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Presentation Materials

• Questioner No. 1

  Q1 You mentioned that packet ARPU is expected to overtake voice ARPU within FY2010. Can you comment on the prospects for aggregate ARPU?

  Open

  A1 The reversal of voice and packet ARPU is one of the important milestones for our future growth. The negative impact of "Value Course" on voice ARPU has gradually eased, so we will now work to increase packet ARPU by encouraging more users to join flat-rate billing plans, stimulating increased usage by subscribers, and employing various other measures. We would like to bring about the reversal of voice and packet ARPU within FY2010. The whole company is engaged in tackling this issue with a shared awareness of its importance, and we are committed to dedicating all our efforts toward raising packet ARPU.

  Q2 There is a 1,575 yen difference in monthly charges between the flat-rate plans for i-mode phones and smartphones. I believe users are using your service nowadays without being so aware of the difference between i-mode and smartphones. How much longer do you think you can maintain your current rate structure whereby you charge a 1,575 yen premium for smartphones? Please share your thoughts on future rate settings, including the possibility of a reduction in rates.

  Open

  A2 Rate setting is one of the fundamental building blocks of our business, and we plan to consider our rates after comprehensively reviewing various factors, including the upcoming introduction of LTE. While it may not be easy to reach any conclusion on this, we plan to study this matter taking into full account the opinions of our customers and others.

• Questioner No. 2

  Q1 The full-year aggregate ARPU for FY2009 seems to have ended approximately 20 yen higher than the forecast in your business plan. If this is true, your operating income should have increased by some 10 billion yen in comparison to your forecast, but in actual fact it did not generate this much of an upside. This implies you incurred more costs than expected. Can you explain the reason for this?

  Open

  A1 Though voice ARPU levels exceeded our forecast due to a less than expected drop in MOU and some other irregular factors, we failed to meet our packet ARPU target. As a consequence, the aggregate ARPU ended up only slightly higher than our projections.
  The main reason that operating income did not increase proportionately was due to expenses growing more than we had estimated. The number of handset repairs exceeded our expectations, which resulted in an increase in related costs. In addition, handset sales jumped in the peak sales months of February and March 2010, during which we generated greater-than-expected operating expenses in order to compete against the aggressive promotions of other carriers.

  Q2 Can you quantify the negative revenue impact of reducing the minimum rate of flat-rate packet billing plans?

  Open

  A2 We do not believe reducing the minimum monthly rate of the flat-rate packet billing plans has negatively affected our revenues. The minimum rate reduction enabled us to significantly increase the total number of flat-rate subscriptions and capture many low-ARPU users. Our challenge going forward will be how to boost the usage of these low-ARPU users who have joined flat-rate packages, and we intend to prepare content and services that can stimulate the data usage of low-ARPU users.

  Q3 The naming of services for smartphones is too complicated. Different names are applied to each individual element of services you offer, which makes them difficult to understand. Can't these be more streamlined?

  Open

  A3 We would like to review services and billing plans that are difficult to understand from our customers' viewpoint.

• Questioner No. 3

  Q1 Let me ask a question about your billing strategies. I understand that you currently employ traffic control against heavy users, and the usage gap among customers is expected to widen even further as you add more new services and introduce LTE in the future. Do you plan to charge higher rates against heavy users based on actual usage?

  Open

  A1 We would like to consider this matter once LTE has been introduced. While we currently deal with this situation through dynamic traffic control, we may look into various other options, including the possibility of extra charges in addition to fixed monthly rates for heavy traffic users, or introducing a complete flat-rate scheme.

  Q2 How do you plan to steer medium and light users toward increasing their usage? What kind of steps have you taken during FY2009?

  Open

  A2 We have placed advertisements introducing the Auto-GPS function in an airport setup using Haneda Airport as part of our mass media advertisements. We have also expanded the variety of local information content. In addition, we have encouraged customers to subscribe the "i-concier" service when they visit our shops, and assist customers that have signed up for the service by configuring the initial phone setup at our shop counters. These efforts have led to a marked decrease in the number of churns. We believe it is important to continually sustain these kinds of small steps. Furthermore, we also intend to enrich the variety of content offered in the i-mode business that is relevant to our users' everyday life.

• Questioner No. 4

  Q1 Can you give a quarterly breakdown of the 110 yen year-on-year increase in the packet ARPU forecast for FY2010?

  Open

  A1 It would be ideal to achieve a linear increase, but growth is expected to accelerate towards the second half of FY2010. This is because we expect that the effects of brisk PC data card sales and measures targeted at increasing i-mode usage will become visible in the second half of the fiscal year.

  Q2 You project acquiring 175,000 net additional i-mode subscribers during this fiscal year. Can you explain how this relates to your smartphone sales plan?

  Open

  A2 Of the total new subscribers joining FOMA service, some 95% also subscribe to i-mode simultaneously. Although we have not yet made any estimate concerning the breakdown of smartphone subscriptions (as to the number of new subscribers and subscribers migrating from FOMA) due to the fact that users switching from i-mode to smartphones only constitute a small portion of smartphone user numbers, we believe that the number of net additional new FOMA i-mode subscriptions will be almost equal to the amount of total net gains. In addition, we also include subscribers migrating from mova to FOMA in the i-mode net additions forecast as we are currently facilitating the migration of these subscribers.

• Questioner No. 5

  Q1 It seems that your network is becoming somewhat congested. Do you foresee any risk of deterioration in quality of service if you appropriate 5MHz of bandwidth for LTE, which is scheduled for launch later this year, from the 2GHz frequency band currently used for 3G?

  Open

  A1 It is true that our network is getting somewhat more congested due to the increase in data communication traffic. To counter this problem, we are controlling data volume through a traffic control mechanism. Even in the event that we allocate some amount of spectrum to LTE, we do not foresee any quality concerns because our total network capacity is expected to become significantly larger.

  Q2 In concrete terms, how do you plan to incorporate i-mode in open OS devices?

  Open

  A2 We are studying ways to realize i-mode compatibility with both new and existing devices. Specifically, we believe we can achieve this through over-the-air downloading or the use of applications. In the case of over-the-air downloading, we need to resolve issues regarding billing, etc. Currently, we are still at the stage of researching the optimal way to incorporate i-mode capabilities in these devices.

  Q3 Although India's TTSL has successfully expanded its subscriber base, I understand that its revenues have not increased relative to its competitors. Do you think TTSL is making a favorable progress in their business?

  Open

  A3 TTSL's success at acquiring new subscribers is due mainly to the second-based billing scheme, which they introduced ahead of the competition. If their performance looks inferior compared to other operators, we believe it is because the second-based billing system has affected their business for a longer period of time than its competitors. Growth in the number of subscribers generally has a diluting effect on ARPU, but this is not something unique to TTSL, and we believe TTSL's performance is making progress in line with the business plan.

• Questioner No. 6

  Q1 How do you evaluate your handset costs for FY2009 and FY2010?

  Open

  A1 Our average handset costs have declined by 2,000-3,000 yen in FY2009, and are expected to continue to fall by the same amount in FY2010. This is due mainly to the popularity of the relatively inexpensive STYLE series handsets, which has had the effect of bringing down the overall average cost of handsets.

  Q2 How do you plan to respond to the removal of SIM lock?

  Open

  A2 Based on the premise that we will basically follow the guidelines set out by the Ministry of Internal Affairs and Communications, we will decide on our approach after carefully ascertaining the needs of our customers. Even if SIM lock is removed, the communication systems, services and spectrum used by each carrier varies, and so it is important to ensure that customers understand these conditions beforehand.

  Q3 You mentioned that you do not intend to finance auction costs in India, but do you have any plans to shoulder TTSL's capital expenditures? Can you also comment on the possibility of making any additional investment in your Indian partner?

  Open

  A3 The auction results are expected to become clear in mid-May, and we will not be able to anticipate the format of TTSL's business operations until the bidding is finished. The subsequent operation of the business will only start from the fall at the earliest. Since there is still time before that occurs, we would like to thoroughly consider our strategies first.
  We decided on our investment in TTSL after internally conducting studies on expected returns and the number of years required to recover our investment, and these studies were predicated upon TTSL business operations using GSM not 3G. If TTSL is granted a license as a result of the auction, they will build a new network on top of GSM, for which we will have to conduct a separate study.

• Questioner No. 7

  Q1 For FY2010, you forecast a 350 yen decline in voice ARPU. Do you think the pace of decline will slow in the future?

  Open

  A1 The impact of "Value Plan" still remains, but it has become considerably smaller in size. On the other hand, we will need to keep a close eye on future trends of billable MOU. We would like to devise ideas as to how to steadily increase not only data but also voice revenues. We will strive toward our goal of generating 900 billion yen in operating income in FY2012 aiming to achieve a rebound in aggregate ARPU after it hits bottom.

  Q2 You recorded approximately 830 billion yen in operating income for both FY2008 and FY2009, and you mentioned that the outlook for FY2010 is 840 billion yen, which you plan to achieve by raising the data ARPU. What are your views at this point on the likelihood of attaining the 900 billion yen operating income target for FY2012?

  Open

  A2 FY2009 was the year of "sowing the seeds" and FY2010 is the first year of "execution" of our "Challenge" programs. During these years, we will secure profitability by also working on improving our operational efficiency. As we move forward, we will strive to bring these efforts to fruition. With respect to the "Challenge" programs, we intend to secure revenues of 300 billion yen by cultivating business in three areas. Assuming that these efforts bear fruit, we believe we can achieve growth in packet ARPU and reach our operating income target for FY2012.

• Questioner No. 8

  Q1 Can you explain how you plan to increase your packet ARPU by 110 yen in FY2010 compared to the previous fiscal year? To raise your packet ARPU, I believe you would require a change of some impact—such as something in the order of 1-2 million users switching to smartphones. What kind of sales strategy do you have in your mind?

  Open

  A1 We plan to sell 700,000 units of PC data cards in FY2010, with the goal of acquiring over 50% of the total number of net additions in the PC data card market.
  As for smartphones, we estimate the total market size to be approximately 3 million in FY2010. The goal we are striving for this fiscal year is to sell 1 million units of smartphones. We would like to increase our packet ARPU by steadily acquiring subscribers in the PC data card and smartphone markets, where we can expect a higher ARPU.