Presentation Materials

With respect to packet ARPU, I think you are aiming to increase the flat-rate subscription rate by luring more light-usage users to the packages through a reduction of flat-rate charges. Even when this is factored, don't you think your FY2009 full-year packet ARPU forecast of 2,420 yen is too low?

Packet ARPU for FY2008 grew by 8% year-on-year. However, this is inclusive of the 100-yen increase in the i-mode basic monthly charge. Excluding this impact, the effective packet ARPU growth for FY2008 would have been approximately 4%. The number of mova subscribers migrating to FOMA is decreasing, and growth in packet ARPU has slowed—in fact, the most recent data (FY2008/4Q) shows that growth in packet ARPU excluding the impact of i-mode basic charge increase was limited to 2.6%. Therefore, to achieve growth in packet ARPU for the future, we have high expectations for video services and revised billing plans designed to allow customers to utilize our services without concerns about their phone bills. Through the provision of a wide range of content and promoting the use of Deco-mail and other services, we would like to create more usage opportunities for customers.

In FY2009, you are forecasting an increase of approximately 20 billion yen in equipment sales and a decrease of some 66 billion yen in distributor commissions before EITF deductions compared to the previous fiscal year. How do you plan to achieve an increase in equipment sales while cutting distributor commissions?

We plan to streamline distributor commissions in the future by increasing the proportion that is not linked with the sale of handsets and other measures. The handset sale-linked commissions will also be more targeted for each segment.

Specifically, what kind of measures do you plan to employ for "loading the pipeline" toward future growth and for enhanced customer satisfaction?

To secure income for the future, a budget totaling some 30 billion yen is allocated for various measures, including R&D and trial costs for new services.
To further enhance customer satisfaction, we plan to spend a total of approximately 40 billion for the measures we recently announced (reduction of entry rates for various flat-rate packages, provision of free battery pack or battery charger and others), to express our gratitude to customers and earn their satisfaction and long-term loyalty.

Please comment on the current state and future plans concerning your investment in India's TTSL.

We invested a total of approximately 260 billion yen in India's TTSL and TTML. India's mobile phone market is expanding rapidly, posting an increase of 15.4 million subscribers in the single month of March alone. Under such circumstances, TTSL is now making preparations toward the launch of GSM service in June 2009 in addition to its existing CDMA network. Furthermore, three directors were nominated by DOCOMO, and we decided to send nearly ten of our employees as expatriates. We believe we have been making favorable progress.

I heard from a foreign vendor that you are planning to add some functions unique to DOCOMO to your LTE equipment. Does that offer you benefits commensurate with the additional cost?

We have established an internal project team to prepare for the launch of LTE in FY2010. We are planning to introduce the system as one of a group of first adopters in the world. We plan to procure the equipment around the same timing with other overseas operators, and do not believe we are pursuing that equipment be built on specifications proprietary to us.
As for capital expenditures, we assume we introduce the system while keeping our total annual CAPEX (inclusive of LTE-related investments) below 700 billion yen.

Regarding your dividend plans, can you consider raising your payout ratio to over 50% under the current business environment?

We have decided to raise our dividend for this fiscal year to respond to the mounting requests for a dividend hike. Going forward, we will continue our management efforts adhering to our basic policy to "continue stable dividend payment". As for shares repurchases, we have decided not to continue the program in the size as before, but to repurchase shares flexibly through a resolution of Board Members while keeping an eye on the progress of achievement of our income target presented in our medium-term vision.

I heard that your handset procurement cost per unit is likely to increase in FY2009. Does it mean that you can no longer expect a reduction in procurement cost if the total number of handsets sold per annum remains at a level below 20 million?

We are committed working unceasingly to bring down the procurement cost per unit. In collaboration with various vendors, we will look into the ways to reduce the procurement costs despite total annual handset sales being limited to 19-20 million units, through measures such as common components and operating systems development.
To bring down the overall procurement cost, the area that requires the largest reduction is software-related costs. It is necessary to install globally common applications to further cut down the costs, and we will steadily move ahead with our plan for the introduction of Operator Pack.

I believe your subscriber base of flat-rate data service for PC access has been growing. How many of these users do you think are the ones who switched from fixed-line networks? Also, is it correct to assume that you perceive the current PC/Internet market as your future target?

There might be some users who have canceled their fixed-line subscription to switch to mobile data service, but we believe the number of such customers is quite limited. We rather think that increasing number of young users are now choosing mobile as the primary means to access the Internet without subscribing to fixed-line from the beginning, and the number of customers who prefer wireless over fixed-line is expected to increase in the future.
We believe fixed-line PC access and mobile-based PC access are not in a substitutionary relationship; they are rather mutually supplementary. The transmission speeds of mobile access are expected to increase significantly with the launch of LTE in the near future, but the actual throughput in a mobile environment will vary depending on the state of traffic congestion. On the other hand, in fixed-line networks, installation of optical fibers is expected to progress. We therefore believe the two different networks will serve different needs depending on the usage scenario or content of service.