Presentation Materials
Main Q&A (Analyst Meeting after the Results for the 2Q FY2019)
Announced on Nov. 1, 2019
Please be advised that the following text has been edited/modified from the original Q&A conversations for the sake of clarity.
-
Questioner No. 1
Q1 Can you present the breakdown of operating profit from Smart life business and Other businesses in such a way that the sum of each category's contribution will add up to 100%?
Open
Q2 Smart life business continued to record a year-on-year decrease in operating profit in the second quarter after the first quarter. Please explain the factors behind the deterioration of profitability and the outlook for the future.
Open
Q3 Does the description "revenue growth" mean you plan to reduce the amount of rewards to customers once the user base reaches a certain size?
Open
-
Questioner No. 2
Q1 Please elaborate on the upward revision you made to the mobile ARPU forecast as a result of your review at the end of FY2019/1H. Why did you decrease the projected impact of discounts compared to before? Please also explain the grounds for the projected ARPU increase even when this element is excluded from the calculation.
Open
Q2 I understand the rationale for the introduction of the new rate plans was to reduce potential churns and boost customer loyalty by optimizing the rate plans by notifying customers who have room for improvement via direct mail and other means. Has the actual development after the launch of the new plans been in line with your expectations? Or do you rather think an unexpectedly high number of customers still remain in the conventional rate plans, because they have not realized how much savings they can achieve by switching to the new rate plan? I would like to know how things are developing because I have an impression that a larger than expected number of customers, who can benefit more by switching, are still on the old plans because the speed of migration has so far been moderate.
Open
-
Questioner No. 3
Q1 Regarding Smart life business and other businesses. I can imagine that enterprise solutions have achieved a strong performance from the numbers you disclosed. Can you share with us the key factors behind the changes in revenues and profit of each sub-segment for FY2019/1H?
Open
Q2 Can you explain the prospects for the second half as well?
Open
Q3 Don't you foresee any growth in finance/payment services?
Open
Q4 Please explain the reasons why you increased the projected amount of losses on disposal of property, plant and equipment and intangible assets when you revised your guidance at the end of the first half. Also, while you made a downward revision to your full-year guidance on the amount of depreciation/amortization, I believe it is estimated to rise by 10 billion yen in FY2019/2H compared to FY2019/1H. Is my understanding correct?
Open
Q5 Do you to some extent have a margin in your operating expenses forecast?
Open
-
Questioner No. 4
Q1 In the beginning of the year, you provided an analysis on the potential impact of the "separation model" (i.e., unbundling of communication charges from handset cost) in which you predicted a negative impact of 200 billion yen from the rate reductions, a positive impact of 90 billion yen from the abolishment of Monthly Support discounts and a negative impact of 40 billion yen from "docomo with" program. How have these numbers changed after the interim review this time?
Open
Q2 You explained that out of the 39 billion-yen upward revision to the mobile communications services revenues forecast, less than half is attributable to the slow-than-expected pace of subscriber migration to the new rate plans, and savings from reduced Monthly Support discounts has been progressing faster than your projections. Does this imply the net impact of 200 billion yen that you projected in the beginning will come down to 160-170 billion yen as a result of your interim review?
Open
Q3 If the net impact is assumed to be 180 billion yen, what was the size of impact from the introduction of the new rate plans in the first half of the year?
Open
Q4 I believe you had a plan to spend approximately 55 billion yen for growth investments this fiscal year. How much progress have you made in the first half? For next fiscal year, are you planning on a similar scale of growth investments or a further increase?
Open
-
Questioner No. 5
Q1 Regarding the migration of 3G users, I am sure that you had allocated a certain amount of expenditures for migration from the beginning, but can you elaborate how you arrived at your recent decision to spend a large sum of money to further accelerate the migration? Unless you tackle this issue with a bold move, you will probably end up not being able to use the allocated expenses and produce sufficient effects. Do you plan, for example, to lower the handset price to close to zero yen to approach your existing feature phone users?
Open
Q2 If the bulk of the incremental cost in the revised forecast is attributable to the increased cost of equipment resulting primarily from the growth in number of handsets sold for subscriber migration to 4G, I think you have a plan to implement additional measures other than what have already publicly announced. Am I correct?
Open
Q3 Does the expression "somewhere in the lower half of 1-2 million subscribers" mean around 1.2-1.3 million subscribers?
Open
-
Questioner No. 6
Q1 Due partly to the effects of expanded adoption of "d CARD," "d POINT" and "d Payment", etc., despite switching to a new handset sales method from June ahead of the competition and your competitors selling handsets at low prices, you achieved an improvement in churn rate. Given that your handset churn rate was maintained low in FY2019/2Q as well, I do not think your churns will increase so much even if your competitors lower their handset prices or service charges. Because your users find convenience in the peripheral services and the scale of these businesses are expanding, I believe you will be able to maintain your churn rate even if a new entrant makes a foray into the market. Now that customers can terminate the subscription contract anytime with a cancellation fee of only 1,000 yen, don't you think it is more important to broadly expand the touchpoints with customers through your service offerings?
Open
-
Questioner No. 7
Q1 I believe you mentioned that in your future cost efficiency improvement program you will attach a stronger focus on sales-related activities such as expansion of online sales and efficiency enhancement of docomo Shops. You explained during the recent results announcement that you will aim to cut down the attendance time at shops by half within this fiscal year, but do you really think this is achievable? How much reduction have you achieved so far? Also, what impact will such effort have on cost efficiency improvement? I assume the cost efficiency improvement derived from increased online sales is already accounted for in your plan for this year, so how much contribution will the sales-related initiatives bring to your cost efficiency improvement plan for next fiscal year?
Open
Q2 What is the current level of wait time at your shops?
Open
Q3 At present, what percentage of handset upgrades are done online and how does that compare with your target? Also, how much impact will the conversion to online procedures have for cost efficiency improvement?
Open
Q4 I thought you planned to drive cost efficiency improvement by working on sales-related initiatives. If the reduction of attendance time or increased use of online procedures do not produce significant effects, from which area do you plan to seek cost efficiency improvement?
Open
Q5 I am sure you have not finalized the cost efficiency improvement plan for next fiscal year, but can you give us an indication on its composition?
Open
-
Questioner No. 8
Q1 I would like to hear why you revised the net adds forecast to 1.5 million, and if there has been any change in your thoughts from the time you developed your initial forecasts.
Open
Q2 How was the net adds performance in FY2019/1H compared to your internal plan?
Open
Q3 Did the delay of Rakuten's market entry affect your revised forecast in any way?
Open
Q4 What are your thoughts about the scenario for the proliferation of 5G devices? In the recent "5G Summit" meeting, President Yoshizawa commented on the need of deliberations concerning 5G handset prices. Under the revised Telecommunications Business Act, what kind of framework are you considering to ensure a smooth take-off in the adoption of 5G devices?
Open
-
Questioner No. 9
Q1 You explained the migration of 3G subscribers has been progressing faster than planned, but how was the performance of other subscribers compared to your initial plan? Have you seen any changes in the billed amount of users before and after the switch to a new rate plan? Or, if you have witnessed any differences compared to your prediction, e.g., larger-than-expected number of low-end users migrating to new rate plans, please let me know.
Open
Q2 Do you foresee a change in your relationship with the agent resellers? You explained earlier that you will offer some services for a charge. I heard you have changed the commission payable to agent resellers (excluding the commissions to finance handset discounts) in a way they will be calculated based on the Life Time Value (LTV) of customers, but do you intend to cut down on the total amount of commissions going forward?
Open
Q3 Is it right to assume that you will set a long period over which the LTV is calculated to determine the commissions payable to agent resellers, and pay a larger amount to those resellers who provide greater added value to customers? Will the total amount of commissions stay unchanged?
Open
Q4 Has the sales method emphasizing LTV delivered any effects?
Open
-
Questioner No. 10
Q1 I have an impression that you have solidified your defense against Rakuten's entry through the measures for handset prices, "d CARD" and the "docomo Hikari" bundle discounts. However, from the perspective of MVNO business, when you consider the outflow of subscribers to Rakuten MNO business and Rakuten's gain of market share in the MVNO market, how much revenue and profit impact did you include in your plan caused by the outflow of MVNO subscriptions?
Open
Q2 I understand that you cannot comment on numbers, but can you give us a general direction as to what kind of impact could potentially happen by when, and if such impact is already factored in your plan?
Open
-
Questioner No. 11
Q1 I would like to hear about your approach to returning to profit growth in FY2020 after hitting a bottom in FY2019. You made an upward revision to your mobile communications services revenues forecast due partly to the slower-than-expected uptake of the new rate plans in the initial phase. On the flip side of the coin, this could potentially become a negative factor for your revenues for next fiscal year. Also, I suspect the sales promotion expenses that you had originally planned for FY2019/2H might have been postponed to FY2020/1H due to Rakuten's delayed market entry. Is my view correct?
Open
-
Questioner No. 12
Q1 I believe you are collaborating with many partners toward the launch of 5G service. How much outlays have you made this year prior to the launch of service?
Open
Q2 Can you comment on the proportion of the amounts shouldered by DOCOMO and your partners?
Open
Q3 Do you plan to spend a similar amount going forward?
Open
Q4 I believe you are far ahead of the competition in terms of the numbers of partners and Proof of Concepts (PoCs). This could entail a risk of only ending up with large number of PoCs that do not produce meaningful outcome caused by a lenient screening of projects. Or, this may provide you with an opportunity to achieve a great success in a large number of projects. What are your views?
Open