Presentation Materials

How do you view the level of profits generated by selling one data communications device?

Users who purchase a PC data card are generally high ARPU users, so we provide higher sales commissions to distributors for data cards on condition of a 2-year subscription contract. Of course this is done while carefully examining the profitability level.
To comment on the contribution of PC data card sales to our total income, even if we are able to acquire a large number of PC data communications subscriptions, the revenues from these subscriptions will not likely grow to a size to increase our overall ARPU. This is because even if total PC data card subscriptions grow to approximately 800,000 and all of the users use packets up to the monthly upper limit of 5,985 yen of the two-tier flat-rate package, their total revenues will still be much smaller compared to the revenues generated by the 49 million i-mode subscribers multiplied by ARPU of 2,460 yen.

It seems that there has been an increase in the number of used handsets sold in the secondhand market. What do you think about this?

We had anticipated that the secondhand market would expand as a result of a rise in the handset prices owing to the introduction of the Value Course. We therefore took measures in October to prevent of stolen handsets from being sold in the secondhand market by disabling their communications capabilities by registering a number uniquely assigned to each handset. We prefer customers to purchase a brand new handset, because the expansion of secondhand market could prevent the widespread adoption of new features like the "i-concier" service. On the other hand, in our insurance service for lost or damaged handsets (including free delivery of replacement phones), we currently provide subscribers with the same model as the one submitted for repair, but we would like to consider the possibility of using used handsets as replacement phones.

Is there any chance of DOCOMO itself being directly involved in the distribution of used handsets in the future?

That is not included in our plans at the moment.

There are opinions suggesting that many of the video users are heavy packet users to begin with, and PC data cards consume a huge amount of traffic so you have to spend a large amount of capital expenditures to prepare adequate capacity, which makes it difficult for you to make profits. What do you think of this?

It is true that video use is mainly for entertainment purposes, and the vast majority of its users are younger people who have been using packets heavily from before. Going forward, we would like to expand the use of video to broader segments by increasing video applications in such areas as tourist information, health-related services or restaurant guides, so that users who so far have not consumed packets up to the upper limit of the two-tier packet plans will start using video services.
We believe the PC data plan users are making positive contributions to our revenues and income for their higher ARPU. Their negative impact to our network is not very big because we already have the data speed restriction feature and other countermeasures against very heavy usage customers.

How much further do you think you can reduce your costs during the next fiscal year? The ARPU for this fiscal year is expected to fall by 400 yen year-on-year, and even if you are able to limit the decline to only 200 yen in the next fiscal year, it will result in a decrease of some 100 billion yen in operating revenues. Under such circumstances, do you think you can increase your income only through cost reduction?
I believe your future growth depends on the trends of ARPU and the progress of your medium-term vision. If you are not able to increase the subscription rate of flat-rate packet users to 70% of total users, and if the percentage of flat-rate users consuming packets up to the monthly upper limit does not reach 50% of the total flat-rate users, do we have to think that it will be difficult for you to achieve the operating income target of 900 billion yen in FY2012?

We are still developing the income plans for next fiscal year, but it does not seem that we have much leeway. How to raise the packet ARPU is one of the issues we are studying. We started various initiatives from the second half of this fiscal year, and we are now studying the implementation of measures on a company-wide level aimed at increasing packet ARPU. On the cost side, we expect to see efficiency improvement resulting from the consolidation of former regional subsidiaries and the effects of the accelerated depreciation of fixed assets. However, the situation remains tough.
Achieving a flat-rate subscription rate of 70%, and to have over 50% of them reaching the monthly upper limit of the two-tier rates are the preconditions for achieving the FY2012 operating income target of 900 billion yen. While we are currently endeavoring to achieve these numbers, in the event that we find them difficult to meet, we will need to explore other avenues for growth.

How do you plan to motivate them to use packet services?

When customers subscribe to a two-tier flat-rate plan for packet access, we will also recommend them to join some other services that could serve as a trigger to start using packet services. We consider "i-channel" and "i-concier" a very effective tool to grow the ARPU of these users. Through "i-concier" service, we plan to deliver information that is attuned to users' lifestyle needs and thereby raise the ARPU of users. Customers also find it easier to utilize video services once they join the flat-rate service. We would like to offer video content that is relevant to user's lifestyle needs and leads to a growth in ARPU.

Let me hear your comments regarding the possibility of a rate hike. With respect to data communications based on PC cards, do you plan to develop a billing plan that could result in an increase in ARPU, for instance, by adding some supplementary services? Also, in your content delivery platform business, do you plan to charge commission fees in the order of 20%-30% by altering the i-mode model?

A key issue that needs to be considered in relation to our billing structure, which is currently being studied, is the rate structure of the LTE service, which is scheduled to be launched next year. With respect to the platform, thorough discussions will be required to change the existing i-mode billing structure, but we are currently contemplating the creation of a separate market for open applications. The commission fees for this market, which is still under study, will likely follow the global standards.

Don't you think that you can improve your margin more efficiently without spending costs and contribute to income growth by adding more inexpensive models produced in mass quantities with limited specifications and less new features, rather than spending costs for handset repair?

In our previous handset lineup, we only had high-end and middle-end models. But now we are offering three ranges of high-end, middle-end and low-end models. Going forward, we plan to further enrich the variety of the least expensive low-end models.

Does your income plan for next fiscal year and beyond factor in any contribution from the reduction of handset costs? Other carriers seem to have plans to channel part of their savings from reduced handset costs into profits. What are your thoughts?

Because there is a general perception among users that our handsets are expensive, we first intend to bring down our handset prices. Of course, we are taking initiatives to reduce our handset procurement costs, for example, by reusing the winter models of last year by adding some new colors. We believe we can reduce our overall procurement costs through these measures. These initiatives will be carried out taking into consideration the balance with other efforts, such as the new development of less expensive handsets through joint studies with manufacturers.

With respect to ARPU, the ideas to launch video content for tourists or "BeeTV" programs for senior users sound effective to raise the ARPU among the middle-aged and the elderly. However, in view of the fact that you have not yet been able to boost the usage among these user brackets in the existing framework, including the way of marketing, don't you think it might be better to pursue other approaches for raising their usage?

When we analyze the usage by age groups, users in their 40's already have high level of literacy, and they will likely continue to use mobile phones even when they get older. Those that are now in their 50's or 60's are expected to increase their packet usage, if we provide them with proper content that is easy to use. People in these age groups are keen about their health, so we are contemplating, among other things, the delivery of wellness services in video format. We would like to devise creative ways of communicating these services, including the provision of free trial periods.

Will you consider addressing such health-related needs through the collaboration with external partners?

We are considering that, among other things. In the field of social support services, in particular, we would like to develop services joining forces with external partners.

The auction of 3G licenses will shortly begin in India. Do you have plans to make additional investment in TTSL?

Our investment in TTSL was intended for the deployment of GSM network and not for the acquisition of 3G license. Therefore, the funds required for 3G license have to be financed by TTSL. However, there might be a request for additional investment when TTSL starts building the 3G network after acquiring the license, and in such case we will study the issue separately.

How confident are you concerning the degree of perfection of the new GPS-enabled "i-concier" service?

Content providers are generally showing a good response. However, we often receive questions about the number of compatible handset models when we visit them to recommend its introduction. We therefore need to increase the variety of compatible handsets.