Presentation Materials
Main Q&A (Analyst Meeting after the Results for the FY2018)
Announced on May 9, 2019
Please be advised that the following text has been edited/modified from the original Q&A conversations for the sake of clarity.
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Questioner No. 1
Q1 The amount of discounts applied to your FY2018/4Q ARPU calculation was 980 yen, which has increased since FY2018/1Q. Please explain the reasons behind this growth and the breakdown of the concrete discount plans included in this amount. Also, how much reduction do you expect to see in the impact of discounts after you switch to the "separation model" i.e., the handset sales method that completely unbundles handset costs from communication tariff?
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Q2 Did you include the impact of the handset purchase support program, which you plan to unveil in May, in the FY2019 business plan? If you did, please comment on the scale of its impact on your financial results?
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Questioner No. 2
Q1 You are planning to execute cost reduction totaling 130 billion yen in FY2019, so the cumulative amount of cost savings for the two years of FY2018 and 2019 is expected to be quite sizable. Please elaborate on the specific initiatives that you plan to implement to deliver on this commitment.
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Q2 Can you continue cost reduction of a similar scale in the next fiscal year and beyond?
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Q3 What degree of visibility do you have for the size of cost reduction for the next fiscal year?
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Q4 Regarding your revenues, you mentioned that the negative impact from the rate reductions are estimated to be 200 billion yen, but there will also be a positive effect of some 40 billion yen. I heard the net impact of the rate reductions for the next fiscal year is estimated at slightly less than 100 billion yen, as the negative revenue impact will likely be smaller than 200 billion yen with the positive impact growing further compared to the current fiscal year. How should we expect the positive impact to ramp up in the future?
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Q5 Is it correct to understand that the positive impacts from customer acquisition, subscriber migration and upsell activities for FY2019 will amount to 40 billion yen, and you can also expect an incremental impact of another 40 billion yen or so in FY2020?
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Questioner No. 3
Q1 Concerning the pace of subscribers' switch to the new rate plans, you mentioned that the total number of customers who will have migrated to the new rate plans by the end of this fiscal year is expected to be around the same as the year-end number of "Kake-hodai" subscribers in its year of launch, and that you do not assume that a huge number of customers will flock to the new rate plans immediately, which was the case for "Kake-hodai." Can you elaborate on the reasons why you believe so?
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Q2 I understand that users who are currently receiving Monthly Support discounts will most likely switch to the new rate plans after receiving all the discounts they are entitled to, but how do you forecast the pace of migration of users who have already finished receiving Monthly Support discounts? And how is that factored in your 830 billion-yen operating profit guidance for FY2019?
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Q3 When do you believe the negative impact from the introduction of the new rate plans will reach its projected peak of 400 billion yen per annum?
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Q4 Will it be correct to assume that the impact of customer returns will be 200 billion yen, 300 billion yen and 400 billion yen for FY2019, FY2020 and FY2021, respectively?
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Q5 The new rate plans, when combined with "Minna DOCOMO Wari" and "docomo Hikari set discount," provide huge savings to customers. However, subscribers who are not eligible for those discounts, i.e., single users who do not form a group with family members, do not benefit as much. Do you think that users who are not eligible for the "Minna DOCOMO Wari" or "docomo Hikari set discount" will also eventually switch to the new rate plans, or do you anticipate a certain degree of outflows of this segment? I would appreciate it if you can answer this question by also referring to the outlook for churn rate.
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Questioner No. 4
Q1 In South Korea, carriers' capital expenditures are rising due to the race for 5G coverage buildout. Do you expect to see a similar competition in Japan?
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Q2 It is rumored that 5G-compatible iPhone will be released in September or October of 2020. Accordingly, should we anticipate that the broad uptake of 5G will start from FY2021 onwards?
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Questioner No. 5
Q1 Can you share with us your views on the new rate plans announced by SoftBank recently, including the "Smartphone Debut Plan"? This plan essentially reduces the monthly fee to 0 yen for 6 months so long as the user uses PayPay. How do you plan to respond to this package?
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Q2 With SoftBank owning 50% of its stake, PayPay has a deep pocket that allows them to provide reward points worth 1,000 yen a month for a period of six months. How do you plan to respond to this with your "d Payment" service, as you mentioned during your recent results presentation session that the burden of your point program is expected to grow by 20 billion yen in FY2019?
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Questioner No. 6
Q1 Please give us a breakdown on the contribution of the different business categories to the operating profit from Smart life and Other businesses for FY2018, and the projection for FY2019.
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Q2 How do you see the outlook of enterprise solutions in FY2019? Also, is it correct to understand that the performance of the content and commerce category will turn around after hitting a bottom in FY2019 and start making positive contributions to profit growth again from next fiscal year, while finance/payment and enterprise solutions will record a steady growth over the medium term?
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Q3 At present, you have a Mobile Virtual Network Operator (MVNO) contract in place with Rakuten. Do you have any idea when you will be able to terminate this contract? Rakuten has announced that after October, if there is a request from Rakuten Mobile users, they will transfer them to their Mobile Network Operator (MNO) service on a SIM-only basis and other users who do not request a transfer will remain on the existing MVNO network. For example, there is a possibility that some consumers will feel that it is more reassuring to stay on Rakuten's MVNO service because the underlying network is offered by DOCOMO, but is it practically possible for Rakuten to continue using your network for their MVNO service? Do you have any plans to propose a contract termination to Rakuten at some point of time?
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Questioner No. 7
Q1 Regarding the sales of your equity stake in Mitsui Sumitomo Card, I thought you have established strong ties with Sumitomo Mitsui Card in the area of issuing and acquiring for the promotion of cashless transactions and d CARD business in the future. Can you explain the reasons why you decided on the sale of shares? Also, do you have any plans to seek a new partner for your finance/payment business in the future? Or do you plan to continue your collaboration with Sumitomo Mitsui Card even after selling your stake?
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Q2 Didn't you think it was too early to sell your stake at this point of time?
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Questioner No. 8
Q1 Please explain the initiatives planned for implementation in FY2019. Slide 26 of the results presentation deck provides some descriptions under the title of "Promotion of Digital Marketing." What kind of concrete measures are you contemplating and what kind of effects will these measures produce? Please also share with us some actual cases.
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Q2 This is a question about the Senior Professional system. I agree that you should take advantage of the skills of professional talent for the development of non-telecommunications businesses. How many people do you plan to hire for that purpose and what is the level of remuneration you plan to offer them?
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Questioner No. 9
Q1 Your target number of net additions for FY2019 is 1.05 million, but you are projecting the number of smartphone and tablet users to grow by 1.7 million during this fiscal year. I guess multiple factors are included in this calculation such as loss of MVNO subscriptions to Rakuten, etc. Can you elaborate on the factors that will cause a negative impact on your subscriber count, other than smartphone/tablet users? I am particularly interested in how you foresee the changes in communication module subscriptions.
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Q2 The total number of smartphone/tablet users is forecast to grow by 1.7 million and the total net additions is projected to increase to 1.05 million. Set aside the growth of smartphones and tablets, which product is expected to see a negative growth?
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Q3 This may not be a problem directly related to DOCOMO's business, but it is most likely that MVNOs will be impacted first by the entry of Rakuten. Does your FY2019 business plan factor in any decline in the number of MVNOs that uses your network?
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Q4 I have a question concerning your equipment sales profit. You mentioned that you will lower the handset gross profit due to the introduction of the "separation model." According to your previous statement, the reduction of incentives that you pay for the sale of handsets will account for 2/3 or 86 billion yen of the 130 billion-yen cost efficiency improvement planned for FY2019. Is it correct to assume that the negative impact from the lowered gross profit will be cancelled out by the reduced promotion spend?
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Questioner No. 10
Q1 Can you present the ARPU outlook for FY2020 and beyond? How do you think the mobile ARPU and the impact of discounts will fare in FY2020 compared to FY2019? Also, do you foresee that the impact of discounts will be lowered to nearly 0 yen in about three years from now?
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Q2 In relation to your FY2019 mobile ARPU forecast, my rough estimate is that the ARPU (before applying discounts) will decrease by 300 yen but the impact of discounts will shrink by 60 yen, so the net reduction of ARPU compared to FY2018 will be 240 yen. For FY2020, I construed that even if the ARPU (before applying discounts) drops by 300 yen you will be able to improve the impact of discounts by 300 yen, thus you can expect a flat growth in both ARPU and revenues compared to the previous fiscal year. Is my understanding correct?
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Q3 Thereafter, in FY2021, I expect the drop in ARPU (before applying discounts) will become much smaller, and the impact of discounts, which currently stands at approximately 940 yen, will continue to shrink in the coming years. Although you said you expect a flat growth in mobile ARPU in FY2020 compared to FY2019, do you think it will start rising again from FY2021 if you can sustain this trend?
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Q4 Will it be impossible to achieve an ARPU rebound on an organic basis, i.e., without the contribution of upsell activities?
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Q5 What is the size of the impact of discounts that you foresee in three years from now?
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Q6 The impact of discounts on your mobile ARPU for FY2019 is estimated to be 860 yen. Can we expect that this will come down to close to 0 yen in the next three years?
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Questioner No. 11
Q1 You announced to launch a new large data bucket plan, "Gigaho." What kind of large-capacity content do you plan to offer to its users? Please share with us your medium-term ambitions.
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Q2 Are the various carrier-agnostic video services that you currently offer, such as "d" services and DAZN for docomo, registering growth in subscriptions? Or are you experiencing customer outflows to similar services offered by the competition?
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Q3 I would like to hear about your plans for the voice option of the new rate plans. You explained that you simplified your rate structure. From the announcements you provided to the media, I got the impression that you do not plan to actively market the voice option to customers. Unless the existing "Kake-hodai" or "Kake-hodai Light" users join the new voice option, I believe you will have to anticipate a larger negative revenue impact from the new rate plans. How much of these existing voice users are assumed to join the new voice option?
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Questioner No. 12
Q1 A question regarding the projected number of handsets sold and commissions payable to agent resellers. You explained that you are projecting a decline in the quantity of handsets to be sold in FY 2019. Can you share the prospects for the next fiscal year? Sales in store fronts will probably drop if online sales grow, but I believe you have already carried out a review on your commission scheme, so can you explain your overall philosophy including the possibility of further changes in the future?
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Q2 What is your medium-to-long term projections on your handset sales volume? It will be good for your agent resellers if they can receive the same amount of commission revenues that you projected, but do you foresee any possible decline in their commission revenues due to the transition to digital channels?
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Q3 The non-face-to-face channel may not grow to 50%, but I believe there is a good chance for this channel to account for 10-20% of the total. If their composition is limited to that level, I believe your total cost will deteriorate because you will have to allocate additional costs to reinforce your non-face-to-face channel while maintaining the commissions to agent resellers. What do you think?
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Questioner No. 13
Q1 I would like to hear your views concerning the growth prospects and future strategy of your finance/payment services. The total number of d CARD members recorded a year-on-year growth of 5% in FY2018, and thereafter reached over 20 million in April 2019. The number of d CARD GOLD members, in particular, recorded a year-on-year growth of 36% in FY2018 and became a major driver of your overall credit card business. Through which component do you plan to further expand your finance/payment business going forward? Or is your strategy to achieve a growth in the amount of transaction per member rather than expanding the d CARD member base?
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