Presentation Materials
Analyst Meeting Q&A (Earnings Release For the Six Months Ended September 30, 2018)
Announced on October 31, 2018
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 Please elaborate on your plans for the path to recovery of operating profit in FY2023. Can you share with us your projections on the positive and negative factors, such as the expected length of declining revenues, the size of reduction in handset subsidies and general expenses to offset the projected increase in depreciation resulting from the change of depreciation method, and the revenue growth from non-telecommunications business?
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Q2 You are forecasting a decline in operating profit for the near term. When do you think the downtrend will hit a bottom? Please also comment on your policy concerning shareholder returns during the period of declining profits.
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Questioner No. 2
Q1 By calculation, a 20-40% cutdown on communication charges will imply a 600 billion-yen decrease in gross revenues. Are there any elements that can be offset from the 400 billion-yen customer return measures? Can you explain the discrepancy between the projected drop in telecommunications revenues caused by the rate reduction and the amount of customer return measures?
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Q2 I believe you have hitherto absorbed the impact of customer returns through cost reduction.
Do you plan to absorb the 400 billion-yen impact with cost reduction this time again?Open
Q3 You mentioned that the concrete measures of customer returns are still under study, but can you explain the basis of the calculation of 400 billion yen?
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Q4 Can you clarify the meaning of "acceleration" of shareholder returns? You have declared a 10-yen dividend hike for this fiscal year. Is it correct to construe that you plan to increase the amount of dividend by 15 yen or 20 yen each year going forward? I believe a lack of dividend increase would be considered a "deceleration," so please give us a little more color on your dividend policy.
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Questioner No. 3
Q1 Is it correct to understand that your capital expenditures will not increase in the future?
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Q2 As a result of shareholder returns, I anticipate that you will face a shortage of funds of approximately 300 billion yen starting this fiscal year. What is the level of debt/EBITDA ratio you can tolerate?
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Q3 Under the current business environment, do you foresee the need of carrying out a major acquisition to develop your B2B business? If you stay on the current track, the shortage may become larger, and if you are planning to sustain your business through large-scale acquisitions, the amount of liabilities will likely expand. Under such scenario, do you have any benchmark as to the level of credit rating you want to maintain or tolerable debt/EBITDA ratio?
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Questioner No. 4
Q1 You explained that non-mobile business will be the largest driver to recover your operating profit to 990 billion yen after plowing back 400 billion yen to the hands of customers, but I rather think that the profit recovery of mobile business is even more important. What do you think?
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Q2 As for the market outlook after your rate reduction, do you foresee that this decision will result in a simple decrease of profit level? Or is this a rate cut strongly aimed at expanding your customer base? Or, do you foresee a recovery in ARPU resulting from traffic growth in the future? I would like to hear Mr. Yoshizawa's view on the most likely scenario that will drive profit recovery.
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Q3 Will it be correct to understand that you will aim to raise ARPU in a broad context, i.e., ARPU that includes other elements than mobile telecommunication revenues, while keeping in mind the number of mobile subscriptions to some extent?
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Questioner No. 5
Q1 The rates after introducing the "separation model" will likely be lower compared to your rates before applying the handset discounts. Is it correct to understand that the 400 billion-yen customer return estimate does not reflect this drop in rate? Also, I believe you previously offered customer returns in the form of points. Does the scheme this time around include such point offers?
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Q2 You mentioned that you have expectations for non-telecommunications revenues in recovering your operating profit to 990 billion yen in the future, but I believe the marginal profit ratio of non-telecommunications business is considerably lower compared to that of telecommunications. If this is true, while you also raised an interim revenue target of 5 trillion yen, what overall revenue size do you think will be necessary to recover your profit to that level? Please give us an explanation to the extent possible.
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Questioner No. 6
Q1 Even if you succeed in recovering your operating profit using non-telecommunications business as a driver, there is always a risk that you will be subject to criticism for making too much profit so long as mobile service continues to be the core of your business. If criticism arises again, will you carry out another round of rate reduction? Your position as a publicly listed, profit-seeking company is not visible.
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Q2 With respect to the 400 billion-yen customer returns, if they are applied to the rates for light users, MVNOs may no longer be able to sustain their business. Are the customer returns more geared toward the heavy user segment? Please share with us your direction concerning the target(s) of the new rate plan.
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Questioner No. 7
Q1 With the 1 trillion-yen cumulative capital investment for 5G, what level of population coverage do you expect to achieve (based on the conventional definition of population coverage)? Please also explain how you arrived at the amount of 1 trillion yen.
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Q2 This relates to how you actually improve your operating profit in the future, Will it be correct to understand that you will not expect any increase in ARPU or ARPA from your telecommunications services after it drops?
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Q3 Theoretically, if your telecommunications ARPU marks an increase, wouldn't you have to consider returning it back to customers by introducing new rate plans?
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Q4 Unless you present communication charges and other fees separately in your 5G billing arrangement, don't you think there is a risk that the argument of "making too much profits from telecommunications service" may arise again?
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Questioner No. 8
Q1 Regarding your 600 billion-yen share repurchase, do you plan to purchase a large number of shares from your parent, NTT Corporation?
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Q2 With respect to your customer returns, it is obvious that the whole discussion was triggered by the comment from the government. Mr. Yoshizawa has hitherto claimed that the mobile phone charges in Japan are not expensive. Everyone knows that the data used by the government as the premise of discussion was clearly inappropriate for comparison. In spite of this, it is not visible how much effort DOCOMO has undertaken to convince the government. You explained it will take five years to recover your operating profit to the FY2017 level and it is the shareholders who will be affected by this negative impact. The complaints that your rate structure is difficult to understand is not something that popped up recently. Yet, why are you making this decision now? Please explain what kind of analysis has been made.
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