NTT DoCoMo's CEO Discusses F2Q 2012 Results - Earnings Call Transcript

| About: NTT DoCoMo, (DCM)


F2Q 2012 Earnings Call

November 2, 2011 4:00 AM ET


Osamu Hirokado – Managing Director, IR Department

Ryuji Yamada – President and CEO

Kazuto Tsubouchi – EVP, Managing Director, Accounts and Finance Department and CFO


Tetsuro Tsusaka – Morgan Stanley

Shinji Moriyuki – SMBC Nikko Securities

Daisaku Masuno – Nomura Securities

Atsuo Takahashi – Mizuho Securities

Daisuke Oshidari – JPMorgan

Yoshio Ando – Deutsche Securities

Hitoshi Hayakawa – Credit Suisse

Osamu Hirokado

(Interpreted) Ladies and gentlemen, thank you very much for waiting and thank you very much for sparing your precious time to attend this analyst meeting presenting the results for the first six months of the fiscal year ending March 2012.

I myself is Hirokado, the Managing Director of IR Department and I’ll be presiding this meeting. Please be advised that this meeting is broadcast live on phone and also on the Internet. And also, the recorded video of this meeting will be provided on DoCoMo’s website for on-demand distribution.

Now, first, I would like to introduce the participants from NTT DoCoMo. We have Mr. Ryuji Yamada, President and CEO. Next, Senior Executive Vice President, Mr. Kiyoyuki Tsujimura. Next, Senior Executive Vice President, Mr. Masatoshi Suzuki. We also have the Executive Vice President and Managing Director of Accounts and Finance Department and CFO, Mr. Kazuto Tsubouchi.

We also have Executive Vice President and Managing Director of Corporate Strategy and Planning Department, Mr. Kaoru Kato; Executive Vice President responsible for Network Division, Mr. Fumio Iwasaki; and Executive Vice President responsible for Consumer Marketing, Mr. Takashi Tanaka.

For today’s meeting, we have four sets of documents: one, earning release; number two, the results presentation slides; number three, the presentation slide for the medium term vision 2015; and fourth, the press release entitled “DoCoMo Releases Medium Term Vision 2015

Shaping a Smart Life.”

First of all, we would like to have a presentation from Mr. Yamada, President and CEO, followed by a Q&A session. We would aim to finish this meeting at 6:00 according to our previous announcement, but because we have this announcement of that medium-term vision, we would like to extend the meeting up to 6:30. Regarding the potential risk regarding the – of our business, please take a look at our slide and also Form 20-F filed with the U.S. SEC.

Now without further ado, I would like to give the microphone to Mr. Yamada.

Ryuji Yamada

(Interpreted) I am Yamada of NTT DoCoMo. Thank you very much indeed for taking part in this meeting despite your busy schedule. I would also like to take this opportunity to express my gratitude to your continuous support to NTT DoCoMo.

Today, we would like to present the results for the first six months of the fiscal year ending March 2012 and also the medium-term vision 2015 which we just recently developed. I know you are very busy and it’s quite bulky, so I would like to extend the meeting by 30 minutes compared to the initial plan.

Now without further ado, I would like to start immediately with the presentation on the results for the first half of fiscal 2011. If you can go straight to page three of the presentation, these are the highlights of the results for the first half of fiscal 2011.

As you can see here, in the first quarter – first half we sold a total of 3.63 million units of smartphones which is much higher compared to 2.52 million units for the full year of last fiscal year. And due to this brisk smartphone sales, the second quarter ARPU for the three months’ period increased by ¥150 year-on-year. As a result, the second quarter operating revenues increased by ¥16.8 billion year-on-year.

And also, if the impact from the loyalty point and handset repair system revision was excluded, it’s right here, if those are excluded which had an impact of ¥55 billion in reality. If those impacts were excluded, the second quarter operating income increased by ¥32 billion according to our view compared to the last fiscal year.

In the second quarter of last fiscal year, we reviewed our point program and also the handset repair system by optimizing the period in which we offer the repair service. As a consequence, we were able to reduce the allowances by ¥55 billion in the second quarter of last fiscal year.

So, I want you to understand that in order for us to precisely understand the business trends, whether it is going upwards or downwards, in order to have a correct understanding on the major trends, I think it is much better for us to exclude this ¥55 billion impact and compile the results without that impact because that more accurately reflects the current situation. And when that impact is excluded, we believe the second quarter operating income effectively posted an increase. And I think this growth trend is expected to continue in the third and fourth quarters.

So, in light of these first half results, we have decided to make an upward revision to the full-year forecast, specifically, operating revenues was revised upwards by ¥10 billion, and it is expected to reach ¥4,240 trillion for the full year. Operating income expected to reach ¥870 billion, up ¥20 billion compared to the initial plan. And our smartphone sales is expected to reach 8.5 million units, up 2.5 million units compared to the initial plan. And packet ARPU is expected to reach ¥170 – is expected to record a ¥170 increase year-on-year, up ¥30 compared to the initial plan, excluding the impact of the monthly support discount.

Slide number four, this is the results in summary. As you can see here, on the red part, we have recorded a decrease of revenues and income. However, if the impact of the loyalty points system revision and the handset repair system change was excluded, we have incurred an increase effectively. And the progress to full-year forecast was 58.4%, which was almost in line with our earlier expectations.

Slide number five, this is the results for the second quarter, the three months period from July to September. When the impact of the system change was excluded, the operating revenues increased by ¥16.8 billion compared to the same period of last fiscal year and operating income posted an increase of ¥4.8 billion. I guess this trend of recording income increase in both revenues and income are likely to continue towards the full year. And that’s the reason why we have decided to make an upward revision to our full-year forecast.

Slide number six. Now, let me explain the details behind the changes in operating income compared to the first half of last fiscal year. Again, in order to give you a precise understanding on the business trends, we would like to explain, excluding the impact on the system change of the loyalty points system and their handset repair system. Actually, voice revenues decreased by ¥96.1 billion but packet revenues on the other hand increased by ¥69.5 billion. So, the reduction of voice revenues is still larger compared to the packet revenues increase. So, we haven’t been able to make up for the losses completely yet, but the GAAP has narrowed quite significantly.

Other revenues also increased by ¥5.4 billion because of the increase of the number of mobile phone protection and delivery service subscriptions and the credit revenues increase, and other equipment sales revenues decreased by ¥4 billion.

On the other hand, the expense side, operating expenses posted an increase of ¥10.1 – equipment sales expenses increased by ¥10.1 billion. The cost of equipment procurement decreased by ¥3 billion, but on the other hand, because we increased the sales of crossy and smartphones, distributor commissions increased by ¥13.1 billion. So, altogether, if you subtract ¥3 billion from ¥13 billion, as a consequence, the operating – excuse me, equipment sales revenues increased by ¥10.1 billion.

Network-related cost decreased by ¥16.8 billion and other expenses decreased by ¥50 billion. This was the largest element behind the changes in operating expenses. Because the number of handsets submitted for repair decreased in number, we were able to save the equipment – handset repair cost and also the cost for Battery Anshin Pack Support. Other expenses decreased by ¥50.5 billion

Why did this happen? This is because a huge number of customers switch to smartphones this – in the first half. Without this migration to smartphones, they would have continued use their old feature phones and that had incurred – that would have incurred more cost for repair, but with the expanded adoption of smartphones we were able to save the repair costs.

Slide number five about the 50% discount services. As you can see on the left, the MAX Discount service subscriber growth is already maturing and this won’t have any significant impact any longer. Value plan is now subscribed by 75% of the subscribers, so we only have to anticipate only slight increase of – and the impact from that one.

Regarding the cellular phone ARPU, I would like to give some detailed explanation here. The aggregate ARPU for the second quarter decreased by ¥230 year-on-year and reached ¥4,970. Voice ARPU posted a decrease of ¥380 year-on-year. There was a decrease of ¥380 to ¥2,280. Among this, the expanded impact of value plan – expanded adoption of value plan accounted for ¥100 of that ¥380 decrease and the reduction of billable MOU accounted to ¥200 out of that ¥380 decrease.

The billable MOU decreased because of customer’s migration to smartphones. With customers migrating to the smartphones, we see a general trend of increased packet usage compared to voice. And because the reduction of billable MOU was larger than our expectations, we decided to revise our four-year voice ARPU forecast downwards by ¥50 compared to the initial plan. So, we are expecting another ¥50 decrease in voice ARPU, so the full-year voice ARPU is currently estimated to be ¥2,170.

On the other hand, packet ARPU posted an increase of ¥150 year-over-year which was larger than our earlier expectations. Due to the expanded sales of smartphones, packet ARPU posted a steadfast increase, and therefore, the full year packet ARPU forecast was revised afterwards by ¥30 compared to the initial plan. So, we are currently expecting ¥2,710 in the new full year packet ARPU forecast. So, we are anticipating a slight decrease in voice ARPU, but an increase in packet ARPU under the new forecast.

Slide number nine. This compares the absolute amount of revenues for voice and packet services. As you can see here, in the fourth quarter of last fiscal year, we achieved a reversal in the levels of voice and packet revenues.

Next slide, number 10, about the increase of packet ARPU and packet revenues. Of course, we have so far focused on packet ARPU when we explained our performance. But I think it is more accurate to give you the packet total revenue numbers in order to give you a big picture of our business performance. Packet ARPU posted an increase of 5.9% year-on-year in the second quarter. But on the other hand, the packet revenues – total packet revenues posted an increase of 9.3% year-on-year because of the number of subscriber growth.

Page number 11 is about the total handsets sales. For the first two quarters, the total number of handsets sold increased by 11.9% and reached 10.35 million units. We also decided to revise the full-year forecast to 21 million in the new plan. In the previous plan, we were estimating 19.8 million units, but we decided to make an upward revision to 21 million under the new forecast.

Now, slide number 12, the churn rate. Churn rate for the first half was 0.5%, maintaining a very low level.

Next, slide 13, net additions. The total number of net additions acquired in the first half was 980,000, which was much higher compared to the 810,000 for the first half of last fiscal year, so we recorded an increase of 21%. So, based on this, we decided to make an upward revision to our full-year forecast. Initially, we were anticipating 1.95 million in net additions for the full-year, but we decided to make an upward revision to 2.2 million for the full year and we’ll strive to achieve this target.

Slide number 14, migration to FOMA and Xi service. We only have 490,000 mova subscribers and 250,000 DoPa subscribers on our second generation metric, so we are making a steadfast progress to complete the migration. The mova service will have to be terminated by the end of March, so we would like to further accelerate the migration in the coming months.

Slide number 15, customer satisfaction improvement. In the business customer survey, we received the number one ranking for three straight years according to J.D. Power Asia Pacific. Also, with the Mobile Data Devices Customer Satisfaction survey conducted by Nikkei BP Consulting, we also received the number one ranking for three straight years.

Next, I would like to talk about the principal actions and the results. Slide number 17. This is about our smartphone line up. Well, we have already announced this when we unveiled the new products on the 18th of October. So, some of you may not have been there but in the interest of time, I would like to give only the highlights.

We currently decided to offer 16 different models as the winter-spring collection, including the 40 models announced on the 18th and most of them are based on Android OS, some are BlackBerry-based but most of them are Android-based.

Slide number 18, we decided to change the smartphones hand – device series. We decided to add a new series called DoCoMo With Series as a new line up. Of course smartphones are very innovative but we decided to add another second line called DoCoMo With Series. The rationale was to offer stylish handsets for those customer who would like to have those stylish phones.

Previously, smartphones are only monotone, dull handsets but we decided to offer brand collaboration devices under the With series. And this time around, we have released two different models, design and collaboration with external models so that we can offer more stylish designs in the future.

Next, about the smartphone sales on page 20, the total number of smartphone sold in the first half leads 3.63 million units. And as of the end of October, the sales topped 4 million. We have set a new fiscal full year target of selling 8.5 million units for the full year. And we will make efforts towards achieving this new target.

Next page, page 21, regarding the market share of our smartphones. Regarding our market share of DoCoMo in the smartphones sold at mass retailers which was, according to the survey conducted by GfK, we acquired a market share of more than 50% in the second quarter of this year. And women are now accounting for a larger proportion to total smartphone buyers compared to the second quarter of last year. Women accounted for only 28%, but that has risen to 44% this fiscal year.

Next, page 21, new services for smartphones starting with dmenu and dmarket. This represents new billing and authentication schemes in the smartphone universe. And it is something that we have very high expectation toward in the future. We have 22 under dmarket. These are directly operated by DoCoMo. For example, video, video shop. It’s the first time that we’re handling this. If you pay ¥500, then you’ll be able to access 5,000 different titles. So, this is what we would like to expand going forward.

Next, slide 23. New services, more smartphones, Translator Phone Service. This is something that we have been exhibiting in places like Citec, and at last we’re able to offer services trial starting from November, and we want to be able to tie up with various service providers. And in a few days, we want to announce to the press the details of this plan and we hope that you will also access the translator phone service.

Page 24, data communications. As for data communications, when you take a look at the graph, you’ll find very strong growth in the second quarter of the year. Again, across this data communication or data devices rather have enjoyed very brisk sales, so in the second quarter, we sold 760,000 units, 60% for crossy devices.

Next, page 25, or slide number five, I should say. I’d like to talk about the growth of crossy subscriptions. In fiscal year 2011, crossy subscriptions is set at 1.3 million subs. We notice 1.3 million subs and the annual sales target with the 1.4 million units. And in fiscal year 2015, we want to increase the number of subs to 30 million. And I’ll talk about this when I talk about the medium-term vision later on.

Slide 26, crossy smartphones from November through October, and also in January and also through February, we will also be launching various Xi crossy smartphones. In particular, those covered in the red, much of that – much more advantageous against iPhone 4S, for example.

Then to page 27, here we talk about new billing plans for crossy smartphones. We are offering voice flat-rate plan. We already unveiled this plan back when we announced our product lineup, and this has – we have received a very strong response. If you pay ¥780 per month, you’ll be able to enjoy unlimited voice calls on a 24/7 basis.

On slide 28, again, talks about new billing plans for crossy smartphones. This was announced on October 18. With 7 gigabyte, you have a choice of slowing down the speed or paying additional charges. 29, crossy area expansion plans, this has already been announced. And just one thing, one additional information, from 2013 until 2015, ¥330 billion investment is being planned, approximately ¥330 billion investment is scheduled for this plan.

Upon the fiscal of 2012, we were talking about ¥200. However, we decided to bring forward these investment plans. So, the number was increased from ¥200 billion to ¥330 billion up until fiscal 2012. This represents a 10% increase.

Slide 30 talks about improved convenience of public wireless local area network. Wi-Fi access points, we have 6,800 at this point in time. We want to increase this for full in one year. So, we want to achieve 30,000.

31, this talks about a totally different subject; new disaster preparedness measures. In principle, up until the end of September, we’ve been able to achieve substantial progress in these preparedness measures. And by December, we will, more or less, complete the preparedness measures.

Slide eight, packet ARPU full-year projection. I said ¥2,170. It should be ¥2,710. So, what is on the print is correct. My verbal description was wrong. So, as of end of October – as of end of October, we have more or less completed a very large part of the new disaster preparedness measures, in particular with regard to installation of large-zone base stations. We want to create 104 such base stations throughout Japan.

And 33, please take a look at slide 33. On top of the antenna, we have already installed this large base – large-zone base stations. We have to prepare against Tokai area as well as Tokyo area earthquakes. So, we want to prioritize installation of these large-zone base stations in the Tokyo area as well as in Tokai area to prepare against earthquakes that could possibly hit either Tokyo or Tokai area.

34. Here, we talk about 24-hour battery supply – 24-hour battery supply. We use these cranes to install these batteries.

Slide 35. This is new additional informations. I’d like to spend some time on this, if I may. At DoCoMo, we have nationwide customer information management system, which are very critical facilities for us. In principle, we placed these systems in Japan, although we have already partially dispersed key locations.

However, should an earthquake directly hit Tokyo, we envisioned such as a scenario, we felt the need to disperse these locations. So, initially, we were talking about doing this from fiscal year 2012. However, considering the various circumstances with all that, we should do this as soon as possible. So, from fiscal year 2011, we decided to already take measures. So, fiscal year 2011, 2012, in two-year period, we want to complete these matters for these present important facilities, ALADIN and mobiles.

We have these billing systems as well as customer information management systems. They have been relocated to Kansai. And packet communications platform for smartphones, they were also relocated to Kyushu, this version of point of interface with Internet. Again, this was dispersed and relocated to Kyushu, although we had concentration in Tokyo up until now. Now, we’re spending about ¥16 billion for this fiscal year. But in total for these three activities, we’re anticipating some ¥55 billion investment.

Naturally, we will practice efficiency improvement and we’ll make sure that we realized maximum benefit based from minimum investment. And we have practiced strong cost benefit. So, as a result, we’ll be spending ¥16 billion, and the remaining will be spent in the following year.

So, what about the possible increase in CapEx which is on the following page? We have ¥705 billion for CapEx, but this was increased for ¥16 billion because they need to disperse important facilities. They also need to accelerate cross-area rollout by ¥7 billion. So, this will bring us up to ¥7 billion to ¥28 billion for this fiscal year. This will continue, but for the next fiscal year, the impact – we have to take new – we will already be completing a new disaster preparedness measure for this fiscal year. And we do not expect any additional investment for the following year. So, for the following year, we anticipate that the CapEx will be contained under ¥700 billion.

So, 37, here, we talk about the fiscal year 2011 full-year forecast. This is self-explanatory, and I’ve already explained this earlier.

38, this is just revised fiscal year 2011 full-year forecast that highlights they’re up. So, how will the operating income be revised upwards from ¥840 billion to ¥870 billion yen as a result of the upward revision?

Decrease in voice revenue was ¥20 billion more than we had anticipated because of the decline in biddable MOU. And also, increase in packet revenue we had, this is a positive ¥30 billion and also reduced handset repairs, ¥40 billion, that’s a positive. And furthermore, because of the increase in sales – increase in commission, so ¥30 billion negative. So, operating income will reach ¥870 billion.

So, this is the financial result for the second quarter. We have already taken new disaster preparedness measures and we have been able to enjoy a strong growth in smartphones and ARPU has been growing as a result. Now, in the second half, we anticipate very smooth business operations. Based on that confidence, we have decided to revise upwards both revenue and income for the full year. We would appreciate your kind understanding.

Usually, this would be the end of my presentation, but because this time around, we compiled a new corporate vision – our new medium-term vision for 2015, so I would like to explain this to you now. If you can open the slide and go straight to page number two, this shows the summary of what we mean and what we try to aim with this new medium-term vision.

Actually, last year, we announced our corporate vision for 2020 “Pursuing Smart Innovation: HEART.” So, toward realizing this new vision, we decided to develop this medium-term vision 2015 to set out the clear steps and initiatives to be implemented for the realization of our corporate vision for 2020. This comprises mainly of three elements. Number one, through a diverse sign-up of devices centered on smartphones, we will endeavor to offer flexible and expandable services and content in an open environment, while continually making advancements in the ease of use, in pursuit of greater enjoyment and convenience for our customers.

Secondly, as an integrated service company placing in mobile at the core, we will drive innovation through the convergence of mobile with other industries and services through a win-win relationship with partners, and thereby creating new values and markets.

And by accelerating these efforts for service innovation and convergence of industries and services with DoCoMo’s cloud, we will aim to offer enhanced safety and security and deliver more convenient and efficient solutions to people’s everyday life and businesses to fulfill smart lives. So, we’ve always talked about affluence, but given the impact of the disaster, we will have to address the environmental concerns and therefore efficiency is another important angle here. And also we would like to fulfill smart lives.

And these three introduces the content, and let me give you the details here. Number two, we will – secondly, we will – in the second part, we will introduce initiatives through the evolution of mobile services. Number three, the new value creations to the convergence of industries; and number four, the use of cloud.

Now, let me introduce one-by-one, this is first – the introduction. The positioning of the medium-term vision 2015, this is the midway vision, as you will, towards realizing our target for fiscal 2020. So, in order to develop the – in order to present the initiatives to be implemented in the periods through fiscal 2015, we decided to set up these new medium-term visions.

Now, what are we going to do toward shaping us shaping a smart life? This is presented in page number two here. As you can see, the initiative for customer satisfaction improvement is the basic building block. On top of that, we will implement new initiatives for evolution of mobile services and also initiatives for the new value creation through the conversions of industries and services.

And the concrete means to achieve that would be the cloud, the personal cloud, business cloud and network cloud. Network Cloud is a jargon created by NTT DoCoMo. What this means is that, if you look at the right-hand side of that slide, this Network Cloud is a platform that adds values through sophisticated information and communication processing performed on the network. Through these three clouds, we would like to help every customer lead a smart life.

Now, section number two, the initiatives for evolution of mobile services. This focuses on the mobile business. As you can see here, the evolution of services and devices and I’ll skip the details here.

Slide number – next, slide number nine. On the service deployment on smartphones, the dmenu and dmarket, these are the size that we are envisioning. And actually, I think this is an unprecedented scale to begin with. So, we are going to further evolve our services on smartphones going forward.

Slide number 10 is about the product lineup. As you can see on the right-hand side, we will continue to add attractive features on our smartphones, and this is enabled because we are adopting an open operating system for our smartphones. So, we will be introducing features strongly demanded by customers and other new features and services and enhanced security and comfort services.

Slide number 11, regarding the further evolution of services. We will drive further evolution of services such as multi-device support, evolution of address books, and many other areas will be sought as well.

Next page. Now, we will also enhance the safety and security in line with the evolution of services. So, these are the concrete efforts that we plan to implement such as the answering mode, the measures against switching scams and advanced span there of filters.

Page 13, advancement of devices driven by new technologies. As you can see here, we will push through comfortable operability enhanced convenience by incorporating new technologies such as sensing technology, such as the radiation sensor, body temperature sensors and so forth. We would also like to add recommending technologies to our devices by achieving a linkage between the scheduler and your devices and other media convergences.

Page number 14, this is about the subscriber forecast for crossy and smartphones. By fiscal 2015, we will aim to increase the total number of subscriptions to smartphones to 40 million. 40 million represents the total number of smartphones, as well as tablet subscribers. This is the combined number for smartphones and tablets. And out of these 40 million subscribers of smartphones, crossy is expected to account for ¥30 million according to our ambition. So, in order to further facilitate efficient utilization of spectrum, we would like to migrate more and more customers to LTE-crossy service.

Page 15. This is about how we plan to grow our packet revenues. This is the size that we are ambitioning towards 2015. For fiscal ‘11, we are anticipating revenue generation of ¥1.8 trillion, and our ambition is to increase this by 1.5 times to ¥2.7 trillion by fiscal 2015 by addressing the three items that you see on the right-hand side of that page. Now, what this mean in terms of traffic growth? Actually, from 2010 to 2011, we are anticipating a two-fold increase in the total volume of traffic. And between 2011 and 2015, according to our current simulation, we are expecting a twelve-fold increase in the total amount of traffic on our network.

Now, how are we planning to accommodate this growth? This is written on the right-hand side, we will migrate customers to crossy service because LTE offers a three-time higher – three times higher spectrum efficiency, so we would like to migrate customers to LTE as much as possible. We would also try to use new spectrum. And on the newspaper, you see articles talking about the allocation of 900 or 700-megahertz band. We would like to be awarded 50 megahertz each in each band.

Also, we will try to use smallest – the smallest sectors. Currently, we are using 4-sector antenna structure as our mainstream solution but we would like to add more 6-sector structures in our antenna configuration. We will also try to apply dynamic traffic control on a continuous basis.

Currently, with the FOMA service, we reduced the speed given to the users after its – their usage reaches 300 million – 3 million packets for the last three days. But currently, with the crossy service, it’s 1 gigabytes.

Reduction of network load. We will utilize wireless LAN service by increasing the number of hotspots to 30,000 next year and eventually, if necessary, to 100,000 hotspots in the future. We will also try to use femtocells and Wi-Fi more heavily in the future.

Also, the new bidding plans for crossy service will be effective to accommodate the growth of traffic because after the uses reaches 7 gigabytes, customers will have to choose between reduced speed or having to pay a higher price for that month so that we can further promote efficient utilization of network resources.

Now, page 12 is about the crossy expansion plan. We will bring forward the expansion plan of our crossy service.

Page 13 is about the R&D efforts underpinning DoCoMo’s evolution. As you can see here on the left-hand side, LTE-Advanced means the real 4G system. Our aim is to complete the development activities for LTE-Advanced by 2015 so that we can be ready anytime, thereafter, for its commercial introduction.

For evolution of services, we will address mobile special statistics, character recognition API. And we would also like to promote creating base stations in order to protect the environment. That was about the areas – efforts in the area of mobile communications.

Section number three is about new value creations with the convergence with different industries and services. This, again, is the corporate vision for 2020, pursuing smart innovation.

And 15, this is about the convergence of new services and industries. This is already happening. We are seeing a lot of convergence between media and content and various equipments. We believe that 21st century is the age of convergence. By combining mobile with various different technologies and services, we believe we can offer new values to our users.

Next page. This talks about actions undertaken. So far, no – from page 23 onwards, here we talk about actions undertaken for transformation into a greater service company. How much investment have we made from 2008 up until fiscal year 2011? We spent ¥52 billion on a cumulative investment. And based on our projection, we believe that for fiscal 2011 rather, the amount will be much larger than the ¥52 billion.

So, turning to the next page towards new market creation. At the risk of repeating myself, we want to create new markets primarily in business areas that offer great synergies with Mobile business by driving innovation through the convergence with various industries services in collaboration with alliance partners. We want to engage in a win-win relationship through such alliance.

And in the following page, again, we talk about toward further value creation as an integrated service company. Please see this picture. We begin with the Mobile Communications business. This is the core. But in periphery, we have various different businesses. So, in the following page, principal actions for new market creation are provided. There are eight such actions. What we want to do is to focus on the sale areas because we believe that these are the business areas that offer great synergies with Mobile business.

First is Media Content business. mmbi is already up and running. Multimedia Broadcast, this is already up and running. We also have D2C. Finance payment business is another sector, (inaudible). The DCMX is already running. And also, we have one-time insurance.

And I should also talk about Media Content business in greater detail. As (inaudible) for fiscal 2011, this is expected to grow by three to four – fivefold – threefold to fivefold in fiscal 2015.

Now, fiscal 2011 for finance payment business, it’s about ¥180 billion. In fiscal 2015, we hope to have 1.5 fold increase. What about commerce business? Likewise. In commerce business we have all gone marketing and they are showing very strong performance to date, medical/healthcare business and in the following page, M2M business, aggregation/platform business, environment/ecology business, safety security business.

So, in these eight areas, we will take our principal actions. Then, in the following page, we would like to talk about global expansion. As for global expansion, from the bottom, you will find the carrier layer. We’ve been active in this area so far but through alliance where we have Connexus, we also have alliance with Vodafone in the corporate sector. And we also have the platform service. So, going forward, we want to very actively – we want to actively deploy platform business, M2M platform, content aggregation platform, and finance and payment platform. These are the businesses which we hope to deploy globally.

So, how would we go about this? This is on the following page, global expansion (2). On the right-hand side, we have finance payment services, maybe let’s just start with this service. Again, in each country and region, the prevailing business environment differs. So, therefore, independent service deployment should be carried out in each country and region. So, be it Japan, Europe or emerging markets, such as Africa, there are differences in respective markets and regions. But on the left-hand side, we have machine-to-machine services, or M2M services. We believe that these are – it will be possible to pursue universal service deployment in Japan, as well as in other global markets, so we will create M2M service platform on a global basis.

In the following page, how will we expand revenues from new business? Right now, in fiscal 2011, we have – we are expecting ¥400 billion as revenue from new business. But by fiscal year 2015, we want to increase this by 2.5-fold up to ¥1 trillion. In order to achieve ¥1 trillion revenue from new business in fiscal year 2015, there are various challenges which must be overcome. However, we are very much intent on achieving this.

In the following page, we talk about the fourth pillar, which is the use of cloud and initiatives for building customer trust and delivering peace of mind. So, here is the DoCoMo’s cloud once again. As already explained, we have the personal cloud, business cloud and the network cloud, three types of clouds.

And in the following page, we’ll talk about new values envisaged by personal cloud. As was indicated on this page, DoCoMo’s personal cloud such as data storage, various logs, social/environment data and external data. This will be supported by the ID authentication and billing and payment cloud, if you will. And that information will be converged with various industries and services and then deliver to various customers.

In the following page, here, we talk about the business cloud. So, this is the corporate sector. In the case of business cloud, we’re focused primarily on SMEs. So, this is the business cloud. We want to offer basic menu, industry-specific solutions and cross-industry horizontal solutions based on strong security.

And the following page talks about the network cloud. The term network cloud is a jargon coined by DoCoMo as I mentioned at the outset. So, it is not universal term. However, NTT DoCoMo would like to use this term network cloud going forward. Network cloud means that in the network, we have various information processing functions. And we’re talking about collaboration with various networks and devices. But we want to do everything in the device. This will place a lot of burden on the devices. And we want to process information in the device. This would again be very burdensome.

And also, we will be asking or force some customers to buy high-performance devices. However, if the processing could be done on the network, then it will be device-free environment. This will enable multi-device environment. You’re not tied down by any given type of device. Self- translator phone, communication agent, can become a possibility as a result of this Network Cloud. So, we very much want to pursue Network Cloud as one major lifeline, if you will, for a network carrier in that those carriers themselves should not end up being a dumb pipe provider.

This is something that we must avoid at all cost – end up being a dumb pipe. We want to avoid that at all costs. So, how can we avoid becoming a dumb pipe so that we can provide a much better service to our customer?

Next page, enhances security and reliance, expansion of customer support. Enrichment of support offered to customer contacts. DoCoMo shop is very – is important such interface. Should customers have a resistance to ICT, we need to resolve that. That’s why we need to pursue mobile phone classes and also call centers and also enrichment of after sales support should be pursued.

Next page, promotion of Corporate Social Responsibility. This is something that we have consistently pursued. We’ll continue to focus on this going forward.

Now, the next page talks about new disaster preparedness measures. After the Great East Japan Earthquake, we should not forget the lessons from this earthquake, and we need to focus on these elements. Our new disaster preparedness measures have some very strong progress. We will be able to complete by December. Some, we will have to shelve until January, but most will be completed by December.

And we will continue to enhance reliability by redundancy and dispersal of the locations of important systems and we will further promote usage of ICT. We also want to provide support for full-scale reconstruction of disaster-stricken areas. Last but not least, we want to work toward further improvement of customer satisfaction. We want to earn long-term trust of customers at NTT DoCoMo.

So, I’m afraid I have talked that length, my apologies. I would now like to take your questions. Thank you for your attention.

Osamu Hirokado

(Interpreted) Thank you very much. Now, we would like to entertain your questions. If you have any questions, please raise your hand and wait for the microphone to be distributed to you. And please begin with identifying your name and affiliation before you start your question. Now, are there any other questions? Yes, the fourth row on the right-hand side of the room?

Question-and-Answer Session

Tetsuro Tsusaka – Morgan Stanley

Thank you very much for your presentation. My name is Tsusaka from Morgan Stanley. I have two questions. First, regarding the LTE voice flat-rate service, this time around, you have set a new target of increasing the LTE subscriptions to 30 million in 2015 and you won’t have any free allowances any longer although the communication charges will increase. And, of course, in the short term, you may have a negative impact because of those – in DoCoMo customer calls. But I think this is – will have a positive effect over the longer term – over the medium to longer term. I think this will have an effect to hold the decline of voice revenues or even further increase of voice revenues. Is that what you have envisioned with the introduction of this new flat rate voice plan?

And the second question is more ambiguous. With this new medium-term vision, you don’t have any financial numbers after all. So, this vision, I think, is quite ambiguous when you consider who is this intended for. If this was meant for investors or shareholders, the message is too weak because you don’t have any financial numbers, and that’s – and without financial numbers, we cannot make assessment. So, can you comment on these two things?

Osamu Hirokado

Yes. Okay. Regarding the flat-rate voice package for crossy service, actually, the crossy voice flat-rate service was because – we introduced this because with a number of customers increasing, we might be able to maintain the voice ARPU or even achieve an increase, but, of course, this is optional. And first, we believe that the heavy usage – heavy voice usage will first come and join the service but, otherwise, those customers will remain on the volume-based or usage-based billing plan. So, this is not a price competition. This was not introduced for the sake of price competition. So, I hope you understand that.

And another major rationale for introducing this was because of the threat of VoIP which will begin to be apparent around 2015. How to compete against VoIP is a question that we will have to consider. This is not a complete answer that can tackle that issue. But I think this will be quite significant. Because for VoIP, of course, they will have to – perhaps, customers will pay the minimum basic monthly fees so that they can have an emergency call when necessary. But then, the only maximum payment will be ¥700. Those will be the customers’ I think choice. So, by having this structure, we can at least to secure ¥700 and that’s the reason why we have introduced this ahead of the competition.

And regarding crossy service, we wanted to promote the uptick of crossy and the voice flat-rate plan was intended as a trigger to increase the subscriptions to crossy service. So, there are many rationales behind the introduction of this flat-rate voice plan. The second point, yes, it is indeed. We don’t – we may not have so many numbers included in the medium-term vision. But this is a basic approach. The change and challenge was the action plan up until 2012. Then, we set a target to achieve over ¥900 billion in operating income for fiscal 2012. And another official place that we made was to achieve a reversal of aggregate ARPU in fiscal 2012 so that it can start rising again.

Then, the vision – these initiatives illustrated in the new vision is the initiatives after 2012. Why did we announce this this time around? This was because we wanted to clearly set out the directions for the future so that our users and alliance partners can be aware of what we are thinking in our minds so that they can understand that we are very serious about this. We have to start now. Otherwise, we cannot switch the years immediately after 2012.

So, it’s a sort of a manifestation of our will. We just presented our direction. Setting the direction was the major purpose of this vision. And perhaps in the second half of next year, we will develop the business plan for the subsequent years. And I think by that time, we’ll be able to see more concrete numbers. So, this time around, we set the general directions.

Tetsuro Tsusaka – Morgan Stanley

Okay. Then I have a follow-up question. You said that the voice plan was not a discount and you didn’t really comment on whether this is going to entail an increase of revenues or a decrease in revenues. But I do understand your subscribers are growing and if this is effective in halting the decline of voice revenues? And on the other hand, if you are able to increase the total packet revenues to 2.5 times or 1.5 times – yes, 1.5 times from ¥1.8 trillion to ¥2.7 trillion in 2015, then that will – immediately as a simple calculation means that you will be able to achieve ¥1.8 trillion in operating income. Well, that’s not going to be easy because for any carriers, I think everybody shares the same anticipation or VoIP. VoIP is going to happen. And because I have a background of working in a fixed line carrier, the fixed line business was significantly affected by the VoIP and VoIP will definitely come next to the mobile arena. And around 2015, we will have to anticipate a significant impact from VoIP, and we cannot stop this because this is the result of technical innovation.

So, we will have to anticipate VoIP and from as early as this time onwards, we will have to take measures in order to minimize the impact. So, we cannot see a rosy feat. We are not foreseeing a rosy feature. There are many, many hurdles to overcome.

Osamu Hirokado

Any other questions? We would now like to go to the person in the second row from the front in the center.

Shinji Moriyuki – SMBC Nikko Securities

Thank you. Moriyuki from SMBC Nikko Securities. I would like to ask two broad questions myself. First, with regard to the upper provision of a forecast, well, smartphones in the second – in the first half rather is enduring very risky sales. And we thank you that you made upward revision. However, in the recent environment, I think the situation has changed because of the launch of the new iPhones. So, as some market analysts thought that this would not happen, so based on what assumption did you decide to announce this upward revision? How this should reflect the impact of the sales of iPhone 4S, because net additions here are increasing? So, why did you – was it possible for you to carry out this upward revision that you forecast at this timing?

My second question, I thought there were also financial indicators in your medium-term vision. As was mentioned by the previous questioner, in the case of mobile packet, this will increase ¥100 billion? And new services increased by ¥600 billion, which means that a total of ¥1.5 trillion increase will be realized. You do not talk about the cloud. But ¥1.5 trillion, plus 20% operating margin, this should reach ¥300 billion. So, maybe, going forward, income – operating profit rather will increase by 10% and also crossy LTE billing plan, voice flat rate plan was introduced, and this will help to halt the decline in voice ARPU. Is my assumption correct?

Because your profit was not growing for a very long time and you have said that you have been planting new seeds and the market analysts have strong expectations. So, you’re saying that there are various factors at play. But you’re saying that the operating margin will not decline compared against the current trend. Is my assumption correct?

Osamu Hirokado

Thank you. I’ll respond to your first question, why now? Why are we announcing the increase in our operating profit? What about the impact of iPhone? I think your question is basically how we see the impact from iPhone. Well, on October 18, we announced our new product. And at that juncture, how much impact from iPhone, we received this question. Now, iPhone was sold from October 14, so that’s four days from October 14. We had data up to four days. Port-out was 2.5 fold, compared against the same day in the previous month. So, we thought that in the first four days this represented a very large porting out.

However, from October 19 through the end of the month, we also followed the numbers for the port out. And we found that the number actually fell down to only 1.2 fold against the previous month. Of course, we have to see the numbers for the month of November and we’ll continue to scrutinize the numbers for November. However, I think the peak was 2.5 fold and subsequent to that, it fell to 1.2 fold in terms of porting out.

And also, we enjoyed a new sales, new handset sales. Those of you who watch DoCoMo, you will know that in October – this is a very difficult month. That is because we announced new product in the October and you add the handset is actually becomes available in November. So, many potential buyers hold back from buying new handsets in October.

But despite that and despite the launch of new iPhone, new handset sales in October was 1.3 fold on a year-on-year basis compared against the October of the previous month 2011. So, that’s the situation in October.

So, we only have a data for October, but drawing from that, the impact of iPhone 4S although it does exist, it is not a major impact. That is our analysis. Furthermore, on October 18, we announced our new product and when we made that – when we announced the new product, (inaudible) devices, devices network. And we found that the response of the customers was very strong. So, Galaxy, Arrows, LTE, we hope that that – the customers will want to utilize the services because we offer 20 of devices, services and network. And our tablets are very convenient to use. We hope that you’ll enjoy using our new tablets.

So, that being the case, we are not going to lose out to the competitors in terms of sales. So, we enjoyed very robust – strong and robust sales in the month of October but decided to announce the upward revision. So, that’s my first respond – my response, rather, to your first question.

Your second question about income. Well, operating income margin in new services, we’re not going to reach 20% operating margin immediately. I’m sure you’re more than familiar with the level of operating margin for new services. But in the case of MMPI, we have to begin with a deficit in the initial phase. So, operating margin is not going to reach 20% in the initial phase. It’s going to be lower. However, that being the case, though, towards 2020, we will make efforts to further improve the margin. But we need various service line-up. So, we had to create new industries and we need to make efforts to further improve our margin. But we need to plant seeds and we need to grow them into young trees, and allow them to green. We need these young trees to grow into full trees. So, 2020 will be a phase when the new services will still be a young tree.

Shinji Moriyuki – SMBC Nikko Securities

Are we going to have a strong margin?

Osamu Hirokado

I think that’s the way you need to analyze the situation.

Shinji Moriyuki – SMBC Nikko Securities

I thought that with the response you will be providing (inaudible) for packet, that’s more than 20% margin, right? So, at minimum, that’s ¥20 billion plus alpha. So, would that be the right assumption to make?

Osamu Hirokado

Well, ¥19 billion plus alpha, as you’re aware; we have the monthly support impact. So, we have to take them into consideration. So, please, we need to bear that in mind. I don’t want to highlight the negatives because there are many positives.

Shinji Moriyuki – SMBC Nikko Securities

If I could go back to my first question. What about port-in? And should we not be concerned about net additions then as far as October is concerned? You mentioned that the impact of iPhone 4 sales is only for four days. Well, I mean we talk about net additions. We’re talking about very small volume on the thousand units, several hundred thousand units.

Osamu Hirokado

In the case of mmbi, we’re talking about 1.4 fold increase. We’re talking about 20,000 to 30, 000. In the case of net additions, if we’re talking about millions of units, it would be a problem. But then we’re talking about smaller volume and DoCoMo will be affected. So, again, after you see the sales of new product, we hope that you will take a look at the net addition.

Shinji Moriyuki – SMBC Nikko Securities

Thank you very much.

Osamu Hirokado

Okay. Any other questions? Yes, the person sitting right in front of the previous questioner?

Daisaku Masuno – Nomura Securities

My name is Masuno from Nomura Securities. I have two questions regarding the results and one question regarding the medium-term vision. Regarding the smartphones board revision to 8.5 million units, if you consider that, usually your ARPU for the second half should be much larger? I thought you should be much larger. But you are anticipating the 20 decrease in ARPU that was questionable from my – in my opinion. So, I think you should be more bullish about the first and second half results.

Kazuto Tsubouchi

Now, let’s go, one by one. I am Tsubouchi and I would like to answer that question. I think your question was about the projected decrease in aggregate ARPU. Actually, with respect to the strong performance of our packet ARPU, we are reflecting the actual attract record. However, the voice ARPU is actually performing lower than expected in the first two quarters. And because of the reduction of billable MOU, we haven’t been able to quote the decline because it’s been decreasing by 6% to 7% year-on-year a few minutes every year. We thought it will be stabilizing already, but it’s still continuing to decrease. Although, initially, we thought it was about the impact of the earthquake, and that was indeed a factor, but in addition to that, with customers migrating to smartphones, the voice usage generally decreases. Therefore, we think in the tradeoff with the increase of packet usage, we are seeing a decline in the voice usage. We will have to continue keeping a close eye, but we are becoming more bearish about the voice performance.

Daisaku Masuno – Nomura Securities

Yes, I do agree with that. But regarding the data ARPU upward revisions made to it, I think that was still weak compared against the recent trend. I think you should be more bullish about the packet ARPU revised forecast.

Osamu Hirokado

Well, whether that’s bullish or bearish, it’s difficult to make a judgment on. I’d say given as a trend, if you add with 2.5 million subscribers in the revised forecast, I think this is an adequate prediction. I think this is quite neutral.

Daisaku Masuno – Nomura Securities

In the spring sales promotion campaign, you have also factored in additional expenses for the sales promotion that you anticipate to spend in the spring season. So, in February-March, are you expecting hefty increase of incentives? Is that included in your plan? Is that a correct assumption?

Osamu Hirokado

Yes, of our February-March. From the beginning, we’ve already anticipated such amount. And during the new revised plan, we also have anticipated that impact.

Daisaku Masuno – Nomura Securities

And the last question is about the medium-term vision regarding the revenues growth currently you are generating ¥3.5 trillion approximately in terms of voice – as total voice and packet revenues. If you are going to generate ¥900 billion impact at revenues going forward and if you are able to hold the decline of voice revenues at the level of ¥700 billion, you will be able to achieve a net increase. If that’s the case, even if it’s not, 20% voice and 80% packet will be the general outcome in 2015. So, do you think it is comfortable for you to achieve 80% of your revenues from data services and 20% from voice? Is that your general idea?

Osamu Hirokado

As of 2015, yes, that’s my general – our general direction.

Daisaku Masuno – Nomura Securities

Then, if that being the case, I think the general trend is going for – are you expecting a general increase in revenues altogether?

Osamu Hirokado

Yes. Basically, that’s the general trend, general direction that we are anticipating. Of course, we will have to come up with a detailed plan in the second half of the next fiscal year, but basically, we would love to aim for an increase in both revenues and income.

Ryuji Yamada

Any other question? Then we go on to the person in the third row from the front in the center of the room.

Atsuo Takahashi – Mizuho Securities

Thank you. Takahashi from Mizuho Securities. I have several questions. I would like to ask for your response one by one. My first question, again, with regard to the upward revision and also the expenses pertaining to the loyalty program. I think that’s about ¥55 billion. That’s the number that you highlighted earlier.

So, if this – that’s the case, I think the operating income has already surpassed the ¥100 billion. Is my understanding correct or is this a very unique factor? Do you believe that if you exclude the special factors regarding income is already higher than ¥100 billion for this fiscal year?

Ryuji Yamada

Well, Mr. Tsubouchi will give you the details, but ¥55 billion expense that I talked about earlier. Well, last year, we had the decline by ¥55 billion in the previous fiscal year. But this year, we don’t have that. So, you need to compare apple-to-apple.

Kazuto Tsubouchi

Yes, it’s exactly as Mr. Yamada mentioned. I think there are two meanings. ¥55 billion, the reason for the decline is that the impact of their allowance was there. So, in the second quarter, at the end of September, this is a one-off impact for the past fiscal year. So, was the operating income very bad in the previous fiscal year? So, ¥870 billion for the fiscal year means that we have reverted to the normal situation for this fiscal year. That’s one meaning.

And secondly, we reviewed the various systems. So, therefore, we wanted to make sure that we could improve cost efficiency without sacrificing customer satisfaction. If you take a look at the various systems, we reviewed the point programs, and also repair programs, they were all reviewed. And over a certain period, we decided to make certain charges and also increased the prices for these services. So, the cost for the loyalty program in total has actually been reduced, and this has allowed us – well, we have already incorporated this. And the impact of this improvement has been reflected in this fiscal year.

Atsuo Takahashi – Mizuho Securities

Thank you. And my second question, I wanted to ask the new medium-term vision and also some short-term questions, as well. But medium-term vision and also the forecast for the next fiscal year, I’d like to make the following confirmation. Crossy voice flat rate is a campaign price, but from October 1st next year, it’s going to go back ¥ 5,180 at that point in time. And then for the fiscal 2015, also, there could be changes, the assumption is that you’re going to revert to the price of ¥5,185 at that point.

Ryuji Yamada

Yes. Let me give you some details. The campaign phase will be until the end of April. So, from May 1, we go back to the original price. Now, from October, the tiered – so, from October onwards, we’re going to have a tiered pricing plan. So, that means that we’re going to revert to the original state after the period of campaign is over.

Atsuo Takahashi – Mizuho Securities

I see. Then, on a related note, well, impact of iPhone was not very prevalent in October according to your comments. And you’re going to go back to your original pricing plan. Then this could have an impact on the (inaudible) customers because I think your churn rate is increasing, isn’t it? That’s the impression. So, do you really believe that it can revert back to a pricing or bidding plan of close to ¥6,000 because you have very price-sensitive customers? Do you believe that you will really be able to revert back to this high price at that juncture? I know you’re confident right now. But do you believe that you might actually extend the campaign period or – so, will it be reflecting the possibility of impact on net additions?

Ryuji Yamada

Well, again, we are in a competitive landscape, so we have to observe the competitive situation. But at this point in time, we do not intend to change our program right now. So, we’re not going to extend the campaign period. We want to go back to the original pricing. And that’s the condition that we want to put forward to our customers. If you use LTE, you will fight. It’s like your experience – your first experience with fiber – optical fiber. I know smartphones seems very – in the case of smartphones, well, you’ll be able to download data very quickly. It’s very convenient if you use LTE. So, we believe the customers will be willing to pay premium for the services. That is our expectation. And also it’s – what does the ¥280 hundred worth of flat of rate plan. So, crossy users will probably join the flat rate – the voice flat rate plan of ¥1,480 which means that we will be able to see efficiency in heavy users as far as the voice plan is concerned.

But as you point out, again, this is competitive landscape. So, we’re not adamant and we’re not rigid about our position. But as far as we’re concerned, at this juncture, we do not intend to do this. We want to bring back the price to the original level.

Atsuo Takahashi – Mizuho Securities

I see. Well, in responding to the competitive environment, even if you undertake the billing plan, do you think that you will make adjustment with your devices? Do you think that you might actually be lowering your handset price?

Osamu Hirokado

Well, that’s – we cannot rule out such a possibility. Up until now, crossy devices had a very strong multi-support, fair high multi-support. So, we are setting prices at ¥30,000 for example, so that this is accessible to the customers. And the multi-support is close to ¥5,000 per month. So, it’s very high. So, this is already – we have already launched for such a program.

Atsuo Takahashi – Mizuho Securities

Thank you very much for your response.

Osamu Hirokado

Any other questions? Yes, I see a hand in the eighth row from the front in the middle section.

Daisuke Oshidari – JPMorgan

My name is Oshidari from JPMorgan. I have two questions. First, regarding new ARPU for fiscal 2012, you’re anticipating a rebound in aggregate ARPU. However, the voice ARPU decline is larger than expected due largely to customer’s migration to smartphones which resulted in a reduction of billable MOU. Even in – given the strength, are you still believing that your voice aggregate ARPU will start to rise again from next fiscal year? I do understand that your ambition, but in reality, even if your data ARPU is rising, if the voice ARPU is continuing to decrease at a higher rate, then it might be difficult for you to achieve a rebound in aggregate ARPU. That maybe just an illusion, if you will.

The second question is something that Mr. Yamada commented on some occasion. That ¥4.2 trillion revenue size, you said you wanted to increase it to ¥5 trillion or so. Is that the basic concept that you had in mind when you develop this medium-term vision? Although you don’t have any financial numbers in here, but is that the basic idea that you had in developing this medium-term vision? Can you comment on that? Just as a concept of – or on those idea that you have in your mind, Mr. Yamada.

Ryuji Yamada

Okay. Then I would like to first answer the second question and the first question will be answered Mr. Tsubouchi later. Regarding the second question, well, in our case, we wanted to achieve an increase in both revenues and income because we attach priority to top line growth to become a growth company.

So, ¥5 trillion is nothing that we have mentioned in the medium-term vision this time around because we cannot precisely predict the impact of the voice revenues and the decline in voice revenue.

Daisuke Oshidari – JPMorgan

So, this vision does not reflect any revenue idea, let’s say, like ¥5 trillion you mentioned? Can you be clear on that one? And if you can comment on the second – and the first question.

Kazuto Tsubouchi

Yes, we cannot make any promise but, of course, the management has a strong intention to achieve a rebound in aggregate ARPU next fiscal year. But I believe personally, it is feasible to achieve this rebound because of the packet ARPU increase caused by the adoption of smartphone is larger than our expectations. Actually, we are anticipating ¥170 increase in total packet ARPU for the year. And if you look at our – on a temporary basis, at some points, we are achieving a ¥200 increase. So, if the smartphone adoption continues to increase steadily to, let’s say, more than ¥10 million next fiscal year, we will continue to see this effect of boosted packet ARPU. And actually, compared to our initial simulation, the packet ARPU is fairing stronger. Therefore, we believe we are well-positioned to achieve this rebounded aggregate ARPU. Although there is voice reduction on a net basis, we believe we’ll be able to achieve this increase.

And the reason why the smartphone adoption increases the packet ARPU is because after the subscriber basis increases, there was a dilution effect. That was our actually initial expectation. But as it turned out, even if the smartphone user base is expanded to millions, customers are increasing their usage. And therefore, after the migration to smartphones, even if they used to be low-usage customers, they’re continuously using huge amounts of packets after the migration to smartphones. And therefore, even if the user base broadens to a broader user basis going forward, we still believe we won’t have to anticipate such a significant dilution effect on the packet ARPU. So, in view of these trends, we still believe it is possible for us to achieve a rebound in aggregate ARPU in fiscal 2012.

Daisuke Oshidari – JPMorgan

Okay, then, just as a reconfirmation. The billable MOU reduced by 7 minutes in the first quarter, how much reduction did you see in the second quarter alone?

Ryuji Yamada

Seven minutes again. So, it was almost on par with the first quarter. Seven minutes first quarter, seven minutes second quarter. So, we haven’t seen any significant change between the first and second quarters. Thank you.

Daisuke Oshidari – JPMorgan:(Interpreted)

Ryuji Yamada

Any other question? We go on to the person in the second row in the right-hand side of the room.

Yoshio Ando – Deutsche Securities

Ando from Deutsche Securities. I have two questions. My first question related to CapEx and also the exclusion in traffic. Well, you have an increased CapEx, but that’s probably different from the traffic explosion. For example, you made upward provision over the medium term because of need to address the popularity of crossy. You talked about traffic increasing by twelvefold over certain period. Do you believe that the amount of traffic could be absorbed in the existing mobile network? There are syndicates of other carriers and they are very concerned about the potential overflow on their mobile networks. So, how do you see the ability of your mobile network to absorb the increase in traffic? That’s my first question.

My second question, medium-term vision. You talked about expanding to new businesses. But I do not believe that this is possible to do at DoCoMo in an organic manner, which means that are you contemplating possible acquisitions? Do you believe that the acquisition activities will increase, which could actually slow down your dividend payment. So, is the scale of acquisition you’re envisioning very large going forward?

Osamu Hirokado

I will have to respond to your first question. On the second question, I’d like to ask Mr. Kato to respond. With regard to capital expenditure, yes, traffic increased by twelve-fold. So, roughly speaking, if we have 900 megahertz or 700 megahertz spectrum, 50 megahertz times two band based on the assumption that we have access to the spectrums.

We are not using 1.5 megahertz spectrum right now. So, if we receive either the 900 megahertz or 700 megahertz spectrum, our bandwidth would actually increase by two-fold at that juncture. And also, with crossy or LTE added on top of that, we will be able to enjoy six-fold the increase because LTE has three-fold efficiency, but (inaudible) by six-fold out of the twelve-fold increase in traffic, which means that the remaining six-fold will have to be accommodated elsewhere.

So, where were small zones or small sectors? That’s something we need to do. We need to practice the efficient spectrum usage. And also, we need to pursue offloading – data offloading. And on top of that, one more thing, practice dynamic, network control over heavy users. This is something that we need to do, and we’ve already launched this. And the other is billing for crossy or LTE beyond 7-gigabyte usage, then the customer has option of paying premium or (inaudible) speed. So, we need to practice efficient usage.

So, in totality, we want to be able to accommodate or absorb the increase in traffic by twelve-fold, then beyond that, what will lead to next?

Next, we have to realize LTE at attempts the so called real 4G. We have to expand there and we need to connect the 3.5 gigahertz spectrum. So, if that’s the case, if you take such measures, do you believe that as far as NTT DoCoMo is concerned, you have – since you have strength in infrastructure, and you have that image, do you believe that you’ll be able to maintain such an image going forward with such activities?

Ryuji Yamada

Well, of course it’s very difficult but yes we want to make a very solid image of NTT DoCoMo as a network carrier with a strong infrastructure. We want that off – we want to be NTT DoCoMo of quality and NTT DoCoMo that offer safety and security. So, this is something that we need to maintain as a brand image. Then (inaudible) investment to safeguard our image.

Yoshio Ando – Deutsche Securities

As far as the investment is concerned, our CapEx is expected to be around ¥700 billion per annum. Why? Even with the increasing traffic, why can we contain our CapEx at ¥700 billion thereabouts?

Ryuji Yamada

Well, up until now, we were very in downturn expanding our network coverage and this was very costly. If we did not have the smartphone popularity and if traffic did not increase to this extent, then DoCoMo’s investment will have a much lower – all they would need to do was to agree of those network coverage – area coverage. But then, the amount of investment that we would have invested into network area coverage is now being spent for other areas if you will, to absorb traffic increase. And with regard to your second question...

Yoshio Ando – Deutsche Securities

Yes, thank you. With regard to the second question, well, you talked about – there is a need to invest more if you want to revise ¥1 trillion revenue in the new business, will this not oppress or bring down your dividend?

Ryuji Yamada

My response is not, it will not. You talked about new business demands. Our definition is as follows. For this fiscal year, in the new businesses, we’ve anticipated ¥400 billion revenue for this fiscal year, and we want to grow this over the next 10 years. We will be around ¥600 billion, ¥700 billion, but we want to reach ¥1 trillion. To reach ¥1 trillion, we need anywhere from ¥300 billion to ¥500 billion. And if required, if there should be opportunities, we want to be very active as far as M&A. However, how much money are we willing to invest? Over four-year period on a cumulative basis, well, we talked about some numbers, but it’s not going to be in this amount that is going to oppress the amount of income or profit on a single-year basis.

If I could also offer additional comment. At the end of the day, the question is, are we going to have the investment which will have negative impact on dividend? Our response is absolutely no. Our ability to raise finance, ability to generate free cash flow, we’re very confident about those. And also the other policy, we want to increase our dividend in a seeable manner. We have a civil dividend policy and any remaining cash will be utilized to generate investment. And anything more we will finance from elsewhere. So, we are very confident about our financial position. Thank you.

Ryuji Yamada

Any other questions? Yes, I see a hand and this will be the last question for this meeting. The fourth row in the middle section.

Hitoshi Hayakawa – Credit Suisse

Thank you very much for your presentation and your explanation. My name is Hayakawa from Credit Suisse. I have two questions. First regarding the medium-term vision for 2015. According to what you have explained so far, it seems like you are not able to predict the performance of voice revenues going forward. But if you add up everything else and if you add voice revenues on top of it, I think we’ll be able to have an understanding on the revenue size of 2015. But the variable, i.e., the voice revenue is still unclear.

So, given that environment, I would like to confirm, as a major direction going forward, your service revenues going forward, generally this is – you are anticipating a down trend but you are going to try to make up for that decline by increasing other revenues from new businesses. Is that the basic pillar of your vision this time around as far as the revenue is concerned? Is that correct?

Ryuji Yamada

Well, that’s very difficult to answer. But as our intention, we would like to achieve even a slight increase in the cellular services revenues including both, a combined revenues from voice and packet services. So, although there might be a significant decrease in voice, we’ll try to make up for that with the increase of packets.

So, we cannot – we do not want to achieve a net decrease.

Hitoshi Hayakawa – Credit Suisse

So, you are trying to achieve an increase in the cellular services revenues?

Ryuji Yamada

Yes, even if it’s slight and that’s going to be affected in reality by VoIP adoption due to technical advancements. And because I have a background in working for a fixed-line carrier, I do understand firsthand that the fixed-line business was significantly affected by VoIP.

Hitoshi Hayakawa – Credit Suisse

The second question – this is a reconfirmation on page 14 regarding your target for smartphone adoption for fiscal 2015. You would like to increase the number of smartphone usage to 40 million, out of which crossy is expected to account for 30 million. Out of this, the 30 million crossy subscribers, how much will data cost and Wi-Fi routers account for, tabs, Wi-Fi routers and smartphones? If these are the three major categories of products, out of that total 30 million crossy users, what will be the contribution of smartphones, tablets and Wi-Fi routers? Can you give us a breakdown? Just roughly, if you have any image or conceptual idea, please share with us.

Ryuji Yamada

Well, actually, it’s very difficult to give you an answer, but the rough idea is as follows. Tablets are expected to account for slightly over 10% of the total but, of course, this depends on the adoption by the enterprise users. Crossy high-speed-enabled tablets will increase in variety going forward, so we would like to boost its sales.

When it comes to data devices, in Wi-Fi, we also try to increase and they will account for another 10% or so, or slightly less than 10% or so. According to our current assumption, of course, this is – we are talking about four years ahead, so it’s very difficult to give you a prediction, but that’s the basic idea. We would like to appeal the strength of crossy services including the attractive billing plans, but that’s the rough idea.

And if I can add just one more comment, this relates to your first question. Well, we just talked about – so much about the ARPU. But achieving a 2 million increase in net additions is because we are already generating the demand for our second device, whether it is a Wi-Fi router or a tablet. And these tablets and the second devices are changing the way people live. And that, I think, will open the possibility of us transforming into an integrated service company. So, data devices ARPU will have to be the combined ARPU of the set first and second mobile phone. And that, I think, will provide us with more opportunities to achieve a growth in ARPU, and therefore, revenues. So, transformation into integrated service company entails that possibility.

Unidentified Company Representative

(Interpreted) Okay. Thank you very much. At this point, we would like to finish this meeting, announcing results for the first two quarters of this fiscal year. Thank you very much for your attendance.

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