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Edited Transcript of 9437.T earnings conference call or presentation 26-Apr-19 8:30am GMT

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Update time : 2019-05-09 17:00:04

Full Year FY18 language Ending March 31, 2019 NTT Docomo Inc revenue Presentation

Tokyo Apr 30, 2019 (Thomson StreetEvents) -- Edited Transcript of NTT Docomo Inc revenue council yell or presentation Friday, April 26, 2019 can 8:30:00am GMT

TEXT translation of Transcript

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Corporate Participants

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* Hiroshi Tsujigami

NTT DOCOMO, INC. - Senior Executive VP, Executive GM of Sales & Marketing section of Broadband affair and Director

* Hiroyasu Asami

NTT DOCOMO, INC. - Senior Executive VP of Technology, Devices & data tactic and delegate Director

* Kazuhiro Yoshizawa

NTT DOCOMO, INC. - President, CEO & delegate Director

* Keisuke Yoshizawa

* Kenichi Mori

NTT DOCOMO, INC. - Executive VP, Executive GM of Smart-life affair section and Director

* Osamu Hirokado

NTT DOCOMO, INC. - Executive VP, CFO, GM of Accounts & Finance maintain and Director

* Seiji Maruyama

NTT DOCOMO, INC. - Executive VP, GM of Corporate tactic & Planning maintain and Director

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Conference yell Participants

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* Daisaku Masuno

Nomura Securities Co. Ltd., investigation section - head of data & Telecommunication Team, Japan & Analyst, Telecommunications Research, Japan

* Kei Takahashi

UBS Investment Bank, investigation section - Executive Director and Telecom & Software Analyst

* Mitsunobu Tsuruo

Citigroup Inc, investigation section - VP and Analyst

* Satoru Kikuchi

SMBC Nikko Securities Inc., investigation section - Senior Analyst

* Shinji Moriyuki

SBI Securities Co., Ltd., investigation section - Analyst

* Tetsuro Tsusaka

Morgan Stanley, investigation section - investigation Analyst

* Yoshio Ando

Daiwa Securities Co. Ltd., investigation section - investigation Analyst

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Presentation

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Keisuke Yoshizawa, [1]

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(foreign language) Thank you equal much during your patience. We comprehend your taking the time in spite of your busy catalog during our conference. We used to now alike ought begin NTT DOCOMO Fiscal 2018 economical Results Presentation. I will exist serving during MC during today's parliament my assign is Yoshizawa, head of Investor Relations. amuse exist advised that this council is alive advertise above the Internet and the recorded video will exist posted above the Docomo's IR website later, amuse exist advised of that can advance. preceding ought the presentation, I used to alike ought introduce the participants from NTT DOCOMO today, principal and CEO, Mr. Yoshizawa; Senior Executive Vice President, Mr. Asami; Senior Executive Vice President, Mr. Tsujigami. We too read 3 members of the Board and Executive Vice Presidents, mutual Manager during Corporate tactic and Planning maintain Mr. Maruyama; mutual Manager of Accounts and Finance Department, Mr. Hirokado; and Executive mutual Manager of glowing Life affair section Mr. Mori.

As during today's agenda, we used to alike ought first read a presentation by the principal and CEO, Mr. Yoshizawa. Using the presentation slides, he will talk approximately 30 minutes, after which we will alike ought amuse your questions. We wish ought sum approximately 7 O'clock today, besides during we used to alike ought amuse during many questions during possible. Finally, regarding the forward-looking statements, including the statements made during the Q&A session, amuse refer ought the final page of the presentation deck. Now, we used to alike ought begin the presentation, Mr. Yoshizawa, please.

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Kazuhiro Yoshizawa, NTT DOCOMO, INC. - President, CEO & delegate Director [2]

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Thank you equal much during your valuable time today this afternoon. I used to now alike ought begin the presentation chiefly above the results during the fiscal 2018 results. We'll assign into 3 parts. First part, I'll lesson approximately the results highlights during 2018. I used to too alike ought lesson approximately the guidance during 2019 and the shareholder returns. And can the third part, I used to alike ought lesson approximately the actions envisaging 2020 and beyond. Now, I used to alike ought begin with the economical results during 2018. Operating revenues increased by JPY 78.6 billion year-on-year ought JPY 4,840.8 billion. Operating advantage increased by JPY 26.7 billion ought JPY 1,013.6 billion. consequently we recorded an enlarge can both revenue and advantage above the operating level. can 2017, we received the arbitration grant from Tata Sons of India. And although of this impact, the advantage attributable ought the shareholders of NTT Docomo Inc. decreased by JPY 127.2 billion year-on-year ought JPY 663.6 billion. Accordingly, free money flow too decreased by JPY 243.4 billion ought JPY 619.4 billion.

This is the results by segment. Telecommunications business, operating revenues increased by JPY 82.7 billion and operating advantage increased by JPY 12.1 billion. during for glowing Life affair and other businesses combined, operating revenues decreased by JPY 1.1 billion and operating advantage increased by JPY 14.6 billion. The decline of operating revenues can glowing Life affair was due chiefly ought the touch of Radish Boya shares and consequently the revenues of the affiliates and subsidiaries decreased compared ought the previous fiscal year.

And this shows the key factors after the year-on-year changes can operating allowance -- operating profit. The operating revenues above the left-hand side and operating expenses above the right-hand side. First, operating revenues increased by JPY 78.6 billion year-on-year. The key factors of this retain the decrease of mobile communications service revenues of JPY 22.9 billion, owing ought the visitor respond measures, enlarge of visitor respond measures, and the optical fiber service revenues increased by JPY 60.9 billion and other operating revenues decreased by JPY 13.9 billion owing ought the touch of Radish Boya shares. And above the other hand, handset sales-related revenues increased by JPY 54.6 billion owing ought the enlarge of wholesale revenue per unit. above the other hand, the operating expenses above the right-hand side, increased by JPY 51.9 billion, consequently operating advantage increased by JPY 26.7 billion ought JPY 1,013.6 billion.

Now, the operational performance. First, I used to alike ought lesson approximately the d POINT league members. The membership base is the concentrate of our affair management, we made that declaration. consequently I used to alike ought lesson approximately the membership of d POINT league first. This exceeded 70 million and reached 70.15 million, up 7% year-on-year. The complete amount of d POINT league registrants, who are the users, who are able ought use d POINT services can the stores above the street, increased by 1.54 million ought 33.72 million. Telecommunications operations results. Mobile telecommunications service subscriptions increased by 3% ought 78.45 million. Churn appraise above the right-hand side, excluding the MVNOs numbers, was 0.57%. The handset churn rate, can special although of our efforts, such during the appraise consultation beautiful and the smartphone classes, although of these efforts, handset churn appraise was maintained can a equal low even of 0.47%, achieving an improvement compared ought the previous fiscal year.

Next the smartphone and tablet user base, exceeded 40 million and reached 40.53 million, up 6% year-on-year. Of course, we however read consequently many feature phone users, consequently can fiscal 2019, leveraging the introduction of the new appraise plans, we used to alike ought farther emigrate the subscriber migration from feature phones ought smartphones. And the docomo Hikari subscribers increased by 1 million ought approximately 5.76 million -- 5.76 million. ARPU. The negative shock of the visitor respond measures read been offset by the enlarge of docomo Hikari subscribers. consequently the fourth belt aggregate ARPU, including the shock of discounts such during Monthly uphold discount increased by JPY 50 year-on-year ought JPY 4,770.

Now, the network, we read made this comparison of the network effective speed. This is based above the effective haste that was measured and announced by each company based above the guidelines of the MIC, we were the fastest during both downloads and uploads can Japan. And we used to alike ought succeed our efforts ought supply a comfortable network surroundings during our customers. Next, fare efficiency improvement. can the fourth belt alone, we achieved improvement of JPY 22 billion and during the entire year of 2018, we achieved fare efficiency improvement totaling JPY 120 billion. consequently we achieved the goal that we read declared. We will succeed ought trade above fare efficiency improvement can fiscal 2019.

Next, glowing Life and other businesses operating profit. Compared ought the previous fiscal year, we achieved 11% enlarge and the operating advantage reached JPY 147.3 billion. although there were impairment losses from the overseas subsidiary, we were able ought attain a higher operating advantage compared ought our initial guidance of JPY 140 billion.

I used to alike ought grant you the breakdown of the advantage contribution of the headmaster services that you yell on above the right-hand side. The mobile tool protection service and other peace of brood uphold accounted during 45%. The sumit one, content/commerce services such during DTV and DAZN during Docomo, those content/commerce services accounted during nearly 20%, and then economical -- finance and payment services such during d CARD and d Payment accounted during nearly 20%, and the remaining Enterprise solutions such during corporate IoT solutions accounted during the remaining 15%.

I used to alike ought progress into the details of those service domains. First, approximately the finance and payment service. This is a transaction volume that was processed. This increased by 24% year-on-year ought JPY 3,910 billion. The d CARD members increased ought 19.95 million, and above the 16th of April, it exceeded the 20 million mark. And specially the d CARD gold members continued ought enlarge its subscriber base, increasing 36% year-on-year and reaching 5.28 million. d CARD, we are seeing an enlarge can the habit of d CARD and the payment services, and accordingly, we read achieved significant -- favorable enlarge can the transactions quantity processed with our finance and payment services.

Next, I used to alike ought lesson approximately d Payment, the QR principle payment service. Both the users and the merchants are increasing can a favorable speed and above the 7th of April, the complete amount of apps downloaded topped 4 million. entire those merchants and the member stores are listed up above the right-hand side and we will succeed ought trade with a great amount of partners ought farther enlarge the d Payment services going forward.

d POINT, the d POINT habit above the left-hand side. The d POINTs used increased by 30% year-on-year ought 162.7 billion points, of which the d POINTs use can comrade stores accounted during 47% of the total, up 1.5-fold (sic) [1.8-fold] year-on-year and reached 76.8 billion points. The d POINT partners above the right-hand side, it too increased by 1.8-fold ought 418 partners and the amount of our participating stores exceeded 100,000 above the 11th of April. Going forward, we will succeed ought trade together with our partners, consequently that we can invent the program attractive and more convenient during our partners too during the members.

Next, the promotion of +d activities. The amount of +d partners continued ought enlarge can a favorable pace, and these are partners that you yell on above the screen, read joined this program can the fourth belt and the complete amount increased ought 843 now. We will succeed ought trade with those partners ought hurry the appraise co-creation below that +d program.

Next, I used to alike ought lesson approximately the progress of implementation of declaration beyond our medium-term tactic 2020. during for the initiatives ought forward appraise and excitement ought customers below declaration #1, we read introduced Disney DELUXE, below the declaration #2, we started the deed of AI-operated automobile service, and declaration #3, we are working ought diminish the attendance time and wait time can our shops.

And next, I used to alike ought lesson approximately the appraise co-creation with partners during the -- below declaration #4, we read continued ought equipment different new strategies towards the commercialization of 5G service, below declaration #5, we read concluded the chief and affair league with M3, and below declaration #6, together with Dentsu, we created a new company during OOH digital advertisement, Life Board Inc.

And can 2018, during the entire year, these are the actions that we read undertaken can order ought forward declaration beyond, including the visitor respond measures, the brisk expansion of the 5G cavity lab, and including entire those measures during 5G era, we read steadily implemented different initiatives below declaration 1 along declaration 6.

And here we read shared with you the medium-term tactic and we read indicated the medium language operational indicators, and during 2021. can 2018, this is a chase record. during you can yell on here, we are making a steadfast progress towards the goal of 2021.

Next page, can the time we announced the second belt results, we talked approximately the measures ought reinforce our catastrophe preparedness and it's can the left-hand side. What we will conduct is introduce and begin introducing storage batteries can 1,100 Docomo shops, and by the aim of May, we used to alike ought install ought entire the shops throughout Japan. And during with admire ought the use of multiple transmission routes, we read already completed the roll-out can Hokkaido. Going forward, Docomo will succeed ought reinforce the catastrophe preparedness above a engagement in/day out basis, and consequently that we will exist able ought perfect our network safety and reliability down the road.

Next, with admire ought ESG evaluations, can Toyo Keizai Corporate CSR Ranking 2019, we earned #1 overall ranking during the second straight year. And during with admire ought Nikkei glowing trade Management Survey, we were awarded the highest 5-star rating during the second straight year during well. And too we were recognized during the encouragement and empowerment of women, during you yell on above the bottom, we were selected ought the Nadeshiko Brand. And too with admire ought Eruboshi Certification, we were awarded the highest certification of degree 3 can this special division during well. consequently I've talked approximately the economical results of the fiscal year 2018, the outline is above this page during you see. consequently that is the results and the outline of fiscal year 2017 (sic) [2018] economical results. consequently section 2, start me lesson approximately the guidance and shareholder returns during fiscal year 2019. consequently start me now grant you the fiscal year 2019 guidance. With the introduction of new appraise plans, the Gigaho and Gigalight, during the goal of reinforcing our visitor base, we will bring out approximately JPY 20 billion worth of visitor respond during this fiscal year. And can cord with that, operating revenue, during you yell on above this page, will decline by JPY 260.8 billion, down ought JPY 4.58 trillion and operating advantage will decline JPY 183.6 billion down ought JPY 830 billion. consequently we wish decrease can operating revenue and operating advantage during this year.

With admire ought operating advantage during glowing Life affair and other affair is expected ought enlarge JPY 12.7 billion, up ought JPY 160 billion, CapEx JPY 570 billion, free money flow JPY 530 billion, and fare efficiency of JPY 130 billion, will we excel the even of the previous year is ought exist expected. And this is reflected can our guidance. consequently that is the guidance we read during this fiscal year.

Now with admire ought the actual initiatives, what are we going ought do? Well, 2019 will exist the year ought murder alter ought shove farther growth. consequently of course, with the dynamic alter of the impartial environment, we'd alike ought reinforce our competitiveness can anticipation of these changes, and this will introduce new appraise plans Gigaho and Gigalight, and will heighten our relationship with our customers and can the equal time promote the most optimal proposal ought each feature customers, thereby enhancing our visitor base and translating that into enlarge can operating revenue and that is the one -- the first pillar.

As during the medium-term growth, we're focusing above finance payment and enterprise solutions sector. We outlook ought farther yell on steadfast growth can glowing Life affair sector. And too we will tackle 5G commercialization, and can the equal time, we'll attain fare efficiency improvement of higher than fiscal year 2018 of JPY 130 billion. consequently that is what we used to alike ought do.

So during for fiscal year 2019, we used to wish decline can both operating revenue and operating allowance or profit, during impartial mentioned, however, with these initiatives. And also, we wish that we'll exist able ought hurry these efforts along promotion of digital marketing and leverage data, and ought cause and hunt farther enlarge can operating revenue down the road. (inaudible) those efforts, consequently we read ought invent certain that fiscal year 2019 is the bottom year can condition of the operating advantage and cause fast recovery of profits during instantly during possible. consequently we outlook ought invent certain that we bottom out can condition of our operating advantage can fiscal year 2019, that is our thinking. We used to alike ought yell on and recover our operating advantage during instantly during possible.

Now with admire ought the promotion during digital marketing, up until now Docomo has expanded our affair partnership along +d program during you yell on above the top. And can the equal time, during you yell on above the bottom, below the policy of affair operations leveraging membership base, we've tried ought supply subsidy -- services pretty ought our non-subscription -- non-Docomo subscribers and joining (inaudible) and d POINT CLUB. consequently we wish that will use these services -- we wish that these customers will use these services and promote digital marketing.

And during you yell on above the right-hand side, we lesson approximately rolling out marketing automation, and consequently we outlook ought invent certain that we hurry commercial transactions, strengthen partnership relationship with our members. And consequently representative economical and payment services entire are incorporated, and along these, we outlook ought invent certain that we cause new appraise during the customers. consequently that's what we outlook ought do.

Next, start me now lesson approximately new appraise plans, and we used to alike ought recap the new appraise plans. The first is that it is equal foolish and straightforward. consequently we read Gigaho, where you can use network and too we read the Gigalight based above the quantity of data usage. It's a equal foolish appraise scheme where you can elect only from the 2. There are concerns that other indispensable monthly charges will exist charged or the other charges we charge, and we received those calls along yell centers, it seems that they're misconceptions. consequently we read ought invent certain that high-speed, indispensable scheme and package pack, entire are integrated during one packet can these appraise plans, consequently -- and you can invent sound calls based above these plans. And we read ought invent certain that we advertise that fact going forward.

And too Minna DOCOMO Wari. consequently we read -- it's [promised] above family discount, consequently the -- and the recognition approximately the family discount plans are no however vigorous established amid the customers. Some customers don't know if they're no -- if they're section of this plan, if they invent a yell along the (inaudible) and too -- and if you outlook ought note the family orchestra discount you could conduct consequently along phone calls, consequently that's been the case during you see. consequently 3 or more members or nearly 70% of masses are joining the family discount orchestra with 2 or more members and too 15% of the customers with 2 or more members are joining the family discount. So, obviously 85% of the customers are now using Minna DOCOMO Wari can a equal beneficial manner. And consequently I impartial outlook ought reinforce this point once again. And consequently with admire ought family discount, you'll exist able ought conduct the procedure along phone yell equal easily, consequently you can invent subscriptions equal easily above the phone, amuse attitude that can mind.

And too next, compared ought the existing rates how much benefits can you gain, and ought reinforce this point once again. With admire ought Gigaho, compared against 30 Giga data L-pack or LL packet rather, compared against that, Gigaho represents 30% reduction. during with admire ought Gigalight, low volume customers who use less than 1 gigabyte are truly 40% of the total, during them this represents a 40% reduction. consequently approximately 40% of the customers use less than 1 gigabyte. during example, let's say, 20% of the customers are among 1 gigabyte ought 3 gigabyte, and this represents 30% reduction during those zone. And too above 7 giga, that represents approximately 20% or more of the visitor base and they'll exist able ought yell on 30% reduction during well. consequently therefore during most customers, I used to say, that they'll exist able ought yell on more than 30% fare reduction during a arise of this new appraise plan. consequently therefore, I trust they'll exist able ought undergo this reduction. consequently with these reductions, during new appraise plans, we trust that 2019 will read [JPY 20 billion] shock from the visitor respond program during this fiscal year.

Next, start me lesson approximately our shareholder returns. consequently we'll bring out dividend enlarge and portion repurchase. We'll succeed dividend enlarge and portion repurchase during this fiscal year and the dividend per portion will exist JPY 120, an enlarge of JPY 10 from the previous fiscal year. And too today, we talked -- we announced the location of the authorization during portion repurchase and too carrying out portion repurchase from the market, we've made those resolutions can the Board of Directors. And from can 7th along April 7th -- April 30th of 2020, we'll bring JPY 20 billion portion repurchase and we will succeed ought reinforce our shareholder respond and [seek efficiency] and chief efficiency.

And during you see, this is the history of -- historic expansion of shareholder return. during 6 years, we read continued ought enlarge our dividend per share. And during with admire ought portion repurchase, we've been doing consequently during 7 years during -- 6 years consecutively from 2014, and we'll succeed ought reinforce shareholder return. consequently that's entire during the actions can the fiscal year 2019 guidance and shareholder returns.

Let me lesson approximately actions envisaging fiscal 20 -- 2020 pretty and beyond. start me now lesson approximately 5G spectrum. above April 10th, we received spectrum allocation above April 10th from MIC. consequently 20 MHz people can 3.7 and 4.5 GHz , and too can 28 GHz band, 400 MHz of bandwidth. That's what -- that was the spectrum allocation and with this we will now begin belt construction that takes advantage of 5G's only properties. And we trust that we are now making a well begin toward the pre-commercial service during September this year.

With admire ought 5G pre-commercial services, consequently we read 2019 Rugby soil Cup, and with that receive advantage of that. From September 20th of this year, we will begin 5G pre-commercial services. consequently can stadiums and alive viewing venues, we will introduce multi-angle of viewing and too eSports and too a new sensory alive [service] we will supply the new services whereby one can undergo and leverage 5G. And too can conjunction with that, during you yell on above the right-hand side, industry creation and solution of social issues. during this project, we outlook ought farther chase co-creation with a broad class of partners. Already, during we speak, more than -- we read [JPY 280 billion] -- we read more than 2,500 of partnership members and we outlook ought invent certain that we conduct this along the 5G pre-commercial services.

And this is something I'll exist sharing during the first time. This is the My Network Kousou, which is a new initiative during the 5G era. consequently My Network Kousou. It's no impartial during us can order ought link different devices such during outer tool with service solutions with -- of the 5G period can no impartial smartphones. We will use the 5G cavity comrade Program and cause a new meaning of the soil with tool vendors and service application vendors. consequently 5G period isn't impartial approximately smartphones. We can equate a sensation of the soil impartial with smartphones. We absence a hub and gateway during the smartphones, and consequently with reality and wearables, cameras and hearables, entire of these make ought exist incorporated only ought this network that enclose you. That is the class of space that we outlook ought cause during the 5G.

And one chief concrete example during that and this is something we announced today. We outlook ought supply new appraise during the 5G and consequently during the goal of creating a new video service of 5G period and enhancing our efforts can the mix reality using spatial computing, what we read done is ought bring out a -- announcing a partnership during chief Alliance, if you will, with Magic Leap. consequently by combining state-of-the-art spatial computing MR technologies of Docomo's -- correction, combining the state-of-the-art MR techniques and Docomo's [as a single] membership base, we used to alike ought forward XR based service only during Japan and Docomo (inaudible) impartial putting MR can the core.

To exist more specific, we'll supply services where one can undergo a new soil such during 3D based immersive games and alive performances can alive space. And too -- and can the equal time, during you yell on above the right-hand side, it seems that you read the breakdown of the core. besides during for the enterprise services, we'd alike ought promote ought the acquisition of technique and improved operating efficiency, based above 3D can different factories and hospitals using this techn