Japanese

Presentation Materials

• Questioner No. 1

  Q1 I believe you set the FY2013 net additions target 440,000 higher compared to the previous fiscal year against the backdrop of improved competitiveness of your handsets. How do you plan to demonstrate the strengths of your products during the current fiscal year?

  Open

  A1 We are beginning to see some signs of improvement, with our key products enjoying great reviews. In fact, the number of net additions for FY2012/4Q recorded an increase over the same period of the previous fiscal year. While maintaining this momentum, in light of the projected increase in smartphone uptake by the follower segment in the future, in addition to pursuing functionality we believe it is necessary to offer products that enable worry-free use of services at affdordable prices. We plan to introduce such products as part of our 2013 summer collection.

  Q2 According to my understanding, I believe your FY2013 operaing income forecast is calculated on the assumption of decreasing both handset gross margin and the amount of Monthly Support discount per unit. Is this correct?
  I believe the Monthly Support discount per unit for FY2012 exceeded 2,000 yen (per month). Do you plan to lower this in FY2013? If so, is it correct to understand that you made that decision in view of the recovery of product competitiveness?

  Open

  A2 The negative impact from the Monthly Support discount program will continue to be significant in FY2013 after the previous fiscal year. However, although there might be some expansion of impacts remaining, we believe the situation will stabilize around FY2014. While the situation is expected to be harsher in FY2013 than in the previous fiscal year, we will steadily implement cost reduction measures in an effort to offset the negative revenue impact from the Monthly Support discounts.

  The negative revenue impact from the Monthly Support program increased by 200 billion yen in FY2012 over the previous fiscal year. For FY2013, the negative impact is expected to expand further by 260 billion yen, but we believe the downward trend caused by this program will hit a bottom during this fiscal year. For your information, the amount of Monthly Support discount per unit for FY2013 is expected to decrease year-on-year.
  For the products to be released in the future, we plan to vary the amount of discount by model, but we cannot comment on any further details.

  Q3 You mentioned that you will aim for approximately 10% operating income margin from non-telecommunications businesses, and the revenues from these businesses for FY2013 are forecast to increase by 165 billion yen year-on-year. Will this be achieved through organic growth, or does it also include acquisitions or other non-organic measures to capture additional revenues? Can you also disclose whether these non-core businesses are profitable or loss making at this point of time?

  Open

  A3 The proportion of growth achieved through organic expansion is becoming larger. We will naturally look into alliances or capital participation if there are any promising opportunities. We are beginning to see tangible progress toward our 1 trillion yen revenues target from new business fields by FY2015 through organic expansion. On top of that, we will consider possible capital alliances and other measures.
  Although it is difficult to present the income margin forecast in concrete numbers at this juncture because profitability improvement cannot be achieved unless we increase the number of subscribers, these new business fields on the whole are not running on losses; rather, they are already generating profits. Going forward, we will strive to further boost the profits toward our target to achieve 10% profit margin by FY2015.

• Questioner No. 2

  Q1 Concerning the interpretation of your FY2013 guidance, I understood that you plan to offset the projected decrease in mobile communications services revenues of 180 billion yen by raising the average handset sales price by some 10% to increase your equipment sales revenues by 170 billion yen. If that is the case, there will be no changes to your business management method from the previous fiscal year. If your plan is based upon higher handset prices and lower Monthly Support discounts, the effective market price of your handsets will inevitably go up. Do you believe you can acquire larger number of net additions than the last fiscal year with this scenario?
  Also, the approach of aggressively promoting cost reduction in response to the decline in mobile communications services revenues gives me an impression of a diminishing equilibrium. When can we expect to see the Company pursuing growth in both revenues and income again?

  Open

  A1 Cost reduction is something that we must tackle on an ongoing basis, and we are implementing various measures including those aimed at raising cost awareness of our employees. As for the Monthly Support program, we plan to vary the amount of discount by each model. Although it might be difficult to achieve a dramatic increase in income in the current fiscal year, toward FY2015 we would like to once again take on the challenge of achieving 900 billion in operating income. In addition to cost-cutting, we are strongly promoting the reform of our business procedures and operational processes. Further, to accelerate these efforts, we decided to newly establish the Smart-life Business Division, launched a review in relation to the optimal structure of the Company comprising the headquarters, regional offices and branches, and started shifting human resources to new business fields.

  In FY2013, we will adopt different approaches than heretofore on some fronts. Although the structure of pursing cost reduction in expectation of a temporary increase in income from equipment sales basically remains unchanged, we will alter our approach this fiscal year by avoiding the negative impact from increased Monthly Support discounts in subsequent years. In light of the results achieved with our latest handsets that have regained competitiveness combined with our proprietary services, we are confident that, if we narrow down the variety of devices and concentrate our resources to key models, our products can compete favorably against the competition's even at relatively higher prices. Our plan is to reduce the subsequent year impact of the Monthly Support program balancing it with the cost reduction initiatives, and ultimately reverse the downtrend of income.

  Q2 A recent survey on "Smart Life" indicated that DOCOMO's market share among university students in Japan was limited to 25%, and the remaining 75% were users of either SoftBank or KDDI. How do you view the current situation in which the proportion of young users to your total subscriber base is decreasing? As you deploy various "Smart Life" services in the future, do you plan to focus on the senior age group giving up the youth, or do you intend to regain the young subscribers from the competition?

  Open

  A2 We have never given up the youth segment. In fact, we are promoting a number of measures targeted at young users, such as the Ouen Student discount campaign for students and the introduction of a smartphone model designed for preteens. In addition, we are preparing models that can compete favorably against the competition in our 2013 summer collection, and we plan to aggressively promote these devices to the youth segment. We believe healthcare and other services offered under the "Smart Life" concept are universally acceptable. While the users' interests may vary depending on their age, we intend to propose concrete offerings suited to each age group.

  Q3 Your FY2013 guidance is predicated upon a business model in which the decline in mobile communications services revenues is offset by improved profitability of equipment sales business. Do you plan to continue this model in FY2014 as well? How long do you think you can sustain this model?

  Open

  A3 I do not think it is possible to abolish this model immediately given the current circumstances in the competitive environment, but we have been reviewing the Monthly Support program—including the appropriateness of the scheme itself—for some time. To reach a conclusion, we will perform a comprehensive study on a number of issues, including among other things, the level of service that customers find acceptable, future trends of smartphone market, handset prices and scheme of Monthly Support program, our service lineup and billing plans.

• Questioner No. 3

  Q1 I believe some of the items affecting the year-on-year changes between the actual FY2012 income and FY2013 guidance are positioned as goals to strive for. If you foresee any potential risks for the achievement of FY2013 operating income guidance of 840 billion yen, please let us know.

  Open

  A1 With the downward revision of the FY2012 operating income forecast at the end of the second quarter, we secured an additional expenses budget to counter competition of 80 billion yen. However, we managed to limit the actual spend to 70 billion yen as a result of the cost efficiency improvement endeavors undertaken in FY2012/3Q and 4Q. Hence, we are confident of achieving certain progress in cost reduction during the current fiscal year as well.
  With respect to Monthly Support discounts and equipment sales revenues, it is difficult to comment on potential risks at this juncture because these factors could be affected by the state of competition. We will keep a close eye on the competitive environment.
  To cite an example of our cost reduction efforts, we have accumulated know-how and experience regarding how to control the number of smartphone-to-smartphone upgrades within a certain limit to curb the Monthly Support expenditures. We would like to devise an efficient method leveraging this experience.

  Q2 In my view, the performance of equipment sales business could become the greatest risk factor. Do you think you can sustain the current style of selling handset with a high gross margin?

  Open

  A2 While carefully observing the competitive landscape, we plan to manage our equipment sales taking into consideration the balance with the Monthly Support program.

• Questioner No. 4

  Q1 In FY2013, do you plan to attach greater significance on securing profits or net additions? As in FY2012, in the event you face a situation where you have to make a choice between two, if you make a decision to secure net additions by increasing the Monthly Support discounts, it will affect the recovery of income from next fiscal year onwards. What are your views concerning the medium-term income recovery, the income level and net additions for the current fiscal year and the balance thereof?

  Open

  A1 Generation of income and pursuit of growth are fundamental to any business entity. In the case of our business, the sources of our medium-term expansion will be the smartphone user base and net additions. Regarding the balance of these factors, it is difficult to state our priorities at this juncture shortly after the start of a new fiscal year.

  Q2 Is your FY2013 business plan based on any assumption pertaining to the handling of the iPhone? Or should it still be considered a variable factor?

  Open

  A2 The introduction of the iPhone is not factored in our FY2013 business plan. We have not made any changes to our position in relation to this issue.

• Questioner No. 5

  Q1 You are the only operator in Japan that offers a discounted billing plan for LTE service. Do you foresee any possibility of revising the rates or terminating this plan altogether?

  Open

  A1 We currently have no intention of changing this plan. We will continue to promote the "Xi Pake-hodai Light" plan offering monthly usage up to 3GB and the "Xi Pake-hodai Flat" plan offering monthly usage up to 7GB taking into consideration the actual usage behavior of each user.

  Q2 Does your cost reduction plan include measures that could cause pain among your workforce, such as reduction of personnel or R&D expenses?

  Open

  A2 Nothing is simple when it comes to cost reduction. We established a project team within the Company, and embarked on a cost-reduction program encompassing capital expenditures, development/maintenance costs and even daily office expenses. This may cause pain among the employees but we are determined to move ahead with structural reforms, which include measures aimed at changing the mindset of employees to make sure they fully understand the importance of cost reduction and efficiency improvement.
  We believe we were able to meet the revised full-year operating income target for FY2012 as a result of the various efficiency improvement endeavors undertaken.
  Although we project a year-on-year decrease in total capital expenditures for FY2013, we plan to achieve this without making any cuts on network construction-related investments. By appropriating the savings in R&D expenditures for network construction, we will aim to improve our overall cost efficiency. And we will continue to pursue cost efficiency improvement going forward, as we believe there are still plenty of opportunities to address.