Presentation Materials

The decline in distributor commissions seems to be small relative to the decrease in the total number of handsets sold. Please explain the factors behind this.

One factor is the revised commission structure, in which we attach greater emphasis on fixed commissions that are not linked with the number of handsets sold. Another is the increase in distributor commissions resulting from the higher-than-expected number of mova (2G) subscribers switching to FOMA (3G), because we stepped up our efforts to migrate subscribers in April and May 2009, when subscriber movement in the market was high. The impact of the latter was larger.

How far do you think you can reduce your churn rate going forward?

The overall Churn rate includes, among other things, forced churns and natural churns such as cancelation of a subscription contract owing to the subscriber's moving overseas. These two combined account for approximately 0.3%. Our goal is to achieve a churn rate of around 0.4% taking into account these unavoidable churns. We achieved this target in the month of June 2009, and we will continually strive to maintain our churn rate low.

Please elaborate on the overview of the business model of MVNO service. The number of monthly net additions can be estimated to some extent, so can you comment on its projected revenues/income size and planned number of net additions?

Subscriptions to the MVNO operator to which DOCOMO provides network access are to be included in DOCOMO's net additions, and these subscriptions have certainly contributed to the growth of our net additions. The business plan of the MVNO operator is not disclosed to us.

Have you achieved any progress in optimizing the inventory level (e.g., elimination of excessive inventory or reduction of lost sales opportunities due to short supply) after consolidating the former regional subsidiaries, which I believe enabled you to more easily coordinate the discrepancy in inventory levels between regional offices?

Prior to the integration, handset procurement and inventory control were carried out separately by each regional subsidiary, and these numbers were simply added up to calculate the figure for the entire DOCOMO group. This was switched to a nationwide common inventory control system following the integration of former regional subsidiaries, making it possible for us to coordinate the imbalance between regional offices. Recently, we have been able to operate our business without facing the problem of short supply, etc. We believe the consolidation delivered positive results for inventory control.

The monthly net additions data show that some operators have achieved strong subscriber acquisitions in some particular regions of Japan. When you analyze your performance based on the territories of the former nine regional subsidiaries, in which area are your strong or weak? Have you seen any discrepancy between different regions in the progress of income generation?

It is impossible to break down our financial results by region because our accounts have been consolidated upon the integration of former regional subsidiaries. But to comment on the vigorousness of each region, I would say Kyushu is extremely energetic. Our performance in Kyushu has been very favorable in every aspect, and staffs in the field are all full of vitality. Having said that, however, the Kanto Koshinetsu region has the largest business scale, and our overall performance is most significantly affected by the performance of this region.

What was your impression after attending the BTCC meeting?

I believe we get along very well with TTSL's Managing Director and his team who are all very diligent and faithful. Their emphasis on "integrity" and "fidelity" is something we find a lot in common with Japanese culture. I once again recognized that it was a good decision to invest in TTSL.

Before you commence LTE service using one carrier frequency, if other carrier(s) launch a different system (HSPA+ or DC-HSPA), don't you think you will lag behind the competition because the catalog specifications of the two systems are basically equal?

We believe it is more efficient to migrate directly to LTE without adopting HSPA+, which is an intermediate technology. By rolling out LTE initially using the 2GHz band, which is the spectrum band that we already use for 3G, it becomes possible to migrate to LTE taking advantage of the benefits of the legacy system such as antenna sharing. Some European operators plan to adopt HSPA+, but we believe in the long run it is more efficient to go straight to LTE.
With HSPA+ systems, high transmission speeds close to the catalog specifications cannot be delivered unless the radio conditions are considerably favorable, so we believe LTE is more advantageous under average radio conditions.
In addition, if two carrier bandwidths are used in areas where spectrum is available, the transmission speed can be doubled, in which case the rates offered by LTE will become higher than those of HSPA+. The difference of transmission rates will enable us to differentiate our services and marketing.

In FY2009/1Q, it seems that you have not conducted any share repurchases. What are your future plans?

Due to the instability of the overall stock market owing to the impact of global financial crisis, there had been mounting requests for a dividend hike from shareholders seeking direct returns. This fiscal year, we decided to raise our dividends taking these requests into consideration. With respect to share repurchases, after a comprehensive review on various factors, including the concern against an steep decrease in the number of floating shares, we decided not to continue the share buy-back program in the size as before, but instead carry out share repurchases more flexibly based on a resolution of the Board of Directors. In FY2009/1Q, we did not repurchase shares, partly because we had a net cash outflow of 90 billion yen due to corporate tax payments and other factors.
We believe we are well positioned to achieve the full-year adjusted free cash flows forecast of 380 billion yen, because of the progress in the collection of installment claims and other factors. While we intend to flexibly carry out share repurchases taking into consideration our financial position toward improving our capital efficiency, the market trends and our share price, etc., nothing is decided at this point.

Considering your billing rates, I assume that the packet ARPU of PC data card users is more than two times higher than that of cellular phone users, but can you comment on the profitability of the PC data card business compared to the handset type devices?
Also, is it correct to understand that laptop PCs are handled solely by the distributors and DOCOMO is not involved in its sales at all?

The sales incentives payable by DOCOMO are provided only for the purpose of acquiring data plan subscriptions. The PCs are handled solely by the distributors and whether to provide discounts or not on these products are decided at their own discretion.
We believe we have paid adequate level of incentives for the acquisition of data plan subscriptions, and this market provides sufficient level of profitability.

In the manifesto announced by the Democratic Party of Japan, there was a description concerning a possible increase of spectrum usage charges or introduction of spectrum auction system. What is your view on this matter, and how do you think it will impact your business?

In Japan, spectrum has so far been allocated not by auctions but through approval system. Each of them has both merits and demerits. For example, in the case of auction, if the bidding price skyrockets, it could lead to a delay of capital spending by the carrier who won the spectrum, or the right to use the spectrum itself might be resold in the market. Because radio waves are public assets, I believe the current system—in which telecommunications carriers receive the approval to use spectrum after submitting the business plan and bear the responsibility to fulfill the plan—is more favorable.