Japanese

Presentation Materials

• Equipment sales

  Q1 How much was the cost of equipment for FY2005? Also, give us your projections for FY2006?

  Open

  A1 The cost of equipment for FY2005 was 1,113.5 billion yen, which was almost in line with our forecast. The cost of equipment for FY2006 is expected to increase more than results of previous fiscal year.

  Q2 It seems that distributor comission is expected to decrease this fiscal year. How do you hold down the distributor comission?

  Open

  A2 We would like to avoid a constant increase in distributor commissions, and instead control it by varying the amount of commissions, for example, depending on the timing such as before and after the introduction of number portability. Going forward, we plan to reduce handset procurement costs by reviewing the procurement method and sharing R&D expenses with the manufacturers, and cut our operating expenses by actively introducing less expensive models, e.g., the SIMPURE series.

  Q3 Give us your projections on the number of handsets to be sold this fiscal year.

  Open

  A3 The number of handsets to be sold this fiscal year is expected to increase more than the previous fiscal year.

  Q4 You explained that your are planning to cut distributor commissions per unit this fiscal year, while the handset procurement cost per unit is expected to increase. Do you think this is truly achievable?

  Open

  A4 We aim to reduce our overall expenses through a more efficient use of commissions, e.g., by targeting specific segments in sales. Also, the expenses for FY2005 grew higher than usual because of extraordinary events like the "50 million subscriber campaign" etc.

  Q5 How many HSDPA handsets do your plan to sell this fiscal year?

  Open

  A5 At the time of service launch, we plan to offer one model in the handset-type form factor, and one PC card-type model. We will first start the service in the 23 Wards of Tokyo, and thereafter expand the coverage to 70% of the populated areas in Japan by the end of March 2007. We, therefore, are not expecting a huge uptake of HSDPA handsets during this fiscal year.

  *For more details concerning HSDPA service, please see "HSDPA Presentation Material" below.

  HSDPA (PDF format:153KB) 2 pages

• Pricing plan

  Q6 If you suffer a sharp reduction in the share of net additions as a result of number portability, do you plan to discount your prices at the sacrifice of profits in order to regain market share?

  Open

  A6 We may see some volatility in our share of net additions for some period after the introduction of number portability, but we would like to decide on prices from a long-term perspective without being influenced by such short-term impacts.

  Q7 Are there any further price cuts planned for this fiscal year?

  Open

  A7 With the rate revisions implemented during the last 12 months, e.g., the introduction of new billing plans and lifting the subscription restrictions relating to the flat-rate package, we believe we have undertaken all necessary measures in the area of pricing plans for the time being.

• "Osaifu-Keitai" (mobile phones with wallet functions) services

  Q8 Give us some updates on the usage of "Osaifu-Keitai" (mobile phones with wallet functions) services, now that the user base of compatible handsets has exceeded 10 million. Please also explain the response of service providers.

  Open

  A8 As we described in the "DoCoMo Report", our survey results shows that approximately 30% of the 12 million compatible handset users are actually using the "Osaifu-Keitai" (mobile phones with wallet functions) services. The number of installed reader/writer machines reached approximately 70,000, and we plan to complete the installations of approximately 150,000 reader/writer machines compatible with our "iD" service by the end of this fiscal year. We believe the uptake of this service will gain further momentum in the future, because the requests from merchants for installation of reader/writer are increasing.

  Q9 Is the contribution from "DCMX" business included in your revenue projections for this fiscal year?

  Open

  A9 Yes, it is included in our business plan for this fiscal year, but we cannot disclose the concrete figures. Our near-term goal is to grow its membership to 10 million, and we made our first step toward this goal this fical year.

  Q10 How do you consider the risks of irrecoverable debts and/or reputation risks that may arise as a result of offering "DCMX" service?

  Open

  A10 Certain risks associated with the provision of financial services are factored in our business plans, and we believe these risks are manageable through our collaboration with Sumitomo Mitsui Card, Co. Ltd.

• Spectrum

  Q11 What is the estimated number of FOMA subscribers as of the end of March 2008? And how many subscribers can you accommodate with the currently available spectrum?

  Open

  A11 By the end of this fiscal year, the number of FOMA subscribers is expected to reach over 35 million, which is the condition for us to receive the fourth carrier bandwidth in the 1.7GHz band. We will therefore apply for the fourth carrier bandwidth once FOMA's subscriber base reaches 35 million. Even before the allotment of this spectrum, we do not foresee any problems whatsoever for the provision of FOMA service because we have sufficient capacity with the already allocated spectrum.

• Network evolution

  Q12 Explain the concrete services that will become available with the launch of HSDPA. Do you plan to offer services linked with Rakuten auction or other new services such as music distribution?

  Open

  A12 We plan to deploy music and visual content services leveraging the high data speeds of HSDPA. Further details will be explained when we unveil our new handset models in May 2006.

  * For more details concerning our new handset models in May 2006, please see "FOMA NEW MODELS Presentation Material" below.

  • FOMA NEW MODELS Presentation Material

  Q13 Will DoCoMo be ethe primary entity in the NTT Group to study the introduction of WiMAX?

  Open

  A13 We are carrying out experiments on WiMAX technology together with NTT East, NTT West and NTT-BP. We plan to experiment and study various possibilities, including fixed and mobile communications as well as other communications service that lie in between the two.

  Q14 Does your capital expenditures forecast for this fiscal year (905 billion yen) include expenses related to the roll-out of NGN (Next Generation Network) facilities?

  Open

  A14 No, they are not included.

  Q15 Will DoCoMo's IMS (IP Multimedia Subsystem) core network be integrated into the NGN concept advocated by the NTT Group in the future?

  Open

  A15 We need to decide after looking into the benefits from integration, but a simple integration of all networks may not necessarily be the right solution.

• Changes in competitive environment

  Q16 With Softbank's acquisition of Vodafone, they may come up with services linked with Yahoo! in an exclusive arrangement. Won't this have a negative impact on your data revenues, given that FOMA users' usage of general sites, including Yahoo!, etc., is high?

  Open

  A16 The use of general sites by FOMA users is certainly rising. We are therefore studying how to link our services with search engines and improve the convenience of our services by the adoption of full browser, etc.

  Q17 Do you have concrete results from surveys concerning users' willingness to switch carriers after the introduction of number portability?

  Open

  A17 Different surveys have been carried out by various institutions, and DoCoMo is also conducting surveys every three months. What we know as a general trend from these surveys is that respondents, who were previously more eager to port numbers, have become less interested as the actual conditions became clearer. Also, previously there was a general perception that our rate plans are more expensive compared to the competition's, but we successfully elimiated this percepetion with the series of rate revisions, which we believe contributed to the improvement in the survey results.

• Outlook of profits and free cash flow

  Q18 What is the profit level you aim to achieve in three years from now?

  Open

  A18 One of our major goal is to recover the operating income to the 1 trillion yen level that we achieved in the past. On the revenue side, the downtrend in ARPU has slowed, and on the expense side, capital expenditures are expected to be reduced from next fiscal year after hitting its peak this fiscal year. We therefore believe we can expect a growth in operating income going forward. In addition, the prospects of mobile-related peripheral businesses are becoming clearer with the launch of our credit payment service, which makes us believe that our business is turning to the better.

  Q19 When will you start to see quantitative results from your cost-cutting measures?

  Open

  A19 In this fiscal year's business plan, we have already factored in savings of several tens of billion yen from the reduction of distributor commissions, network costs and other costs, and we are committed to continuing our efforts to further reduce costs.

  Q20 Adjusted free cash flow for this fiscal year is expected to drop to 280 billion yen. What are the major reasons behind this sharp year-on-year reduction?

  Open

  A20 In our results forecasts for this fiscal year, under ordinary circumstances, free cash flow can be estimated at approximately 400 billion yen after subtracting capital expenditures of approximately 900 billion yen from EBITDA of approximately 1,600 billion yen, and estimating the corporate taxes based on an operating income of approximately 800 billion yen. However, for this fiscal year, we appropriated the cost for investments that have already been decided, the impact resutling from the launch of credit business and other increases in expenses associated with strategic business activities. The corporate taxes, which reduced temporarily last fiscal year owing to the losses from the sale of AT&T Wirelss shares in FY2004, are also expected to increase in the current fiscal year. Because of these factors, we estimated the free cash flow for this fiscal year to be approximately 280 billion yen.

  Q21 Will there be an impact from the launch of credit business to your free cash flow for next fiscal year (FY2007) and subsequent years?

  Open

  A21 It depends on how we expand the credit business next fiscal year and beyond, but the risks of an increase in current liabilities cannot be ruled out.