NTT DoCoMo, Inc. (OTCPK:DCMYY) Q2 2018 Earnings Conference Call October 31, 2018 4:00 AM ET
Yoshizawa Keisuke – Investor Relations
Kazuhiro Yoshizawa – President and Chief Executive Officer
Seiji Maruyama – Executive Vice President and General Manager of Corporate Strategy and Planning Department
Osamu Hirokado – Executive Vice President and General Manager of Accounts and Finance Department
Daisaku Masuno – Nomura Securities
Satoru Kikuchi – SMBC Nikko Securities
MitsunobuTsuruo – Citi Securities
Yoshio Ando – Daiwa Securities
Ikuo Matsuhashi – Goldman Sachs
Hideaki Tanaka – Mitsubishi UFJ Morgan Stanley
Yoshiyuki Kinoshita – Merrill Lynch
Kei Takahashi – UBS Securities
Thank you very much for your patience. We appreciate you taking your time despite your busy schedule to attend our conference. We would now like to begin NTT DOCOMO’s results presentation for the second quarter of the fiscal year ending March 2019.
I am the emcee for today’s presentation. My name is Yoshizawa from the IR department. Please be advised that this session is broadcast live over the Internet, and later the recorded video will be posted on DOCOMO’s website – IR website. Please be advised of that in advance.
I would like to introduce the participants before we begin the presentation. The President and CEO, Mr. Yoshizawa; Senior Executive Vice President, Mr. Asami; Senior Executive Vice President, Mr. Tsujigami; and Executive Vice President and General Manager of Corporate Strategy and Planning Department, Mr. Maruyama; Executive Vice President and General Manager of Accounts and Finance Department, Mr. Hirokado; and Executive Vice President and Executive General Manager of Smart Life division, Mr. Mori.
As for the schedule today, we will begin with a presentation by the CEO, Mr. Yoshizawa. For about 30 minutes we will make a presentation on the results using the slides, after which we will take your questions. We expect to finish the session at around 6:00 p.m. Regarding the forward-looking statements, including those pertaining to the Q&A, please look at the final slide of the presentation deck.
Now we would like to move on to the presentation. Mr. Yoshizawa, please begin your presentation.
I am Yoshizawa. Thank you very much for taking your precious time despite your busy schedule for our announcement. Now we would like to begin the presentation of the financial results for the first half of the fiscal year ending March 2019, but I would like to take this opportunity to express my sincere sympathy to those who are affected by Typhoon 21 of 2018 and the Hokkaido Eastern Iburi Earthquake. I would like to touch upon the disaster countermeasures later in the presentation.
Now today, the presentation comprises of three parts. In the first section I would like to talk about the results highlights for the first half of 2018; in the second section I would like to talk about the medium-term management strategy; and in the third section, we would like – third section, I would like to talk about the shareholder returns.
Now I would like to begin with the financial results highlights. Operating revenues increased by ¥95 billion year-on-year to ¥2,389,500,000,000. Operating income, profit increased by ¥50.6 billion to ¥610.5 billion. We received – recorded an increase in both profits and revenue. And the profit attributable to shareholders of NTT DOCOMO increased by ¥15 billion to ¥407.1 billion, and free cash flow decreased by ¥16.6 billion due to the corporate tax payment and reached ¥374.7 billion.
The results by segment. In Telecommunications business, revenues increased by ¥91.2 billion, and operating profit increased by ¥35.2 billion. Smart Life and other businesses combined operating revenues increased by ¥5 billion, and operating profit increased by ¥15.4 billion. So we recorded an increase in revenues and profit both in Telecommunications as well as Smart Life business.
And as we mentioned, at the end of the first quarter, that due to the transfer of the Radishbo-ya, the Smart Life operating revenues was negatively affected in the first quarter. However, despite this negative impact due to the favorable performance of the finance and payment business, we achieved an increase of ¥700 million in operating revenues in the Smart Life segment.
Now this is the factors behind the year-on-year changes in operating profit. Operating revenues increased by ¥95 billion, which was driven mainly by the decrease of the operating – mobile telecommunications service revenues due to the expansion of customer returns. However, on the other hand, optical fiber business revenues increased by ¥32.3 billion and other revenues increased by ¥1.8 billion. And the selling and revenues and expenses improved by ¥71.4 billion due to the unit price increase, and operating expenses increased by ¥44 billion and operating profit, therefore, increased by ¥50.6 billion to ¥610.5 billion.
Operational performance d POINT CLUB members, because we are expanding the customer base centered on membership, we are continuing to make this effort, and therefore, the d CLUB – POINT CLUB members reached 67.63 million as of the end of September. And the number of d POINT CARD registrants, those are the users who are able to use d POINTs at the partner shops, reached 27.88 million.
And this is the operational performance of Telecommunications business. The sales subscriptions increased by 2% to 77.05 million. The churn rate, as you can see, improved from 0.64% to 0.54%, and the handset generate, in particular, improved from 0.47% to 0.46%. So we have achieved a year-on-year improvement in both indicators and these had been remained low – have maybe maintained low. We would like to continue to work on customer return measures improvement to curb churns going forward.
And the next is about the smartphone and tablet user base, which increased by 6% to 39.21 million. I will come back to this topic later in more detail. But in order to facilitate the migration from feature phones to smartphones, we will launch what is called Welcome Sumaho Wari discount from the 1st of November. So we would like to facilitate the migration to smartphones from feature phones through these measures, and of course, promote the sales of tablets going forward. And on the right-hand side the docomo Hikari subscriptions increased by 28% and reached 5.33 million.
Now ARPU next. The negative impact from customer returns was offset by the docomo Hikari subscriber growth. So the second quarter aggregate ARPU, including the impact of the monthly support and other discount programs, increased by ¥80 year-on-year to – and reached ¥4,820.
Next, about the network side. As of the end of September, the LTE base stations amounted to 193,800 base stations, of which PREMIUM 4G enabled base stations accounted for 123,000. The – Japan’s fastest download speed of 1,288 megabit per second, and the upload speed of 131 megabit per second, these services will become available on these two handsets here that will be released going forward. Xperia will support 131 megabit per second so this is the only device that supports this speed, and going forward, in light of the introduction of 5G, we would like to further advance our network capability.
Next, about cost efficiency improvement. In the second quarter, we achieved improvement of ¥40 billion, so that for the total of the first have we achieved cost efficiency improvement totaling ¥74 billion. So we are making a steady progress towards our full year target of ¥120 billion.
Operating profit from Smart Life business in the first half. We achieved a 22% increase and therefore, the operating profit reached ¥86 billion. We are making a steady progress towards our full year guidance of ¥140 billion in operating profit from Smart Life-related business. Out of the ¥86 billion in the first half, the major category that contributed this was the – came from the mobile device protection service and other piece-of-mind services, which accounted for 40%.
The next contributor was the top one that’s on DOCOMO and dTV, and other content and commerce services, which accounted for 20%. And then d CARD and d Payment and other payment solutions accounted for 20%. And the fourth one was the corporate IoT and other corporate solutions, which accounted for 15%, and the remaining 5% came from the large lifestyle services, such as d Photo service, which accounted for 5%.
Next about finance and payment services. With regard to the transactions handled, it is expanding very rapidly. It increased 22% year-on-year and reached ¥1.83 trillion. As for d CARD members, it reached 19.41 million, of which d CARD GOLD has expanded their subscriber base very steadily and increasing 1.5-fold up to ¥4.58 million. As for d CARD and d Payments used and expansions, we have seen the transactions handled for finance and payment services have been expanding very strongly as well.
Next with regard to the d POINT. The d POINT usage has also increased 1.5-fold on a year-on-year basis reaching 79.4 billion, of which usage at the so called d POINT partners accounted for 45%, which represents a 2.2-fold increase of 35.6 billion points. So that’s the monthly use by the d POINT partners. As for the d POINT – or the d POINT partners, our total number of brands and sites where d POINTs can be earned and used. This increased 2.1-fold up to 322, and the number of stores reached 41,900. Going forward we want to make sure that we offer attractive and very convenient point programs for the d POINT members, as well as for d Partners, and we’ll actively pursue those initiatives going forward.
Next about +d. So member partners increasing very rapidly and very steadily as of September, and we have 644. And going forward, we want to continue to pursue a co-creation through d+ with our partners. So collaboration, cooperation, we want to pursue further.
Next with regard to the – this year, we have mentioned that this is the year whereby we will be executing Declaration beyond and comp reductions are easy to get on this page. For example, providing value and excitement to customers, Declaration 1 and 2 and 3 are indicated on this page. These are the actions, which we have already expanded or have already carried out to introduce this. And in the following page, we talk about the value co-creation with partners, that relates to Declaration 4 through 6.
In Declaration 4, we started collaboration with Okinawa Prefecture, and have launched DOCOMO 5G Open Lab. Okinawa already a tentative open in December, and also Declaration 5. As is indicated on this page, these initiatives are being pursued. So execution of Declaration beyond, we want to make sure that we accelerate their initiatives so that we can create a richer future.
Next up, at ESG Evaluations. We have been selected as constituents of three leading ESG indices. As you see, in Japan, for example, we’ve been adopted as constituents of all ESG indices selection by GPIF. For example, corporate efficiencies, for example, is one case in point. So we adopted as constituents of all full is indices selected by GPIF. We want to make sure that we can continue to work toward creation of a sizable society because this will also translate into achievement of Declaration beyond.
Next, about the 5G initiatives. Up until now, you have already observed this, but we have had 5G Demo Bus and 5G Open Lab and also very verification environment. So therefore, we are increasing trials and environment up until now. And the other day we have already announced the fact that the 5G preservice implementation. We announced this so 5G precommercial services, and so we want to accelerate our dividend. This was buildout for the pre – 5G precommercial service. We have already – we want to further expand the 5G coverage. And also, we are going to further add up ¥10 billion investment
Next is disaster response initiatives. I did talk about this at the outset. Up until now, DOCOMO has making that experience of the great Eastern earthquake, have carried out these following measures – three measures, primarily. And we have – and as a result of these measures, we’ve been able to benefit from the following. For example when it comes to Typhoon No. 11, and also the Typhoon No. 21 and Hokkaido Eastern Iburi Earthquake, we believe that these past initiatives have really translated into concrete results, et cetera.
We have been able to active a large zone-based station. For the first time we activated this large zone-based stations for the first time in the Hokkaido earthquake, and we introduced this in the crucial city. And been able to – we’ve been able to responsibly – to recovering the telecommunication services by activating large zone base. We have roughly 106 locations, and we started out in Kushiro though, for the actual service. And as on the page, for example, dispatch of mobile base stations, a free battery charging and Wi-Fi services, have been implemented. So we only want to make sure that we were able to minimize the impact of the disaster to the extent possible. And next, let me talk about the following.
So we want to look back and reflect on the disaster that took place. And we had the blackout in Hokaido. That’s an important event so that we can respond to all sorts of disasters going forward. For the next two years – for the next two years, so between 2018 and 2020, we want to have ¥20 billion additional investment for disaster preparedness. For example, install storage batteries at the DOCOMO Shop, 2,400 shops.
Even during blackout we want to make sure that these customers will be able to utilize this in better ways. And also, second part, and also, we wanted to make sure that we increase the deployment of emergency base stations that are portable and portable satellite equipment. We will make this preparedness measures up until now. We want to make sure that we expand this further, so that we can secure reliability – and the safety of our efficacy of our network.
So these are the measures which we have taken. And next, this is the projection – the revision of fiscal 2018 full year guidance. First of all if we look at the operating revenue, increase of ¥70 billion, up to ¥4.86 trillion. And operating free cash flow increase – reduction for ¥20 billion, down to ¥940 billion, and as for CapEx, as we have explained, to accelerate the initiatives toward the the introduction of five precommercial services into 2019.
And also, to enhance our disaster preparedness, CapEx will be increased by ¥20 billion and will be ¥590 billion. So this is the first half year summary as you see. So, so much for the first half financial results. So next. Now I’d like to move on to the medium-term management strategy of the company. In April of last year we have announced our Declaration beyond, while promoting ESG management and calculating the sustainable development of society.
We are working and moving ahead towards the delivery of the Declarations. This time around as our new medium-term management strategy, I would like to talk about the actions undertaken towards the delivery of Declaration beyond and our new medium-term targets. Now next page. This time around, as the concrete towards the sustained growth in the 2020, we have decided to shift the focus to the two elements here.
One, is the transformation into business management, pivoted on membership base, and the second one is 5G rollout and business creation. These will be the focus going forward. And the pillars. There are three strategic pillars to sustain this effort. One, is the revenue opportunity creation centered on customer base; secondly, growth driven by 5G; and third, execution of customer returns and evolution of customer touch points. I would like to explain all these one by one.
First, about the customer opportunity – revenue opportunity creation centered on customer base. So this is the partners and the membership-base numbers, and to members and to partners, we would like to deliver new value and create revenues thereby. So our focus is to expand our membership base. In 2021, fiscal 2021, we will aim for 78 million members. And eventually, further down the road, we would like to aim for 100 members.
And towards fiscal, we would like to focus on expanding the number of d POINT CLUB members. On the right-hand side, for our – towards the partners, we would like to further expand the merchants as well as the corporate partners. And in particular, the 5G Open partner – program participants has now risen to 1,800 today, but we would aim for 5,000 companies by 2021. And also by promoting +d co-creation, we would like to tie the membership base and partners with DOCOMO’s assets.
As you can see in the model – in the middle there, d POINTs or DMP and AI, with 3D’s assets we would like to link the customer base as with the partners, and provide opportunities for them to generate additional revenues. And we would like to also create revenues as a result of this. And of course, the +d itself will continue to evolve. So we – in addition to collaboration – in addition to the collaboration of d POINT and d CARD merchants, we would like to study the possibility of marketing collaboration with the membership, and also, would likely promote new business development jointly with customers.
For example, we are already working together with J.LEAGUE to expand the fans to micromarketing. And also for joint business development, we are working together with Matsumotokiyoshi in the development of marketing tools. So going forward we would like to further roll this out into the manufacturers and other partners so that we can further expand the business and create new values.
So additional marketing and data utilization is the key here. So these are the businesses that we would like to further cultivate going forward. Next is about Smart Life businesses and the growth of our finance and payment business thereof. Traditionally we have been working on the expansion of the Payment Services at just d POINT and d CARD. Going forward, we would like to also expand and evolve the entire ecosystem for the payment platform, including d Payment and d quota accounts so that we can grow the finance and payment domain.
Towards this end, we would like to expand the locations where either d POINT and d Payments can be utilized to two million locations by fiscal 2021, which is more than double the current level. And also by expanding this ecosystem, we would like to realize our transaction volume of ¥6 trillion in 2021 in our finance and payment business.
And further, by deploying this in our value services such as fame and – financial services and advertisement, we would like to further expand the Smart Life business overall. So of course, we have the FinTech solutions such as investments. We would like to roll out new services one after another in the FinTech solutions going forward. And for the corporate business, enterprise businesses, we have already formed what is called a Top Gun team, a small team comprising customers, DOCOMO’s R&D team, as well as corporate sales.
So – and also, we have been promoting the 5G Open partner program. So through these efforts, we would like to further expand the number of partners. And therefore, as a result of that, we would like to create commercialized solutions one after another, and these solutions will be deployed through our corporate sales teams across Japan in a horizontal manner. And we would like to facilitate our partners to utilize these solutions, and thereby solve various social issues.
Through these efforts, we would like to aim to achieve ¥120 billion in revenues from corporate solutions by 2021, which has doubled the level 2017. Next I would like to talk about the growth driven by 5G. The second pillar here. Two stage of 5G. From 2019 to 2023, on a cumulative basis, we plan to invest ¥1 trillion. This is going to be a very aggressive investment.
In September next year, we will start the precommercial service, and in the spring of 2020, the commercial launch is scheduled. And in time for the Rugby World Cup next year, we are now making preparations so that people can start experiencing 5G early – from early on. And as you can see at the red part here, we would like to rollout the coverage steadily in where – in locations where the service is necessary.
So – and by doing so, we would like to support the digital transformation by 5G and contribute to regional vitalization and the solution of social issues. And parallel to this effort, although this is not really finalized, after the launch of 5G sometime around middle of 2020s, we will consider the termination of the third-generation system. We still have so many customers on this system, but looking at the customer’s behavior and response, we would like to look into the possibility of terminating the 3G service around that time frame.
As for 5G services and solutions through our trial sites, we are announcing many new solutions one after another. And especially, in order to further increase the number of solution creation, we are working together with many 5G partners, and new experience services on the left here. So stadium solutions, diversing the 5G capability, and VR and AR and MR, we are trying to offer a new entertainment experience to customers, and for corporations for enterprises, we are working together with various partners to realize remote medicine, and also, disaster prevention measures, so that we can contribute to the development of society and industries.
And some cases, on the following slides, I think we have explained this on various occasions so I would like to skip the details, but we would like to offer new sport-viewing styles and sharing of experience on the far right. So for example, the spectators, we would like to offer a solution that the spectators can share their experience immediately in realtime, with other people who are not at the venue using the fast speed connections of 5G, and because of the low latency there.
So this will offer a new sports-viewing style to customers. And our case number 2 is the using the city video feed, which will be carried by 5G, will be utilized for fire detection or other anomaly detections such as congestions, so that we can dispatch security guards and inform the relevant facilities immediately. And the third one is the remote medicine because there is inequality in medical service access in Japan.
So we would like to solve these issue, leveraging 5G technology. We have continued many trials with many partners. And this year, the mobile clinic car is going to be the challenge that we are going to tackle this year. And actually, on the 6th of December, at Tokyo big site, we are planning to hold a DOCOMO open house event, and these cases will be showcased during those events. So I hope you’ll take a visit to this event.
And we would like to create new solutions with 5G going forward. And the third one, the customer returns. Execution of customer returns and evolution of customer touch points. We talked about this earlier. So we want to provide new customer returns for first-time smartphone users. And we have some press release on this matter. Starting from November 1, which is tomorrow.
We’re going to offer what is called the Welcome Sumaho discount, so that different – a feature from customers can utilize smartphone’s value in a very – under a sense of comfort. You can combine this with docomo with. So if you have Welcome Sumaho Wari discount on top of docomo with, then you will able to start from ¥180 per month. So even for first-time smartphone customers, we believe that we can offer a very accessible value.
And we want to make sure that we can promote this further. Next, we want to talk about DOCOMO’s major pricing policy. Up until now we did offer various customer returns suited to the diverse requirements of the word of the customers. But on the other hand, as you see in this pie chart, some feedback we received was that the billing plans are very difficult to understand. They are too complex.
Or some say that they cannot perceive savings or great value. These are some of the feedbacks.
It’s been about 4.5 years ago, we introduced Kake-hodai and Pake-aeru sharing plan, and we did add a lot of elements on top of that plan. And so I suppose it has become somewhat difficult, complicated, and not easy for the customers to understand. So we want to – we very sincerely received this feedback. And we wanted to make sure that we offer a simple and easy-to-understand billing plan.
So we are going to review the billing plan so that we can form a straightforward and easy-to-understand billing plan. And next plan – the next page. In line with the introduction of these new simplified plans, and again, it will vary depending on the usage of the customers, but we want to offer them – we want to make sure that these user risk can be reduced by as much as 20% to 40%, depending on the usage status of the customer.
So with this, it means that – I’m sorry, yes, it should be 20% to 40%, sorry. So between 20% to 40% reduction is something that we want to aim for. So with this, on a per annum basis, at a maximum, I believe the customer returns can reach high as ¥400 billion. ¥400 billion. And as for the details of this billing plan, we are going to construct this from what works, and the conditions for the execution have to be finalized from now on. So after finalizing the announcement of the details and the delivery date, we planned this will be sometime around first quarter of fiscal 2019 – first quarter fiscal 2019.
So at the risk of repeating myself, the new plan will be simple, straightforward, and easy to understand, and will be something that customers can see great value. So these are the two points that we want to prioritize in preparing. Next for customers' comfortable experience, there are a lot of issues, which have been highlighted. So the waiting time and the attendance time. It’s about two hours on average, and it’s very long, and we have inconvenienced customers.
As one countermeasure, as we mentioned earlier, we want to simplify the billing plans. And upon that – and based on that, expansion of the reservation for shop visit, and also review the explanation method, and we want to make sure that we reduce the wait and attendance time.
With regard to shop visit reservations, it’s been introduced at some stores, that throughout fiscal year 2018, we want to expand the shop visit reservation throughout the shops throughout Japan and fiscal year 2019 we want to expand that number to 1,000 shops.
And also as you see on the bottom, we want to reinforce the web page promote to micromarketing as well as coordination between different channels. Through this, we want to make sure that we enhance our abilities to respond, suited to the customers requirements.
And by enhancing these efforts, we believe during fiscal 2019, we’ll be able to have the current wait and attendance time, that is what we want to attain. So from fiscal 2020 onwards, we want to make sure that we are able to reduce this further through our various initiatives.
And so bearing this in mind, I wanted to share with you something. Medium-term operational indices, this is the list. So again, as a revenue opportunity creation to customer base growth, we want to make sure that we’re able to increase the opportunities for business for DOCOMO group.
And also, we want to make sure that we’re able to have sustainable growth with active 5G investments. And also, we want to make sure that we’ll be able to offer a sense of value and comfort to the customers. So the customers will be willing to be with us for a very long time. And these are the financial targets.
As I mentioned earlier, we are planning the series of customer returns and through that, well, there will be a drop in operating profit, temporarily. We will reinforce our customer base through this customer returns. And through that, as mentioned earlier, I want to make sure that based on these initiatives, we’ll be able to increase the Smart Life business, our enterprise business, and also realize growth of our 5G business. And through the growth – through the growth in this business, we want to offset the decline in operating profit.
So therefore, in fiscal 2021 we want to reach operating revenue of ¥5 trillion, and in fiscal 2023, we want to recover operating profit ¥990 billion, which is the level of fiscal 2017. We want to start implementing these actions.
So this is the summary of the medium term management strategy, which I have already alluded to, at the risk of repeating myself, but it is self-explanatory. So we want to make sure that we transform into – rather, the transformation into business management pivoted our membership base and 5G rollout and business creations, as concrete initiatives, customer returns to simple rate plans that offer great value in response to consumer voice.
And also with this, we believe we’ll be able to further reinforce our customer membership base, and align with our partners, and then we’ll be able to generate revenue opportunities for 5G business as well as enterprise business, as well as non-telecom business, which is Smart Life business.
And we want to continue on this – translate this, rather, into recovery toward 2023. And so we want to make sure that we’re able to realize sustainable growth for the 2020. We look forward to your kind understanding and support.
So – and lastly, this shareholder return. This is the last part of the three parts of our presentation. As I mentioned, earlier, we will be reinforcing our shareholder returned. Yes, there will be a dip in operating profit, but over the medium term, we’ll be able to generate the cash flow – in free cash flow in a simple manner.
And on top of that, as I mentioned, earlier, the interest-bearing debt is very low. So we have a very firm financial base. We want to make sure that we realize an increase in dividend and also realize a flexible share buyout, so that we will be able to further expand our shareholder return.
And also, as for shareholder return, it’s indicated on the right-hand side of the page, with regard to the dividend. Planned annual dividend per share is ¥110. That’s a ¥10 increase from the last fiscal year. We’ll continue to increase dividend.
And also the share repurchase. We have received authorization for ¥600 billion share repurchase. So ¥600 billion share repurchase authorization. This is the largest ever in line with the scale we had back in 2003 and 2004. And also, cancellation of treasury shares. We’ll be revisiting the cancellation of all treasury subs. Up until now, the 5% of issued stocks, they were held as treasury shares. But going forward, all treasury shares cancellation will be considered.
So as you see we have continued to increase – increase in dividend channels, so have realized a share – a flexible share repurchase, other share repurchase in order to realize very strong and solid shareholder return growth. Of course, we want to make sure that we continue to provide returns for shareholders. This is the most important issues on the agenda for the management. We want to make sure that we realize shareholder returns based on this policy.
With regard to share repurchase, we believe that this will contribute to the capital efficiency. So while bearing demand improvement of ROE, we want to make sure that we realize earnings in line with our capital. And we – and last, always chosen to sustain connections as your robust ICT service partner. As I mentioned earlier, we will transform into business management. Pivoted on membership base, and also, 5G rollout to business creation. Through this, we will make sure that we’ll continue to contribute to our partners and to our customers.
So that is all for myself. Thank you very much.
A - Yoshizawa Keisuke
Thank you very much. Now we would like to move on to the Q&A session. We would like to limit the number of questions to two questions per one questioner, so that we can accommodate as many questions as possible from many questioners. Now the number will be limited to two questions per one person. If you have a question, please raise your hand. The first row, please wait for the microphone, and let us know your name and affiliation before you begin your question.
My name is Masuno from Nomura Securities. I’ve got two questions. First, is about how to digest your presentation, I think. Towards 2023, you are projecting a recovery in operating profit, so there is a decline and increase going forward. And I believe you are talking about the separation of communication charges with the handset charges.
So can you talk about the negative impact and how much discounts are you going to suppress going forward? Those were the subsidies and incentives. How much reduction are you seeking there? On the other hand, I think, because of the flat-rate service, the depreciation is going to increase and what kind of general expenses are you expecting to decline going forward?
And what are the other revenue increase that you are expecting from non-Telecommunications business? So I think you’ll be able to sort this level of details out to us. So what kind of impact are you expecting behind these numbers, negative factors and positive factors? Can you, just roughly, talk about these things to us?
This time around, the profit recovery in 2023, as far as the billing plan is concerned, simple and easy to understand billing plan, so the separation method, separating telecom charges from the handset charges is what we are contemplating at this moment. Accordingly the handset, how to sell this handsets will have to be considered and this is going to hold the key. And actually we are continuing our studies into this matter right now.
And through this effort we would like achieve an improvement in our competitiveness. But of course, there are some feedback from customers, and of course, how customers will shift according to this billing plan. So at which pace will that occur, and how will that impact on the bottom line is another factor that we have to take into consideration.
And also, on the cost side, we have to continue working on cost reductions despite this environment. So that is going to be another factor that we have to take into consideration. So as I said at the outset though, membership would be the focus of our business management going forward.
So the non-telecommunication services offered to those members, how to expand that, will be the key. The point program, the d CARD and also the enterprise partners expansion, we will have to work on these matters and these efforts so that this can lead to revenues. So I think that would be the driver of recovery, I think, the main driver of recovery. I think that will account for the largest portion of our recovery.
So we will look into these trends and see what will happen to the bottom line, and the profit and losses. Of course, I cannot give you any quantitative numbers at this point of time. But we will look into these trends and so – when we announced the first full year results, for this year, we would like to give you certain projections for 2019.
Second question. Because you are expecting a decline in profits going forward, in which year will you hit the bottom? And during this period of decline, you mentioned the shareholder returns, but during the declining period from next year onwards, what is your approach to shareholder returns during that period? Can you elaborate?
Hirokado can explain that matter, I think.
As for the shareholder returns, this time around, we have decided a policy to accelerate our shareholder returns. So despite the decrease in profits, free cash flow is expected to remain stable, and the interest-bearing debt liabilities. Actually, we have repaid ¥110 billion in the first half of this year. So the remaining balance is only about ¥50 billion corporate bond that we have issued in the past.
So our strong balance sheet remains unchanged. So from next fiscal year onwards, continuous increase in dividends, and the share repurchase funds cannot be promised at this moment, but there won’t be any decrease in dividends, despite the decrease in profits. So we would like to flexibly consider the expeditious shareholder return – share repurchases. So we would like to strike a good balance between customer returns and shareholder returns.
So when will you hit the bottom in terms of the decline in profit? So what is the projection you have there? I think you have some vision there, don’t you?
So including that, the customer return measures impact on the PL is currently being scrutinized. So at this moment of time, we cannot give you an exact answer. So sorry about that.
Thank you. We will go on the next question then. [Foreign Language] [Operator Instructions]
Thank you so much. SMBC Nikko Securities, Kikuchi is my name. It’s a little bit to – it overlaps with Mr Masuno’s question. I’m sure it’s the poignant question for many of us here in the audience, so let me ask that question.
So you talked about a 20% to 40% reduction in rates. That means that your telecom-related revenue’s ¥2.8 trillion for mobile, you’ve included the Hikari. It will reach ¥30 trillion but in any event – ¥3 trillion correction. So the gross – so the drop on the gross level is likely to be ¥600 billion I think that is the image we can calculate that if you have this level of rate reduction.
And also customer return ¥400 billion of customer returns. I suppose there are elements that will offset that, but so the billing plan revisioning and the lowering of the rates and also the reductions of telecom revenues and also customer returns. Can you talk about the gap between the two and also the relations between these two are different components? That’s my first question.
Well, first of all, we did earlier mentioned that we want to offer simple and straightforward, easy-to-understand plans so we want to present – produce a model for where there’s separation of handset charges and telecom charges. So subsidies such as monthly support, of course that will come into play. That will be eliminated or that will be offset rather.
So this ¥400 billion in this regard is on a net basis?
It’s a customer return on a net basis. That’s how you should construe and characterize this ¥400 billion.
I see. Cost reduction, you’ve actually absorbed the customer returns through your cost reduction, that’s been your principle so far. So the ¥400 billion, that’s a net base, inclusive of impact of monthly support and other subsidies. But are you going to reabsorb this amount through cost reduction?
Well it includes cost reduction efforts, but as I mentioned earlier, for example, the first pivot, the first principle which is transformation of business management – pivoted our membership basis, financial payments and also membership related business, point programs. And also – and provision services based on these principles. We want to make sure that customers make use of theses. It means that we want to make sure that we’re really transforming the business, which has pivoted to our membership. We want to expand that. So we want to expand non-telecom related revenues and gain profitability there.
And a result, offsetting whatever reduction in profit. And I think that’s the biggest element here. Of course, cost reduction is part the plan. But then cost reduction is something that we have pursued, ¥120 billion is the plan for this fiscal year. Every single year we’ve been able to achieve significant cost reductions inclusive of all the settlements we want to make sure that we do achieve recovery. But the main focus will be to expand our non-Telecom business. That is the plan.
I see. And at the risk of sounding a bit persistent, you mention that you want to start the cancellation from now but ¥400 billion, how do you come up with this number ¥400 billion? What is the basis for calculation? I think something – you probably have image of sorts. I think that’s how you came up with this number ¥400 billion. But for us, it came out of the blue, you see. So we don’t know how to interpret this number, so if you could help us out, so why ¥400 billion, if you could share that with us, please.
Well, the basis and the grounds in which we came up with this number, I am afraid that we are not in a position to respond at this juncture. But I think it’s a very bold number. And as I mentioned at the onset, we want to make sure that we offer plans that are easy to understand, very simple.
And one which the customer can sense value in. So the separation of handset charges and telecom charges, docomo with will be a case in point. So bearing that in mind as well, something that customers can sense value, that’s what we focused on.
So anywhere between 20% to 40% reduction in rates through that as a result of that, we believe that’s the number that we are likely to achieve. So I’m afraid I really can’t give you the details. So in relation to your question. I do apologize. Your second question. This is your second question, then?
And again, the same question – shareholder return. You talk about acceleration of shareholder returns. What did you mean by that? For example, right now, I think you’ve been increasing your dividend by ¥10, so if you talked about acceleration, are we talking about ¥15 to ¥20 per share dividend increase?
Is that the case when you talk about acceleration? I think that’s the image one would associate with the term acceleration. So if you mean simply flat, not reducing the dividend, then it doesn’t – it’s not acceleration, it’s deceleration. So can you translate the meaning of your term acceleration and in terms of the concrete dividend policy? That’s my second question.
Mr. Hirokado will respond to that question.
Thank you. With regard to increase in dividend, yes, we want to make sure we continue with dividend increase. That’s been the consistent plan. At the same time does that mean that we do this every single year? That’s not what we have said. But that position will remain unchanged. So if shareholder repurchase – combined with shareholder repurchase, we might continue to see dividend increase and flexible dividend – flexible share repurchase.
We want to accelerate shareholder return. And also with regard to shareholder repurchase, as indicated on the chart of Page 48, you will find that we have done this maybe once every two years, between ¥200 billion to ¥500 billion each time. This time around ¥600 billion only after one year since the last repurchase. So I think that represents acceleration. Now we came out with this policy. We want to do the same in conjunction with the announcement of new medium-term plan. So it’s not about the 1-year 2018 alone. We want to continue to enhance shareholder return from 2019 as well.
Now we would like to move on to the next question. The block co-assisted entrance. The second row from the front. The person closest to the entrance, yes.
My name is Tsuruo from Citi Securities. Just a little comment, I am listening to your story with a very complex feeling that this is going to have a negative impact on the shareholder value. So from that perspective I would ask two questions. One is about the resource allocation of your management resources. So there are some detail points that I will like to ask and for your confirmation.
CapEx is not going to increase from going forward, is that the right understanding? Secondly, as a result of that – as a result of the shareholder return, how further would you like to sustain this with EBITDA – How much that EBITDA multiples can you sustain going forward? Like ¥300 billion, of sure, this is likely to happen that fiscal year?
And that was my second question. And the third question would be transformation by acquisition. Would that be necessary for you to continue in this current business environment? In order for you to sustain your business do you have to acquire anything transformational? That’s my second – those are the questions.
Regarding the CapEx, five – as we have explained, ¥570 billion. Within that number we would like to manage our CapEx going forward and the – we would like to maintain on this number going forward. Okay, debt to EBITDA multiples. I am can’t really understand your question but I think and I’m not sure, we only have ¥50 billion in the liabilities' remaining balance.
But EBITDA is much larger than that?
So it’s not that we are approaching the ceiling. We have lots of leeway.
But if you continue this level of share repurchase, I think there will be some shortage at some point of time. So if that happens and of course, if you are going to sustain your business with a large acquisition going forward hypothetically, then that means you will have to have a large amount of liabilities. So given the ratings of your company what is the minimum level that you would like to maintain and I think they would be some assumptions which – pertaining to the debt EBITDA multiple. So what is the acceptable level that you can accept for the limit of the debt EBITDA – debt multiples?
AA3, WA- is the ratings that we would like to maintain going forward. We have a strong intentions there. And for the share repurchase, the cash at hand, ¥830 billion will be utilized to finance this share repurchase. So even if we spend ¥600 billion for share repurchase, we won’t to have any increase in the liabilities, interest-bearing liabilities. And also for the ratings and M&A.
If you have to borrow money for M&A, the balance thereof, actually the ratings is something that will have to be decided by the rating agencies. So there is no – nothing that we can control there but if you go beyond ¥1 trillion, I’m not really sure of the ratings will change but 100s of billions of yen of MD&A can be sustained by borrowings and ¥630 billion is the annual free cash flow. So therefore, I think we can maintain the ratings with the size of borrowings of hundreds of billions of yen. That’s our view. Thank you.
We’ll take the next question. So let us go on to the gentleman in the front row. The gentleman with the laptop open.
Daiwa Securities, Ando is my name. I just to confirm, if I may. Well with regard to profit, ¥990 billion you want to recover to it that. Now against that, the major driver will be non-telecom related business. I think that was your explanation. So ¥400 billion impact and ¥400 billion recovery through telecom – non-telecom services, that seems very bold. How should we interpret that? Are you saying that recovery in telecom in mobile is going to be significant factor? Can you confirm that, please?
As far as that is concerned, we cannot give you the specifics. So through non-telecom revenues, can we recover everything? That is not the case naturally. With regard to Hikari broad – Hikari optical fiber broadband, it is enjoying very strong growth so Hikari will be a contributor. And also the cost reduction and cost efficiency will also be a driver. So all of these items are included. To what extent, I’m afraid we cannot share with you the breakdown of these – each elements, I’m afraid.
I see. My second question after you released your prices, what will be the circumstance of the mobile market?
Let me try to confirm that. So price reduction could simply translate into a mere reduction in operating profit. On the other hand it could be that the customer base expansion can be achieved.
Well is it price reduction varying or do they need to enhance the customer enhance base? Maybe that’s the thing. Or maybe traffic and you be able to get back your ARPU? So is that the status of the market that you envision as a result of your price reduction, rate reduction? So can you give us a scenario, which is most likely translate into recovery. So can you talk about the most probable recovery scenario?
I see, well, as I mentioned earlier, I mentioned in that we want to transform into business management pivoted on the membership base, which means that we have data accumulated for each person where they shared d Plus in the account. So based on that individual data, we want to make sure we approach individual customers and deliver different services, propose different services, in other words, pursue digital marketing.
And we want to do that together with our partners and the target customers. It could be through deep – going to the cards and also Fintech will be another way or another channel. So through that, we need to enhance business whereby we’ll be able to generate revenues.
And we believe that today’s price rate reductions will contribute to that, enhancing the base. And also as I mentioned earlier, the, for example, feature phone customers we are going to introduce Welcome Sumaho Wari discount for current feature phone customers. These – the current feature phone customers, they are very satisfied with the current billing plan. And they have an image that they migrate to smartphones so the prices will raise.
So if the usage is the same, then other than your billing plan you will able to continue and migrate to smartphones and enjoy the same, similar prices even if you migrate to smartphone. So that is something we wanted to come up with. So therefore, it means that we present these plans and then the current feature phone customer willing to stay on with customers – with DOCOMO, correction. And maybe non-DOCOMO customers might be shifting to DOCOMO, as a result of the new billing plan. So that’s the thing behind the new billing plan. Thank you, very good follow up
Let me try to clarify the situation. So numbers, you bear in mind the numbers. But you’re also envisioning increase in ARPU on broad scale?
So ARPU point increase in the broad sense, it doesn’t have to be mobile services. Well, in the case of Smart Life business, it’s not like ARPU. But if we include ARPU from Smart Life, making sure that our members, the members' ARPU, or ARPA; ARPA because they are count, yes, we want increase that. But I did use the term non-telecom but we’re talking members. So increasing ARPA for each member, that’s a very executive thing that we want to achieve. That is the ultimate target, I believe.
Now we would like to take the next question. I see this hand consistently up. So this will be the block on the far right. The gentleman wearing eyeglasses, please.
Goldman Sachs, my name is Matsuhashi. The first question is, this ¥400 billion returns to customers, so this is based on separation plan, separation telecoms of handset. Is that not included, is that right? So can you confirm that?
And what about the point allocation? So in the past customer return measures, there were some points allocated. So those are excluded from this calculation? Can you confirm this point? What is the definition of this ¥400 billion customer return? Can you elaborate?
Maruyama-san, can you? So this will be answered by Mr. Maruyama.
So I couldn’t really understand the first portion of your question. So are you asking me that before, so you are asking the rate plans after the reduction of the handset prices, and if you compare that on the surface that the prices will come down and if that’s not included in ¥400 billion?
In that regard, yes, as Mr. Yoshizawa mentioned, the handset subsidies are also included so on a net-net basis this is the actual impact. On a net impact. So the point program actually we are still working on the detailed design of the rate plan so we cannot comment whether the points are included or not, at this point of time, sorry.
My second question is about for the future. You are planning to return your profit to ¥990 billion and therefore, you are expecting the contribution from the non-telecommunications services and businesses. But, of course, the margin of profit there is quite different.
So any given business is low in terms of manager of profit compared to the telecommunications business. So in that environment, what kind of revenue? Maybe ¥5 trillion is a mid-level revenue that you are going to target, on the middle of the way there? So what kind of revenue is needed for you to achieve the ¥990 billion profit level? Can you comment on that one?
In that regard those items to be incurred is encouraging revenues and the profit margin is currently being scrutinized and we have just started to exercise. So sorry, we cannot comment on the details. But as far as the non-Telecommunications profit margin is concerned, yes, it is true that we have always been talking about the profit margin and non-telecom businesses were compared to telecom business. Having said that however ¥140 billion is the profit guidance from Smart Life business this year.
And so in the third-year we were not really able to confirm the profit generation extending to this level. But currently it’s about 14% to 13% profit margin in the Smart Life segment already. But of course it’s not going to be as high as telecommunications business, but we are going to increase the transaction volume to ¥6 billion as I said earlier.
And additional marketing will be explored so that we can further offer new proposals to each individual customers and maybe usage based services and also be explored so by doing so would like to expand the overall pie and therefore, we would like to achieve an increase in profit.
So the profit margin, I’m not really sure that, that is going to be as high as telecommunications business but the absolute size of the business will be expanded. And that’s the plan. We will absolutely expand the size of the business. Thank you.
Thank you very much. And we are afraid the time is fast running out. So we would like to go to the gentleman that is seated – we would like to go to the remaining three gentlemen and we’ll take question from three and then end the session. So we’d like to go to the gentleman in the white shirt.
Thank you very much, thank you for explanation. I am with Mitsubishi UFJ Morgan Stanley, Tanaka is my name. If I could ask three questions. Starting with my first question. 44 Page, the financial targets on Page 44. There are a lot of government-led initiatives so I can only guess what is going in your mind. But I thank for the next – you’re not – you are proactively dropping profit. It’s not that you are forced to see declining operating profits.
So once you make a recovery in the operating profit, I think revenue based on the mobile services but at that juncture, once again people I think – once again I think the community will probably criticize one again that you’re generating too much profit once you make that recovery.
So are you going to once again reduce your rate at that juncture? What do you want to do with yourself going forward? You are a listed company on the stock market. And we analyze your company as something that – as a company that is trying to generate a profit but you’re proactively, voluntarily dropping your profit intentionally?
Well, we are voluntarily taking these initiatives. We are voluntarily trying to respond to what the customers want. But are we going to go through the same thing three years from now? I think that’s not what we’re talking about. It’s something that we have to continuously provide returns. Returns are something we need to continuously provide. Of course they – providing the environment may change.
But having said that, maybe people will say that you’re generating revenue through your smartphones maybe in 2023, maybe people say the same thing.
But again, how we generate profits, I think the structure of how we generate profit, I think we need to communicate this much clearly to the marketplace. We generate profit through services, not just three, four telecom services. People are finding value in that and paying for that.
And that is how we’re generating the profit. I think – we hope that, that will be the perception people will have. Right now, people focus so much on rates. And maybe it’s very difficult to understand the situation and maybe people say that they don’t find or sense value in our billing plans.
But people who receive our services, they gain – they get a sense of benefit and the convenience. We hope they will be able to more easily understand the convenience and the benefits we bring. Maybe there was a shortfall of efforts on our side. So we need to make sure we pursue this in the robust manner. I know that it’s not a straightforward response, but I do apologize.
No, thank you very much. I understand. My second question. So rate reductions. The ¥400 billion in customer returns, I know that you’re going to finalize the DD sales going forward, but let’s say that for the light users maybe you should provide more returns through both reduction in rates for light users.
If that is the case, then MVNOs price will no longer be attractive and then MVNOs once again make complaint about the low rates from your side. If that should happen? What about heavy users? Are you going to provide billing plans for heavy user who will be able to sense – get a great sense of value? Can you give a sense of direction as to what type of users you are going to target in relation to your rate reductions?
Again, very difficult us in a sense of clarity. We are not pursuing these initiatives, bearing in mind the MVNOs in mind. They’re not on our minds. Again, what have in mind is our customers, making sure that our customers are able to find the sense of value in our plans. Make sure that our plans are straightforward and easy to understand. So what type of customer segment are we going to focus on?
That’s something that we need to design going forward. But again at this juncture we cannot say anything with definitive. We talked about over 20% to 40% in reduction plan. So some segments may enjoy 40% reduction, some nay enjoy 20%, and somewhere – and some other segments in between. So we need to build and design that scheme going forward and then announce. Thank you very much.
The person sitting right next to the previously questioner.
My name is Kinoshita from Merrill Lynch. I have two questions too. So from a different angle, so sorry for this question but the 4G CapEx plan. The 5G CapEx plan was ¥1 trillion for the next five years. So in terms of population coverage how much coverage can you achieve that with this ¥1 trillion budget? Can you comment on that on that for the first part of my question?
This coverage of 5G, because this spectrum allocation has not been finalized in terms of the policy it’s about to be decided towards the end of this year. So the coverage calculation, I’m not really sure it’s the same definition as the past will apply this time around or not. Actually we will roll out the coverage in a timely manner in the areas where there is a requirement.
So in 2019, 2020, 2021, in these years I think we have an idea where to build the coverage, but people like this continue talking with the local government and also the community and also the – and private companies. We received those requests and then respond accordingly.
So maybe there is different approach to coverage will be applied going forward from 5G compared to the traditional systems and once these definition becomes clear we would like to communicate the details to you. So in that regard we cannot – the definition of the coverage is not defined clearly yet.
Now my second question is that as an additional follow-up question so then when the definition of coverage is not defined, how did you come up this ¥1 trillion budget?
So as I said for 2019, 2020 and 2021, for the three years, we built a process. Construction procedures are almost, by and large, becoming clear. But going forward we would like to continue to listen to the request of the corporations and local government. So we would like to extend on the track record or the budget for 2019, 2020 and 2021 and we have the experience of LTE so we can draw the extension line there. So at the end of the day, 2023 is the final year. So the proportion of that is going to be significant compared to the total budget, I think.
And my second question is just a point of confirmation. So as you recover the profit, once the profit will come down due to the rate reduction and that relates to Mr. Ando’s question, so your basic approach is that if the telecommunications ARPU or ARPA from telecommunications business, if we still have that KPIs in place, are you not seeking any growth in the ARPU or ARPU after the rate reduction? Is that the questions you have in your minds?
You’re talking about telecommunications, right? Not excluding the Smart Life services, right? In that regard then, although the details are not decided and defined yet, but our service out of this customer returns, their – our ARPU level will come down at least once. But on the other hand there will migration subscribers from feature phones to smartphones and maybe some other targets are elsewhere and of course, with the attractive levels of – attractiveness of our services, though the details are not defined, but maybe some customers will agree to upsell to larger bucket, there could be some uplift from there. So we cannot rule the possibility of ARPU going up.
So if the ARPU goes up, then you may introduce some new billing plans and return those profits to the customers. Isn’t that the case?
This is, by then, we are talking about the 5G rate plans, what to do with the 5G rate plans in the age of 5G is another question. So of course the rates will be more harmonized with the 5G enrollment and what kind of billing structure that we have to design for that it is something that we have to consider going forward. So it’s not only about telecommunications that may indicate our 5G. All these plans will be blended together including non-telecom and telecom services altogether. So how to divide and breaking down is another question that we have to sort out here.
I am so sorry to be so persistent, then we have to go back to the previous question. So unless you separate these things out, you will be always criticized and you’ll be making so much money out of your telecommunications service.
Of course. This depends on how you interpret it, I think. So of course the underlined network is utilized to offer many different services and many players are offering services and this relates to the neutrality debate. So telecommunications, how to generate revenues. Where the revenues are generating. Is this the basics of telecommunications functions or is it the supplementary services that we offer on top of the telecommunications infrastructure?
So there are heavy users of such supplementary services and they are receiving many different benefits but those benefits are not always coming into us. So in age of 5G, I think this will open up new debates. So but I don’t think we will use the same axis of discussion. So I think we have to sort things out. So maybe this could be a discontinuity of discussion. I’m so sorry that I cannot comment any further on that. But that’s, I think, what I have in my mind.
Thank you. Will go to the gentleman for the next question, please.
Thank you. UBS Securities, Takahashi is my name. I will start with a simple question. Say that you’re building a share buyback. When you talk about the scale of the buyback this time around, of course, I think a lot of our share repurchase NTT Holding Company are part of this number. So can you to share with us the percentage of the share buyback from NTT Holding Company?
We cannot give to the number I’m afraid. But it’s far different from what you’ve envisioned. But please wait, you’ll get the numbers very soon.
I see. The next question, so it’s about customer return. I think the starting point is clearly the government remarks. The government remarks was the starting point for this whole exercise. Now Mr. Yoshizawa, through the media you have mentioned that DOCOMO’s plans are not expensive. I think that’s I have observed those remarks that you made to the media. But then this whole thing started out with the government.
And the government data that is the premise and assumption of this whole discussion, for someone like ourselves clearly, these are the numbers that are not simply appropriate for comparison purposes. But then despite that backdrop, you have – it seems you have not made efforts to explain to the government. I have to question the extent of efforts you have made explain to the government.
So you mentioned that from years from now you’re going to return the profit that you saw in 2017. So this – are you going to suffer negative consequences as a result of those exercise? You mentioned that voluntary responded to the customers' recommendations – their feedback so it’s difficult to understand the billing plans and of course a sense – a lack of sense – the ability to sense value in these billing plans. This is something that was constantly said back in the past. So what is it that you inevitably came up with this? Can you share with us why now?
While I think this, you talked about very essence of this whole issue. Yes, I did remark that the billing plan of DOCOMO is not expensive. If you compare – if you make a comparison on various conditions, you can say that this is not expensive. That is what I mentioned. So it’s not significant – expensive. So based on set of conditions it – our pricing is not expensive. That’s what I mentioned. But under certain set of conditions, that phrase was excluded. Depending on the conditions, the price of goods may seem expensive or not.
I don’t think we were lower than other plans. It all depends on how you compare it. It all depends on how you set the parameters for comparison. So with regard to the survey between the prices for domestic and overseas prices, I have always commented about this. For example, long-term discounts. It’s not part of data, it’s not significantly the data also reference to the plan. And also we have docomo with. These are the options that should be part of the comparison.
For example, in the case of Y!mobile. I think the billing part for Y!mobile was part of the premise for this exercise this time around. And we have mentioned that the assumptions for comparing domestic and GOLD prices are questionable. Second, it’s all a matter of how you set the parameters for comparison. That is the fact.
So what can I say, too expensive or low? In maybe two years from now, three years from, or a year ago, are we going to repeat the same thing? I’m not sure whether or not the same thing will be repeated. But as far as I can say, we have listened to the voice of the customers, that is a fact. And also one other element. From next year onwards a new entrant is going to come into the marketplace. So we need to take actions beforehand. And make sure that we provide customer returns.
And by doing this, we believe we will be able to further enhance and reinforce our customer base. We want to do that now. So that’s the basis on which we made this decision. We believe naturally we want to – we hope that we will be able to gain understand of our shareholders as well as our customers. So at the risk of repeating myself, I think we need to continue to hammer out message and also permit the investment in the first quarter. We hope that we will claim the significance of our initiatives and provide appropriate explanations.
Thank you very much for that.
I do understand but we would like to take more questions, but we already ran out of time. So at this juncture, we would like the closing of this presentation. Once again, thank you very much for taking precious time to attend our announcement. Thank you.