Japanese

Presentation Materials

• Questioner No. 1

  Q1 The FY2017/3Q handset churn rate recorded a slight increase over the previous quarter. Was this caused by a change in the competitive environment? If so, which was the primary reason, the competition against MVNOs or MNOs? Can you also disclose the number of year-on-year net additions of MVNO subscriptions using DOCOMO SIMs?

  Open

  A1 The handset churn rate dropped by 0.04% for FY2017/1-3Q (cumulative) and 0.08% for FY2017/3Q (three months), but the number of subscriber outflows to the sub-brands of the competition and other low-cost smartphone services was maintained at a level comparable to the same period of last fiscal year. Since summer of 2017, our competitors have stepped up their promotional activities for their main brands increasing the cash rebates provided by distributors, which impacted our sales performance. The year-on-year deterioration of churn rate was also partly due to the fact that the churn rate for previous fiscal year was the lowest in the last five years. Since 2014, we have rolled out products and services that have strong retention effects (e.g., "Share Pack", "docomo Hikari" and"dCARD", etc.) which allowed us to properly control our subscriber base despite the intensified competition in the MNP market. To curb churns, we will continue to introduce measures for mass—retailers?the main battlefield, and reinforce one-to-one marketing initiatives.
  The biggest factor behind the year-on-year decrease in net additions was the communications modules. Although the net additional MVNO subscriptions using DOCOMO SIMs fared slightly lower than the same period of last fiscal year, it was in line with our projections.

  Q2 Your mobile ARPU (excluding the impact of discounts) decreased by 40 yen in FY2017/3Q compared to the same period of the previous fiscal year, with voice ARPU recording a drop of 30 yen. Was this decrease of mobile ARPU caused by the introduction of "Simple Plan?" Can you also comment on the outlook of the ARPU (excluding the impact of discounts) and the projected impact of the "Monthly Support" discounts in FY2018 and beyond?

  Open

  A2 The ARPU (excluding the impact of discounts) dropped by 30 yen compared to the previous quarter, primarily becauce the FY2017/2Q ARPU (excluding the impact of discounts) included the 30-yen projected expiry of the "Zutto Kurikoshi" carry-over allowances. Without this irregular factor, the FY2017/3Q ARPU (excluding the impact of discounts) was on par with that of the previous quarter. While there have been certain impacts from "Simple Plan" and other customer return measures, we have successfully maintained the ARPU by upselling customers to higher plans and other inititives.
  As for the prospects for the impact of "Monthly Support" program, for the current fiscal year its negative impact on revenues will moderate by approximately 100 billion yen over the previous fiscal year, and we expect to see certain amount of improvement in the coming fiscal year as well. In our current estimate, the improvement for FY2018 is projected to be about half the level of this fiscal year.

• Questioner No. 2

  Q1 I assume that your ARPU (excluding the impact of discounts) will remain flat going forward due to the expansion of customer return measures, but can you provide us with an outlook on the ARPU for the next one year taking into consideration the impacts from the customer return measures that have been implemented so far and subscribers' migration to the new billing plan?
  In addition, since you mentioned that the impact of "Monthly Support" discounts is expected to moderate by 100 billion yen this fiscal year, can you also let us know the absolute amount of reduction projected for the next fiscal year?

  Open

  A1 The FY2018 ARPU (excluding the impact of discounts) will be affected by the size of customer return measures we implement, but we are not expecting a significant decline in the next one year from the current level.
  We would like to reserve our comments on the absolute amount of projected reduction in "Monthly Support" discounts for the next fiscal year. Again, for the current fiscal year, the negative revenue impact from the "Monthly Support" program is expected to moderate by some 100 billion yen over the previous fiscal year.

  Q2 You explained that your ARPU (excluding the impact of discounts) is projected to remain flat, and the negative impact from "Monthly Support" will nearly halve in the next fiscal year compared to this year. If that is the case, can we expect your mobile communications services revenues to increase by approximately 50 billion yen next fiscal year?

  Open

  A2 That is difficult to comment, because we are still in the process of developing our business plan for the next fiscal year. But please be aware that the customer return measures are expected to be an important factor in light of the projected changes in the competitive landscape, including the potential of having a new entrant in the market.

  Q3 I believe the new entrant will launch a price attack in expectation of receiving various support from DOCOMO. From the perspective of DOCOMO's shareholders and investors, we hope that you would not offer support that will result in a drop of market share or anything negative to your share price. How do you plan to respond to the competition policy of Ministry of Internal Affairs & Communications (MIC) without undermining shareholder value?

  Open

  A3 Because nothing is officially decided as to the market entry by a new player, we do not have anything concrete to comment on at this juncture. Generally speaking, any entity entering the market as a MNO will be on an equal footing with us, so we hope to see fair competition based on fair rules. As for roaming and other support, since we have not been contacted at all, there is no way for us to know what is expected of us.

• Questioner No. 3

  Q1 What are the reasons behind the revision of your full-year free cash flow projection from previously 710 billion to 855 billion yen?

  Open

  A1 On October 31, 2017, after receiving the payment of the arbitration award from Tata Sons, we disclosed its projected impact to our FY2017 full-year results, revising our net income forecast upwards by 85 billion yen. Simultaneously, we also made an upward revision to our free cash flow projection. The payment received from Tata Sons was the only reason behind the revisions.

  Q2 Please let us know the planned amount of capital expenditures for FY2018 and the timing of 5G launch.

  Open

  A2 While the CAPEX plan for FY2018 is currently under review, our basic policy is to ensure proper control on the outlays. In our Medium-Term Strategy 2020 "Declaration beyond", we expressed our commitment to increase our operating free cash flow, thus the amount of CAPEX be controlled within a range that will allow us to deliver on our commitment.
  With respect to 5G, our current target is to launch the service in 2020 and we will begin to incur 5G-related CAPEX from FY2019.

• Questioner No. 4

  Q1 A question pertaining to the competitive landscape. You mentioned that one of the reasons behind the rising churn rate was the cash rebates provided by the competition to secure net additions for their main brands. Is this situation still continuing?

  Open

  A1 The aggressive sales offensive of the competition still continues today. But our churn rate has shown improvement thanks to the effects of the active rollout of churn prevention measures starting from FY2017/3Q.
  This issue is also deliberated by the MIC's Study Group on Promotion of Fair Competition in the Mobile Market. On a number of occasions, we have stated that unhealthy sales practices will have an adverse effect on the entire mobile industry and we hope that the Study Group will discuss this issue so that the situation will improve toward the development of a healthier industry.

  Q2 If the impact from the "Monthly Support" program continues to improve in FY2018 by approximately half the level of FY2017, according to my calculation, it will boost your mobile communications services revenues by approximately 1.7%. Can you confirm if this is correct?

  Open

  A2 I have already informed you on the projected improvement of the impact from "Monthly Support" program earlier. We are continually implementing measures to minimize the negative revenue impact from the "Monthly Support" discounts. We will continue to tackle this in the next fiscal year to derive the maximum improvement.

  Q3 Please give us an indication on the amount of the impact from the change of depcreciation method in FY2018.

  Open

  A3 The impact of the change of depreciation method will become smaller every year. At this point of time, we believe the size of impact for the next fiscal year is estimated to be roughly 100 billion yen.
  Just like the last two years, because we plan to employ measures to alleviate the future impact in the next fiscal year as well, the entire amount of the impact will not directly translate into incremental operating income. We will develop the plans for FY2018, including the size of future impact mitigation programs, from now onwards. In developing the plans, we will perform reviews from the perspective of achieving sustained profit growth.

  Q4 You have a track record of providing roaming access to eMobile when they newly entered the mobile phone market, so what are your views concerning the feasibility of sharing towers? Can you also explain your understanding pertaining to the regulatory framework for joint use of facililties by MNO and MVNO?

  Open

  A4 Basically, the provision of roaming access or sharing of tower facilities between MNOs are outside the scope of obligations set forth in the Telecommunications Business Law, and the past practices do not necessarily have to be followed. In our recognition, these matters are decided through negotiations between the relevant parties. While the spectrum allocation is scheduled towards the end of the current fiscal year, we have not recieved any requests from the entity that is reported to be studying market entry. If we receive a request going forward and if the conditions are met, we will conduct negotations in good faith.
  Regarding the joint use of tower facilities, the MIC has defined a set of guidelines. We will hold discussions in accordance with the rules, including the applicability of the guidelines to this case. Since there are no precedents of towers jointly used by MNO and MVNO, if we receive such requests, we will probably need to study the matter making reference to the views of MIC, in addition to the mutual discussion between the parties. As a general comment, we believe any entity entering this business as a MNO should in principle compete under fair conditions.