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CEO Press Conference

August 4, 2017 (Friday)

Financial Results for the Three Months Ended June 30, 2017

Hiroo Unoura, Representative Director and
President, Chief Executive Officer
Also in attendance were:
Takashi Hiroi, Senior Vice President, Director of Finance and Accounting Dept.
Eiichi SakamotoSenior Vice President, Director of Corporate Strategy Planning Dept.

Photo of CEO Press Conference

Summarized below are the key points of the explanations and comments given at the press conference.

(Hiroo Unoura, CEO)

I would like to give the outline of our Consolidated Financial Results for the Three Months Ended June 30, 2017.
We booked increased revenue and increased profit.
Our operating revenue increased by 3.4%, or ¥93 billion, year on year to ¥2.8098 trillion. The operating revenue, both in Japan and overseas, increased year on year by ¥15.8 billion and ¥77.2 billion, respectively. We had been greatly affected by exchange fluctuations until last year, but the impact of exchange rates is neutral in the first quarter of the fiscal year concerned. Some companies and areas have seen positive effects and some others negative ones, but the impact of exchange rates is neutral on a consolidated basis.
Our operating income increased by 0.9%, or ¥4.2 billion, year on year to ¥491.6 billion. The operating income was in line with our expectations and we made a good start to achieve our annual plan.
Owing partially to improvement in our non-operating income and expenses, our net income for the quarter concerned increased by 11.4%, or ¥27.8 billion, year on year to ¥271.5 billion. In the first quarter of the previous fiscal year, our net income reached the highest-ever level for a first quarter, but we posted a new record high in the fiscal year concerned as well.
We saw steady growth in our overseas sales and operating income, both of which increased year on year.

Next, let me explain our major initiatives.
Regarding our initiatives based on the Medium-Term Management Strategy, we took measures to strengthen the profitability of our network services and as a result, mobile services subscribers increased to 75.11 million registering a net increase of 230,000 subscribers, while the number of “Kake-hodai & Pake-aeru” subscribers also continued to grow to 38.34 million, registering a net increase of 1.28 million subscribers.

The number of FTTH subscribers reached 20.29 million, adding 240,000 new subscribers. Of those, the number of Hikari Collaboration subscribers steadily increased to 9.57 million, registering a net increase of 830,000 subscribers.

As for Wi-Fi area owners, our customers (companies and local governments) have been actively promoting Wi-Fi introduction and the number of area owners working with our Group has grown to reach 612, adding 55 area owners.

As for reducing costs in fixed/mobile access networks, as a result of various initiatives which included reduced equipment costs, cost reduction in the first quarter reached ¥28 billion. Therefore, the total of costs reduced since FY 2015 amounts to ¥682 billion. We intend to make steady progression to achieve the Medium-Term Financial Goal of ¥800 billion (cumulative total) in cost savings by the end of the fiscal year concerned, by continuing to reduce costs.

Regarding the promotion of the B2B2X model, in this first quarter as well, the NTT Group companies have utilized AI, big data and IoT technologies in a wide range of fields including sports and agriculture and promoted validation experiments and collaborations in various fields.

Those companies have already released information on their own individual initiatives. As an example of such initiatives, an official technology partner contract has recently been executed with the J. League. As a part of the above project, we are working on the realization of “smart stadiums.” Following Yurtec Stadium Sendai, we started smart stadium services for Ibaraki Prefectural Kashima Soccer Stadium as well in July 22. We intend to further develop these efforts in the future.

Photo of CEO Press ConferenceNext, I would like to explain the results by segment.
As for the annual business performance forecast, we are working to achieve the operating income target of ¥1.59 trillion, or a year-on-year increase of ¥50.2 billion on a consolidated basis. In the first quarter, profits increased by ¥4.2 billion in aggregate due to the fact that the profit decrease in the mobile communications business was made up for by increased profits of other business segments.

The first quarter financial results greatly differ from the business performance forecast for the end of the fiscal year concerned, which was released when financial results were announced in May of this year. With regard to the annual business performance in the regional communications business, profits are expected to decrease. From the previous fiscal year, the depreciation method was changed from the declining balance method to the straight line method, and in connection with this, we also implemented measures aimed at reducing the future burden. Last year, we mainly focused on revising residual value in line with the change in the depreciation method. Initiatives for the fiscal year concerned will have an effect on the results of the second quarter and beyond. Until then, profits from the regional communications business are expected to be on an upward trend, owing partially to cumulative effects of our painstaking efforts in the business, but, in the second quarter and beyond, get closer to the business performance forecast for the end of the fiscal year concerned.

On the other hand, profits from the mobile communications business are expected to improve in the second half, due partially to improved cost efficiency. The above business saw a decline in profits in the first quarter, but we have a plan to set a new tone for a slight profit growth on an annual basis.

In the long distance and international business, we are working to achieve organic growth. Profits increased in the first quarter and since factors such as a reaction to disposal of impaired assets in the previous fiscal year are expected to have an effect in the second quarter and beyond, a profit increase is also expected in the business performance forecast for the end of the fiscal year concerned.

You are kindly requested to confirm that the results of the first quarter of the fiscal year concerned do not necessarily reflect the annual plan due partially to several changes in systems and frameworks.
The first quarter progressed in line with our expectations and we made a good start to achieve our annual plan. We intend to continuously proceed with initiatives aimed at surpassing the targets in the annual plan.

That concludes my explanation on the financial results.

Photo of CEO Press ConferenceNext, I would like to provide some explanation about the progress of the Tokyo 2020 Medal Project: Towards an Innovative Future for All. This project makes Tokyo 2020 a first in the history of the Olympics and Paralympics by involving citizens in the collection of mobile phones and other small consumer electronics used to manufacture the medals for use at Tokyo 2020, and the NTT Group as a sponsor organization supports this project.

In April of this year, we started to collect such devices at approximately 2,400 DOCOMO Shops across Japan. On April 1, a start event took place at the DOCOMO Shop Tokyo-eki Otemachi Branch, with Mr. Matsuda, an Olympic medalist in swimming and Mr. Yamada, a Paralympic medalist swimmer and employee of the NTT Group in attendance.

Thereafter, we started to collect devices from companies, and currently the scale of collections is growing to cover tens of thousands of devices mainly from Olympic and Paralympic Partners.

Moreover, we participated in the Tokyo 2020 Approval Program events such as Japan Walk in SENDAI and have been engaged in collection activities across Japan. In July, we established a new program named “Mobile Phone Recycling Course” targeting elementary school students and see Tokyo 2020 as a good opportunity to promote activities so that recycling activity takes root in the minds of all Japanese citizens.

As a result of these efforts, the cumulative number of used mobile phones we collected reached approximately 740,000 in the first quarter. Compared with the year-ago period, the number of those phones increased by slightly more than 10%. Because all the medals are to be manufactured using recycled metals, however, we need your further cooperation to achieve the goal of collecting 3 million units in the fiscal year concerned.

That concludes my explanation.

Related information
Financial Results for the Three Months Ended June 30, 2017 
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