Financial Results for the 3rd Quarter of the 2021 Fiscal Year

I cannot talk about the next fiscal year's capital investment plan at this stage, but basically we will accelerate our 5G and carry out research and development for IOWN. Meanwhile, we have our global structural reform and strong demand for our data centers. We also have our eye on capital investment in areas such as real estate and energy, and will increase this. At the same time, our basic principle is to streamline the scope of our investment to the greatest degree possible by utilizing off-balance-sheet transactions. Additionally, we want to increase the efficiency of investments in our existing networks in order to meet our Capex to Sales target for this fiscal year. On the other hand, we are expecting to see prices increase by several percent due to the semiconductor shortage, which creates pressure to increase capital investment, so we will be forced to account for the impact of that.

I think the ultimate, ubiquitous needs of individual and corporate customers are for things to be cheap and easy to use. Obviously there are cases where good service can increase the value of something even if the price is the same. I want to continue working to provide pricing and service that will be acceptable to our customers, which will include cost reduction. But as the other companies have said, when you compare prices internationally, we are already the cheapest in the world, and I think that's why there has been a pause in competition on that point. So our basic stance is to keep doing what we have been doing, but I think for now there will be no more exceptional cases of price decreases. On the other hand, I think businesses need to keep working on our next investments, such as increasing ARPU, boosting cost efficiency or improving service.

ahamo is doing well as we now have around 2.5 million subscribers, but I will not specify any further details.

Its launch was delayed and there still wasn't enough recognition for it at that time, but we have been promoting it heavily since around December, and are now watching to see how much sales will increase. Boosting Economy MVNO sales is NTT DOCOMO's policy, so as the holding company, we are throwing our support behind that.

NTT DATA is performing strongly both in Japan and overseas. In particular, this year there has been an increase in general corporate projects where even if the project isn't large, it involves DX consulting, which is highly profitable work. The company's finance business has received large orders and this has tended to be the case every year, so I think we can assume that the large amounts of business in the general corporate and finance areas will continue in the next fiscal year. The public sector is also seeing a substantial amount of DX, both in Japan and overseas, and I expect that that will basically continue in years to come, although some elements in Japan are uncertain as they are dependent on the Digital Agency's procurement policies. Lastly, in the medical sector, a significant amount of DX is taking place in hospitals and healthcare due to COVID-19. NTT DATA Services is particularly strong in the U.S. medical sector, and we can expect to see more projects in this area in years to come.

Regarding 5G, we have launched stand-alone 5G. The government is telling us to increase coverage, the percentage of the population that has access to 5G, and we aim to do so, but I think our first move should not be to simply shift existing 4G frequencies to 5G but to introduce and roll out services with new frequencies just for 5G so that people can experience the full value of 5G. The broadband work is being organized by the Ministry of Internal Affairs and Communications, and the universal service concept that previously only existed for fixed-line phone services will now be applied to broadband too. We ourselves act as a public service provider in some ways, so we intend to work on setting up and maintaining broadband services in regions that have been without access to broadband, with subsidies from charitable funds. This new policy on broadband services from the Ministry of Internal Affairs and Communications is one that we can stand behind in light of the current situation.

I would like to offer my sincere apologies to the around 18,000 customers who were affected by the disruption to our services. As NTT DOCOMO said, the fault occurred after our protocol changeover because the server design and capacity design did not adequately account for the traffic that came with the new protocol. The previous service disruption was discussed, and that discussion covered our partner company's server systems, but this disruption occurred because server capacity was not sufficient to load things like the new addresses after the changeover from IPv4 to IPv6. If the communication between a device and a server is delayed, various functions kick in, such as cutting off information from the device, so it's not a matter of simply having enough server capacity; you have to look more deeply at the network design and consider which device will handle packets that are too large, and what that device will do. NTT DOCOMO needs to rethink the basic operations from scratch.

From customers' perspective, home Denwa is phone service contract that combines fixed-line and mobile. This is something our competitors have already introduced, so the NTT Group is basically just regaining ground that was taken by our competitors. I've explained in the past that acquiring NTT DOCOMO as a wholly owned subsidiary has enabled us to provide services that combine mobile and fixed-line services, and home Denwa is one of those services. And for that reason, I have no intention to coordinate between NTT East and West and NTT DOCOMO. Rather, I think healthy competition between the three companies is the right way to go. As for those last areas with wired services, I think we're now in an age where it's more convenient and cost-effective to upgrade to wireless.

In terms of virtual spaces and the metaverse, NTT has had a technical presence in digital twin computing for several years. Second Life used to be a term that was heard a lot, but that virtual world had a lot of technical issues. In a way, I think the term "metaverse" is a buzzword too, but our approach has two steps. First, we've been providing a VR space called DOOR since the year before last. This is a media owned by NTT, and we are working on incorporating new technology and elements such as 3D and XR. Efforts to create services and platforms for the next step are being undertaken not only by NTT DOCOMO but by the NTT Group as a whole, using XR as a starting point to build our virtual world. In the long term, various discussions will be needed about the legal and systemic sides of our metaverse world. And in order to create more elaborate and realistic content, we will need to reduce high-volume data processing and the power consumption that comes with it. To accomplish that, we will need to build an IOWN. So, I want to approach the current state of our metaverse with a resolute view to the future.

In terms of governance, I think it is important to ensure our customers' safety and allay any fears they may have. Specifically, I think having our servers in Japan where we can handle them ourselves is the right approach. Obviously, we could broaden that policy if we can be sure that the servers will be in an allied country with the same approach as Japan, or an otherwise trustworthy country. That mindset is called "Data Free Flow with Trust", and I find it odd that a business would not want to disclose where its servers are. When it comes to the Ministry of Internal Affairs and Communications' Telecommunications Business Governance Study Group and the points covered by their report, I want Japanese businesses to address these issues thoroughly so that we do not fall behind other countries in this area.

Regarding remote work, we had already taken measures such as split hours, remote work allowance and scrapping commuter pass charges. Our move to allow employees to work from anywhere will take a while to roll out since we have 180,000 employees. Additionally, if employees can live anywhere, we will need to establish provisions such as how many times employees can use the Shinkansen to commute. With all of this in mind, we plan to put this system in place from the 2022 fiscal year. I cannot give specifics at this point in time, but I want NTT's main subsidiaries to roll out various initiatives. In terms of securing personnel, we are also hiring more mid-career employees and we expect that no longer having restrictions on where employees can live will be a point that attracts talent to the NTT Group. With that said, this is not solely to attract good personnel but to provide healthier management, a better work-in-life and greater wellbeing for the employees we have now.

The migration of carrier email addresses is something every company has been doing to eliminate a bottleneck and make themselves more competitive, but development costs are confidential. Email development in general comes with some costs, so think of the expenses that have been involved in other development projects of this nature. As for usage of our carrier email migration service, we've had feedback through channels such as social media from customers saying they appreciate being able to migrate their carrier email address, but we are not expecting a major impact. Regarding user details, those are confidential.

For the spring sales battle, NTT DOCOMO plans to launch services related to DOCOMO Denki and the company's carbon neutrality plan, as well as the home Denwa service we mentioned earlier. You'll need to ask NTT DOCOMO about details such as how these will be promoted and how they will work together with OCN Mobile and FreeBit on joint promotions.

Restructuring of local sales and engineering will take place in the NTT DOCOMO Group after the reorganization. The group will also strengthen its smart lifestyle business, so all in all there will be many more changes in future. The response has been excellent: we achieved record financial results such as profit for the period in the third quarter of the 2021 fiscal year, and NTT DOCOMO, NTT Communications and NTT COMWARE are clearly redoubling their efforts in the leadup to July. I expect to see synergies like the ones we have seen so far; we are on track to achieve our targets of 100 billion yen in the 2023 fiscal year and 200 billion yen in the 2025 fiscal year.

Regarding our 5G investment and coverage, I want to make sure all of the media representatives in the audience understand the difference between 5G created by shifting existing 4G frequencies and 5G that uses new dedicated 5G frequencies (Shunsoku 5G). It's not clear whether the Ministry of Internal Affairs and Communications is including 5G created by shifting existing 4G frequencies or whether they are referring solely to 5G that uses new dedicated 5G frequencies (Shunsoku 5G), but when other companies talk about coverage, they're referring to the percentage of the population with access to any 5G, including 5G created by shifting existing 4G frequencies. But only 5G that uses new dedicated 5G frequencies (Shunsoku 5G) really gives customers the full benefits of 5G in terms of speed and capacity. When NTT DOCOMO talks about 80% coverage, this refers to the coverage of 5G that uses new dedicated 5G frequencies (Shunsoku 5G). So what NTT DOCOMO is saying is that they will launch 5G on dedicated frequencies right from the start, rather than starting with 4G frequencies, although in future they will also shift existing 4G frequencies for efficient 5G rollouts in areas where covering a wider area is the priority. If by moving forward NTT DOCOMO's 5G rollout you mean the part where they expand their 5G created by shifting existing 4G frequencies, I do not expect significant capital investment to be necessary.

^Note: Some of this section is not a direct quote.

As I've explained before, the benefits of 5G are seen in businesses, in companies. I think IoT and its high-speed connections, including local 5G, is easier to use when it comes to companies' DX. There are actually various services being launched for businesses. In that sense, we're likely to see a lot of progress in services for businesses in 2022 and 2023. Consumers, I think, won't see the benefits of 5G unless their devices support Sub6 or millimeter wave 5G rather than 4G-based 5G, and are using a service like the metaverse, where high speeds and capacities are involved. So it's a little unrealistic to expect benefits to be noticeable with that coverage that was mentioned earlier, which will be achieved by shifting 4G frequencies. We really need to increase our coverage of 5G that uses new dedicated 5G frequencies, and that's likely to take another two years or so.

^Note: Some of this section is not a direct quote.

As with green bonds, basically we carry out financing measures when interest conditions are favorable. While interest rates are trending upward around the world, I don't expect costs associated with financing to increase for the time being. At present, our interest-bearing debt as of the end of the last period is 7.6 trillion yen, and that figure is expected to be over 7 trillion yen again at the end of this period, but that's based on a repayment schedule of around 10 years. That means that we need to procure 600 billion to 700 billion yen for refinancing and repayment. Meanwhile, we are expecting to put around 500 billion yen into green investments, and use around 600 billion yen of refinancing each year to issue company bonds and procure long-term refinancing from banks. In any case, we plan to focus on green bonds when we issue company bonds.