Japanese

Presentation Materials

• Questioner No. 1

  Q1 In January 2013, you launched new promotional campaigns such as the "Ouen Student Discount" program and unveiled the new handset models for spring 2013. Can you explain how these measures have affected your recent sales performance?

  Open

  A1 The movement of subscribers using the Mobile Number Portability (MNP) system has slowed in January 2013 compared to the previous month. Following our recent new product presentation, in which we highlighted models such as the Xperia Z, our sales have been impacted by customers waiting for the release of these new models. However, as we are seeing a buildup of orders for the new models, we have high expectations for our sales performance in February and March 2013.

  Q2 I would like to ask about the operating income outlook for the next fiscal year. Unless you succeed in growing net additions and data ARPU, it will be very difficult for you to make up for the decline in cellular services revenues (inclusive of the impact of Monthly Support discounts). Under such circumstances, cost reduction will become very important. How do you plan to balance the different elements of gross margin, cellular services revenues and cost reduction?

  Open

  A2 The business plan for the next fiscal year will be developed based on our achievements during the spring sales season. We are already beginning to see tangible results from our cost-cutting efforts, and we will continue to work hard on this issue in FY2012/4Q. The expansion of our subscriber base, successful reduction of costs and the degree of packet revenue growth hold the key to our performance for the next fiscal year.

  Q3 You mentioned that you that you have set a cost reduction target of 200 billion yen compared to the level of FY2011. How much of that, do you think, can be achieved within the current fiscal year, and next fiscal year?

  Open

  A3 We believe that we are on track for a 50 billion yen reduction for the current fiscal year, and expect a further 50 billion yen reduction for the next fiscal year. Thus we believe we can cut our costs by a total of 100 billion in two years. We are already tackling structural reform projects within the company, and we will further accelerate our efforts going forward.

• Questioner No. 2

  Q1 I would like to ask each of the three Representative Directors to share their own views on management target and accountability.

  Open

  A1 Mr. Kato, President and CEO:
  Mobile communications business is currently undergoing a transition, driven mainly by smartphones. One of our management targets is to establish a solid user base for smartphones. On top of that, we will look to deliver on our "mission" and realize our "dream", i.e., our service deployment plans. It is both my responsibility and management target to realize our "mission" and "dream" at an early date, thereby establishing a sustainable path toward the future.

  Mr. Tsubouchi, Senior EVP:
  My main mission is to generate steady profits by refining our core business while reducing costs. It is also my job to establish a solid network infrastructure on which to build the platforms for the future. If possible, I would like to develop services that will flourish on such platforms, but for the time being, I would like to focus my efforts to polishing up our core business.

  Mr. Iwasaki, Senior EVP:
  In light of my past experience in network-related operations, among the three elements of devices, network and services, I believe it is important for me to improve our competitiveness on the network front, and I will devote myself to this goal. While I may have to take on new challenges in certain areas, I am committed to making an active contribution.

  Q2 The conditions surrounding your cellular services revenues are severe, and a huge drop in revenues is projected for the next fiscal year. In the event that you record a decrease in income for the next fiscal year, will you be prepared to implement structural reforms including a reshuffle of management team putting the right person in the right position?

  Open

  A2 We are aware that the conditions surrounding our business are harsh. Structural reforms are being implemented across the board, and we are currently reviewing our business processes, organizational structure, human resource allocation and other elements in pursuit of the ideal structure.

  Q3 I understand your strategy of expanding smartphone sales and lead it to increased packet revenues. In the case of DOCOMO, however, it seems that you are inferior to other carriers in terms of efficiency in turning handset sales into active subscribers, which has resulted in higher costs. What are your views on this?

  Open

  A3 Due to our sluggish performance in the area of net additions, we are less efficient when compared in terms of cost per net additional subscriber. However, the packet ARPU has been increasing steadily as a result of expanded adoption of smartphones, and we do not think we are inferior to the competition in this regard. Furthermore, our smart ARPU is also rising thanks to the contribution of "dvideo" and other services. Going forward, we will endeavor to improve our net additions performance without spending wasteful expenses.

• Questioner No. 3

  Q1 Please explain the reasons behind the deterioration of equity in net losses of affiliates.

  Open

  A1 This was primarily due to the recognition of a 12 billion yen impairment loss for the decline in the value of our investment in Robi Axiata of Bangladesh.

  Q2 Can you disclose the number of users who have migrated from "Xi Pake-hodai Flat" to "Xi Pake-hodai Light", and those who have switched the other way around (from "Light" to "Flat") since October 2012?

  Open

  A2 Several hundreds of thousands of subscribers have switched from "Flat" to "Light" since October, which was actually lower than our projections. In recent months, approximately 60% of users have chosen the "Light" option, and this rate is expected to remain unchanged going forward. Although we do not possess any data concerning the number of users who have migrated from the "Light" package to "Flat", we believe this number is not so large.

  Q3 Can you share with us your projections for operating income for the current fiscal year? I believe your income will come under pressure if you prioritize handset sales to achieve your net additions target. What are your views on this?

  Open

  A3 As we enter the spring sales season, there are many factors that could influence our income level. Taking these factors into consideration, we will strive to achieve the stated guidance calling for operating income of 820 billion yen for the current fiscal year.

• Questioner No. 4

  Q1 How do you assess the competitiveness and brand strength of your core mobile phone business? Can you explain your approaches to strengthening sales and marketing, and rebuilding your brand in the core business toward next year?

  Open

  A1 In tandem with structural reform, the improvement of customer satisfaction is another important managerial goal for us. We are aware that the DOCOMO brand has been slightly undermined. One of the main factors behind this was the series of service disruptions that occurred in and after December 2011, and it is certainly true that customers' confidence in our network was gravely shaken by these incidents. We also think it is necessary to improve our communication with the external community. In a nutshell, refining our brand is a pressing issue that we must tackle head on.

• Questioner No. 5

  Q1 Please explain the average amount of Monthly Support discount per unit for FY2012/3Q. Please also comment on how you plan to control this going forward?

  Open

  A1 The average amount of Monthly Support discount per unit was slightly over 2,000 yen for FY2012/3Q. On the other hand, subscriber migration from a feature phone to a smartphone results in an increase in ARPU of approximately 2,100 yen per month on average. This indicates that although it is increasing, the Monthly Support discount is still less than the increase in ARPU resulting from the migration. Going forward, we will work to turn around our net additions performance, while keeping a tighter control on discounts.

• Questioner No. 6

  Q1 You commented earlier that it is vital for you to "narrow down the variety of handset models" to achieve further cost reduction. Can we expect that the number of new models to be released in the winter of 2013 will be comparable to those of your competitors?

  Open

  A1 It is difficult to give you a precise indication as to the size of the reduction, because it will be determined by our future planning, negotiations with handset manufacturers and other factors. Although we expect there to be some reduction when we introduce our 2013 summer collection, the full-scale effects of this exercise are expected to become visible upon the release of the winter collection. Our aim is to cut our costs by reducing the variety of models, thereby increasing the volume per model.

  Q2 You mentioned that while you have confidence in your products, your communication has been weak. When do you think we will start to see the effects of the measures taken to improve your communication?

  Open

  A2 It is important to design our communications, including those relating to our products and services, with a focus on the message that we intend to get across, instead of highlighting the features and functions of the product. At the last new product presentation, we heavily promoted a few selected models. I believe this was a major step forward, as it was the first time that we had used this type of promotion method. We intend to clearly define the points of appeal in the process of product development and planning in order to strengthen our communication.

  Q3 Regarding your endeavors for the "refinement of core business", please elaborate on the specific measures you plan to implement in the areas other than devices, including the timing of their implementation.

  Open

  A3 As for the network, we are currently moving ahead with coverage roll-out ahead of the original schedule, while steadily enhancing the throughput of the Xi LTE network through equipment tuning and other measures. To reinforce our basic services, we are working on the improvement of our phonebook and email service, and we expect the results of these endeavors will become visible shortly.

• Questioner No. 7

  Q1 The ARPU excluding the impact of the Monthly Support discount for FY2012/3Q remained flat for the first time in history, but the negative impact on ARPU caused by the Monthly Support program has been expanding. I believe you will be able to reverse the downtrend in cellular services revenues if you cut the amount of Monthly Support discounts that you provide to users. What are your thoughts on this issue?

  Open

  A1 We are looking into ways to optimize the amount of Monthly Support discounts. However, when the competitive environment is taken into consideration, it is difficult to make a judgment at this juncture. Having said that, as we do not want to compete with other carriers by giving away our handsets for free, we will undertake a serious review in relation to the optimal structure.

  Q2 You mentioned that you are moving ahead with a structural reform program to improve your cost efficiency by 200 billion yen. Can you give us a breakdown showing the projected improvement from individual activities?

  Open

  A2 We are currently looking into the details of the structural reform program, but we do not plan to assign a budget for each activity based on a foregone conclusion of achieving an efficiency improvement of 200 billion yen. We will do our best in all areas to enable us to achieve an upside, even by a small amount, compared to the stated target of 200 billion yen. In particular, the measures undertaken in the area of "devices", such as those relating to equipment cost, handset repair and recycling, are expected to deliver the greatest cost-savings effect.

• Questioner No. 8

  Q1 Please share with us your current assessment of the "dgame" service.

  Open

  A1 We recognize that "dgame" is still in its nascent stage. Our intent is to offer even more compelling items and content going forward.