Presentation Materials
Main Q&A (Analyst Meeting after the Results for FY2020/2Q)
Announced on November 4, 2020
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 I would like to ask some details about the revenues and profit from Smart life business and Other businesses. During your recent results presentation, you explained that there was an impact from the accounting treatment of “d POINTs”. When this impact is excluded, it seems you have not achieved any increase in profit. Can you elaborate on the revenue and profit trends, citing the finance/payment business as an example?
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Q2 When I compare the three-month period of FY2020/2Q with the same period of the prior year, the profit growth of Smart life business was short of 20 billion yen. According to your explantation, the impact from “d POINT” accounting treatment was slightly less than 20 billion yen, which implies you have effectively recorded a decerase in profit if the point impact is excluded from the calculation. Wasn’t there a decrease in profit from finance/payment services? Is this trend projected to continue in FY2020/2H?
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Q3 Please share with us your philosophy for future rate plans. Your two major competitors announced to introduce a new 20GB plan priced approximately 4,500 yen from their sub-brands. What are your thoughts about the 20GB rate plan? Please also let us know your views concerning the launch of a sub-brand. I would like to know the current status of your studies. During the press conference in October, President Yoshizawa indicated that dual pricing for the same service was not considered favorable. Does this remain intact?
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Q4 I understand that you cannot make an announcement about a new rate plan at the moment because the TOB is currently in progress, but once it is complete, do you plan to make an announcement immediately? Or, would you rather not rush and wait until the early next year to announce your new rate plan, if it is planned for launch in the spring of next year?
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Questioner No. 2
Q1 Regarding Smart life business and Other businesses, please indicate how the incremental profit of 20 billion yen attributable to the point program impacted each business category (e.g., finance/payment, or content/lifestyle)? Is it correct to assume that this profit impact will disappear in the next fiscal year?
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Q2 The expansion of finance/payment transactions seems to be driven by the strong performance of “d CARD” and “d Payment” services, but I also believe your direct carrier billing service, a proxy bill collection service, is also expanding. Can you explain the growth rate of each service comprising your finance/payment offerings?
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Q3 This is a question about your rate plan. In the MIC’s international price discrepancy survey, the rates for 2GB and 5GB were also indicated as more expensive. What are your thoughts on this point?
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Q4 Will it be correct to assume that you believe the current circumstances are different from late March, 2020, when the survey was carried out?
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Questioner No. 3
Q1 I would like to hear about your assessment of your price competitiveness vis-à-vis the sub-brands of other carriers. Do you believe you can sufficiently compete against the rate levels of the sub- brands with your “Gigalight” service and your campaigns and other initiatives that you offer? Or do you think you need to employ additional measures to beef up your offerings?
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Q2 As far as the low-end (e.g., 2GB, 5GB) and middle-range price points are concerned, according to your previous comment, I construed that while the 20GB package is currently drawing more attention, you do not see the need to immediately bolster your offerings. Is my understanding correct?
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Q3 Will there be a significant change in DOCOMO from users’ perspective, after you become a wholly-owned subsidiary of NTT? Please let us know if there are any points you want to alter dramatically from users’ viewpoint.
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Q4 You have hitherto undertaken various initiatives to respond to user requirements. Should I consider that the addition of fixed-line and other services to your lineup would be the most significant change compared to the past?
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Questioner No. 4
Q1 Regarding Smart life business and Other businesses, you mentioned that you plan to spend costs for marketing in FY2020, but you foresee a moderation in the projected amount of expenditures from FY2021 onwards. Will you aim to achieve an operating profit margin from Smart life business and Other businesses comparable to FY2020/1Q of approximately 24% in FY2021? Or, will you aim for a higher level, e.g., over 30%?
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Q2 Can I expect a level higher than that of FY2020/1Q at least?
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Q3 What about the absolute amount of Smart life-related operating profit in FY2021? Can we expect a level higher than your FY2020 full-year target of 160 billion yen?
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Q4 The performance of telecommunications business in FY2020/2Q was almost on par with the same period of the previous fiscal year. The year-on-year decrease in mobile communications services revenues was slower compared to FY2020/1Q, but the revenue growth from the expansion of optical-fiber broadband services and equipment sales came in smaller compared to FY2020/1Q. Can you comment on the factors behind the improved performance, taking these three points into consideration?
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Q5 Other than those associated with equipment sales business, what other cost items have you been able to reduce in FY2020/2Q over the previous quarter?
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Questioner No. 5
Q1 You pointed out that the 20GB plan is the focal point in the new rate structure. However, if you want to fit it to your existing pricing regime comprising “Gigaho” and “Gigalight” plans, I believe it will require a very delicate price setting. Can you clarify what could possibly happen, if you newly create a plan offering 20GB at a price lower than the “Gigaho” rate, in terms of the number of people downgrading to the new plan and acquistion of fresh subscribers from the competition?
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Q2 Does that mean you are focusing on 20GB as a baseline?
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Q3 In your medium-term strategy, you presented an operating profit target of 990 billion yen. Will this target remain unchanged even after you become a wholly-owned subsidiary of NTT? I would also like to reconfirm if you anticipate to achieve profit growth every year in the roadmap to get there.
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Q4 During the earnings call for FY2020/1Q, you mentioned that you are on track toward the delivery of the 990 billion-yen operating profit target. Should we understand your statement basically remains intact despite the comments from Prime Minister Suga?
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Questioner No. 6
Q1 I believe you had a negative view for DSS (Dynamic Spectrum Sharing), but has there been any changes to your position? I understand your basic plan is to first expand coverage using the new spectrum allocated for 5G, but can you give us an update on your plans for the use of existing bands for which you were granted a license before the start of 4G?
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Q2 Do you have any plans to use the spectrum originally allocated for 4G services, not for DSS but for 5G, by converting the 3.5GHz band into 5G NR? Because I believe the the number of users served with the 3.5GHz band is not so siginificant, this is something you can tackle immediately, but what do you think?
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Q3 I heard that NTT has an ambition to integrate DOCOMO with NTT Communications after making DOCOMO a wholly-owned subsidiary. Do you have any plans to absorb OCN, the MVNO service operated by NTT Communications and offer it as a sub-brand of DOCOMO? Also, is it taking long time for you to launch a second brand because you are studying the use of OCN asset in the future? Please let us know your thoughts on this matter.
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Questioner No. 7
Q1 It seems that you are carefully controlling 5G capital expenditures without bringing forward your spending plans. What is the reason for this? I partly understand your rationale, given the difficulty of monetizing the new 5G business immediately, and the general business climate forcing you to lower the tariff for the former Type I Telecommunications Business. However, back in the age of 1G and 2G, DOCOMO achieved a tremendous success by making active network investments. Thereafter, with 3G, KDDI regained ground because you suppressed investments for W-CDMA. After 4G, all carriers kept pace with one another in network investment, but it seems that you are overwhelmed by the competition on the pricing front. Do you have any plans to make active capital expenditures in the future? Or would you pursue profit generation through cost control in your telecommunications business? Please present us your medium-to-long term perspective.
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Q2 In your overall capital expenditures, is it correct to understand that there are areas where you make active investments, and other areas where you control your outlays to a certain percentage of your revenues? After becoming a wholly-owned subsidiary of NTT, do you plan to vary your investments based on projects? Or, will you attach a stronger focus on cost control to defend profits? I would appreciate your comment on this.
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Questioner No. 8
Q1 Have you seen any changes in the number of customer outflows to Rakuten MNO service between the FY2020/1Q and 2Q? Please also share with if there has been any changes in the attributes of customers switching to Rakuten. As far as I understand, price-sensitive light-usage customers have so far accounted for the bulk of users moving out from DOCOMO to MVNOs. Have you witnessed any changes of late, such as outflows of heavy users?
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Questioner No. 9
Q1 This is a question relating to your rate plan. Your competitors nurtured their customers into large data users from early on, and had them migrate to more expensive rate plans. This suggests that, even if they introduce a new rate plan for 20GB, those super-large data users are not likely to downgrade, and they will still be able to aim for upselling users of 10GB, etc., to higher plans. In this context, because you set the minimum size of “Gigaho” at 30GB, you face the risk of downgrade by customers. You commented earlier that eventually the rate discussions will likely extend to the 2GB and 5GB plans. Do you think when you execute your rate revision this time around, you will need to take this point into consideration?
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Questioner No. 10
Q1 This is a question for President Yoshizawa. How do you think you changed DOCOMO during your tenure? And what are the capabilities that DOCOMO needs to develop newly in the future, including the challenges that the Company needs to address?
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