Presentation Materials
Principal Questions and Answers Earnings Release for FY2007 (ended Mar. 31, 2008)
Announced on April 25, 2008
Please be advised that the following text has been edited/modified from the original Q&A conversations for the sake of clarity.
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Operating income forecast
Q1 Why do you think the operating income for FY2008 will be limited to approximately 830 billion yen, in spite of the full-year impact of accelerated profit generation resulting from the introduction of a new handset purchase method?
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Q2 In your forecast, cellular services revenues for FY2008 are estimated to decline by 414 billion yen year-on-year. Please give us a breakdown of this reduction.
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Q3 Other non-personnel expenses are forecast to rise by more than 100 billion yen year-on-year in FY2008. What are the reasons behind this growth?
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Q4 According to today’s announcement, there are no plans for a dividend hike, the budget for share repurchase will be reduced, and operating income is expected to be lower than the market consensus. What is the message contained in your FY2008 guidance and what are your goals for next fiscal year?
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ARPU
Q5 Your ARPU guidance for FY2008 (5,640 yen) seems to be very conservative. While the 500-yen impact of rate reductions is in line with earlier assumptions, this means the decline in MOU and incremental discount rates based on the length of subscription will reduce your revenues by 220 billion yen. Do you truly believe your revenues will decrease that much?
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Q6 Packet ARPU is estimated to grow 160 yen year-on-year. Don’t you think this is too small when the hike of i-mode usage charge is excluded?
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Q7 If you start "Home Area" services, as shown in page 14 of the presentation material, it could negatively affect your existing packet revenues. How do you foresee its financial impact?
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Handset sales and net additions
Q8 Inventory control becomes very important in your new handset purchase scheme; a lack of sufficient supply leads to a loss of sales opportunities, but carrying excessive stock could prevent a smooth switchover to the next-generation model. How do you plan to handle this dilemma?
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Q9 It seems that you are foreseeing only a slight decline, if any, in handset procurement costs this fiscal year. Why?
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Q10 What are your views regarding the market price of your handsets? Do you think, for example, the price of a handset marketed at 50,000 yen today will not change that much in the future?
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Q11 How many "2in1" subscriptions are included in your net additions forecast for FY2008?
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Competitive strategies
Q12 Your market share of new handsets sold dropped to less than 30% in February and March. How do you analyze the reasons behind this decline, and what kind of measures do you plan to take to turn around the situation in the future?
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Q13 What did you gain as a result of introducing the new purchase methods? What are the challenges that need to be resolved in the future?
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Q14 You spent one year to improve your network, handsets and services, and I believe you have achieved certain results. Nevertheless, your share of new handsets sold dropped to unprecedented low levels in February and March, and the net MNP losses also expanded in March. Do you think this is a temporary factor resulting from the difference in the timing of introducing free voice calls between family members, or are there any fundamental problems that need remedy?
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Q15 I have an impression that your decision-making has always been late over the last 12 months, lagging behind your competitors. Do you think you will be able to become the first mover and take the offensive in offering new services through the rebranding initiatives or the consolidation of regional subsidiaries?
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Q16 You announced a new policy to strengthen your ties with existing customers and value the quality of relationships. Your MNP performance has improved in April. And KDDI admits that the sales approach it adopted in February and March is unsustainable. When these are taken into account, although DOCOMO has certainly been in a difficult condition so far, I believe it was because you have taken the lead to move toward the desirable direction, which I think was the right decision for your business management.
I therefore consider that the improved MNP performance in April and reduction of churn rate should be more highly appreciated, but you seem to be somewhat lacking in confidence and hesitant. Why? Let us know if you have any concerns.Open
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Loyalty marketing/churn rate
Q17 What kind of indicators do you plan to employ to measure the success of loyalty marketing?
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Q18 What is your target churn rate for FY2008?
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Middle-term outlook
Q19 Other carriers have announced their middle-term plans. Since you have recently unveiled your new branding strategies, don’t you think you should also disclose your middle-term guidance at this juncture?
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Q20 Do you think there are risks because you have plans to offer new discounts, such as a two-tier flat-rate service?
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Capital Expenditures
Q21 Do you foresee any possibility of your capital expenditures decreasing to the 600 billion-yen level over the middle to long term?
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Q22 Is it correct to understand that the amount of your capital expenditures will be decided based on the traffic volume, and that you do not have plans to invest in something new? Have you officially decided to start LTE-related investments from 2010?
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Handset development
Q23 You mentioned that handsets equipped with "Operator Pack" will not become available until 1.5 years from now. How do you plan to reduce your handset procurement costs in the meantime? I believe your handsets are currently approximately 10,000 yen more expensive compared to your competitors’. When do you think your handset costs can be reduced to a level comparable to those of other carriers?
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Q24 Have you thought about selling old models, for which you have already recovered the cost of development, over an extensive period like SoftBank? Or have you considered skipping one cycle of new model development instead of constantly releasing two generations every year?
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