Hiroo Unoura, President, CEO
Also in attendance:
Hiroshi Tsujigami, Senior Vice President, Director of Corporate Strategy Planning Department
Takashi Hiroi, Senior Vice President, Director of Finance and Accounting Department
The following are the key points of the comments given at the Press Conference.
(Hiroo Unoura, CEO)
First I would like to explain the Financial Results for the three months ended June 30, 2015,
the highlights of which are as follows.
This fiscal year is the initial year of the “Towards the Next Stage 2.0 ” which is a revised interim management strategy announced in May and also a target year in many respects of the interim management strategy before revision. I, myself, have been watching the values of these three months with more interest than in the past.
Our operating revenues increased by 2.5% to ¥66.2 billion year-on-year, posting an increase for the fifth consecutive year and marking a record high, driven by the growth of overseas operations as well as the domestic revenue which remained at the same level as in the previous year due to the revenue increase from NTT DOCOMO’s Smart Life business. Our operating income increased by 20.4% to ¥358.8 billion year-on-year due to a successful cost control of the regional communications business and the mobile communications business, which shows good progress toward the achievement of our annual target.
Next, I would like to talk about our achievements in the field of global cloud services.
We are continuously promoting the M&A for the global cloud services. In the past three months, NTT DATA acquired Carlisle & Gallagher Consulting Group, a U.S. financial IT consulting firm, to obtain the consulting ability specialized in the financial sector.
In addition, NTT Communications entered into a contract to take over Cyber CSF, a data center provider with the largest server room space in the city center of Jakarta, Indonesia in order to enhance its competitiveness, so that it may meet the rapidly expanding demand for the cloud data center in Indonesia.
Sales from our overseas activities increased by ¥64.6 billion year-on-year to ¥428 billion, accounting for 15.8% of the consolidated sales, up 2.1 percentage points year-on-year, which shows steady growth. Also, the Operating Income from our overseas activities which were set forth as a target in the “Towards the New Stage 2.0 ” increased by ¥2.7 billion year-on-year whereby we can accumulate income steadily.
Next, I would like to talk about our efforts to enhance our earning power in the field of network services.
In the network services business, the user base is steadily expanding in the mobile and fixed broad band.
In the mobile services business, the net increase doubled that of the previous year amounting to 940,000 subscribers due to a good sale of the data plan for the use of the second tablet.
The net increase for the FTTH amounted to 240,000 subscribers with a progression rate of 39% of the annual plan.
The net increase for the Hikari Collaboration Model amounted to 1.05 million subscribers, including 0.11 million new subscriptions with the accumulated number of subscribers being 1.32 million. Unfortunately, we did not have a satisfactory operation system to process the subscription procedures in these three months but our operation is improving recently and I think that the number of subscribers will increase gradually in the coming selling seasons.
In addition, we achieved cost reduction of ¥104 billion year-on-year in the fixed-line / mobile access network and we will continue our efforts to make our business more efficient and reduce costs steadily.
In the announcement of “Towards the New Stage 2.0 ” I said that we will accelerate the transformation into the B2B2X Model taking the Tokyo 2020 Olympic and Paralympic Games as an opportunity for the sustainable growth of our domestic businesses.
In these past three months, we have been steadily enhancing our commitment by establishing a business alliance with Panasonic Corporation and working on the “innovation of visual entertainment” and the “advancement of user experiences” in order to achieve the “coming future” in 2020 and on.
Next, I would like to talk about the outline of our Consolidated Results.
The outline of our Consolidated Results was as reported earlier and now I am making a supplementary statement for the quarterly net income. The quarterly net income increased by 29.7% year-on-year, recording the highest equal to ¥193.2 billion since the first quarter of FY2004, when we disclosed the quarterly financial results for the first time, due to the increase in the Operating Income and under the influence of tax rate reduction by the tax system revision.
Now, I would like to explain the results in each individual segment.
For the regional communications business, the fixed voice revenues still tended to fall but, due to a decreased discount on FLET’S Hikari, reduced marketing cost and reduced depreciation cost from investment efficiency, our Operating Income increased by 74.7% (¥30.4 billion) year-on-year.
In the second half, we assume that the revenue decrease may have more impact due to development of Hikari Collaboration Model, but we will continue our efforts to reduce the marketing cost and to make our business more efficient aiming at income above the target.
For the Long Distance and International Communications Business, the operating revenue increased by 11.5% (¥53.3 billion) year-on-year due to the steady growth of the overseas business. The Operating Income decreased by ¥5.2 billion year-on-year due to the domestic and overseas intensifying competitions as well as the increasing upfront expenses because Dimension Data increased the number of staff in order to increase the sales and customers mainly in the cloud services, IT outsourcing and other growing fields.
In the second half, we will ensure that we achieve the target income by increasing the income by means of the drastic cost reduction for domestic businesses such as the selling cost efficiency and the promotion of the collaboration in the group for overseas businesses like the cross-selling.
The Financial Results for the mobile communications business and the Data Communications Business were already reported by each company and I would like to explain the key points briefly.
Despite the impact of the “monthly support” discount program and “new billing plan” on the revenue decrease, the Operating Income from the mobile communications business increased by 12.5% (¥26.2 billion) year-on-year thanks to the revenue increase of the Smart Life business, the decreasing depreciation cost by investment efficiency and the complete cost control.
In the second half, we will aim at income above the target by achieving further cost control and continuously working towards ensuring the revenue increase in the Smart Life business in addition to the year-on-year profit improvement due to the reduced impact of the new billing plan on the revenue decrease.
The Data Communications Business posted an increase in Operating Income by 130.5% (¥10.7 billion) year-on-year due to the increase in gross margins in conjunction with the increase in sales as well as the reduced impact on unprofitable transactions. We will ensure that we achieve the target income by increasing the sales in addition to continuously minimizing unprofitable transactions.
As I explained, NTT Group, as a whole, had a better start than in the previous year and we will continuously exert efforts to achieve the target. In addition, I think that we could have a very good start in terms of the interim management strategy I talked about at the beginning.
Finally, I would like to explain the Stock Repurchases.
At the Board of Directors meeting today, a resolution has been made for the Stock Repurchases up to ¥100 billion (up to 21 million shares acquired). This resolution is intended for a measure in the initial year to achieve the interim target of EPS 350 yen.
We will continue working towards the improvement of capital efficiency hereafter, too, taking our business performance and market trends into account.
I would like to thank you for your attention.