Medium-Term Management Strategy
Last updated : December 27, 2017
Progress of and Outlook for "Towards the Next Stage 2.0" Medium-Term Management Strategy
Progress toward Medium-Term Financial Targets and Future Outlook
"Towards the Next Stage 2.0" has four financial targets. The most important of these targets is for EPS growth. The other targets are for streamlining capital investment in the domestic network business, reducing costs associated with fixed-line and mobile access networks, and increasing overseas sales and operating income.
These financial targets are set to be achieved in the fiscal year ending March 31, 2018. I will now briefly discuss our current forecasts with regard to these targets.
For the fiscal year ending March 31, 2018, we aim to achieve recording-breaking operating revenues, operating income, and net income. Through efforts targeting this goal, EPS—defined as the most important medium-term financial target—should come to ¥414, exceeding the targeted level of at least ¥400. We are also making smooth progress toward our targets for streamlining capital investment in the domestic network business and reducing costs associated with fixed-line and mobile access networks, both of which we expect to achieve.
With regard to overseas sales and operating income, we have determined that it will be difficult to accomplish the targets of $22.0 billion and $1.5 billion set for these items, respectively, in the fiscal year ending March 31, 2018.
Instead, we are forecasting overseas sales of $19.6 billion and overseas operating income of $1.2 billion. In regard to our overseas operations, we have continued to expand our global business lineup through mergers and acquisitions while pursuing sales and service coordination between Group companies. In the fiscal year ended March 31, 2017, the results of these efforts began appearing steadily as we received orders from customers in various industries around the world. One noteworthy example of a global client would be the Public Transport Victoria of Australia. In the fiscal year ending March 31, 2018, we will step up the cross-selling and other collaborative initiatives we have been implementing thus far and also work toward further cost reductions. At the same time, we will undertake new initiatives, such as the integration and reinforcement of the cloud services of NTT Communications and Dimension Data. We will seek to accomplish our global business targets at the earliest possible date through the continued advancement of such cross-Group initiatives.
Progress toward Medium-Term Financial Targets and Future Outlook
|Category||Medium-term financial targets
(Fiscal year ending March 31, 2018)
|Fiscal year ended March 31, 2017
|Fiscal year ending March 31, 2018
|EPS Growth||At least ¥400||¥391||¥414|
|Streamlining Capital Investment
(in domestic network business) [vs. FY ended March 31, 2015]
|At least ¥200.0 billion||¥136.4 billion||¥205.0 billion|
(fixed-line / mobile access networks) [vs. FY ended March 31, 2015]
|At least ¥800.0 billion||¥654.0 billion||¥830.0 billion|
|Overseas Sales / Operating Income||$22.0 billion /
|$16.9 billion /
|$19.6 billion /
- 1.Overseas operating income excludes M&A-related temporary expenses, such as depreciation costs of intangible fixed assets.
- 2.Streamlining capital investment (domestic network business) excludes capital investment for NTT Communications' data centers and certain other assets.
- 3.Figures for cost reductions (fixed-line / mobile access networks) are financial targets that exclude the impact of the change in the depreciation method for property, plant and equipment.
- 4.Financial targets for overseas sales and overseas operating income and for streamlining capital investment have not been revised.5. In May 2016, the target for EPS growth was revised from at least ¥350 to at least ¥400.6. In May 2016, the target for cost reductions was revised from at least ¥600.0 billion to at least ¥800.0 billion.
Enhancement of Shareholder Returns
We plan to continue increasing dividend payments over the medium term while giving consideration to stability and sustainability. Annual dividends for the fiscal year ended March 31, 2017, were ¥120 per share. We plan to raise dividend payments by ¥30, to ¥150 per share, in the fiscal year ending March 31, 2018, in light of the favorable trends in business performance. This amount is six times higher than when the Company was first listed on the stock market 30 years ago. Looking ahead, we will continue to increase dividend payments while giving consideration to stability and sustainability.
With regard to share buybacks, it was decided to conduct acquisitions of treasury stock with an upper limit of ¥150.0 billion at a meeting of the Board of Directors held in December 2016. These acquisitions were completed in April 2017. This entailed treasury stock acquisitions in the fiscal year ended March 31, 2017, that totaled ¥374.1 billion, including the portion acquired from the government of Japan in June 2016, as well as an additional ¥43.2 billion in acquisitions conducted in April 2017. In the future, we will maintain a flexible stance toward conducting share buybacks based on consideration of factors including performance and market trends as well as the need to improve capital efficiency.
- Figures above have been adjusted for a stock split of common stock (100-for-1) conducted with an effective date of January 4, 2009, and a stock split of common stock (2-for-1) conducted with an effective date of July 1, 2015.
Pursuit of Further Corporate Value Gains
Aim of B2B2X Model Initiatives
In the fiscal year ended March 31, 2017, we were able to accelerate several concrete collaborative projects together with various partner companies through our B2B2X model initiatives. We have been proactive in explaining NTT Group's efforts with this regard. For example, some of these initiatives were described at CEBIT 2017, the world's largest ICT business trade fair, which was held in Germany in March 2017. I feel that strong progress was made in B2B2X model initiatives during the fiscal year ended March 31, 2017. I would like to take this opportunity to refresh your understanding with regard to the aim and concept of our B2B2X model initiatives.
In the "Towards the Next Stage" Medium-Term Management Strategy announced in November 2012, we set forth our goal of becoming a "Value Partner" that customers continue to select and deem valuable. This goal is meant to be achieved by responding to the globalization of markets and the evolution of cloud services in order to break away from being simply a telecommunications operator.
The current era is one in which customers are able to freely choose the services they wish to use. In this era, it is not enough to be chosen once; companies must continue to be selected. Furthermore, this era is no longer one in which telecommunications operators can play a lead role by supplying all the necessary services themselves. NTT Group does not look to play a lead role, but rather aims to become one of many crucial actors in supporting customers as they transform their business models and create new businesses. Launched in February 2015, the Hikari Collaboration Model, the world's first model for full-scale fiber-access services offered through a wholesale framework, is based on this policy. This service is thus aimed at creating new businesses and new, high-value added services together with partners.
The "Towards the Next Stage 2.0" Medium-Term Management Strategy, which inherited this policy, set the clear goal for achieving sustainable growth of exploring new markets by further promoting the B2B2X model. The aim of the B2B2X model is to support the business model transformations of service providers, represented by the center B, in order to contribute to innovation in the lifestyles of end users, represented by the X, or to the resolution of social issues with new services created together with service providers. In this manner, the B2B2X model goes beyond the previous approach of growing earnings by providing network and peripheral services directly to individuals, companies, and other consumers. The true aim of this model is to work together with partners to provide the value born out of NTT Group's strengths to individuals and companies through an ever-widening range of service providers, and thereby create new business models.
We are currently accelerating numerous B2B2X model collaborative projects together with various service providers. These ventures include the merger of Kabuki and ICT to create new and moving experiences in the entertainment field, the realization of smart soccer stadiums and new visual expressions in the sports field, the optimization of manufacturing through the use of the IoT in factories in the manufacturing field, and the development and verification of connected car technologies in the automotive field. We will further build upon these initiatives going forward.
B2B2X Business Model
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