Japanese

Presentation Materials

• Questioner No. 1

  Q1 Let me ask about the actions you are taking to improve your churn rate and the number of net additions. Your LTE service is technologically superior to other networks, your "Xi Pake-hodai Light" billing plan is cheaper than 3G or the WiMAX plans of other companies, and your products are offered at less expensive prices compared to the competition. But I do not think that these facts are widely known among users. Please elaborate on the measures you have taken to broaden awareness.

  Open

  A1 Various survey results show that there is a general misperception that our communication charges and product prices are more expensive, which makes me believe that our promotional efforts have been insufficient. With the introduction of various discount packages tailored to different user segments, we believe we are well positioned to compete favorably in the market because our handset prices and billing plans are by no means inferior to those of the competition.
  Our performance concerning the acquisition of subscribers using Mobile Number Portability (MNP) system had been lackluster in the months of April and May 2012 due to the cash rebates and other promotional measures offered by our competitors. However, as the new models of our 2012 summer collection become available in July and August, we will strongly promote these products together with the tailor-made billing plans for each segment.

  Q2 I heard that your acquisition of net additions for the month of July improved compared to the first quarter. As the market becomes more invigorated during the summer sales season, how much recovery do you aim to achieve in the acquisition of net additions before autumn?

  Open

  A2 We need to anticipate a certain degree of impact if the new version of the iPhone is released by other companies in the fall, such as possible price cuts of the existing iPhone 4S. We have devised various countermeasures for the months of July and August, such as expanding the roll-out of the "Family Set Discount" campaign on a nationwide scale. Thereafter, taking the competitive landscape into consideration, we will study the implementation of additional measures.

• Questioner No. 2

  Q1 Can you explain the rationale behind the introduction of your new flat-rate billing plan, "Xi Pake-hodai Light" and its effects?

  Open

  A1 The rate structure for FOMA service has become very complicated over time, so we wanted to from the start introduce a new structure for Xi service. We defined Xi rates based on the general principle of introducing a flat-rate scheme for voice calls, and a hybrid structure combining usage-based and flat-rate billing schemes for packet data service. Based on the premise of encouraging subscriber migration to Xi service for its greater spectral efficiency, we held internal studies and came to a conclusion to add another rate option to the existing tiered pricing model and the flat-rate plan that offers unlimited data access up to 7GB of monthly usage. The actual rate was decided in view of Xi's promotional discount rates.
  Leveraging this new package, we intend to encourage medium data-usage users to switch to Xi, so that they can enjoy video and other services even more comfortably.

  Q2 Can you explain how your rate structure will look like in 1-3 years time from the viewpoint of your ambition to achieve revenues growth? Also, do you have any plans to introduce other, less expensive billing plans going forward?

  Open

  A2 Nothing is planned at this juncture. We would like to avoid complicating our rate structure and offer plans that are easy for customers to choose from.

• Questioner No. 3

  Q1 Can you give us a breakdown concerning the percentage of users with a monthly data usage not exceeding 500MB and 3GB, respectively?

  Open

  A1 Users with monthly data traffic consumption of 3GB or less account for 70-80% of our total smartphone users, those with 1GB or less data usage approximately half of the total, and those with 500MB or less data usage approximately 30% of the total. As a general trend, customers' data usage increases after they switch to a smartphone. Although the actual traffic conditions change constantly, we will keep a close eye on the usage trends because we foresee an increase in customers' data consumption going forward.

• Questioner No. 4

  Q1 Under the new management team led by Mr. Kato, the Company adopted a new slogan, "Speed and Challenge," but what kind of change can we expect to see? Don't you think it is about time that you start making top-down decisions? Do you intend to make bold changes to your strategies?

  Open

  A1 Our basic policies remain unchanged from the days of my predecessor, Mr. Yamada; we will aim to transform ourselves into an "Integrated Service Company" and facilitate "subscribers' migration to smartphones." However, the approach that I may take toward their achievement may be different. We had been slow in some of our actions hitherto because we attached so much importance on the degree of perfection at the sacrifice of speed. Going forward, we are committed to taking on audacious challenges, which may involve top-down decisions. While ensuring the stability of our core mobile phone business, we will aim to deploy new upper-layer services without delay taking advantage of the expertise and know-how we have accumulated toward the goal of achieving sustainable growth.

  Q2 When you announce the first half results, do you plan to publish a new medium-term vision that includes your future management policies? Despite the large difference in subscriber market share, SoftBank's profit level is approaching yours. Do you plan to publish any numerical targets as your commitment to the investor community?

  Open

  A2 Our management policies remain unchanged from those that we unveiled in the beginning of the current fiscal year. We may, however, make revisions or additions to them as necessary, taking into consideration the competitive landscape and market conditions when we announce the first half results.

  Q3 The sales of GALAXY S III seem to be slower compared to its previous model, and I also heard that the sales of Xperia series handsets have lost momentum compared to the spring of this year. Do you really think you can counter the competition, particularly with the release of the new version of the iPhone in the second half?

  Open

  A3 The sales of GALAXY S III has picked up after a slow start in the first 2-3 days. We intend to compete with other carriers by working on many fronts, including among other things, the improvement of coverage and diversification of services.

• Questioner No. 5

  Q1 The downtrend of ARPU is expected to continue in the next fiscal year due to the expanded impact of "Monthly Support" discounts. Do you think you can sustain growth of cellular services revenues only by the increase in subscriber count?

  Open

  A1 Because the decline in ARPU is projected to continue in the next fiscal year, we will work to expand our revenues as much as possible while securing net additions. As you rightly pointed out, the impact of "Monthly Support" discounts is expected to become larger in the future, so we will strive to make proper assessment of its impact and manage it.

  Q2 Do you have any plans to change your financial disclosure in response to your competitors, such as singling out the data of enterprise contracts?

  Open

  A2 Internally, we keep track of the financial performance of enterprise accounts on a monthly basis, but (to change the method of disclosure) we need to sort out issues like the allocation of common costs. Currently, we disclose our financial results by dividing our business into the two segments of "Mobile Phone Business" and "All Other Businesses." In the future, we will look into the possibility of making revisions to our financial disclosure after reviewing the appropriate segmentation method of our business.

  Q3 Do you have any intention of entering the low-price market using a totally different approach like the LCC (low-cost carrier) model?

  Open

  A3 That is not contemplated at this juncture.

• Questioner No. 6

  Q1 Both your ARPU and MOU have been decreasing. At which level do you foresee your voice ARPU stabilizing in the future?

  Open

  A1 It appears that at present, the impact of VoIP is approximately 10-20% of the decline in voice ARPU. We would like to encourage more customers to switch to the Xi network. For voice, we would like to entice them with "Xi Talk 24," which allows for unlimited calls for a flat monthly rate. We expect that the constant decline in voice ARPU will come to a halt when the number of "Xi Talk 24" subscribers reaches a certain level.
  We will closely monitor the impact of VoIP, including the impact from the use of SNS applications.

  Q2 What the Company wants to achieve under the new management team is indiscernible. What message did you want to convey to investors with the results presentation for FY2012/1Q?

  Open

  A2 In summary, the FY2012/1Q results illustrated the outlook of our future business. We secured profits minimizing our expenses amid rampant discounts. I hope you would understand that this was made possible because the leanness of our cost structure improved over the last few years. The discounts provided under the "Monthly Support" program are outlays that can be calculated, so we are now sowing the seeds of our future business while securing near-term profits. Although the track record of our device sales has been in no way inferior to the competition, the problem we face is the continued outflow of subscribers. We are implementing countermeasures one after another, so we hope you will allow us a little more time to turn the situation around.
  We also hope that you will notice that we have achieved a steadfast increase in our non ARPU-related revenues. These include revenues from "i-channel," "dmarket," and other content and services. In our medium-term business plan, we will come up with a way of showing these numbers so you can better them.

  Q3 You have not been able to halt the outflow of subscribers. Has the management team set any target date to stop the outflows?

  Open

  A3 Our MNP subscriber acquisition performance has been improving. With the addition of the FY2012 summer collection handsets in July, we are beginning to see the results of various initiatives. We will carefully examine the status of improvement in July and August. Generally speaking, the MNP system has a harsh impact on carriers that have a larger customer base. I hope you will allow us a little while to turn around the situation.

• Questioner No. 7

  Q1 It seems to me that your appeal to users concerning your product lineup, billing plans and handset prices has been weak. KDDI has been emphasizing affordability with their "Smart Value" campaign and other marketing programs. Don't you think you need to drastically change your approach to marketing?

  Open

  A1 Reflecting on the complicated billing structure of FOMA service, we adopted a strategy to increase the number of billing options for Xi, while keeping its rate structure simple and easy to understand. The same applies to our discount plans. Some confusion, however, remains. For example, some users have the misunderstanding that the "Xi Talk 24" billing plan offers unlimited voice calls only between Xi subscribers; moreover, from various survey results we know that there is a general misperception in the market that our prices are more expensive relative to the competition. We have been working hard to eliminate this misunderstanding. For example, we post posters showing the amount of cash rebates or other promotional measures on the shop windows as part of our direct advertisement to customers. We would like to make more efforts to convey the truth to users and raise their awareness.

  Q2 How do you plan to make your efforts appealing going forward to counter the new iPhone?

  Open

  A2 We intend to compete with other carriers leveraging our comprehensive strengths?e.g., our product lineup, network coverage and quality, service portfolio and other elements. We would like, without delay, to implement countermeasures after analyzing the capabilities of the new iPhone.

  Q3 What is your target concerning MNP subscribers?
  Also, KDDI indicated their intention to bring down incentives. Have you set any MNP subscriber targets that will allow you to reduce the amount of handset incentives once it is achieved?

  Open

  A3 We do not think that we are leading the price competition in the market. In fact, we reluctantly introduced cash rebates and some other measures in response to our rivals. We have implemented these countermeasures within predefined limits, while carefully observing their effects. It is difficult to set a clear MNP subscriber acquisition target; however, we will aim to reduce the number of net MNP outflows by about half from 800,000 for the full year of FY2011.