Financial Results for the First Quarter of FY2024

To strengthen our customer base, we believe that we must strengthen sales at mass retailers and other outlets, and we have begun to strengthen our sales staff. I think we will see this effect in the second half of fiscal 2024. Also, the selection rate of eximo is increasing considerably. To compete, we also sell irumo, so ARPU is on a downward trend, but more customers are choosing eximo than expected, so I think ARPU will be balanced in the near future.
At the same time, in the past, ahamo users had the inconvenience of having to go through the procedures online to change their handsets. However, in response to the needs of customers who want to see their handsets when they change, we have started a service at DOCOMO Shops and some mass retailers that allows ahamo customers to exchange their handsets in-store.
In addition to strengthening the sales channel in this way, since eximo started poikatsu (act of point hunting) on August 1, 2024, we are spending a lot of money to strengthen the marketing at once.

We have been expanding through M&A in securities and loans. Considering the customer's convenience, I think it's easier to use if you have a bank account. Competitors are also conducting such operations, so I think we have a choice of whether to conduct them through M&A or create them ourselves. In any case, we will further strengthen the elements necessary to provide comprehensive financial services.
Currently, card and d payment settlement businesses are growing steadily and generating solid profits. NTT DOCOMO President Maeda has taken the lead in considering further expansion of the overall financial business, and we would like to provide solid support.

I believe that a major factor will be to strengthen our customer base in the consumer business. In addition, we will steadily expand the Smart Life business, which is expected to grow significantly.
At the same time, although NTT Communications is expected to be affected by PSTN migration in the second quarter of fiscal 2024, we will absorb the impact through the growth of the overall corporate business and secure profits.

For example, in the supply chain, businesses are created through various distribution processes, from manufacturing to wholesalers, but AI itself enters various processes. By connecting data horizontally in these processes and delivering it to the final consumer, we can expect cost savings.
We announced this in January 2024, but we have already started cooperation with Trial Company Inc., which operates a discount store in Kyushu, and with Shinmei Holdings, we are working to improve data on the distribution of fruits and vegetables, and to establish a link between the production areas and consumers, and to consider whether this will lead to efficient distribution and transactions.
There is a data related division unit in NTT's research laboratory that have been dealing with customers. We will spin off that unit, and create a company with the idea of transforming between industries using AI-CIX (Cross Industry transformation).
Please understand that the business scale is included in the target of ¥100 billion in AI-related operating revenue in fiscal 2027. I hope we can reach 1/10 of that.

I am very grateful that the Ministry of Internal Affairs and Communications working groups are discussing the NTT Law. Each is important, but what I think is very important for us is how to achieve universal service, and I think we should think from a customer perspective and a future-oriented perspective.
I'm sorry to talk about the earthquake all the time, but most people want mobile communications, and I think it's common sense now. So, ultimately, I think there is a need to create an environment where mobile communication is possible, at least in and around the residence.
Therefore, in principle, I think that we should take the form of how we will eventually cover universal service with mobile lines. We have also shown some cost-sharing simulations. The cheapest way is to use mobile fixed phones in areas where mobile lines are already provided, and to use optical lines in other areas, the deficit burden in 2035 will be about 3 billion, making it the cheapest.
As another option, we have proposed a plan to cover the entire mobile network. The plan shows a deficit burden of approximately 6 billion yen per year. However, if the area covered by mobile networks gradually increases, the deficit burden will gradually decrease, so I think we should gradually shift to such a plan.
However, in the process, I think there is a step to ensure universal service by covering the current mobile line area with mobile fixed phones and covering the rest with optical lines.
And regarding fair competition, I think it's about the regulation of the basic scope of business. The business of NTT EAST and NTT WEST is a fundamental part of Japan's information and communications infrastructure, so we need to maintain it firmly. To maintain it, it is desirable to have a form that does not interfere with efficiency, and the infrastructure itself will evolve with technology. Therefore, I would appreciate it if we could maintain and upgrade our infrastructure with a degree of freedom.
I understand that there are various opinions on foreign capital regulations, and there are opinions from different perspectives. However, when we look at foreign countries, there is a reality that they are strengthening individual regulations, and there are almost no countries that have been organized under special laws. Therefore, I think it is necessary to consider the direction of strengthening individual regulations.

I think the biggest thing is what we're going to do with landlines. I believe that the principle is to replace the current universal service and move it to a form that is easier for customers to use and provides more advanced services. In addition, we have said that fixed-line telephones will reach their capacity limit by about 2035, so this is a question of how to handle this situation.
The number of contracts has decreased to about 12 million, but we still have to install it in about 1 week if ordered. If we do not maintain the capacity we had when we had 60 million contracts, we will not be able to respond to the approximately 100,000 applications we receive annually.
Maintaining a system that can be opened anywhere in Japan means that maintenance costs will increase accordingly, and we are currently operating with a deficit of about 60 billion yen per year. I'm not saying we want to stop because we're in the red, but we're doing it as an obligation. I think it's better to spend money on new and advanced services than to waste investment and money.
We are also planning to terminate services such as the phonebook, which hasbeen used very little.
At the same time, we are increasingly introducing systems that respond to customer inquiries with chatbots and automatically answer them in conjunction with AI. I think it is also important to improve efficiency by introducing AI in response to the labor shortage.
Although there is a legal aspect to telegraph services, I believe that we should move toward terminating them at some point.

As you pointed out, the reason for the decline in ARPU is the number of irumo sales. However, irumo itself is a strategic product for competitive purposes, so we want to sell it well and do advertising. Also, the selection of eximo has been increasing recently. As the ARPU of eximo is higher, we intend to increase the overall ARPU by strengthening these sales.
Eximo is also a great way to increase ARPU, and there is a growing need for people to watch videos outdoors, so we are thinking of a strategy to capture these needs and restore the overall ARPU by using large-capacity eximo and ahamo large servings.
We would like to reverse the ARPU within this fiscal year if possible.

NTT DOCOMO has a history of reducing its customer base, and I think it's about time we reached our limit. I think we need to take measures to protect our market share.
Therefore, we will strengthen our marketing, and in addition, we will improve the customer experience by responding to customer needs.
Communication quality is, of course, a major factor in that. NTT DOCOMO President Maeda has been visiting the Yamanote Line to check the communication quality himself, and executives of NTT DOCOMO have now started to visit Nagoya and Osaka to check the quality themselves, so my expectations are very high.
We believe that our customer base will increase by strengthening our marketing measures along with the quality of communications and gaining customer satisfaction, so we will continue to do so steadily.
I think the impact of Rakuten Mobile is the same as other competitors.

The exchange rate itself is difficult to predict, but our business is not so affected by the exchange rate in terms of operating income. On the other hand, if the yen depreciates excessively, energy prices will soar and the cost of communications equipment, which is heavily imported from the United States and other countries, will rise. I think stability is the most desirable.
The plan for this fiscal year itself seems to be set at ¥138, which is a strong yen, but since it was ¥140 in January this year and ¥137 in the first quarter of last year, we have set it at this value. Therefore, if the yen rises above ¥138, there will be a negative impact on operating revenues.
Today it was about ¥147, and in 2023 it was about ¥145 for 1 year, so I think it would be best if the current level is maintained.

I think there are two elements. Even if the U.S. economy declines a little, I don't believe the data center business declines because it's difficult to match customer demand now. I don't think the trend of accumulating and analyzing data will stop, so we need to develop our business that will not be affected by these trends and we will keep up with the growth.
On the other hand, the traditional system integration business may be an affected industry. However, the trend of digitalization itself may not change, so even if a slightly negative trend emerges, I personally think it will not be affected much, though I may be a little optimistic.

Ahamo's poikatsu is going well. Some people join even if they don't use d payment or d card, and we can expect more usage in the future. The "eximo Poikatsu" campaign has just started, and I expect that more people using NTT DOCOMO's payment methods will enter this campaign, so I expect this trend to accelerate.

As for SIM, I think it is relatively liquid because it is easy to change.

I think it's both. Generally, ahamo itself will further strengthen its support remotely, but for example, we will respond to the needs of customers who want to select their handsets while viewing them at the store in a fine-tuned manner, and we will respond to customer requests while cooperating well with the remote and the real world.