Japanese

Presentation Materials

• Questioner No. 1

  Q1 How far do you think the number of PC data communications subscriptions will grow in the next fiscal year and beyond, and how will it affect your revenues?

  Open

  A1 We are currently employing various measures to expand the sales of PC data cards, such as building them in notebook PCs marketed by manufacturers. We are also reinforcing the sales promotion activities at mass retailers and other stores, with the goal of expanding the subscription count of PC-based mobile data plans to 800,000 by March 31, 2010. The number of subscriptions is growing faster than our initial expectations—although not to the extent of making an upward revision to our full-year sales forecast—and we will strive to sell as much as possible. The ARPU of these data plan users is higher than the packet ARPU of ordinary cellular phone subscribers.

  Q2 How do you view the level of profits generated by selling one data communications device?

  Open

  A2 Users who purchase a PC data card are generally high ARPU users, so we provide higher sales commissions to distributors for data cards on condition of a 2-year subscription contract. Of course this is done while carefully examining the profitability level.
  To comment on the contribution of PC data card sales to our total income, even if we are able to acquire a large number of PC data communications subscriptions, the revenues from these subscriptions will not likely grow to a size to increase our overall ARPU. This is because even if total PC data card subscriptions grow to approximately 800,000 and all of the users use packets up to the monthly upper limit of 5,985 yen of the two-tier flat-rate package, their total revenues will still be much smaller compared to the revenues generated by the 49 million i-mode subscribers multiplied by ARPU of 2,460 yen.

  Q3 It seems that there has been an increase in the number of used handsets sold in the secondhand market. What do you think about this?

  Open

  A3 We had anticipated that the secondhand market would expand as a result of a rise in the handset prices owing to the introduction of the Value Course. We therefore took measures in October to prevent of stolen handsets from being sold in the secondhand market by disabling their communications capabilities by registering a number uniquely assigned to each handset. We prefer customers to purchase a brand new handset, because the expansion of secondhand market could prevent the widespread adoption of new features like the "i-concier" service. On the other hand, in our insurance service for lost or damaged handsets (including free delivery of replacement phones), we currently provide subscribers with the same model as the one submitted for repair, but we would like to consider the possibility of using used handsets as replacement phones.

  Q4 Is there any chance of DOCOMO itself being directly involved in the distribution of used handsets in the future?

  Open

  A4 That is not included in our plans at the moment.

• Questioner No. 2

  Q1 Subscriber movement may become more active during the high-sales season in the coming spring. If new subscriptions are doing well, do you intend to step up your efforts for the acquisition of new subscriptions even if recuperation of these costs only begins in the next fiscal year?

  Open

  A1 We intend to achieve our full-year operating income target of 830 billion yen while strengthening the acquisition of new subscriptions. We have already prioritized our expenditures item by item, according to which we will endeavor to reduce our overall costs. Cost items considered to be traded off with the acquisition of new subscriptions will be cut.

  Q2 There are opinions suggesting that many of the video users are heavy packet users to begin with, and PC data cards consume a huge amount of traffic so you have to spend a large amount of capital expenditures to prepare adequate capacity, which makes it difficult for you to make profits. What do you think of this?

  Open

  A2 It is true that video use is mainly for entertainment purposes, and the vast majority of its users are younger people who have been using packets heavily from before. Going forward, we would like to expand the use of video to broader segments by increasing video applications in such areas as tourist information, health-related services or restaurant guides, so that users who so far have not consumed packets up to the upper limit of the two-tier packet plans will start using video services.
  We believe the PC data plan users are making positive contributions to our revenues and income for their higher ARPU. Their negative impact to our network is not very big because we already have the data speed restriction feature and other countermeasures against very heavy usage customers.

• Questioner No. 3

  Q1 Do you plan to use the costs saved from reduced number of handsets sold to finance the incentives required for boosting your handset sales going forward?

  Open

  A1 The basic approach in our incentive plan is to spend costs that are necessary to counter the competition, instead of simply building up the amount of sales commissions. Also, with the average handset use period growing longer, we have recently seen a rise in expenses from the growth in the number of handsets submitted for repairs, which has generated expenses. Our full-year operating income target of 830 billion yen cannot be achieved without a concrete plan. We are committed to further improving our efficiency to achieve this target by all means.

  Q2 How much further do you think you can reduce your costs during the next fiscal year? The ARPU for this fiscal year is expected to fall by 400 yen year-on-year, and even if you are able to limit the decline to only 200 yen in the next fiscal year, it will result in a decrease of some 100 billion yen in operating revenues. Under such circumstances, do you think you can increase your income only through cost reduction?
  I believe your future growth depends on the trends of ARPU and the progress of your medium-term vision. If you are not able to increase the subscription rate of flat-rate packet users to 70% of total users, and if the percentage of flat-rate users consuming packets up to the monthly upper limit does not reach 50% of the total flat-rate users, do we have to think that it will be difficult for you to achieve the operating income target of 900 billion yen in FY2012?

  Open

  A2 We are still developing the income plans for next fiscal year, but it does not seem that we have much leeway. How to raise the packet ARPU is one of the issues we are studying. We started various initiatives from the second half of this fiscal year, and we are now studying the implementation of measures on a company-wide level aimed at increasing packet ARPU. On the cost side, we expect to see efficiency improvement resulting from the consolidation of former regional subsidiaries and the effects of the accelerated depreciation of fixed assets. However, the situation remains tough.
  Achieving a flat-rate subscription rate of 70%, and to have over 50% of them reaching the monthly upper limit of the two-tier rates are the preconditions for achieving the FY2012 operating income target of 900 billion yen. While we are currently endeavoring to achieve these numbers, in the event that we find them difficult to meet, we will need to explore other avenues for growth.

• Questioner No. 4

  Q1 Please explain the attributes of the flat-rate data service subscribers. In addition, what is your target with respect to the percentage of flat-rate users with usage reaching the monthly upper limit of the two-tier plan for this fiscal year?

  Open

  A1 Currently, the users who spend packets up to the monthly upper limit of the two-tier flat-rate plan are considered to be mostly heavy usage customers. At present, slightly below half of the total flat-rate users are using up to the monthly upper limit, but we see a clear division between the user group reaching the maximum limit and the group with very low usage close to the minimum rate of the two-tier plan. We would like to first encourage more low-ARPU users to join the flat-rate package by lowering the minimum monthly rate of "Pake-hodai double" so they can utilize our services free of concerns about their telephone bills, and then work to boost their packet usage to a higher level.

  Q2 How do you plan to motivate them to use packet services?

  Open

  A2 When customers subscribe to a two-tier flat-rate plan for packet access, we will also recommend them to join some other services that could serve as a trigger to start using packet services. We consider "i-channel" and "i-concier" a very effective tool to grow the ARPU of these users. Through "i-concier" service, we plan to deliver information that is attuned to users' lifestyle needs and thereby raise the ARPU of users. Customers also find it easier to utilize video services once they join the flat-rate service. We would like to offer video content that is relevant to user's lifestyle needs and leads to a growth in ARPU.

  Q3 Let me hear your comments regarding the possibility of a rate hike. With respect to data communications based on PC cards, do you plan to develop a billing plan that could result in an increase in ARPU, for instance, by adding some supplementary services? Also, in your content delivery platform business, do you plan to charge commission fees in the order of 20%-30% by altering the i-mode model?

  Open

  A3 A key issue that needs to be considered in relation to our billing structure, which is currently being studied, is the rate structure of the LTE service, which is scheduled to be launched next year. With respect to the platform, thorough discussions will be required to change the existing i-mode billing structure, but we are currently contemplating the creation of a separate market for open applications. The commission fees for this market, which is still under study, will likely follow the global standards.

• Questioner No. 5

  Q1 You mentioned that the number of handsets turned in for repair is increasing. Given the current situation that the savings from reduced handset sales are offset by the increase in repair costs, don't you think it makes more sense for you to urge customers to replace the handsets instead of repairing them?

  Open

  A1 It will be difficult to urge all customers who want to have their handsets fixed to change to a new handset at a discount, because we cannot eliminate phones damaged intentionally. To those customers who request repairs, we sometimes recommend replacement with a brand new handset on the spot, depending on the degree of damage.

  Q2 Don't you think that you can improve your margin more efficiently without spending costs and contribute to income growth by adding more inexpensive models produced in mass quantities with limited specifications and less new features, rather than spending costs for handset repair?

  Open

  A2 In our previous handset lineup, we only had high-end and middle-end models. But now we are offering three ranges of high-end, middle-end and low-end models. Going forward, we plan to further enrich the variety of the least expensive low-end models.

  Q3 Does your income plan for next fiscal year and beyond factor in any contribution from the reduction of handset costs? Other carriers seem to have plans to channel part of their savings from reduced handset costs into profits. What are your thoughts?

  Open

  A3 Because there is a general perception among users that our handsets are expensive, we first intend to bring down our handset prices. Of course, we are taking initiatives to reduce our handset procurement costs, for example, by reusing the winter models of last year by adding some new colors. We believe we can reduce our overall procurement costs through these measures. These initiatives will be carried out taking into consideration the balance with other efforts, such as the new development of less expensive handsets through joint studies with manufacturers.

  Q4 With respect to ARPU, the ideas to launch video content for tourists or "BeeTV" programs for senior users sound effective to raise the ARPU among the middle-aged and the elderly. However, in view of the fact that you have not yet been able to boost the usage among these user brackets in the existing framework, including the way of marketing, don't you think it might be better to pursue other approaches for raising their usage?

  Open

  A4 When we analyze the usage by age groups, users in their 40's already have high level of literacy, and they will likely continue to use mobile phones even when they get older. Those that are now in their 50's or 60's are expected to increase their packet usage, if we provide them with proper content that is easy to use. People in these age groups are keen about their health, so we are contemplating, among other things, the delivery of wellness services in video format. We would like to devise creative ways of communicating these services, including the provision of free trial periods.

  Q5 Will you consider addressing such health-related needs through the collaboration with external partners?

  Open

  A5 We are considering that, among other things. In the field of social support services, in particular, we would like to develop services joining forces with external partners.

• Questioner No. 6

  Q1 With respect to your medium-term vision and ARPU targets, what should we look to as a benchmark to make an investment in your company? Even if you succeed in raising the ARPU of 35% of your total subscribers (combined impact of 70% of total subscribers joining flat-rate package + 50% of them using up to maximum monthly limit), this can only raise your aggregate ARPU by a few tens of yen after subtracting the decrease in voice ARPU. If this is the case, your business operations for the next few years will have to be driven mainly by cost reduction, and I cannot find any clues to invest in your company until packet ARPU actually takes over voice ARPU. Your recent share price has been on a constant decline and reached the lower 130,000-yen level. Aren't you considering any major business developments, such as overseas investment, aimed at generating large amounts of returns?

  Open

  A1 We feel undeserved about our recent share price performance. We believe there are two main reasons behind the sluggishness; our medium-term vision has not been fully appreciated by investors and concerns against intensifying competition in the industry. We are aware that there are views concerning the refueling of competition, but we do not expect the competition to be so fierce going forward, because carriers are recently rebalancing their price reductions through creative measures on other fronts. For the medium-term vision, we need to deliver stronger messages to explain our undertakings. We hope investors will look at our performance, not for the next 1-2 years, but the next 2-3 years or beyond. We hope that the seeds we sowed will begin to sprout and grow. We would like to maximize the number of such successful cases.
  We will actively seek overseas investments if there are good opportunities. We believe our investment in TTSL was a good decision. But since it is rare to find an investment opportunity that can generate returns immediately, we will have to take a long-term perspective of 3-5 years.

• Questioner No. 7

  Q1 Are you making progress toward your medium-term vision announced 1 year ago as planned?

  Open

  A1 The target to realize 900 billion yen in operating income in FY2012 is a very challenging target in the first place, and whether we can achieve this or not depends on the progress of our "Challenge" programs. What is most important for the success of the medium-term vision is to properly repeat the cycle of "PDCA" (Plan, Do, Check and Action), to ensure that we can successfully implement what we had planned, and this message has been communicated throughout the entire company. We are committed to moving ahead with our plans with a strong focus on "execution".

  Q2 The auction of 3G licenses will shortly begin in India. Do you have plans to make additional investment in TTSL?

  Open

  A2 Our investment in TTSL was intended for the deployment of GSM network and not for the acquisition of 3G license. Therefore, the funds required for 3G license have to be financed by TTSL. However, there might be a request for additional investment when TTSL starts building the 3G network after acquiring the license, and in such case we will study the issue separately.

  Q3 How confident are you concerning the degree of perfection of the new GPS-enabled "i-concier" service?

  Open

  A3 Content providers are generally showing a good response. However, we often receive questions about the number of compatible handset models when we visit them to recommend its introduction. We therefore need to increase the variety of compatible handsets.