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 core 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 December 31, 2015, the highlights of which are as follows.
Operating revenues increased 3.8% year-on-year (+ ¥312.8 billion) for a sixth consecutive year of positive growth. This increase was created by growth in overseas operations and increased revenues in domestic businesses, namely NTT DOCOMO’s mobile communications, Smart Life business, and SI businesses. This marks the highest total operating revenue ever recorded for this three-month period since we began releasing three-month Financial Results in 2004. Operating income grew by 23.7% year-on-year (+ ¥215.6 billion) to a total of ¥1,126.6 billion, boosted by thorough cost-efficiency measures implemented in the regional communications and mobile communications businesses.
In global cloud services, overseas sales increased ¥273.5 billion year-on-year to a total of ¥1,422.6 billion. This steady growth increased global cloud services’ share of consolidated sales by 2.7 points over last year to 16.7%. Operating income from overseas activities also saw a solid increase by ¥8.9 billion year-on-year. Additionally, the ¥273.5 billion increase in overseas sales includes ¥39.7 billion from foreign exchange effects.
Next, I will discuss our efforts to improve earning power in the network services field.
In network services, we are steadily growing our user base for mobile and fixed-line broadband services. In mobile services, sales of data plans for “second tablet” usage and other developments are strong, with net additions growing by 1.4 times year-on-year to 3.01 million subscribers. The Hikari Collaboration Model gained 510,000 net new additions, bringing the total number of subscribers to 3.48 million. Expansion of the sales structure and an increase in the number of service providers for the Hikari Collaboration Model brought 280,000 new lines in this three-month period alone (Oct. - Dec.), which is 1.5 times the number of new lines achieved in the preceding three-month period (July - September). Wi-Fi services have also grown steadily as area owners have doubled since the end of last fiscal year to a total of 322, reflecting the active work on the part of businesses and local governments to implement Wi-Fi as a powerful tool for their own information services.
In addition, costs for fixed/mobile access networks were successfully reduced by ¥346.0 billion year-on-year (versus the goal of ¥600.0 billion) in this three-month period. We intend to continue streamlining business and steadily reducing costs on into the future.
Although our Consolidated Results are as outlined, net income in this three-month period increased due to growth in operating income and tax reform, among other factors. Net income increased by 34.3% (¥154.1 billion) year-on-year to a total of ¥604.1 billion.
Next, I will explain the results for each of our individual business segments.
In the regional communications business, revenues from voice communication continued to decline, but reductions in marketing costs and reductions in depreciation through more efficient investing managed to increase income by 76.6% year-on-year, or ¥100.7 billion. This is the largest income we have ever posted for this three-month period (Oct. - Dec.) since we began releasing three-month Financial Results in 2004. In the next three-month period (Jan. - Mar.), we will enter the first real moving season since the introduction of the Hikari Collaboration Model, making it somewhat difficult to predict how net subscribers will change. However, we will continue to work to reduce marketing costs and streamline business on into the future to achieve incomes exceeding our targets.
The long distance and international communications Business grew by 15.8% (¥228.1 billion) year-on-year as the overseas business posted steady growth. Operating income declined by 6.5% (¥5.7 billion) year-on-year, primarily due to increased operations associated with expanding sales in Dimension Data’s existing businesses and increased anticipatory costs in growing sectors.
In the future, we will secure our target income by thoroughly reducing costs in our domestic business and pursuing cross-selling and cross-group streamlining measures in our international business.
In the mobile communications business, mobile communications services achieved increased revenues due to successfully addressing the dampening effects of the new rate plans and increased packet revenues from “second device” usage. The Smart Life business also achieved a healthy increase in operating revenues. Cost-efficiency measures including reducing network costs through efficient investments helped to increase income by 16.8% (¥98.2 billion) year-on-year. This marks a healthy recovery from the major income decline of last fiscal year. It is difficult to make any predictions about the next three-month period, as it is the most competitive time of the year, and moreover we will be implementing the revisions of rate plans and device sales methods prompted by the task force on mobile device rates. Although these factors introduce some uncertainty, we will continue pursuing cost-efficiency measures and aim for incomes exceeding our target in the future.
The data communications business achieved a 30.5% (¥17.3 billion) increase in income year-on-year due to sales growth and the reduced impact of unprofitable transactions. In the future, we will attain our target income by continuing to work to grow sales and limit unprofitable transactions.
Next, I will discuss adjustments to the results forecasts for the NTT holding company alone.
Regarding today’s announcement by NTT DOCOMO that it will launch a tender offer for ¥350.0 billion in treasury stock, we have decided in today’s Board of Directors meeting to contribute, as we did in August 2014, ¥300.0 billion of our own NTT DOCOMO stock. Additionally, it has also been decided that we will also receive a ¥100.0 billion special dividend from NTT East, scheduled for receipt at the end of this month. This dividend from NTT East will be added to operating revenue, while the proceeds from the sale of NTT DOCOMO stock will be added to extraordinary income. As a result, the net income forecast for this year has been adjusted from the ¥393.0 billion reported in last year’s interim Financial Results to ¥681.0 billion.
Because these transactions will be conducted within the NTT Group, there will be no effect on the consolidated results and hence there is no need to adjust the consolidated forecasts.
The above initiatives will be used to improve the balance sheet of the NTT holding company. While taking financial conditions and capital efficiency into consideration, we continue to focus on capital investments, shareholder returns, and debt repayment by using capital.
Lastly, I will discuss dividend increases.
It was determined in today’s Board of Directors meeting to increase the year-end dividend to ¥60 (i.e., ¥10 higher than initially forecast) thereby making for dividends of ¥110 annually per share. This decision is based on our achievement of our 2012 goal to grow EPS by over 60% by FY 2015, and our steady progress toward our May 2015 goal to grow EPS to over ¥350 by FY 2017. We made this decision to contribute back to the investors and stockholders who have supported our mid-term management plan up to this point. Additionally, this dividend increase is the fifth consecutive increase since FY 2011. We have increased the dividend by 83% from FY 2010, from its FY2010 value of ¥60 to its new value of ¥110.
This concludes my report. Thank you for your attention.