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CEO Press Conference

February 7, 2019 (Thursday)

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Financial Results for the Nine Months Ended December 31, 2018
Jun Sawada, Representative Director and President, Chief Executive Officer
Also in attendance were:
Takashi Hiroi, Senior Vice President, Director of Finance and Accounting Dept.
Ryota Kitamura, Senior Vice President, Director of Corporate Strategy Planning Dept.

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

(Jun Sawada, CEO)

I’ll start by giving a brief summary of our financial results for the third quarter of the 2018 fiscal year. Our financial results can be summed up as higher revenue and profits. In fact, we had the best third quarter ever. Business revenue, operating income, and net income for the quarter all set record highs two years in a row, three years in a row, and two years in a row, respectively. We are on track to achieve the annual target.

The business revenue was about the same as our plan thanks to the steady growth of the mobile communications business and data communications business. Regarding operating income, all segments except for “Other businesses, etc.” saw growth from the same time the previous year.

First, the regional communications business. Profits grew from the same period in the previous year thanks to continued cost reduction efforts and a smaller impairment loss related to metal cables than the previous year. We will continue our efforts to beat the annual target.

Profits of the long-distance international communication business increased from the same period in the previous year thanks to the improved profits of Dimension Data and no impairment loss this fiscal year as opposed to the previous fiscal year.

The mobile communications business also saw a year-on-year increase in profits thanks to better cost efficiency and the steady growth of docomo Hikari and the “smart life” field. We will not revise our annual target because we want to set aside adequate profits for a loss from our new measure to return profits to customers in the fourth quarter, although we are not sure how big the loss will be and also because we will take a measure to mitigate expenses of the following years.

In the data communications business, unprofitable projects resulted in a loss while domestic and overseas businesses expanded strongly. As a result, the data communications business had a year-on-year increase in profits.

There are five topics I would like to touch on.

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The first topic is about the promotion of the B2B2X model. Our medium-term business strategy sets a goal of increasing the number of projects to 100 by FY2021. We now have 13 under way. To make sure that we can achieve the goal, we will establish the B2B2X Strategy Committee in the company. The Committee will start this month and we expect all groups to join, update each other on efforts, and work together. For instance, we would like to promote our B2B2X model in areas including credit scoring with Shinsei Bank, provision of DX solutions for call centers, and recently announced TOB for Netyear Group by NTT DATA.

Second, we decided to switch the parent company of NTT Plala from NTT Communications to NTT DOCOMO with a view to strengthening video content business as part of our efforts for “promotion of personalization” stated in the medium-term business strategy. In addition, NTT Plala will invest in East Group Holdings, which is said to be the number one independent content production company. By directly working with the program production company, NTT Plala aims to enhance its content production capabilities. NTT Plala will produce new content, personalized content, and unprecedented kinds of content which will be a good match for, New Experience Live Viewing recently held by NTT DOCOMO.

Third, I will give you a summary of updates on efforts to strengthen the competitiveness of our global business. Let’s start with what we call IMO (Integration Management Office), which is the project for integrating NTT Communications, Dimension Data, and NTT Security. It started by assigning 60 core members. IMO is now working to develop a reorganization basic plan and an action plan as scheduled. NTT, Inc., which is an intermediate holding company, has increased its directors since its launch in August last year. As most of the director positions were filled, I will give you their names today. First, Mr. Shimada, Mr. Okuno, Mr. Brandon Lee, and I. We all concurrently hold positions at the holding company. Then, the President of NTT Communications Mr. Shoji and the President of NTT DATA Mr. Honma. In addition, there are two executives from Dimension Data. We have three non-Japanese directors. While most of us hold two posts concurrently, we have Mr. Yanase, the former Vice-Minister for International Affairs, Ministry of Economy, Trade and Industry, on board as an outside director from February 1. I directly requested him to join us. It is not that somebody asked me to do so. Mr. Yanase was practically in charge of negotiations with other countries on economic policies, so his worldwide human resources network and skills would help us a lot. Next, as auditors, Mr. Maezawa and Mr. Ide are looking after NTT, Inc. besides concurrently working as auditors at the holding company. To enhance governance, we have also decided to assign Mr. Enomoto, the former Executive Vice President of NTT DATA who led global business, as a standing statutory auditor.
Speaking of global business, we announced in January that we would be the title sponsor for the IndyCar Series with a view to strengthening the One NTT brand. The IndyCar Series will bear the name NTT, replacing Verizon, when the season starts in March 2019. As the official technology partner, we also work with the IndyCar Series for smartification of races and circuits and improvement of fans’ experience. All the racing cars (around 30) and racing suits will have NTT’s logo. The Series will have 17 races in 15 cities in North America a year. We are hoping to see a significant effect regarding brand recognition as the sport is popular in North America, watched on TV by an average of around a million households per race. I know some people argue that NTT DATA is not doing well in North America but we, as the holding company, will strive to improve the business through efforts like this.
We will participate in MWC19 as NTT Group. There, we will present case examples for realization of a Smart World, new 5G services to be commercialized in 2020, and other cutting-edge technologies.

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Let me move on to the fourth topic. In our medium-term business strategy, we stated “Leverage talent, technology and assets”. To this end, we will advance our efforts in the field of energy among others. We will provide communities with smart energy solutions which utilize AI and telecommunication buildings. First, we would like to install batteries in NTT offices to realize a structure which enables backup when commercial power is out in case of a disaster as well as from the perspective of promoting the local consumption of locally produced goods in normal times. This week we signed an agreement for joint studies with the Chiba City, which is willing to advance its transformation into a smart city and support our concept. Specifically, we will try emergency backup, regular cost reduction, the local consumption of locally produced goods, etc., in Chiba City by using direct current.

The fifth topic is about shareholder returns. Regarding dividends, we resolved to increase the year-end dividend to 95 yen at today’s board of directors, up 10 yen from what was expected at the beginning of the fiscal year. The dividend per share is 180 yen a year, up 30 yen from the previous year. We increased the dividend 30 yen the previous year, and we will do the same this fiscal year as well. In our medium-term business strategy, we also expressed our intention to increase dividends steadily as our basic policy for shareholder returns. As we are on track to meet our annual expectations, we have decided to announce the dividend increase at an early stage. Regarding share repurchases, in January, we completed a buyback of shares worth 150 billion yen, the upper limit decided by the board of directors last November. We bought back total 258 billion yen in shares this fiscal year.

That’s all for my explanations.

Related information
Financial Results for the Nine Months Ended December 31, 2018