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 consolidated results for the fiscal year ended March 2019.
Our financial results can be summed up as higher business revenue and operating income. Both set record highs for two fiscal years in a row. Business revenue and operating income increased by approximately 100 billion yen and 50 billion yen, respectively. In FY2017, NTT DOCOMO received payment for arbitration awarded from Tata Sons, and this caused the value of shares held by us to increase by approximately 50 billion yen. If such ad hoc revenue is excluded, net income also increased by 6.7 billion yen. In addition, EPS and overseas sales increased by 15 yen and 600 million dollars, respectively and the overseas operating income ratio improved by 0.1 point, if only by a little.
Next, I would like to explain the status of financial results by segment.
The business revenue was driven mainly by the data communications and mobile communications businesses. Operating income decreased in the “other business” segment, but increased in all other segments. A notable event in the “other business” segment is that because NTT Urban Development posted ad hoc revenue in FY2017, its profit appeared to have decreased abnormally in the current fiscal year, but basically there is no structural problem about such decrease.
Next, I will give you a summary of our business performance forecast for the fiscal year ending March 2020.
As announced by NTT DOCDOMO in the presentation of financial results before the 10-day holiday period, NTT DOCOMO’s operating income is expected to decline by 180 billion yen. However, we have a plan to increase the income by approximately 40 billion yen in businesses other than mobile communications business, thereby limiting the decline to approximately 140 billion yen in total.
Business revenue is expected to decrease significantly at NTT DOCOMO and as explained later, we have a plan in which the revenue is projected to decrease by 50 billion yen due partially to consolidation of ENNET as a subsidiary into the Group.
An important point to note is net income and we have a plan to earn 855 billion yen of net income, which is almost the same as for FY2018, due to factors such as consolidation of ENNET as a subsidiary into the Group. We have a plan in which business revenue and operating income are projected to decrease, but as for net income, which influences our shareholders, we plan to maintain the FY2018 level. Due to this, we expect EPS to improve by 16 yen.
At the time of the announcement of NTT DOCOMO’s financial results, President Yoshizawa of NTT DOCOMO stated that the company will strive to improve its profitability quickly after bottoming out in FY2019. Of course, NTT Group will also aim to quickly improve its profitability.
I will now discuss business performance forecasts for each segment.
We expect business revenue to increase in the “other business” segment, and this includes revenue of approximately 250 billion yen resulting from consolidation of ENNET as a subsidiary into the Group. We will endeavor to make up for a decline in operating income at NTT DOCOMO and the mobile communications business with income in the other segments, for each of which we have a plan for increasing income. However, the Group’s overall efforts will not offset the decline in operating income at NTT DOCOMO.
Next, I would like to explain the status of our efforts for each topic of the medium-term business strategy announced last November.
With regard to the ten initiatives in the medium-term business strategy, I would like to omit an explanation about initiatives for which information has already been provided at a press conference or other occasions.
First, as for “1. Promote B2B2X Model,” we announced that there were 13 projects as of autumn of 2018, but the number increased to 39 by the end of 2018. Our goal is to have 100 projects in FY2021, so the number is growing satisfactorily. We also set a sales goal of 600 billion yen for FY2023. This number is made public for the first time, and with regard to this sales goal, related NTT Group companies will get together to hold B2B2X model promotion meetings in which I serve as the representative. Through the meetings, we will build consensus and drive the growth of the model.
I would like to skip the topics “2. Roll Out and Provide 5th-Generation Wireless Services” and “3. Promotion of Personalization” because an explanation about them has already been provided.
As for “4. Enhance Competitiveness in Global Business,” I will explain later.
In relation to “5. Drive Digital Transformation in Domestic Business,” we intend to move ahead with new logistics operation measures to successively start joint distribution and integration/abolition of warehouses in regard to goods used by NTT Group.
With regard to “8. Initiatives Using Personnel, Technology and Assets (Formerly Utilization of Real Estate),” which is related to assets, President Nakagawa of a preparation company for NTT Urban Solutions will explain the medium-term vision of aiming to achieve the 600 billion yen revenue size by FY2025 after I finish my explanation.
Additionally, we will establish NTT Anode Energy in relation to our smart energy business. Anode means a positive electrode of direct current power source. The company name was selected because we want to make the company focus on the direct current business. NTT Anode Energy will be established on June 3 and headed by President Ii, who is concurrently serving as Senior Executive Vice President of the Company.
Furthermore, in order to develop a business of digitizing spatial information with an emphasis on social infrastructure and accumulating digitized data, NTT InfraNet, which is currently a subsidiary of NTT East, will be made a subsidiary owned directly by the holding company in July. Thereafter, we will sort out our operations and organizations to develop a smart infrastructure business.
As I explain later, in July, we will establish a new company (NTT Life Science, whose establishment is being planned) to advance the medical science business utilizing genome information, especially the business of making recommendations including the method of improving lifestyle habits.
With regard to “9. Contribute to Vitalization of Regional Societies and Economies,” President Inoue of NTT East and President Kobayashi of NTT West will explain specific efforts for vitalization of local economies after President Nakagawa of a preparation company for NTT Urban Solutions finishes his explanation.
As for “10. Disaster Countermeasures,” in order to strengthen initial responses to typhoon disasters in particular, AI technology will be utilized for initial response prediction by drawing on information such as the status of past equipment failures, past typhoon routes, and damage. Through these activities, we will start to implement prompt responses to failures in June. In addition, with regard to information transmissions by NTT East, NTT West and NTT DOCOMO that are required at the time of disasters, such information was provided only in Japanese in the past. However, we completed making English language support available for such information transmissions in April.
Regarding “4. Enhance Competitiveness in Global Business,” which I said I will explain later, an important point to note is that a company named “NTT Ltd.” will be established as a subsidiary of “NTT, Inc.” (NTT’s global holding company) with the head office of NTT Ltd. located in London. The reason why we chose London is that compared with other cities, London is judged to be suitable for IT-related businesses taking into account the tax system, ease of hiring IT personnel, and other factors. Although there are negative factors caused by Brexit, we think that the UK will return to the global economy in the medium term, and London is suitable for the location of the head office. As for the lines of business, the overseas portion of NTT Communications, Dimension Data and NTT Security will be integrated to create the company (NTT Ltd.) focusing on managed IT services. We will coordinate this company with the SI business of NTT DATA to work on the global business. Jason Goodall, who is currently the President of Dimension Data will assume the position of President of NTT Ltd. Out of six directors, four come from overseas and two are Japanese, and our aim is that the company will conduct business on a global basis.
Let me move on to the smart energy business. We plan to establish a company on June 3, and the company will start business in September. A license application will be first made, and then ENNET (a joint venture of Osaka Gas, Tokyo Gas and NTT Facilities; develops electric power retail business targeting companies) will be consolidated as a subsidiary into the Group. By doing so, we aim to double the sales of the energy-related business in the NTT Group in the medium term (from the current level of approximately 300 billion yen to the 600 billion yen level in FY2025).
Next, I will explain the medical science business. NTT Group will realize business management that promotes health by analyzing health and medical data, and will establish a new company that plays a key role in such business management. By utilizing ICT abilities accumulated by NTT Group so far and cooperating with alliance partners, we will analyze healthcare data and create solutions, thereby establishing the healthcare recommendation business. This business will be geared to employees of the NTT Group for the time being, but will also provide services to work fields and employees of our various partners that give us permission to do so. Currently, alliance partners have requested us to conduct the business together. In the current fiscal year, we will make related arrangements, consider building a platform and expand the business.
The next topic I would like to cover is the addition of three candidates for new directors, in regards to this, a proposal will be submitted at the general meeting of shareholders to be held on June 25. Currently, there are twelve directors and the number of outside directors will be increased to four with the addition of an extra two, while the number of inside directors will be increased to eleven by adding one. One outside director and one inside director will be female. As a result, the number of independent outside directors will increase to four out of 15 directors (26.7%). Female directors will be appointed for the first time and the number of them will be two out of 15 directors (approximately 13%). We will manage the business with greater attention to diversity and corporate governance.
Finally, I will explain returns to shareholders. Regarding dividends for FY2019, we resolved to increase the annual dividend per share to 190 yen at today’s board of directors, up 10 yen from the previous fiscal year. This marks an increase in dividends for nine fiscal years in a row since FY2011. Along with this, we resolved to acquire treasury stock, the total maximum amount of which will be 250 billion yen. The acquisition period is planned to continue until the end of July. Although the Japanese government’s budget states that the government will sell NTT stock held by the Ministry of Finance, the timing of the sale is to be determined, so we will acquire treasury stock before such sale.
That concludes my explanation.