Presentation Materials
Analyst Meeting Q&A (Earnings Release for the Fiscal Year Ended March 31, 2016)
Announced on April 28, 2016
Please be advised that the following text has been edited/modified from the original Q&A conversations for the sake of clarity.
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Questioner No. 1
Q1 This is a question pertaining to the impact of the change of depreciation method (from declining-balance to straight-line method) on your income. While you forecast a year-on-year decrease of approximately 178 billion yen in depreciation expenses for the fiscal year ending March 31, 2017 (FY2016), you explained that the impact from the change of depreciation method on your income is estimated to be approximately 50 billion yen. Can you give us an explanation on the overall picture?
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Q2 I construed that you are planning to implement both non-cash and cash measures to alleviate the burden on subsequent years because of the projected decline in EBITDA. Is my understanding correct?
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Q3 You also explained that the new rate plans and benefits aimed at returning profits to consumers will negatively affect your revenues by 70 billion yen. Can you explain this in more detail? Also, how do you plan to balance those new measures with the reduction of excessive handset subsidies requested by the Ministry of Internal Affairs and Communications (MIC)?
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Q4 The enrichment of "Zutto DOCOMO Discount" program does not seem to have an impact as sizable as 70 billion yen. How did you arrive at this number? (Does the amount include the impact of reward points given to subscribers renewing contract?)
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Q5 With respect to your shareholder returns policy, do you have a specific target for your dividend payout ratio, e.g., 50%?
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Questioner No. 2
Q1 According to your FY2016 plan, capital expenditures are estimated to be 585 billion yen, which is higher than the projected depreciation expenses of 448 billion yen. In the natural course of things, I believe this implies an increase in depreciation expenses from next fiscal year onwards, although the amount may vary depending on the nature of capital expenditures. What is the natural-course estimate of depreciation expenses for the next fiscal year? Also, out of the 200 billion yen impact from the change of depreciation method for FY2016, you mentioned that you will appropriate 150 billion yen to some sort of measures. I construed that this amount includes residual value write-off of approximately 40 billion yen and that you will continue this exercise for two years. Can you explain the concrete items for which you plan appropriate these expenses during this fiscal year, and whether such expenses will continue to arise in the next fiscal year?
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Q2 You said you expect an impact in both FY2016 and FY2017. If FY2016 is taken as the base case, will it be correct to anticipate an increase in depreciation expenses in FY2017?
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Q3 The operating income from Smart Life business and Other businesses for FY2015/4Q dropped compared to the previous quarter (FY2015/3Q). Should we consider this a result of the transitory costs relating to the disposition of mmbi, Inc.?
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Questioner No. 3
Q1 You mentioned that the total amount of transactions handled in the Smart Life business and Other businesses reached 3 trillion yen. How much did it grow compared to the last fiscal year?
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Q2 Because the operating income was slightly below 80 billion yen, this translates into an income margin of slightly below 3%. What level of income margin do you forecast based on the assumption that the transaction amount will continue to grow in the future?
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Q3 In your FY2016 business plan, EBITDA is projected to decrease over the previous fiscal year, but your cash outlays seem to increase by some 150 billion yen by simple calculation. Can you explain which expense items are projected to increase and the rationale behind that?
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Questioner No. 4
Q1 It is wonderful that you announced an income guidance of effectively 860 billion yen this time around, which will allow you to achieve your medium-term target one year ahead of the original plan. However, despite this year's income guidance which is set higher than your medium-term target, I do not have visibility on the directions for the future. You explained the change of depreciation method and planned cash costs, but these things make it difficult to distinguish the temporary factors. I believe you will undertake measures to ensure that your operating income will never dip below the 910 billion-yen mark when measured by a new yardstick, but then, why didn't you revise your medium-term targets in the first place? Can you also comment if you have any specific operating income target in your mind?
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Q2 You mentioned that you will provide returns worth 70 billion yen to the customers. By simple calculation, this will translate into a negative impact of 100 yen in terms of ARPU, and I believe it will be very tough to make up for a 100-yen decline in ARPU. Now that more than 30 million subscribers have already switched to the new billing plan, the ARPU uplift you can expect by migrating subscribers to the new billing plan is getting smaller. The recent trend of ARPU and the actual full-year ARPU for FY2015 were splendid, but I wonder how much further can you expand the ARPU in the future. Do you have any views as to where it will hit a ceiling?
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Q3 When the outlook for next fiscal year and the year after becomes less clear due to the change of depreciation method, investors tend to focus on EBITDA. I would like to request you to manage your business with a focus on raising your EBITDA, because even if you declare that operating income is your key management indicator, investors will pay attention to EBITDA.
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Questioner No. 5
Q1 How much room is left for further cost efficiency improvement?
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Q2 Can you comment on the growth prospects for Smart Life business and Other businesses based on the existing services without accounting for any mergers and acquisitions?
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Q3 Will it be correct to assume that you will be able to grow the income to around 150 billion yen with your current asset portfolio? And how does that relate to your ambition to expand the transaction amount handled by Smart Life business and Other businesses?
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Q4 Do you plan to revise your medium-term plan sometime in the future?
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