Japanese

Presentation Materials

• Mobile Number Portability

  Q1 How have you been faring with the acquisition of net additional subscribers so far in January 2007?

  Open

  A1 The number of subscribers porting out from DoCoMo was proportional to our cumulative market share, i.e., over 50% of the total port-outs in the market, thus within the range of our expectations. However, the circumstances are difficult, because even if we were able to acquire all subscribers who ported out from our competitors (accounting for over 40% of the total port-outs in the market), we would still not be able to achieve net gains in the MNP market. The number of net losses due to MNP has been declining gradually, but its impact still remains in January. While we do not think we will record net losses in our total subscriber count in January, we believe it will be difficult to secure as many net additional subscribers as in December, when the overall market expanded.

  Q2 The number of your port-outs has been in line with your projections, but you have failed to acquire as many port-in subscribers as planned. What are the challenges?

  Open

  A2 We believe our coverage, handsets, billing plans and services all compare favorably against those of our competitors. Going forward, we must introduce attractive services that our rivals do not offer. For this reason, we have aggressively formed alliances with players in the peripheral industries since last year, and there are some other projects in the pipeline.

• Sales Policy

  Q3 Recently, it seems the demand for a second phone per subscriber is rising. Do you plan to implement a sales policy in view of this trend?

  Open

  A3 For the near term, we need to take swift actions in our sales policies keeping an eye on the moves of our competitors. For the mid-term, however, it is essential to differentiate ourselves by further improving our coverage, handsets and services, thereby acquiring customers.

  Q4 Have you noticed any specific trends in subscriber movement following the introduction of the "White Plan" by Softbank?

  Open

  A4 Softbank introduced the "White Plan" in the middle of January, but we have not seen any major impact from its launch so far. Softbank also announced the introduction of the "Double White Plan". We believe our customers will seldom have to pay a more expensive bill compared to the "Double White Plan", so long as they have chosen the optimal billing plan suited to their usage behavior. We would like to carefully watch subscriber movement after the introduction of the "Double White Plan" which is scheduled for launch in March.

  Q5 You have not been able to completely erase the negative perception of FOMA's area coverage. Now that you have constructed so many base stations, isn't it possible for you to do some PR by presenting a quantitative assessment on your network coverage?

  Open

  A5 FOMA's coverage has already been expanded to a level superior to our mova network. However, when compared against au's network, it is not necessarily always superior depending on the location. Since last year, we have been posting advertisements concerning our network coverage and we intend to strengthen our publicity going forward. We will publish quantitative data if available, but we would like to first work to improve the general perception.

  Q6 Which is more important for you, the subscriber target or the profit target?

  Open

  A6 We always pay attention to achieving a good balance between subscriber count and profits, but as far as the fourth quarter of FY2006 is concerned, we would like to attach a slightly higher priority on subscriber acquisition.

• Handset Procurement

  Q7 Why hasn't your handset procurement cost come down as much as expected?

  Open

  A7 We will continue our efforts to bring down the cost of our handsets by introducing single-chip LSIs and increasing the percentage of "7-series" phones in the total number of handsets sold. However, with respect to the "9-series" handsets, because we plan to continue adding new features to this lineup, the cost will likely remain unchanged, even if we are able to reduce the cost through various efforts such as introducing single-chip LSIs.

  Q8 Given the decrease in your inventory level, will it be appropriate to consider that you will not have to expect any appraisal losses from obsolete handsets, thus contributing to the achievement of your profit targets for this fiscal year?

  Open

  A8 We believe we will be able to decrease the inventory level during the current quarter. We perform an appraisal for each model of our handsets, and the models that are deemed difficult to sell are written off in accordance with our internal rules. The number of models that we market has been increasing and it is difficult to predict whether the models subject to write-off will decrease or not at this point.

• Capital Expenditures

  Q9 You mentioned that your full-year capital expenditures may end up higher than your guidance. How do you foresee capital expenditures for the next fiscal year?

  Open

  A9 Although a more detailed examination is necessary, our capital expenditures for this fiscal year may be slightly higher than our projections, given the steadfast progress in the roll-out of base stations. While we will need to continue our base station construction next fiscal year, we believe we can reduce the amount of capital expenditures to a level lower than this fiscal year because the investment requirements have already peaked.

• Full-Year Results Forecast

  Q10 You mentioned it will be difficult to achieve your target results for this fiscal year. Explain in more detail.

  Open

  A10 Given the current competitive environment, we think it is necessary to reinforce our sales activities in the fourth quarter to achieve our target number of subscribers. We have aggressively used distributor commissions in December to do so. And in March, when subscriber movement is expected to be more active and our new models become available, we plan to strengthen our marketing activities again.

  Q11 Give us your projections on the operating income for the next fiscal year.

  Open

  A11 We think it is difficult to achieve our subscriber target for this fiscal year, and this will likely impact our revenues for the next fiscal year. While we are expecting a decline in capital expenditures, depreciation/amortization is not expected to decrease given the high amount of capital expenditures this fiscal year. We will strive to reduce procurement costs and distributor commissions. It is premature to predict the results for the next fiscal year at this point because they will be affected by handset sales in March. We would like to develop the forecast after observing various factors a little longer.

  Q12 If DoCoMo introduces a scheme similar to Softbank's "Super Bonus", how greatly will it affect your revenues?

  Open

  A12 We do not negate Softbank's approach as one of the possible sales methods. However, we have not made any calculations on the hypothesis of introducing a similar scheme. The issues pertaining to the business model of handset sales cannot be resolved simply through the combination of abolishing distributor commissions and removing the SIM lock. Many other possible approaches, e.g., introducing a method to bind a subscriber and prohibit cancellation through a time-limited contract, etc., should be addressed. We therefore think it is necessary to study a business model that will benefit each player, the users, manufacturers, distributors and carrier.

  Q13 The Mobile Business Study Group is currently discussing possible changes to the current business model, which is built on the distributor commission system. How significantly will such change impact your results?

  Open

  A13 This is not simply about abolishing the commissions; issues such as the introduction of a time-limited contract system like those adopted in Europe or the United States, and removal of the SIM lock need to be addressed together. As for the SIM lock issue, because the technical standards are different among carriers, i.e., DoCoMo and Softbank use the same W-CDMA technology but au uses cdma2000, even if the SIM lock is removed, we will still face a situation in which users cannot use the same handset between carriers adopting different technical standards. Discussions on this matter are thus necessary going forward. The impact on our financial results may vary depending on the outcome of the discussions.

• Returns to Shareholders

  Q14 You have so far spent 90 billion yen for the repurchase of your own shares out of an authorized budget of 250 billion yen. What are the prospects going forward? Do you have any plans to change your shareholder return policies in the next fiscal year or beyond?

  Open

  A14 The 250 billion-yen budget for the repurchase of our own shares is set for the one-year period starting from the date of our ordinary general meeting of shareholders held in June 2006, for which six months have elapsed. We would like to proceed with our share buy-back program taking into account the number of shares that would be practical for us to purchase from the market in the remaining six months. The policies for the next fiscal year and beyond have not been decided at this point, but as usual, we believe we will seek an authorization to set a certain amount of the budget—although the amount has to be studied—for the repurchase of our own shares.

  Q15 Your results will not be as good as the last three years and the outlook for next fiscal year appears to be difficult. In this environment, how do you plan to reward your shareholders overall, including individual shareholders?

  Open

  A15 We executed a strategy to narrow the gap with our competitors to compete in the MNP race, but we were forced to play a structurally difficult game because we control a large share of the market. But now that we have eliminated the gap with our competitors, we will focus not only on the business defined by ARPU multiplied by the number of subscribers, but also various other services provided in the flat-rate platform, with the goal to win the acceptance of our customers. We would like to seek your understanding on these efforts. Traditionally, we have rewarded our shareholders through dividends and the repurchase of our own shares. We would like to study the balance between dividends and the repurchase of our own shares going forward, while listening to the opinions of the capital markets as well.

• Others

  Q16 Do you plan to cover the decline in ARPU by cutting costs and increasing non-traffic revenues?

  Open

  A16 We believe the industry is standing on the edge of a paradigm shift. What has happened in the PC-based Internet world will probably occur in the mobile business. However, we do not think Web 2.0 can be introduced in the mobile world as is; it will have to be adapted for mobile phones, incorporating characteristics that are unique to mobile phones (location information and personal identification capabilities, etc.). Players in various sectors, e.g., distribution and transportation, are showing interest in new businesses that use mobile technologies, and fortunately DoCoMo is positioned at the intersection of these sectors. This trend is already becoming visible and the key is how we can create new businesses together with these players. We are also moving ahead in securing human resources that have knowledge and expertise in other industries, and in fact, we have credit card specialists among our middle management. The power of the young generation is needed to generate new businesses that combine the mobile industry with other sectors.

  Q17 You have been reducing your other non-personnel expenses. Will it be possible to reduce them even further from the current level?

  Open

  A17 The primary reason for the year-on-year decline in other non-personnel expenses was the increase in expenses in the third quarter of last fiscal year caused by an extraordinary factor. Operating expenses and base station-related expenses both increased compared against the same period of the prior year, but we will strive to reduce our expenses even further.

  Q18 Give us an update regarding the acquisition of PLDT shares from through FPC.

  Open

  A18 In December, we announced our plan to acquire PLDT shares from FPC. We are currently holding negotiations with FPC for the purchase of such PLDT shares.