Presentation Materials
Main Q&A (Analyst Meeting after the Results for the 3Q FY2018)
Announced on February 6, 2019
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 I believe bundling of services will become increasingly important for the reduction of churns going forward. DOCOMO bundles "docomo Hikari," "dTV" and various other services in finance and other domains. Among those offerings, which service is most effective for customer retention? Please also let us know if you perform churn rate analysis for the services you offer and make investment decisions based on the results of analysis?
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Q2 "d CARD" seems to be a very powerful product, but the competition in this space has also intensified. Have you witnessed any changes?
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Questioner No. 2
Q1 Can you elaborate on the content and size of the measures, if any, that are expected to absorb the negative impact of customer returns to be provided through the new rate plans? On a related note, can you also share with us the drivers behind the growth of operating profit of Smart life and Other businesses in FY2018/3Q?
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Q2 The operating profit of Smart life and Other businesses for the first three quarters amounted to 134.8 billion yen as a result of achieving a growth of slightly less than 50 billion yen in FY2018/3Q from 86 billion yen in FY2018/1H. Because there appears to be no special factors according to the explanation you just provided, if we set aside the cost increase projected for FY2018/4Q, will it be correct to assess that profit generation from Smart life and Other businesses is generally gaining momentum?
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Q3 Regarding the three points you mentioned earlier, how do you think these factors will contribute to boost profit in the next fiscal year and beyond?
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Q4 I do not think your subscriber migration efforts will produce results anytime soon, but what are your expectations for the cost-cutting initiatives?
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Q5 When you announced the results for FY2018/1H, you mentioned that you will accelerate shareholder returns. Were you alluding to the most recent 600 billion-yen share repurchase from your parent NTT, or did you have anything else in your mind when you made that statement?
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Q6 Please explain your dividend policy for the next fiscal year. Can we expect that you will aim for sustained dividend increase?
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Questioner No. 3
Q1 You explained that you have already spent 50 billion yen out of the total 80 billion-yen budget for new growth investment for FY2018 in the first three quarters. Can you comment on the quarterly breakdown of the 50 billion yen and the details concerning the destination of the investment.
Are you planning to continue investments for new growth in the next fiscal year as well? Also, do you expect the 80 billion-yen investment made during this fiscal year will begin to bear fruit as early as next year?Open
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Questioner No. 4
Q1 The spectrum allocation for 5G is scheduled in the spring of 2019. Do you think there will be a crucial difference between the cases of being able to receive two slots or just one slot in the sub-6 radio frequency bands (3.7GHz and 4.5GHz)? Is it right to assume that DOCOMO is very eager to receive the allocation of two slots?
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Q2 You developed a plan to spend 1 trillion yen for 5G over a period of five years. Do you have any plans to invest aggressively to provide 5G connectivity in rural areas from early on?
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Q3 If you can wait a little longer, there will be additional rounds of allocation, so maybe you do not need to be pessimistic even if you end up receiving only one slot in the first allocation so long as you have a reasonable plan. What do you think?
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Q4 How should I think about your approach to local 5G networks? I recall that you failed in local WiMAX businesses in the past. Do you have an ambition to actively pursue local 5G?
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Questioner No. 5
Q1 You explained that the contraction of working capital could be a means for you to improve your balance sheet and generate free cash flow. How much progress have you achieved in putting this into practice? Also, over what time frame do you plan to execute the program?
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Q2 In the 5G spectrum allocation process, "operator's contribution for the economic value of spectrum" is said to become an element for evaluation. Can you give us an update on the current situation?
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Questioner No. 6
Q1 You explained that the number of net additional subscriptions acquired in FY2018/3Q was 450,000. Can you give us a breakdown of MVNO and DOCOMO brand subscriptions?
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Q2 Please explain the progress of capital outlays. Because the progress through the first three quarters was slow, I believe you will end up spending a large amount in the fourth quarter. Please also share with us the CAPEX prospects for FY2019.
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Q3 You plan to launch 5G services on a pre-commercial basis this year. If you have a plan to implement traffic countermeasures during the current or next fiscal year in view of pre-commercial services, please let us know.
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Questioner No. 7
Q1 I believe the market environment surrounding MVNOs will become harsher after you introduce the new rate structure. Do you intend to review your relationship with MVNOs? Please explain your strategy.
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Q2 From the perspective of prosperous coexistence, the price difference has been one of the largest differentiation factors for MVNOs so far. What do you think will be the largest source of competitiveness of MVNOs in the future?
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Questioner No. 8
Q1 When you roll out the new rate plans based on the separation model, what do you think about the provision of reward points or cash rebates for other-than-telecommunications charges, which I do not think is prohibited?
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Q2 I do not think the study group has deliberated any ban on discounts, except for the discounts on communication service charges. Also, you mentioned during your FY2018/3Q results presentation that you provided handset discounts during the year-end holiday season on a scale comparable to the previous year. Can we expect you will continue this practice going forward?
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Q3 This is a question regarding your 400 billion-yen customer return measures. Your competitors include limited-time campaigns that offer discounts on service charges in the amount of customer returns. Do you also include such amounts in your estimated customer returns?
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Questioner No. 9
Q1 I believe you performed an evaluation on your existing rate plans. Your competitors have realized a semi-separation model by offering the "Pitatto Plan," "Flat Plan" and various other plans in return for selling handsets in a standard way. When I simulate the monthly fees of DOCOMO users based on the assumption that the handset price was paid in one lump sum, your rates are overwhelmingly cheaper compared to the competitions'. So why do you need to reduce your rates further with the introduction of the new rate scheme when your rates are already significantly lower? Also, once the market switches to the separation model and paying a higher amount for handsets become the new norm, it will make sense to lower your service charges from the current level. In that event, your rates will appear to be considerably cheaper compared to those of the competition. On the contrary, if you set the rates higher, it will bring about a net positive impact on your profits. Do you plan to design the scheme in a way that you will have net positive impact on profit after the Monthly Support program is terminated? Or, will you seek further reduction from a level that is already less expensive compared to your rivals? Please share with us your assessment on your existing rates.
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Questioner No. 10
Q1 If the same service charges are applied to SIM-only subscribers under the separation model, does that mean the same rate structure will be applied to SIM-only subscribers and you will leave it to the discretion of each user whether to choose a SIM-only plan or not? If that is the case, essentially there will be no changes from the arrangement under the current rate structure. Is my understanding correct?
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Q2 If the number of users choosing the latter option does not increase so much, I do not foresee a significant change from today. Am I right?
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Q3 The total amount of transactions processed with your finance/payment services has been growing. Please give us a breakdown of the components driving the growth.
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Q4 Can you give us the breakdown of "d CARD" usage between payment of DOCOMO's monthly telecommunications bill and other payments?
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Q5 Is it correct to understand that the usage per card member is expanding?
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Questioner No. 11
Q1 I would like to hear more details about the services that you handle to curb churns. You mentioned that the subscription to "d CARD" or "Share Pack" resulted in improved churn rates. Can you give us some more details as to the percentage of "Share Pack" subscribers who also own a "d CARD?"
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Q2 For example, when a user subscribes to "d CARD" and "Share Pack" individually, I believe each service has the effect to reduce churns. But when the user signs up for both, does the effect multiply lowering the churn rate to 1/4 of the overall average?
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Q3 Under a hypothetical scenario that you will NOT introduce a new rate structure in the coming spring, how do you think your mobile ARPU will perform in FY2018/4Q and subsequent periods?
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Q4 In a natural scenario excluding the impact of the planned rate revisions, how do you foresee the future ARPU trends?
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Questioner No. 12
Q1 You explained that the timing of introduction of the new rate structure is expected around April. What is this time lag for? I believe you have already nearly finalized the design of the revised rate structure. What other works do you need to complete in the period until April?
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Q2 I believe the introduction of the separation model will induce changes to the position and roles of your agent resellers. What kind of changes do you foresee with respect to the size of your agent resellers and the amount of sales commissions that you pay to them in a few years from now when the new scheme achieves broad penetration.
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Q3 If that is the case, I construed that you will pay higher commissions for activities that contribute to increasing DOCOMO's revenues. Because the total budget of commissions payable to the agent resellers will remain unchanged, am I right to assume that this will result in larger revenue growth for DOCOMO? Or, because there are still a large number of agent resellers that generate profit primarily from product sales, do you anticipate an improvement on the cost front by reducing the number of such agent resellers while the revenues remain flat?
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Questioner No. 13
Q1 Regarding the regulations, can you let us know timings of law enactment, promulgation of ministerial ordinance and guidelines vis-à-vis your announcement of the new rate plans? Because it is rumored that the issuance of ministerial ordinance and guidelines may take some time, I thought the interpretation of the separation model could potentially change depending on the timing of their issuance. Please share with us your thoughts on this.
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Q2 If the introduction of the separation model reignites another round of discount battles amongst carriers, don't you foresee a risk of a similar debate repeated again after implementing the separation model? Or, if competition in the market intensifies by the entry of a new player and once the new guidelines are implemented in autumn, do you think the discussion on the regulatory framework will settle down and the industry will return to normal?
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Questioner No. 14
Q1 The total transactions processed with your finance/payment services, shown on slide no. 13, appears to be increasing but the revenues from Smart life and Other businesses combined have not grown at a comparable pace. What is the take rate of finance/payment transactions? Please also let us know how the increase in finance/payment transactions has impacted the revenues and profit from Smart life and Other businesses?
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Q2 The total transactions processed with your finance/payment services amounted to over 3 trillion yen in FY2017, and I believe it will reach to slightly less than 4 trillion yen this fiscal year. If it continues to expand at a similar pace to 4 trillion and then to 5 trillion yen, this will grow into one of the most sizable payment business in the Japanese market. How do you plan to utilize and monetize the payment data you possess?
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Questioner No. 15
Q1 This is a question for confirmation regarding the impact of customer return measures of maximum 400 billion yen. When you use the term "maximum," does it imply that there are elements of volatility that could affect the total amount of 400 billion yen? Or, does it mean that you foresee an impact on the 400 billion-yen customer return measures per annum at some point in the future as customers are gradually integrated into the separation model over time after its introduction was defined in the law?
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Questioner No. 16
Q1 Was the integration of NTT Plala as your subsidiary a predetermined policy? Or was it decided based on a strong request from NTT Communications? Please explain the background that lead to this conclusion. Can we also expect similar acquisitions based on reasonable judgement to take place for the reorganization of NTT Group business?
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Q2 Can I assume that DOCOMO does not have a negative view about generating over 1 trillion yen in operating profit this fiscal year?
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Questioner No. 17
Q1 I understand that you are promoting the development of 5G use cases in collaboration with various partners. Among the various projects, have you found any services that takes full advantage of 5G's unique properties and offer clear visibility for the path to mass market deployment and monetization? Also, when will the service content be available? Will it be after the launch of release 16? Please share with us your plans about service content and timing of launch.
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