Japanese

Presentation Materials

• Mobile Number Portability (MNP)

  Q1 Explain the trend of subscriber movement following the introduction of MNP.

  Open

  A1 It has only been three days after the launch of MNP, but the overall movement of subscribers has so far been lower than our expectations. We believe the impact of MNP will become more visible after we obtain the data from tomorrow onwards, the first weekend following the introduction of MNP.

Handset sales

• Q2 How do you predict the handset procurement cost will change going forward?

  Open

  A2 The percentage of FOMA handsets to the total number of handsets sold has risen from 63% in the first half of last fiscal year to 88% in the first half of this fiscal year. Therefore, the upside pressure on the handset costs resulting from the rise in the percentage of the more expensive FOMA phones to total handset sales is expected to subside in the future. Going forward, we plan to cut the cost of handsets by introducing single-chip LSIs, increasing the percentage of 7-series phones, which are less expensive than the 9-series phones, and reducing the manhours required for debugging through over-the-air software upgrade, etc.

  Q3 DoCoMo's handsets are currently sold at the highest prices in the market. How do you plan to deal with this issue going forward?

  Open

  A3 The handset prices in the market are decided by the balance of various factors, such as functionality and the market prices of our competitors' products, etc. We believe we can reduce the market price of our handsets as we lower their procurement costs in the future. And if our models are competitive enough, customers will be willing to buy them even at relatively higher prices, which will allow us to cut commissions.

  Q4 You decreased your full-year projection on the number of handsets to be sold. I believe this is because you are not expecting a major change in your handset sales forecast for the second half of this fiscal year. Aren't there any changes to this forecast even after the start of MNP?

  Open

  A4 MNP is expected to affect the sales of new handsets, but as far as the replacement handsets are concerned, the replacement cycle is getting longer than before, and we are not foreseeing a major change in this general trend.

  Q5 Which model accounts for the higest volume in your total inventory today? And won't this become a problem in the future?

  Open

  A5 The 902iS and 702iS series are the principal models kept in our inventory at this point. We believe we can complete the sale of the prior models within this fiscal year. The inventory level as of the end of September has come down compared to the end of June, but we do not necessarily think it is low. Having said that, however, we would like to maintain a certain level of inventory so as not to cause inconvenience to our customer due to a lack of products, in view of MNP and the important months of November and December when the sales volume is higher.

  Q6 You mentioned that the 9-series phones currently account for 65% and 7-series 35% of the total FOMA handsets sold, but you intend to increase the percentage of 7-series to cut the procurement costs. In concrete terms, how further do you plan to increase the percentage of 7-series phones?

  Open

  A6 As far as the 9-series phones are concerned, while we will strive to cut its cost through the introduction of single-chip LSIs, etc., its procurement cost is unlikely to decrease dramatically because we plan to continue adding new features to this model. In order to reduce the procurement costs, therefore, it becomes important to grow the sales of 7-series phones, which offer distinctive characteristics tailored to different user segments, but not as sophisticated as the 9-series in terms of functionality. Our goal is to raise the precentage of 7-series to 50% of the total FOMA handsets sold as early as possible. Because we believe the current second-genereation mova subscribers attach more importance on the thickness and weight of the handsets rather than advanced functionality, as more mova subscribers switch to FOMA in line with its coverage expansion, the percentage of 7-series handsets to total FOMA handset sales is expected to increase in the future.

  Q7 Is it correct to expect an increase in handset procurement cost next fiscal year resulting from a growth in the number of HSDPA handsets sold?

  Open

  A7 We aim to cut the procurement costs by increasing the sale of 7-series phones and SIMPURE series handsets.

• Flat-rate voice service/Spectrum

  Q8 There was a media article reporting that DoCoMo does not intend to follow Softbank's flat-rate voice package. Is this true?

  Open

  A8 We currently accommodate over 50 million subscribers on our networks. The traffic is estimated to grow by 5-fold if we introduced a flat-rate voice service, which may cause risks of connection difficulties in urban areas and other places. Very deliberate studies are therefore required before we decide on its introduction.

  Q9 How many subscribers can you accommodate with the spectrum currently allocated to you? Also, how many net additional FOMA subscribers will you be able to acquire next fiscal year in view of your network capacity?

  Open

  A9 Currently, we are receiving additional spectrum in the 1.7GHz band due to the growth of FOMA subscibsers, with the allocation of 2x5MHz carrier frequencies that can be used in Tokyo/Osaka/Nagoya areas. Going forward, if we satisfy the conditions set forth by the Ministry of Internal Affairs and Communication, we believe we will be able to recieve the allocation of the third and forth 5MHz carrier freqiencies. However, it is difficult to precisely predict the network capacity that we can prepare for next fiscal year and beyond, because it will vary depending on the specific frequency band allocated to us.

• Outlook of profits

  Q10 With Softbank taking the offensive selling 0-yen handsets, if you suffer higher-than-expected outflow of users, you may need to increase your sales commissions to distributors. Under such circumstances, will it be truly possible for you to achieve your full-year operating income target of 810 billion yen?

  Open

  A10 Although Softbank claims it offers a package enabling users to use voice and mail for free, users need to be careful becauase there are many caveats to this package. The handsets are marketed for free on condition that subscribers enter into a installment payment contract for up to two years, and in the event they decide to terminate the contract or replace the handset before the end of the term of contract, they may need to pay a considerable amount for the remaining installments. Because Softbank has been marketing many of its handsets at 0 yen for some time already, its campaign this time does not change the situation in any significant way. Therefore, we do not intend to follow Softbank's pricing plan at this point, nor do we have any concerns about the achievement of our full-year operating income target.

  Q11 You revised your operating expenses forecast downwards by 39 billion yen reflecting the revision of projected handset sales, but non-equipment sales-related costs were also reduced by 16 billion yen in the revised forecast. I believe you should have been able to reduce these costs through managerial efforts from the beginning. Didn't you make this downward revision this time around only for the sake of keeping your operating income forecast intact, so that you don't have to revise it downwards from your original guidance?

  Open

  A11 Among the non-equipment sale-related cost items, we have identified additional sources of cost reduction by lowering the access transmission circuit charges, and this was not foreseeable before. On top of this, we have also made considerable and extensive cost cutting in other non-personnel expenses with the goal to achieve our full-year operating income target of 810 billion yen.

• Capital Expenditures

  Q12 Can we expect a significant reduction in your total capital expenditures next fiscal year, given that you may need to increase your HSDPA-related CAPEX? Also, explain the reason why you revised your full-year capital expenditures forecast for this fiscal year.

  Open

  A12 We plan to reduce the capital expenditures for next fiscal year from the level of this fiscal year. The principal reason for the upward revision in our full-year forecast for this fiscal year is the growth in the number of FOMA base stations to be constructed.

• Corporate market/International service/Search service

  Q13 Give us some updates on the competitive landscape in the corporate market, including the impactof MNP and introduction of new services.

  Open

  A13 Corporate market can be divided into two categories: companies using cellular phones in combination with some sort of system(s), and companies using cellular phones as a means for simple voice communication. The former type customers may not easily switch to other carriers even with the introduction of MNP, but the latter is the market in which all three cellular phone operators and WILLCOM a PHS operator, compete fiercely against one another, and we expect the price competition in this market will intensify for the near term.

  Q14 You have adopted a strategy to focus on international roaming service, and yet, it seems you do not offer as many GSM-enabled handsets as your competitors. Why so?

  Open

  A14 We are currently offering 8 GSM-enabled models. While W-CDMA-based 3G roaming coverage in overseas market is expanding, we are planning to further enrich the lineup of GSM roaming-enabled handsets in view of the competition. Going forward, we will study to implement GSM capabilities in our 9-series phones.

  Q15 I heard your competitors saw a significant growth of traffic after launching their search service. How about DoCoMo?

  Open

  A15 We would like to reserve our comments on specific numbers concerning the traffic, because our search service was launched only just recently. The search capability that we offer today is similar to the ones used in PCs, and this is just the first phase in our development plan. We believe the needs for cellular-based search capability is different from the one on PCs, and it will be possible for us to further grow the traffic if we fine tune the search functions to cater to the needs of our customers. And further down the road, we are looking into the possibility of advertisement business linked with the search function, which is suited to cellular-based search engines.

  Q16 Do you plan to achieve such enhancement of search functions jointly with other companies, or develop them on your own?

  Open

  A16 Cellular phones are equipped various location information capabilities, e.g., GPS or our "i-area" service. How to link such location information functions/services with the search capability will become an important challenge. Google Local is not equipped with a function to perform search leveraging the linkage with GPS. While we may ally with other parties as necessary, DoCoMo will basically play a central role in the development.