Financial Results for the Second Quarter of FY2024

As you know, I believe that strengthening our customer base and improving communication quality are two of the most important issues this year. We want to accomplish this at all costs. Of course, to achieve this, we need to improve costs in all aspects, but we would like to emphasize these two points.
Thanks to your support, MNP has been going very well recently. For example, EXIMO had planned to transition to the new plan at approximately 60% by the end of FY2024, and as of the second quarter, we have reached that level.

As for the tower sharing business, we are also investing in Southeast Asia. Therefore, a wide variety of people are investing globally, both in Japan and overseas. We have sold the steel towers of NTT DOCOMO and NTT EAST and NTT WEST to JTOWER from the beginning, and we believe there is no risk at all because we have fixed all the basic contracts, including the rates and the terms and conditions if we were to sell in the future. Since the target of this sale is an American company, I think a certain level of international economic exchange is naturally necessary, and we also want to invest in overseas server companies, so I don't think that will cause any problems in economic security.

I will refrain from commenting on the political situation, but I believe that the Japan-U.S. alliance is very important in supporting the Japanese economy and the global economy, so we need to seek stability. Whoever becomes president, I think it is important for Japan to maintain a strong relationship. We are not involved in politics, but I think it is important to cooperate with the United States in the economic field.

Political stability is important for the economy. Stability is not achieved by taking a majority position, but by discussing various values and reaching a consensus on them. I think it is desirable for the political situation to be stabilized in this way.

We are sorry to our shareholders for the drop in stock price caused by the announcement in May 2024 of a decrease in profits for fiscal 2024, but as I mentioned earlier, we believe that individual shareholders are buying what institutional investors have sold. We are very grateful that the number of individual shareholders is increasing, and to raise our stock price from now on, we must steadily raise our business performance. As set forth in the new medium-term management strategy, we will make solid investments in growth areas, earn cash, and I am confident that the growth of these businesses will lead to a rise in stock prices.

First, cost reduction is a perennial issue, so we must make steady efforts. The entire NTT Group, including NTT EAST and NTT WEST, is working to improve processes through AI and DX, so we will steadily promote these efforts.
In addition, regarding the universal service, the direction of allowing the use of mobile fixed-line phones has just been shown this time. We have estimated that the current deficit for fixed-line phones is about ¥55 billion, and about ¥3 billion is covered by the Universal Service Fund, so the actual deficit is about ¥52 billion. By 2035, the deficit will exceed ¥90 billion, but the current review will result in a deficit of about ¥3 billion, which will be covered by the Universal Service Fund, so we think that the balance will be almost balanced.
I think the balance will improve, but it will be necessary to calculate the actual impact on the balance of payments after making a concrete plan on how to roll fixed-line phones into new alternative services based on transition costs, including other companies that have become providers as a result of this review.
In any case, there is no doubt that the conclusion of this report will work in a positive direction for NTT EAST and NTT WEST. I believe that the prospect of changing the current metal fixed-line telephone equipment, which will reach its capacity around 2035, is a major achievement. I am very grateful for the draft report.

I'm aware of the report, but I don't know if it's true or not, and it's up to the government to decide how they want to use their stock, so I'd like to refrain from commenting.

As for semiconductors, I think it has led to industrial promotion in Kyushu and Hokkaido. I think that it is very good to conduct the semiconductor business in Japan from the front-end process to the back-end process, because it will lead to the development of the regional economy, and it will also be a solution to the supply chain issues related to economic security.
Regarding Rapidus Corporation, I think it is very important not only for NTT but also for Japanese companies that produce various products to have a supplier that can produce semiconductors that can be ordered by a small number, so I would like to provide support to the extent that I can.

We received more than 900 inquiries, proposed our services to more than 400 companies, and received orders from 10 companies. Thanks to you, it has been very well received, but once we start providing it, there will naturally be issues. Since the mobility of employment in Japan is lower than in other countries, it has also become clear that Japan is dependent on people and that knowledge and experience are stored in their heads and not in a manual of data and texts.
Unless these issues are addressed in the future, the use of AI will not progress well, and society as a whole may fall behind.
In addition, we have started with 7B, a very lightweight type of AI, but there are customers with slightly larger needs, so we would like to continue development toward next year.
We have about 260 partners who have approached us, and we hope to work with them on sales and tuning as well.
Overall, I think we're making progress.

As for the consumer AI service, we are not considering developing it as a business right now, as it is already in use in the world as a practical matter.

I do not expect it to have much of an impact, but we are also doing business in the U.S., so we will keep a close eye on the situation. We hope it will have a positive impact.

I am not talking about anything specific, but to take it to the extreme, I think that wiring harnesses should also be made of light. Although we are currently working on converting semiconductor electronic circuits to optical waveguides, I think it is quite possible that photonics-electrics convergence device will replace them in a variety of devices in various fields.
Of course, we need to solve durability issues, but we would like to promote such research and development as well as talk with automobile manufacturers and electrical component manufacturers.
What I have just said is not something that can be done immediately, but I believe that there are opportunities.

It is difficult to comment on the decision to build the data center in Tochigi City, since it is not a fact that we have decided on Tochigi City, but it is true that the members of NTT Global Data Centers are searching for a suitable location for the data center in Japan where electricity can be supplied.
If there is suitable land around the Tokyo metropolitan area, it would be very advantageous, but Inzai City is already occupied. I think it's very valuable to have a data center in a place that's a little bit far away from Tokyo metropolitan area but also accessible. In that regard, the location reported in the press is one of the major candidates.

I think it's a good business opportunity. As a cashless society advances, putting payroll itself on a digital platform would be very convenient for users, so I don't think it is something to deny at all.

At a recent press conference, President Sato of Toyota Motor Corporation mentioned that they would first conduct experiments in Woven City.
Woven City is a project of Toyota Motor Corporation, so I will refrain from commenting on the details of the project. We were originally planning to work on a smart city project with Toyota Motor Corporation in the Shinagawa area, but the development itself has been delayed slightly due to urban planning issues. We would like to proceed with various trials in appropriate locations as we move forward with this new initiative with Toyota Motor Corporation.