Japanese

Presentation Materials

• Questioner No. 1

  Q1 Concerning your guidance for the fiscal year ending March 31, 2019 (FY2018), can you share with us the background and rationale that led to the flat-growth projection in operating revenues?

  Open

  A1 In consideration of the medium-term prospects, we decided to position FY2018 as the year of "sowing the seeds" envisaging the future beyond the year 2020—when 5G service starts and its impact begins to kick in. After comparing the negative impacts, such as investments for future growth and costs, with the positive impacts from our corporate-wide cost efficiency improvement efforts and other factors, we arrived at a forecast projecting a small increase in operating income for FY2018. We did not intentionally suppress the amount of the operating income; the forecast was developed as a result of calculating the required investments and costs to propel our next phase of growth. While some uncertainties remain in the competitive enviroment, etc., we have set this income guidance as our minimum commitment.

  Q2 You explained that you are planning some strategic investments in FY2018. If you foresee any upside in your financial performance, will you consider increasing your strategic investments to keep the operating income unchanged?

  Open

  A2 We have no intension of controlling investments to match the income to the planned amount. In FY2017, our actual operating income came in higher at 973.3 billion yen than the planned amount of 960 billion yen. We will operate our business in FY2018 based on the same approach.

• Questioner No. 2

  Q1 During the FY2017 full-year results presentation, you commented that you are expecting a flat-growth or decline in mobile communications services revenues for FY2018. Do you foresee this trend to continue over the medium term?

  Open

  A1 While we are fully aware of the significance of mobile communications services revenues which account for the bulk of our operating revenues, if we single out this revenue item, we project a decline given the planned reinforcement of customer return measures, the impact from monthly support discounts and other factors. In the future, however, we would like to track our performance based on the overall telecommunications services revenues including the optical-fiber broadband services revenues. In addition to the fixed-mobile bundle offers, we plan to offer integrated packages combining them with value-added services to expand our overall revenues. I hope that you will also break away from the conventional approach of focusing only on the single component of mobile communications revenues.

  Q2 Can you comment on the outlook for ARPU?

  Open

  A2 The FY2018 mobile ARPU is expected to record a slight decline over the previous fiscal year when we consider the impacts of the "Basic Pack" and "Basic Share Pack" to be started from May 25, 2018, as well as the customer return measures that we have rolled out in the past. The aggregate ARPU, however, is projected a post a year-on-year increase driven mainly by the expanded adoption of "docomo Hikari" optical-fiber broadband service.
  We plan to absorb the negative impact from the customer return measures with thorough execution of the 120 billion yen cost efficiency improvement plan to secure the operating income of telecommunications business. Further, we may have to increase our customer returns depending on the state of competition. In such event, we will carry out additional cost efficiency measures to secure the operating income we have committed.
  Over the medium term, with respect to the mobile ARPU excluding the impact of discounts, we plan to at least maintain our aggregate ARPU (inclusive of docomo Hikari ARPU), or even aim for a slight increase until FY2020. For the ARPU after applying discounts (e.g., monthly support and "docomo Hikari Set Discounts"), we will strive to prevent any reduction.

• Questioner No. 3

  Q1 Please explain the medium-term prospects of the Smart life business and Other businesses. As you have already launched QR code payment and various other new services, can you give us an explanation on your future plans from the perspective of business model?

  Open

  A1 As a result of the rapid expansion in the last three to four years, our Smart life business and Other businesses have grown to a size of over 100 billion yen in operating income. However, these businesses have now entered the phase of stable growth due to the changes in environment and other factors. As with the entire company, it is now time for us to sow the seeds for the next stage of growth of Smart life business and Other businesses. As demonstrated by the number of subscriptions, which came to a standstill in the recent months, we are currently in a difficult phase. We will therefore build a mechanism that will allow us to launch a second rocket in view of the 5G era, while brushing up our existing businesses in parallel.
  As we explained using the keyword of "transition from quantitative expansion to qualitative enhancement" during the FY2017 results presentation, we are currently reviewing our sales practices of "d market" and we believe it will take some more time before we see the results of these endeavors.
  Finance/Payment is an area where we have high expectations for its growth potential. The credit business, including the pace of increase of "d CARD" members, continues to show strong momentum. We intend to expand the Finance/Payment services as the future growth engine of Smart life business and Other businesses, leveraging the launch of the new payment scheme, "d Payment", and other means.
  Envisaging the arrival of the 5G era, as we presented in "Declaration 2" of our Medium-Term Strategy 2020 "Declaration beyond", we are now sowing the seeds for our next phase of growth, introducing new services that realize style innovation, drones and AI agent, etc.

  Q2 Among the various payment solutions that you offer, which gives you the highest profit margin?

  Open

  A2 It is difficult to give you a straightforward answer as this relates to the competition and our business partners. We are competing in the respective markets for each service, setting an appropriate level of profits vis-a-vis the prevailing rates in the market.

  Q3 Recently, there has been an increase of media coverage of DOCOMO's activities, e.g., your verification trial on a drone-based solution aimed at new business creation. Can you share with us some of the initiatives that you are particularly focusing?

  Open

  A3 At present, we offer a large number of products/services in different categories. Going forward, we will continue to compete against various players, including those other than MNOs, leveraging our comprehensive strengths built upon our wide array of services and ecosystem as opposed to the idea of trying to making a foray into the market relying on a single service. Further, through a "business foundation centered on our membership base", we will transform our approach to CRM and data utilization as well as our communications with customers with the aim of reinforcing our services and ecosystem.
  By executing the "transformation to a business foundation centered on our membership base" that we announced this time around, we will translate this into enhanced one-to-one marketing that will allow us to provide services catered to the individual needs of each customer. For example, to some users who currently subscribe to our monthly subscription-based services, we may start recommending usage-based billing services depending on the usage behavior or the requests of each customer, in an effort to further boost customers' usage of our services. In addition, in the area of FinTech services, while details are planned to be announced in mid-May 2018, we are planning to expand the scope of our offerings, launching a new service tailored to the individual requirements of each user, to further expand our revenues.
  As for 5G, although we are currently promoting co-creation activities with a number of "+d" partners, we have not yet finalized its business model. To give you an example, in drone-based solutions, we are now exploring an initiative where we first use drones for the inspection of our own base stations for cost reduction, and then deploy the solution to customers to seek productivity gains in their businesses as well as an expansion in our own revenues.
  We cannot create a one-size-fits-all service that can satisfy the needs of all customers at once. Thus, our important action item for FY2018 is to study the services that match the requirements of each customer.
  Although we do not project a significant year-on-year increase in the operating income from Smart life business and Other businesses for FY2018, we will definitely aim for a solid expansion over the medium term.

• Questioner No. 4

  Q1 I believe the size of your membership base is already publicly disclosed. What is the proportion of members who do not have a mobile contract vis-a-vis the total?

  Open

  A1 We would like to reserve comments concerning the detailed number, but the total number of carrier-free "d ACCOUNT" holders (without a DOCOMO mobile subscription) is currently over ten million.

  Q2 Which service (s) has a higher rate of subscription by carrier-free members?

  Open

  A2 Among the total "d market" service subscriptions, at present, the carrier-free members account for several hundred thousands. We will strive for further expansion, including an increase in the size of operating revenues and income from this service.

  Q3 Regarding the strategic investments planned for FY2018, do you plan to appropriate a higher amount for services targeted at non-members?

  Open

  A3 We do not plan to intentionally allocate a larger amount for the services for non-members. We rather intend to make investments for our entire membership base including those who have a mobile subscription with us, so we can enrich our total membership base. The new FinTech service, for example, will be provided to all members with or without a mobile subscription.

  Q4 In what way do the carrier-free members usually become a member?

  Open

  A4 The most common case is customers who previously did not have a mobile contract with us becoming our member when they join our mobile service. In addition, while the absolute number is limited, there are some ex-DOCOMO mobile phone users keeping their membership account even after porting out to the competition. On the other hand, there are also some customers who newly acquire membership without subscribing to our mobile phone service. We would like to offer a wide variety of services to these customers as well, aiming to eventually convert them into our mobile phone user. We will continue to increase the proportion of such customers.

  Q5 Can you disclose the number of active users?

  Open

  A5 The number of "d ACCOUNT" holders represents the total number of customers who have actually completed account registration. Please allow us to reserve comments concerning the concrete number of active users.

• Questioner No. 5

  Q1 Rakuten's entry in the mobile phone business in FY2019 was officially decided. What are your current thoughts about the strategies to counter them? Also, have you started negotiations to provide them with roaming access?

  Open

  A1 Although we are contemplating a few scenarios, we have not yet finalized anything concrete because the strategies of the new entrant is not clear yet. However, we assume that they will have to rely on the port-ins from the competition because it will be difficult to acquire a huge number of fresh subscriptions given the current market conditions. As soon as we have more visibility on Rakuten's customer acquisition strategy, we will study and decide on our countermeasures.
  With respect to the provision of roaming access, etc., while we would like to reserve our comments because this involves a counterparty, there is no change to our policy, i. e., as we have stated on a number of occasions, we will make a case-by-case decision upon request.

  Q2 You mentioned that you set a cost efficiency improvement target of 120 billion yen for FY2018. Specifically, in which field do you plan to achieve this?

  Open

  A2 Traditionally, network-related initiatives accounted for the bulk of our cost efficiency improvements. In FY2018, in addition to the network, we will pursue cost efficiency improvement in the marketing area. For example, the customer services, e.g., confirmation of contract details and handset upgrade, etc., that we have hitherto provided through our docomo Shops, call centers, web site and other channels, will be promoted as part of our one-to-one marketing using an AI agent going forward, which will allow us to increase our contact points with customers and streamline our operations. At the same time, we will also integrate our promotions to step up our efficiency improvement acitivities, and thereby aim to deliver on our 120 billion yen cost efficiency target.

  Q3 How much further do you think you can grow your operating free cash flow over the medium term?

  Open

  A3 The basic idea is to grow our operating free cash flow through an expansion of EBITDA in tandem with the increase in operating income. However, since we are projecting a flat growth or just a marginal increase in operating income from telecommunications business, we will manage our business without precluding the option of controlling our capital expenditures if need be, to secure an increase in operating free cash flow.

• Questioner No. 6

  Q1 Concerning your "d Payment" service, other players have also announced similar services. Is there anything unique to DOCOMO that will allow you to outpace the services of your competitiors?

  Open

  A1 We believe we have an edge on the competition in the usability of our loyalty points. We award our customers a large amount of points, so if we can increase the number of places where the points can be used, we can enhance the value to customers. There is also another unique benefit that we offer to customers as a carrier, which is the option of paying "d Payment" charges together with their monthly communication bill.

  Q2 You explained that you will seek a transition from "quantitative expansion to qualitative enhancement" in "d market" services. Can you explain your thoughts about the active user ratio and value per one member?

  Open

  A2 Internally, we have started to facilitate the shift to a member-oriented foundation and change of mindset attaching a greater focus on continued "d market" usage by the users. We are currently in the middle of creating a mechanism for running a PDCA cycle based on the actual performance by making the progress of this transition visible. When things get settled, we will start looking into the metrics that can be publicly disclosed.

• Questioner No. 7

  Q1 The total number of "d POINT CLUB" members currently stands at approximately 65 million, while Matsumotokiyoshi has about 20 million members. I assume that Matsumotokiyoshi's rationale behind their decision to partner with DOCOMO was the reinforcement of marketing capability, but what do you think is your strength of having a large membership base? Further, Rakuten, with a membership base of slightly less than 100 million, is expected to gain a strong power once they become a telecommunications operator and have access to subscriber's data. Do you plan to further increase the number of partnerships to strengthen customer data analytics before that happens?

  Open

  A1 Without limiting to Matsumotokiyoshi, our plan is to promote mutual customer referral leveraging the point scheme. We would like to utilize the customer attribute data possessed by the respective organizations in a mutually beneficial manner, and turn it to increased purchases by customers. By increasing the number of such partnerships as well as the amount of marketing data of each customer, we aim to induce additional purchases by customers.
  In FY2017, we issued over 150 billion points under our "d POINT" program, of which over 120 billion points were actually used. After handset purchase, the most popular way of using these points was consumption at our partner stores. Therefore, expansion of the number of participating stores is critical. While we have not yet been able to catch up with Rakuten in terms of point issuance, we hope to take over them in 2020. To this end, we plan to provide recommendations to customers based on their individual purchase logs to assist their purchase decisions. We have been using "d POINTs" also as a tool for customer returns in the form of "Zutto DOCOMO Discount Plus" and "Reward Points for Contract Renewal". Because of this award of points as a means for customer returns, we believe DOCOMO's program has a competititive advantage in terms of depth of penetration of the point scheme.

  Q2 Among the different convenience store chains, I know that you have allied with Lawson, but don't you have any plans to partner with 7-Eleven?

  Open

  A2 While this also relates to the strategy of the counterparty, it is not that we are only forming alliances with certain companies. We are always exploring various possibilities.

  Q3 Concerning your optical-fiber broadband service, some of your competitors offer maximum transmission speeds of 5Gbps or 10Gbps. Have you performed any studies on this?

  Open

  A3 The optical-fiber broadband service involves not only us but also the wholesale scheme and facilities of NTT. While we need to look into this in the future, we do not have any definitive plans for speed enhancement at the moment.

• Questioner No. 8

  Q1 Expansion of operating free cash flow continues to be your focus, but don't you foresee any impact from the market entry by Rakuten? Please let us know if there are any risks.

  Open

  A1 We announced operating free cash flow as our KPI in the medium-term strategy, and that remains intact today because we do not foresee any problem. If the business environment changes with the entry by Rakuten or other factors, we will perform studies as necessary. At this point of time, we have no plans of introducing new indicators, etc.

  Q2 I believe there are some technical developments that you need to tackle, including 5G-related developments. Even under such circumstance, do you still plan to attach a stronger emphasis on oprating free cash flow without increasing your capital expenditures (CAPEX) or even reducing it in some cases?

  Open

  A2 We do not intend to cut down on the CAPEX that are required. We will seek efficiency improvement wherever possible so we can deliver effects with a lower amount of investments. By devising such creative approaches, we plan to manage the total amount of our CAPEX.

  Q3 With respect to your medium-term targets, are there any numerical targets that you plan to disclose other than those that are already in the public domain? Please share with us your philosophy to the extent possible.

  Open

  A3 It would have been better if we had presented our managerial targets at the beginning of the fiscal year. However, in light of the new developments, such as the start of business operations based on the membership concept, the launch of AI agent service as well as 5G equipment development and network rollout, etc., we considered it was necessary to assess the returns of our strategic investments and progress of cost efficiency improvement. We would like to complete such assessment within the first half of FY2018, and present our medium-term numerical targets in the fall of this year. In concrete terms, we are studying the possibility of disclosing the revenues/income relating to the membership foundation and the new businesses created as a result of introducing 5G as well as cost efficiency improvement targets, etc. As for capital expenditures, we currently forecast an annual CAPEX of approximately 570 billion yen over the medium term, but as we make further progress in 5G development and once the equipment costs become more visible, we will be able to examine the required investments more precisely. We currently do not expect our annual CAPEX to exceed 570 billion yen, but we would like to first ascertain this to determine our operating free cash flow projections. For these assessments, we need time in the first half of this year.

• Questioner No. 9

  Q1 How long will the span of the medium-term plan to be announced in autumn be?

  Open

  A1 It may cover a period beyond 2020. The timing of starting income generation after commencing the 5G services is expected to be further down the line.

  Q2 Do you think you can generate returns in about five years after starting the service?

  Open

  A2 We are currently in the middle of an evaluation. With 3G and LTE services, we started generating returns in about three to four years after the launch of service.

• Questioner No. 10

  Q1 This fiscal year, do you think you can sell a comparable number of tablet devices as last year of about two million units?

  Open

  A1 The sales target for the current fiscal year is on par with last year.

  Q2 How do you view the risk of recording net losses in DOCOMO mobile subscriptions in the next fiscal year and beyond, in light of the possibility of existing Rakuten MVNO subscribers switching to Rakuten MNO service, and the acquisition of an MVNO operator (using DOCOMO SIM) by another mobile carrier?

  Open

  A2 Conversion of Rakuten's existing MVNO subscribers into their own MNO service is naturally likely to happen, but practically, it will be difficult to complete that process in just six months or one year. As Rakuten has declared to become an MNO, we are not sure about the appropriateness of concurrently running an MVNO business. Having said that, however, we do not foresee any radical impact on our subscriber count. We will continue to perform a simulation on this.

• Questioner No. 11

  Q1 Is there a possibility for Rakuten to realize a new form of interconnection, instead of roaming, that allows them to utilize your network in a manner similar to the current MVNO arrangement?

  Open

  A1 MNOs are obliged to grant MVNOs with network access via interconnection, but the provision of network access to an MNO is outside the scope of our obligations.

  Q2 If the Company is really giving thought to maximizing shareholder value, why don't you review your balance sheet and improve your capital efficiency? Improvement of balance sheet is something that can be achieved in DOCOMO's sole discretion, and yet this inefficiency has been left untouched for many years. Do you ever talk about this matter in your managerial deliberations in the first place?

  Open

  A2 We are aware of the need to do something about our underleveraged balance sheet, but we admit that we have hitherto not been able to introduce any drastic measures. We have conducted share repurchases and dividend hikes among the limited options available to us. For other meaures, please allow us to take this back and study further. We are strongly aware of the issue.

  Q3 Won't a large-scale acquisition of the size of few trillions of yen solve the problem?

  Open

  A3 We are performing studies pertaining to potential acquisitions. However, if the size of the deal is large, we need to discern the synergies and other aspects of the deal particularly carefully.

  Q4 Are you keeping your current balance sheet in anticipation of a large-scale acquisition?

  Open

  A4 We do not acquire companies for the sake of improving our balance sheet. But it is important to prepare a financial position that will allow us to respond swiftly when the need for acquisition arises.

• Questioner No. 12

  Q1 Is there a possibility for you to provide Rakuten with roaming access in Tokyo, Nagoya and Osaka regions?

  Open

  A1 We are not in a position to comment on the strategies of other companies.