Presentation Materials

You mentioned that you will increase the variety of smartphones and tablets so they will account for half of the total number of models planned for release in this fiscal year, but why is their contribution limited to only 30% of your total device sales? Can you also give us an outlook of the total number of tablets you plan to sell in FY2011?

We basically intend to sell as many smartphones as possible. The functionality of smartphones can be upgraded through downloading of applications, so we would like to offer models that can sell in large quantities. However, among all the products that we introduce, some may sell well but others may not.
Regarding tablets, we will aim to sell approximately 800,000 units in this fiscal year. Our main target is enterprise users, to whom we will try to market tablets in combination with various enterprise solutions.

With regards to LTE, Verizon has already sold some 500,000 units of compatible devices. As you started the service around the same time, I get the impression that there is some great difference in the speed of adoption between the two companies. In addition, it does not seem likely that you will roll out LTE-enabled handset type devices anytime soon. Can you comment on your future LTE strategy?

Any LTE handset we sell must be attractive and excel in quality, and we are currently moving forward with product development aimed at allowing us to roll out such devices as scheduled. Some devices, such as Wi-Fi routers and tablets, are planned for introduction in the summer or autumn, and we will strive to expand these sales thereafter.
In addition to devices, coverage and services will also play an important role in the widespread adoption of LTE. We are still in the process of expanding LTE coverage—which is currently limited to Tokyo/Nagoya/Osaka, and services and content that are exclusively available to LTE are still under development. In light of these restrictions, we believe that the current pace of uptake is reasonable.

As far as I look at your cellular services revenues for FY2010, the impacts from the decline of ARPU and the increase of active subscribers have almost canceled each other out. If this is correct, I think you can conclude that the phase of declining revenues has come to an end. But your presentation on this occasion did not carry such a message. Don't you think you should have given a clear message that the downward trend in revenues has bottomed out, and this is why you decided to raise dividends?

The aggregate ARPU is expected to hit bottom in FY2011, and start rising again in FY2012. We plan to keep a close eye on how things unfold during this fiscal year. Regarding the full-year outlook for FY2011, this is the first time that we expect to achieve an increase, albeit small, in both revenues and income since FY2003.

Were it not for these incremental expenses, don't you think you would be able to expect a higher income for this fiscal year? Am I correct to understand that you decided to allocate additional expenses toward these measures because your revenues are beginning to recover? Can I also understand that you will be able to achieve an operating income exceeding 900.0 billion yen in FY2012, by executing these measures?

We have been focusing on these three business areas as new revenue sources ever since we formulated our medium-term vision. We will take appropriate actions to grow these three areas towards our goal of delivering tangible results in FY2012. In other words, we did not decide to make these additional expenditures as one-off expenses because we foresaw an improvement in our financial position.
With regards to operating income for FY2012, we will work toward our target of achieving over 900.0 billion yen.

It seems that you are anticipating a huge decline in communication network charges for this fiscal year. Is this because you are assuming a considerable reduction in the access charges of other companies, or are there any other factors?

While we cannot comment on detailed figures, we assume that other companies will bring down their access charges by a rate similar to our 35% reduction.

I believe that 35% was the rate of reduction you applied in the last fiscal year. Are you planning to cut your interconnection charges again this fiscal year?

We have no choice but to decrease our access charges this year again. We will carefully examine the rate for this fiscal year, which we believe will have the effect to decreasing both our revenues and expenses by approximately the same amount.

I think you are already paying a considerable amount in electricity charges, but do you foresee any risk of increased power supply costs over the long term?

The large zone scheme with 360-degree antenna directivity that we plan to install as part of our new disaster preparedness measures will start transmitting radio signals only after occurrence of a disaster. Then, the transmission equipment will switch to a hot-standby mode, but this will not likely result in a significant increase in electricity charges. Batteries will require electricity when they are recharged, but once the charging is complete, they will not consume any more power. Therefore, we do not foresee any significant increase in electricity charges.

I believe the losses incurred by India's TTSL have been expanding. What are the prospects for the next fiscal year?

With respect to the outlook of TTSL's financial performance, we basically expect that it will continue to run at a loss for some time. However, the cellular penetration rate in India is still limited to 65%, and TTSL's subscriber growth rate shows no signs of diminishing constantly acquiring some 2.00 million net additions every month. However, competition in the market is fierce and the ARPU of the whole industry remains lower than our earlier projections, so it may take longer than expected for TTSL to become profitable. But we do not think this will diminish the financial position of the company to a level that will require us to take a pessimistic view.

There have been reports about a corruption scandal involving the spectrum allocation by the former telecommunications minister of India. Please provide us with an explanation of the facts of this matter. Also, will this have any impact on TTSL operations in terms of compliance?

There are many speculative reports, and we do not think we are in a position to comment on this matter, but we believe the truth will be revealed through the investigations being carried out by the parliamentary committee and the investigatory authorities of India. Judging from the current situation, we believe that the results of the investigations are increasingly pointing to Tata's innocence. Although we think the situation is turning out toward the better, we are not in a position to comment on whether this will be reflected in interests relating to spectrum administration.

You mentioned that your aggregate ARPU will start rising again in FY2012 if the impact of the Monthly Support discounts is excluded. On a quarterly basis, when will it begin to increase?

We would like to reserve comments regarding the timing of recovery on a quarterly basis.