Japanese

Presentation Materials

• Questioner No. 1

  Q1 You explained that the "Two Top" strategy delivered certain positive results. How do you think the stepped up sales promotion measures implemented from July will improve the acquisition of net additions toward your full-year target of 1.85 million?
  Further, with respect to the autumn/winter handset collection, I assume you are planning only a minor upgrade for GALAXY but a full-scale model change for the Xperia series. As far as the handsets are concerned, do you think that will be sufficient for you to turn around your net additions performance? Please explain your future plans concerning your handset portfolio.

  Open

  A1 Our performance concerning the acquisition of net additions and subscribers using the Mobile Number Portability (MNP) system for the month of July 2013—although the numbers are only preliminary before the close of the month—has improved steadily. The number of port-ins, in particular, has shown a remarkable improvement, and the number of port-outs have been decreasing since June 2013 as well. In light of the July results, we will develop a plan laying out the targets for each quarter toward the achievement of our full year net adds guidance.
  With respect to the autumn/winter collection, we intend to procure models that can be chosen by customers for their benefits such as longer battery life. We have already received good proposals from manufacturers, so we will try to make a decision at an early date.

  Q2 Is it correct to understand that your net additions performance for the month of July 2013 has improved as a result of stepped up sales promotions, such as the provision of cash rebates and handset discounts on models other than the "Two Top" models?

  Open

  A2 That is correct. We stopped providing cash rebates for port-in subscribers in June 2013, but we reinstated them in July in light of our recent sales performance, which turned out to be very effective. In addition to handset discounts, we intend to properly communicate the compelling benefits of our services, and improve our net additions/MNP subscriber acquisitions thereby.

  Q3 I believe the re-implementation of cash rebates will result in higher expenses. Do you think you can control your costs?

  Open

  A3 We believe we can keep the costs well under control based on our full-year expenditures plan.

• Questioner No. 2

  Q1 Just like the last fiscal year, you evaluated that you got off to a good start, with the first quarter operating income reaching slightly less than 30% of your full-year target. However, in the last fiscal year, you made a downward revision to your full-year guidance at the end of the first half to appropriate an additional sales promotion budget amounting to 80 billion yen.
  With the new iPhone model expected to come out in the autumn, do you think it is proper to declare that your results were favorable at this early timing, i.e., the end of the first quarter? Please also explain how you plan to make it through the second half of the year.

  Open

  A1 Our evaluation at this point does not factor in the conditions in the second half or after the release of the next iPhone model. The iPhone continues to record brisk sales in Japan and the US, and the circumstances have not changed in relation to this point since the last fiscal year. Currently, we are narrowing down our handset varieties to boost the competitiveness of our products. And we will determine the effectiveness of this strategy going forward.
  Although we are not entirely satisfied with the FY2013/1Q results, we were able to generate operating income slightly higher than planned. Our initial forecast was based on a scenario of recording a year-on-year decrease in income for the first quarter, and then recovering in the subsequent quarters to achieve full-year income almost on par with the prior year. As the actual drop in the first quarter was smaller than expected, we believe we were able to properly reduce our costs.

• Questioner No. 3

  Q1 For the last fiscal year, you steered business under the slogan "Speed and Challenge." This fiscal year, you reshuffled your management team and organizational structure. Can you give us an idea as to how will the character of Mr. Kato and the new management team be reflected in your business going forward?

  Open

  A1 We established the Smart-life Business Division and Structural Reform Office on July 1, 2013. You can consider that this reorganization was implemented to reflect my intentions. The Smart-life Business Division will spearhead the development of new businesses with a strong emphasis on speed, so that we can truly deliver on the "Speed and Challenge" slogan and "70% will do" spirit. Meanwhile, we will also conduct a sweeping review on our corporate structure that will also encompass the Regional Offices, with the Structural Reform Office playing a central role. We have not set a particular deadline for the completion of this exercise, as we plan to conduct reviews on an ongoing basis.

  Q2 You mentioned that you achieved favorable results in FY2013/1Q as planned. According to my estimates, however, I believe the ARPU ended lower than your expectations because both your data ARPU and smart ARPU have been stagnant. Plus, your subscriber growth was not so favorable. This will likely result in a shortfall of mobile communications services revenues at the end of the fiscal year of approximately 10-20 billion yen compared to the forecast. On what grounds do you claim that you have achieved "favorable progress vis-a-vis your forecast?"

  Open

  A2 The FY2013/1Q operating income was higher than our projections. The growth of smart ARPU slowed compared to FY2012/4Q, but this was due to the impact of seasonal factors such as increased advertisement revenues at the end of the previous fiscal year. In fact, the FY2013/1Q smart ARPU posted gains compared to the same period of the previous fiscal year. Of the various "dmarket" services comprising the smart ARPU, "dvideo" service is recording steadfast growth, and "danime store" and "dhits" are also expanding at a rapid pace.

  Q3 You said you recorded higher-than-expected operating income in FY2013/1Q. Does it mean that you will be able to secure income no matter what happens in the second half of the fiscal year?

  Open

  A3 Because we live in an industry characterized by constant changes, there are of course many variable factors. Yet, we are determined to achieve our full-year income target.
  The progress of cost reduction achieved in the first quarter of 22 billion yen vis-a-vis our full-year target of 110 billion yen was in just line with our plan. However, from an outsider's perspective, you may think that we should have been able to do more. We developed a plan that appropriates greater amount of cost reduction in the latter half of the year, because the streamlining of some processes, such as those relating to capital expenditures and subcontracting costs require a certain amount of time for coordination. The achievement of our full-year cost reduction plan is conditioned upon the successful implementation of such coordination. We do not have any intention whatsoever to put aside some extra savings in the first half of the year.

  Q4 How much cost reduction do you plan to achieve in the next fiscal year?

  Open

  A4 We set a target to reduce our costs by a cumulative 160 billion yen by the end of FY2013, and a cumulative 250 billion yen by the end of FY2015 compared to the level of FY2011. Therefore, the planned cost reduction for the single year of FY2014 would be about half the amount of the cost reduction to be achieved in the last two years.

• Questioner No. 4

  Q1 There are differences between the US and Japanese markets with respect to the available handset models and their sales schemes. Have you ever considered introducing new sales methods? In Japan, handsets are sold predominantly using installment payment schemes. In the US, by contrast, there are various other sales methods, such as those that allow users to own multiple devices.

  Open

  A1 The schemes that you just referred to have not been studied hitherto. However, we will carefully monitor and study the trends in markets outside Japan.

  Q2 With the rise in subscriber count, your new non-core businesses present interesting prospects. Can you provide us with a recap on their future expansion plans? Please also give us your full-year guidance on the revenues, sales volume, etc., from these businesses.

  Open

  A2 Although I cannot comment on the projected full-year revenues from the individual services (e.g. "dvideo"), we set a target to generate revenues totaling 1 trillion from the overall non-core businesses in FY2015. As a step toward this goal, we will endeavor to achieve 700 billion yen for the current fiscal year. The rough breakdown of the contribution of each business field is contained in the presentation.

• Questioner No. 5

  Q1 When you announced your initial business plan for the current fiscal year, you mentioned that you would aim to reduce the amount of Monthly Support discount per unit by approximately 10,000 yen compared to the previous fiscal year. How did it fare in the April-June 2013 quarter after concentrating your resources on the "Two Top" models?

  Open

  A1 We are working toward the goal of reducing the amount of Monthly Support discount per unit by 10,000 yen compared to the previous fiscal year, however, the amount of discount for FY2013/1Q ended up slightly higher than planned. Going forward, we will control the discounts so that we can come close to our full year target.

  Q2 In July, you reinstated the measures for new subscriber acquisition after suspending them in June. Have you been able to achieve the planned sales in the month of July?
  In addition, the subscribers who have joined DOCOMO using the "Onorikae Xi Smartphone Discount" (discount plan targeting MNP port-in subscribers) will have their basic monthly charges waived for 12 months. How long do you plan to continue this measure? Won't it have a negative impact on your ARPU for the next fiscal year if you continue it for a long period of time?

  Open

  A2 We would like to determine the offer period of the "Onorikae Xi Smartphone Discount" after carefully analyzing the sales performance for July 2013. The conditions in the competitive environment changes constantly, and we reinstated in July the measures that had been suspended in the previous month in response to the changes in the marketplace. This resulted in an improvement of MNP port-ins for the month of July.

• Questioner No. 6

  Q1 You explained that the "Two Top" strategy facilitated the migration of subscribers from feature phones to smartphones, and reduced the port-outs of feature phone users by approximately 30%. However, it did not lead to a significant decrease in the overall number of port-outs. When these factors are all taken into consideration, is it correct to construe that the number of smartphone port-outs is increasing? Please share with us your assessment on the current situation.

  Open

  A1 The subscribers who have ported out from DOCOMO are not lopsided to either feature phone or smartphone users. Currently, the main purchasers of our smartphones are the existing feature phone users, and feature phone users previously accounted for the bulk of port-outs. To curb these port-outs, we introduced the "Two Top" strategy, which turned out to be effective resulting in a 32% decrease in feature phone port-outs. However, in terms of overall MNP performance, we struggled with the acquisition of port-ins and fell short of our plan. Thus, we started to employ reinforced promotion measures from July.
  Furthermore, in the past, we suffered increased port-outs upon subscribers' first replacement from a feature phone to a smartphone. Going forward, we will strive to retain these users by boosting the attractiveness of our handsets and undertaking other measures. We have seen a gradual decline in the number of port-outs from May to June 2013, and the net MNP outflows have come down in the month of July as well. We will keep a close eye on our performance for a certain period of time to determine the effectiveness of the measures employed.

• Questioner No. 7

  Q1 Your mobile communications services revenues have been on a constant decline. When do you think you can reverse the trend and return to the growth track?

  Open

  A1 We believe our mobile communications services revenues will start rising again when the smartphone user base reaches a certain size. Because the migration from a feature phone to a smartphone has an effect to boost the user's monthly bill by an average of some 2,000 yen, we will encourage users to switch to a smartphone. We will basically provide the services in the new business areas through smartphones, aiming to boost non-core revenues leveraging the smartphone user base. It is difficult to predict when the revenues trend will begin to reverse.

  Q2 Do you really believe the "Two Top" strategy has delivered successful results, given that you recorded net losses of subscribers in some months after the release of the "Two Top" models? Will you continue the "Two Top" strategy, even if you start handling the iPhone in the future?

  Open

  A2 While it is hard to answer a hypothetical question, let me try to respond. We are currently in the final phase of selecting the models for the 2013 winter collection. We intend to select models that customers will find compelling, such as handsets equipped with battery that can last three days without recharging. The number of models to be promoted as our "recommended models" is also under study.

  Q3 Previously, you raised a target to "expand the smartphone user base to over 20 million as quickly as possible." Now that you have already accomplished that number, will you seek to expand the smartphone user base to 30 million or 40 million, or even have your entire subscriber base switch to a smartphone? What are your views?

  Open

  A3 We do not assume that all of our subscriber will eventually migrate to a smartphone, and we expect that a certain proportion of users will continue to use feature phones. According to our current forecast, the number of smartphone users is expected to reach 41 million by March 31, 2016. We will strive to have these smartphone users utilize various new services, so that they can appreciate the convenience and enjoyment that smartphones offer to their everyday lives.