Presentation Materials

I found it difficult to figure out whom the messages contained in this medium-term vision were intended for. Frankly speaking, as an investor, it is hard to make an evaluation of this vision as it does not contain any financial targets.

It is true that financial targets are not included in our medium-term vision. Based on the assumption that we will achieve our operating income target of over 900.0 billion yen in FY2012, we decided to develop a new medium-term vision at this juncture to clarify the general direction of the Company's activities in the subsequent years. In this new vision, we envisage developing new businesses jointly with external partners. By clearly presenting the Company's stance at this point of time, we believe we can accelerate initiatives to be implemented in FY2012, and thereafter. We expect to announce a more detailed business plan at a later stage.

In your medium-term vision, you set a target of raising your packet revenues to 1.5 times the level of the current fiscal year by FY2015. By simple calculation, this implies that your operating income could reach 1.8 trillion yen in FY2015, once the decline of voice revenues comes to a halt and starts rising again. Is this an appropriate estimate?

It is not that simple. We need to make preparations for business deployment in new areas, in light of possible decline of voice revenues due to the expanded adoption of VoIP.

How do you analyze your performance in the acquisition of net additions for October?

Because the total number of net additions per month is limited to only a few hundred thousand, we have to anticipate a certain degree of impact. I hope you will look forward to our new sales after the 2011 winter-spring models go on the market.

Regarding your medium-term vision, based on the assumption that you will maintain your current operating income margin of approximately 20%, I calculate that operating revenues for FY2015 would be expected to increase by 1.5 trillion yen (including 900.0 billion yen in packet revenues and 600.0 billion in revenues from new businesses) and operating income by 300.0 billion yen compared to current levels. Is this understanding correct?

It will be difficult to achieve an operating income margin of 20% during the initial stage of new businesses. For example, mmbi is expected to incur losses in its initial phase of operations. We must launch and expand new services in order to enhance the operating income margin of such new businesses toward FY2020. After we sow the seeds of these new businesses, they will then begin to sprout and eventually grow into a large tree, but as of FY2015, we believe these businesses will still be too young to bear fruit.

Would it be fair to understand that you will be able to maintain a 20% operating income margin in your cellular services business, after achieving the 900.0 billion yen income target for FY2012?

We will study our future income targets taking into consideration of the impact of Monthly Support discounts.

The decrease of voice ARPU was in line with my expectations and I don't find anything awkward about your explanation. Do you foresee any chance of your packet ARPU ending up higher than your forecast?

Please understand that the revised full-year packet ARPU forecast was determined after factoring in recent ARPU trends, the track record of smartphone sales and our prospects for future device sales.

Does your forecast factor in a further increase in sales promotion expenses for the high-sales season in the coming spring?

Yes, it does.

I would like to hear your comments concerning your medium-term revenue outlook. Your full-year cellular service revenues are estimated to be approximately 3.4 trillion yen, and you mentioned in your vision that you will aim to increase your packet revenues by 900.0 billion yen by FY2015. In my estimate, if you are able to grow your packet revenues by approximately 700.0 billion yen from the current level, you should be able to record a year-on-year increase in your operating revenues from FY2015 onwards, at which point it is estimated that the ratio of voice and packet revenues will be 20:80. Is my understanding correct?

The general direction that you indicated is correct (i.e., packet revenues accounting for a larger proportion of total revenues). We will basically aim for an increase in both operating revenues and income, and we may be able to provide you with more details after compiling a business plan sometime in FY2012/2H.

Was your medium-term vision developed based on the premise that you will restore Xi rates to normal levels when the current introductory campaign offering discounted rates expires? Do you foresee any risks of increased churn or subscriber liquidity resulting from the termination of these special discounts? Or do you have plans to extend the discount period?

We intend to end the introductory campaign on April 30, 2012, as planned. The termination of this campaign will of course be decided in view of the competitive landscape and we do not intend to take a rigid stance of terminating the campaign by any means without taking the prevailing circumstances into consideration, but the current plan is to finish the campaign as scheduled. Because LTE offers enhanced convenience with its higher speed connections, we believe customers will accept the higher charges for its extra utility. In addition, we believe that many heavy voice users will also join this service, because the flat-rate voice plan allows users to make unlimited domestic voice calls to any DOCOMO subscriber for 1,480 yen a month,.

Do you have any plans to counter the competition by maneuvering your handset prices?

We will not rule out such possibility. Even today, we provide higher commissions for Xi devices compared to FOMA handsets to make them more affordable for customers.

The billable MOU decreased by seven minutes year-on-year in FY2011/1Q. What was the decline for the FY2011/2Q?

It recorded a decrease comparable to that of FY2011/1Q.

I remember that Mr. Yamada previously commented that you have an ambition to raise your operating revenues to 5.0 trillion yen in the future. Is your medium-term vision aligned with that statement?

We have the basic aim of achieving growth in both operating revenues and income, but our medium-term vision was developed without taking the 5.0 trillion yen ambition into account.

By employing those measures, do you think you will be able to maintain your corporate image as a carrier that offers high-quality service with a robust infrastructure?

We will aim to maintain our current quality levels and gain customer recognition for our superior quality and safety/security offerings. Regarding capital expenditures, we intend to maintain the current level of approximately 700.0 billion yen per annum. We have hitherto made investments for the expansion of our service areas, and we believe we would have been able to reduce our CAPEX by now, were it not for the traffic increase caused by the expanded uptake of smartphones. Going forward, our capital investments will be used in principle for capacity expansion.

I expect that you will increase the number of mergers and acquisitions in the future to expand new businesses. Will that result in a slowdown in the pace of dividend hikes?

No, we do not foresee any impact on dividends. Our aim is to grow the revenue size of new businesses to 1.0 trillion yen by FY2015. Estimated revenues from new business fields for this fiscal year are estimated to be 400.0 billion yen, and we will aim to expand the revenues from these existing non-core services to 600.0-700.0 billion yen by FY2015. In addition, we also plan to start up other new businesses with the aim of growing their revenues to 300.0-500.0 billion yen. We may engage in mergers and acquisitions if there are any good opportunities to do so, but we do not have any concerns about how they are financed. We will attach highest priority to using available cash flow for dividend payments, and any remaining cash will be used for growth investments. If there is an investment opportunity that requires an amount higher than the cash on hand, we will basically rely on external financing. We have not made any changes to our basic policy of continuing stable dividend payments.

You mentioned that you will aim to raise the total number of smartphone subscriptions to 40.00 million within FY2015, of which Xi subscriptions are projected to account for 30.00 million. Can you give us a breakdown of the number of data cards, Wi-Fi routers, tablets and smartphones included in this forecast?

In our forecast, we assume that the combined subscriptions to data cards and Wi-Fi routers will account for 10% of the total, and subscriptions to tablets another 10%. We intend to more strongly promote the sales of Wi-Fi routers and data cards going forward appealing Xi's attractive data billing plans and other things. For tablets, we plan to cultivate the enterprise market leveraging Xi's faster transmission speeds.