Presentation Materials

The number of your port-outs has been in line with your projections, but you have failed to acquire as many port-in subscribers as planned. What are the challenges?

We believe our coverage, handsets, billing plans and services all compare favorably against those of our competitors. Going forward, we must introduce attractive services that our rivals do not offer. For this reason, we have aggressively formed alliances with players in the peripheral industries since last year, and there are some other projects in the pipeline.

Have you noticed any specific trends in subscriber movement following the introduction of the "White Plan" by Softbank?

Softbank introduced the "White Plan" in the middle of January, but we have not seen any major impact from its launch so far. Softbank also announced the introduction of the "Double White Plan". We believe our customers will seldom have to pay a more expensive bill compared to the "Double White Plan", so long as they have chosen the optimal billing plan suited to their usage behavior. We would like to carefully watch subscriber movement after the introduction of the "Double White Plan" which is scheduled for launch in March.

You have not been able to completely erase the negative perception of FOMA's area coverage. Now that you have constructed so many base stations, isn't it possible for you to do some PR by presenting a quantitative assessment on your network coverage?

FOMA's coverage has already been expanded to a level superior to our mova network. However, when compared against au's network, it is not necessarily always superior depending on the location. Since last year, we have been posting advertisements concerning our network coverage and we intend to strengthen our publicity going forward. We will publish quantitative data if available, but we would like to first work to improve the general perception.

Which is more important for you, the subscriber target or the profit target?

We always pay attention to achieving a good balance between subscriber count and profits, but as far as the fourth quarter of FY2006 is concerned, we would like to attach a slightly higher priority on subscriber acquisition.

Given the decrease in your inventory level, will it be appropriate to consider that you will not have to expect any appraisal losses from obsolete handsets, thus contributing to the achievement of your profit targets for this fiscal year?

We believe we will be able to decrease the inventory level during the current quarter. We perform an appraisal for each model of our handsets, and the models that are deemed difficult to sell are written off in accordance with our internal rules. The number of models that we market has been increasing and it is difficult to predict whether the models subject to write-off will decrease or not at this point.

Give us your projections on the operating income for the next fiscal year.

We think it is difficult to achieve our subscriber target for this fiscal year, and this will likely impact our revenues for the next fiscal year. While we are expecting a decline in capital expenditures, depreciation/amortization is not expected to decrease given the high amount of capital expenditures this fiscal year. We will strive to reduce procurement costs and distributor commissions. It is premature to predict the results for the next fiscal year at this point because they will be affected by handset sales in March. We would like to develop the forecast after observing various factors a little longer.

If DoCoMo introduces a scheme similar to Softbank's "Super Bonus", how greatly will it affect your revenues?

We do not negate Softbank's approach as one of the possible sales methods. However, we have not made any calculations on the hypothesis of introducing a similar scheme. The issues pertaining to the business model of handset sales cannot be resolved simply through the combination of abolishing distributor commissions and removing the SIM lock. Many other possible approaches, e.g., introducing a method to bind a subscriber and prohibit cancellation through a time-limited contract, etc., should be addressed. We therefore think it is necessary to study a business model that will benefit each player, the users, manufacturers, distributors and carrier.

The Mobile Business Study Group is currently discussing possible changes to the current business model, which is built on the distributor commission system. How significantly will such change impact your results?

This is not simply about abolishing the commissions; issues such as the introduction of a time-limited contract system like those adopted in Europe or the United States, and removal of the SIM lock need to be addressed together. As for the SIM lock issue, because the technical standards are different among carriers, i.e., DoCoMo and Softbank use the same W-CDMA technology but au uses cdma2000, even if the SIM lock is removed, we will still face a situation in which users cannot use the same handset between carriers adopting different technical standards. Discussions on this matter are thus necessary going forward. The impact on our financial results may vary depending on the outcome of the discussions.

Your results will not be as good as the last three years and the outlook for next fiscal year appears to be difficult. In this environment, how do you plan to reward your shareholders overall, including individual shareholders?

We executed a strategy to narrow the gap with our competitors to compete in the MNP race, but we were forced to play a structurally difficult game because we control a large share of the market. But now that we have eliminated the gap with our competitors, we will focus not only on the business defined by ARPU multiplied by the number of subscribers, but also various other services provided in the flat-rate platform, with the goal to win the acceptance of our customers. We would like to seek your understanding on these efforts. Traditionally, we have rewarded our shareholders through dividends and the repurchase of our own shares. We would like to study the balance between dividends and the repurchase of our own shares going forward, while listening to the opinions of the capital markets as well.

You have been reducing your other non-personnel expenses. Will it be possible to reduce them even further from the current level?

The primary reason for the year-on-year decline in other non-personnel expenses was the increase in expenses in the third quarter of last fiscal year caused by an extraordinary factor. Operating expenses and base station-related expenses both increased compared against the same period of the prior year, but we will strive to reduce our expenses even further.

Give us an update regarding the acquisition of PLDT shares from through FPC.

In December, we announced our plan to acquire PLDT shares from FPC. We are currently holding negotiations with FPC for the purchase of such PLDT shares.