introducing Monthly Support and I think you talked about the 2,100 yen increase in ARPU for smartphone users. So when it goes all these elements, I think there is a lot of upside for 2011. And you talked about reorganization. And this might involve costs, but I have a feeling that the moment is on your side. So can you share with us a more thoughts of 2011 fiscal year onwards? Are you not sure about how long the 2,100 yen increase effort [ph] can continue. Is that the reason for your caution?

Ryuji Yamada

Well, we carry that questionnaire survey among Xperia users. And we find that the Xperia subscribers or buyers are people who have very strong literacy. But if the smartphone subscriber base reaches 6 million, then it means that ordinary users are going to be buying smartphones. And in the case of our ordinary users it’s not – we’re not sure to what extent they might be using the full flat-rate service or the two-tiered service. So as the customer base seeks balance for smartphones, then naturally the incremental portion are people have to be diluted. But then in the two-tiered structure, I think it’s very easier for the smartphone users to reach the higher limit soon. We just really hope so.

Shinji Moriyuki – Nikko Cordial Securities

My last question. I have a feeling that the contribution of i-mode is quite strong, but after the first half I think i-mode ARPU was not growing as much. But has the momentum changed once again. What about the contribution from i-mode?

Ryuji Yamada

Well in the case of i-mode, we’re not talking about increasing packet but a 110 yen is very difficult to reach. A 110 yen on a full-year basis. We’re talking about 80 yen, 90 yen, a 100 yen increase, what about the fourth quarter? That's something that we need to work on. We really need to work to expand data ARPU. But yes, the i-mode subscriber base is very large in absolute terms. But then the level of increase i-mode users is somewhat limited right now, that's the difficulty.

But then i-mode users right now are migrating to smartphones. So high-end users, high volume users are now migrating to smartphones. So maybe that’s the reason for the like last year increase in data ARPU for i-mode users. But we’re hoping that we’ll be able to boost the usage amongst the light users. We have some 50 million subscribers for i-mode feature phones. So we need to work on that.

Osamu Hirokado

And this will be the last question. The third row from the front.

Daisuke Oshidari – JP Morgan

JP Morgan, my name is Oshidari. In the interest of time I would like to keep my question short just for confirmation, regarding this CapEx, if the traffic increases more than you projected, are you committed not to increase up to absolute amount of CapEx anymore by all means or for example, if the situation comes in which the that you will have to raise the total CapEx, temporarily even to somewhere above 800 billion yen or maybe 700 billion yen, not next fiscal year alone. If you look at the CapEx outlook for over the medium term, what will be the possible scenario?

Ryuji Yamada

Well the total capital expenditures for the last two to three years have been reduced. And of course we cannot be so precise about the future but for the next two, three years again we would like to maintain the total CapEx at the current level of below 700 billion yen. At least we will like to maintain it a flat, at least flat. We are not going to increase. Actually we would like to curb to the extent possible any increase in capital expenditures.

And rather using Wideband CDMA technology, it is more efficient to build up the network using LTE. So what we are asking to our engineers today is that the basic approach of capacity increase should be done with LTE as opposed to Wideband CDMA. But of course the circumstances vary depending on our locations. So in some situations we will have to use Wideband CDMA. But by adhering to this approach, we would like to maintain the CapEx at flat at maximum.

Daisuke Oshidari – JP Morgan

The second question. For two straight years you received the number one customer satisfaction rating, as a result of that, what kind of impact will it have on you management? evenues, be it income ction rating, as a result fo that tion CDMA. but he network using LTE. So what we are asking to our engiFrom our viewpoint be it revenues, be it income. In what form quantitatively are you expecting results from customer satisfaction improvement? You spared two more slides for customer satisfaction every time. But so what happens when you receive the number one rating? Can you quantify how much costs you spared for that and what was the results or can you say that what could have happened if you didn’t do this?

Ryuji Yamada

Okay, I understand your question. Customer satisfaction, number one was the goal but we did not work on it just because for the sake of receiving the number one rating. Actually it would be very good if we were able to receive the number one rating. That was the approach in our first place. The goal didn’t come first. We needed to improve the customer satisfaction in the first place. And as a result of our efforts, we were able to receive the number one rating. So what could have happened if we didn’t received the number one?

What would have happened if we were not able to – or if you were not successful, this would have resulted in an increase of our churn rate. If the churn rate increases by 0.3% every month, then you’ll be able to calculate what kind of losses we were talking about. Even a 0.1 – 1.0% churn rate was what we had before. So customer satisfaction was something that we had to work on. I could always give you a simulation and a calculation afterwards. I can do that myself.

Daisuke Oshidari – JP Morgan

Okay, I think on the other hand churn rate is very low already, it’s like 0.4% or something and I don’t think it is very easy for you to reduce it even further from the current level. So can you expect it to come down even further? Do you have any mechanism in place to do that or do you have to spend additional cost to further reduce it?

Ryuji Yamada

0.4% something to reduce it below the 0.4% level could be quite difficult because there are some forced churns that we have to anticipate and also there are natural churns. Forced churns and natural churns account for 0.2% already. And 0.46% means that we only can work on the remaining 0.26%. And this is there, we are heavily competing against the competition. So customer satisfaction improvement means customers will continuously stay with DoCoMo. And 0.4% is something that we would like to maintain going forward, but reducing it below 0.4% is not something that we are determined to do.

But improving customer satisfaction entailed cost. And that costs will have to spared, but we will work very hard and try to improve ratios easily, so that we can squeeze the cost out of it.

Osamu Hirokado

Thank you very much. This ends the presentation. Thank you very much for your attendance.

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