Japanese

Presentation Materials

• Questioner No. 1

  Q1 Have you developed any contingency plans in the event of a possible reoccurrence of network troubles due to shortage of capacity occurring even after implementing the newly announced network infrastructure advancement measures?

  Open

  A1 As we explained in the presentation of our network infrastructure advancement plans, we believe it is important to take measures to handle the "quantity," i.e., the increase in network traffic and control signals. This is because we do not foresee any changes in the "quality" as the types of control signals that we need to handle are not likely to increase. As part of the newly developed countermeasures, we plan to implement a signal volume measurement function in the packet switches, which will allow us to keep track of the number of control signals in each switching system. We believe we will be able to make proper response in the future by effectively utilizing this function.

  Q2 Next fiscal year marks the 20th anniversary of the establishment of the Company. Do you have any plans to pay commemorative dividends?

  Open

  A2 To commemorate our 20th anniversary, we are planning to offer, among other things, billing plans and services that can be well appreciated by our customers.
  We are currently studying various ways of providing returns (in commemoration of our 20th anniversary), but there is nothing specific that we can share with you at this time.

• Questioner No. 2

  Q1 You mentioned that the primary cause of the recent network failure was the greater-than-expected increase in the volume of control signals transmitted from smartphone applications, but wasn't the increase of traffic anticipated in the first place given the widespread adoption of smartphones? Please explain your current assumptions concerning future traffic growth and how you plan to respond to it.

  Open

  A1 To respond to the network congestion caused by the increase of smartphones, we have developed a new, larger-capacity packet switching system that can handle greater volume of traffic, which is planned for introduction shortly. On the other hand, the surge in the volume of control signals resulting from the expanded use of VoIP or chat applications exceeded our earlier projections. To cope with the increase in signal volume, about six months ago, we started the development activities to implement a signal volume measurement function in our packet switches, and this feature is expected to enable us to more accurately predict the signal volume in the future. Regarding the impact of applications, previously, we were able to exercise a certain level of control because the applications were developed mainly by ourselves. Currently, however, we are no longer able to control the packet volume, and carriers around the world are struggling due to this problem. Going forward, we intend to closely keep track of the increase of signals from applications and take proper countermeasures.
  With mobile phone systems in order to use the radio spectrum efficiently, VoIP or other applications that require constant connection constantly generate signals, and user's mobile phone repeats the process of connecting and disconnecting with the network. This process of connection and disconnection generates control signals. Such constant connections are not an issue with fixed-line systems, because they do not cause significant burden on the network. We hope that applications providers, who have hitherto developed applications mainly for fixed-line PCs, will be aware of this difference between fixed-line and mobile environments. Going forward, to curb the volume of control signals emitted from applications, we would like to cooperate with other telecommunications carriers around to world to communicate information to operating system developers such as Google and application providers. We already informed Google of this problem.

  Q2 You did not make any reference to data off-loading in the network countermeasures unveiled today. In the future, do you plan to focus on reinforcing your existing mobile network, or will you also consider off-loading data traffic to other systems?

  Open

  A2 Data off-loading using Wi-Fi systems is included in our planned countermeasures. Because Wi-Fi does not require any control signals, it is considered an important solution both for accommodating traffic and resolving the control signal problem.
  We plan to increase the number of Wi-Fi access points to 30,000 within FY2012/1H, and possibly to up to 100,000 further down the road.

  Q3 In light of the projected increase in capital expenditures for the implementation of network problem countermeasures, stagnant data ARPU and your decision to extend the period of Xi discount campaign, do you foresee any need to revise your FY2012 operating income target of 900.0 billion yen?

  Open

  A3 We are projecting an increase of 50.0 billion yen in capital expenditures over three years, or approximately 20.0 billion yen per annum. After absorbing this increase associated with the network countermeasures, our annual capital expenditures for FY2012 are estimated remain around the 700.0 billion yen level. Our smartphone sales showed temporary slowdown in October and November because some customers had waited for the release of new models, but it recovered in December 2011. And, the full-year packet ARPU is expected to be in line with our forecast. Therefore, we do not plan to make any changes to the FY2012 operating income target of 900.0 billion yen, and we will strive toward its achievement.

• Questioner No. 3

  Q1 I heard your Android devices sales have picked up since December 2011, but I am concerned about the increase in churn rate and subscriber outflows to other operators. Do you think you will be able to improve your performance in these areas?

  Open

  A1 As background to that question, I guess you are asking our views concerning competing against the iPhone4S. In October 2011 when the iPhone4S went on sale, the number of port-outs from DOCOMO to other mobile carriers increased to 2.5 times compared to the same day of the previous month, but then by November it stabilized to 1.1-1.2 times compared to the previous month. In December when many new models were released, the absolute number of both port-ins and port-outs increased. In fact, for December 2011, the number of port-outs was 1.3 times the level of the previous month, but the number of port-ins jumped to 1.7 times. Regarding our recent performance, the number port-ins for January 2012 has slightly weakened. While we have traditionally focused on the reduction of churns and port-outs, we will implement measures aimed at acquiring greater number of port-ins starting February. We will strive to improve our MNP performance and aim for a churn rate at around 0.50%.

  Q2 Regarding fixed-mobile convergence services, I believe there are services that you cannot offer due to the regulations imposed on the NTT Group. The newly announced bundled discount package for users using Xi service for smartphones with a tablet or other second device for data communications seems to be a new approach. Please elaborate on your medium-term strategies for this kind of package discounts?

  Open

  A2 It will be difficult for us to offer packages bundling the fixed and mobile services of NTT Group companies. In addition, we want to avoid being dragged into the quagmire of a price war with other companies. The ideal for us is to offer easy-to-use services through high-quality products. The newly unveiled "Xi2" rate plan is a package uniquely available from DOCOMO, and we believe our competitors will find it difficult to offer anything similar. We would like to continue introducing many other original billing plans going forward.

  Q3 Investors are looking forward to a dividend hike for the next fiscal year. Is it correct to understand that you have not made any changes to your policy that you will increase dividends if you have cash surplus?

  Open

  A3 There are no changes to our policies for shareholder return, which is considered one of the most important issues in our corporate management. We intend to attach greater emphasis on dividends than share buy-back.

• Questioner No. 4

  Q1 You have constantly maintained your churn rate at low levels over the last several years. However, the rise in churn rate and sales commissions in FY2011/3Q makes me concerned that the foundation of your business may have begun to shake. When there is a possibility of expanding discounts in your rate plans, the key to achieving a stable growth in operating income would be the acquisition of net additions. But if the churn rate is kept at this high level, you may have to anticipate other impacts such as an increase sales commission for the acquisition of subscribers. What are your views on these circumstances?

  Open

  A1 We do not think our foundation is shaken. We will endeavor to bring down the churn rate from the current level of 0.59% for FY2011/3Q. Also, while the actual amount of commissions will depend on the circumstances, we plan to step up the initiatives aimed for increasing the number of port-ins. By the time the Xi rates resume to normal in October 2012 after the expiry of campaign discounts, Xi-enabled devices are expected to account for the majority of smartphones sold, which we believe will have an effect to boost packet ARPU. In addition, as the adoption of smartphones expands to middle-usage customers, we will study the possibility of offering more affordable billing plans for users with limited data usage. We will aim to increase our packet ARPU as a result of a comprehensive study on these issues.

  Q2 The government's medium-term spectrum allocation plan covers spectrum use up to the fourth-generation mobile communication systems. How do you view the chances of acquiring radio spectrum in the future? And how does that relate to your plans for data off-loading?

  Open

  A2 Today, we submitted an application for the 900MHz band, and we hope to receive a license for this band. Because the allocation process for the 700MHz band has been delayed, we would like to receive spectrum in the 900MHz band so we can use it as quickly as possible for LTE service. We have not yet started using the frequencies in the 800MHz and 1.5GHz bands that we had received for LTE service. In addition to these bandwidths, our plan for accommodating the growth of traffic—which is expected to increase by 12 times by 2015 from the current level—is predicated upon the use of 900MHz or other comparable spectrum bands. We will be put in a very difficult position if we cannot have access to the 900MHz band. And even if the 900MHz spectrum is granted to us, we can only accommodate a 6-fold increase in traffic from the current level, so we will need to devise various other efficient solutions, such as use of smaller-zone base stations, increasing the number of antenna sectors, data off-loading to wireless LAN systems, dynamic traffic control and introduction of more expensive billing plans for heavy users, to cope with the remaining increase. Beyond that, we will study the introduction of the fourth-generation mobile communications system (LTE-Advanced).

  Q3 If you cannot receive any spectrum in 900 or 700MHz bands, will it have any impact on your target of acquiring 50.00 million smartphone users?

  Open

  A3 Failure of acquiring spectrum in both 900 and 700MHz bands is not anticipated.

• Questioner No. 5

  Q1 It seems that your packet ARPU growth has lost momentum. In fact, when I look at the quarterly changes in cellular services (voice + packet) revenues, they have recorded year-on-year decreases of approximately 12.0-13.0 billion yen in each of the last few quarters. Although I believe there is only so much you can do with cost savings, when do you think you can start achieving a healthy increase in income after reversing the downtrend in revenues?

  Open

  A1 While the year-on-year growth of packet ARPU for FY2011/3Q (three months) was limited to 150 yen, or 5.9%, our total packet revenues expanded at a higher pace of 9.5%.
  With respect to cellular services revenues, for FY2011/4Q, we believe the increase of packet revenues will nearly offset the decrease in voice revenues. While this will depend on the future smartphone sales and MNP subscriber acquisition performance, if we can successfully achieve a steadfast increase in packet revenues through the implementation of various initiatives, we may be able to start posting gains in cellular service revenues from the next fiscal year.

• Questioner No. 6

  Q1 My question may overlap with the previous questioner, but it seems your packet ARPU growth has weakened. You explained that this was attributable to the sluggish smartphone sales in October and November 2011, but your sales recovered in December 2011. Please elaborate on users' recent usage trends excluding the impact of October-November 2011 sales.

  Open

  A1 According to a survey we conducted in the spring of this year, the packet ARPU of users who have switched from a feature phone to a smartphone showed a 1,700 yen increase after the migration. We carried out a similar survey in November 2011, according to which the increase of packet ARPU remained unchanged at 1,700 yen. Also, after a temporary slowdown in October and November, our smartphone sales recovered in December 2011. Because of these factors, we are not concerned about our performance.

  Q2 Have you witnessed any changes in the user segments of smartphones?

  Open

  A2 The percentage of women users has been increasing. Also, the number of users who belong to the tier below the heaviest users has been increasing. Some of you may have an impression that these second-tier users consume a large amount of packets because they rank right below the heaviest-user segment, but we believe some of these users are holding back their usage from worries about their phone bill.
  In light of the increase of entry-level users, we are contemplating the launch of a remote support service. This will allow our call center staff to remotely operate customers' smartphones installed with a dedicated application in response to their inquiries.

  Q3 Let me ask about the competitive landscape. Have you set any triggers, such as churn rate or other benchmarks, for the launch of discount plans, increase of commissions or other measures?

  Open

  A3 As it is difficult to change the billing plans themselves, we basically intend to implement various promotional measures as a campaign.

• Questioner No. 7

  Q1 Do you think you can maintain your annual CAPEX at around 700.0 billion yen despite all these measures to solve your network troubles? Or, if you can keep your annual CAPEX for the next fiscal year at the current level in spite of the increase of expenditures due to the network countermeasures, don't you think you would have been able to achieve a greater reduction in the previous fiscal years?

  Open

  A1 With the past investments, we have nearly completed the expansion of 3G area coverage. Therefore, had it not been for the expansion of smartphone adoption, our annual CAPEX for the next fiscal year would be much lower at around 650.0-700.0 billion yen. But now that we need to make additional spending to accommodate the increase of smartphone traffic, we currently intend to maintain our annual CAPEX at around 700.0 billion yen. For the next fiscal year, however, our annual CAPEX is estimated to be slightly over 700.0 billion yen.

  Q2 I believe you will have to anticipate an increase in operation and maintenance expenses due to the roll-out of additional equipment to solve the network troubles. What are your views?

  Open

  A2 Because we do not foresee a significant increase in the number of base stations, the operation and maintenance (O&M) expenses are likely to remain unchanged. We are also looking into ways to enhance our service quality and efficiency by reinforcing our operation systems. The subscriber migration from 3G to LTE is expected to reach its peak in 2013-2014, and we plan to respond to this by replacing or integrating our existing facilities and equipment, so this is not considered to result in an increase of O&M expenses.