Nippon Telegraph & Telephone (NTT)

Thank you very much for attending today despite your busy schedules. We will now start the briefing of NTT's financial results for the first quarter. I am Fujiki from the IR office and will be serving as today's facilitator. First, I would like to introduce today's attending members. Mr. Sawada, Representative Member of the Board, President. Mr. Shimada, Representative Member of the Board, Senior Executive Vice President. Mr. Kimura, Executive Officer, Senior VP, Head of Corporate Strategy Planning. Mr. Nakayama, Executive Officer, Senior VP, Head of Finance and Accounting. Today's briefing is conducted in the web streaming format. please refer to the presentation materials posted on our company IR website. On the first page of the presentation materials, points to be considered is stated, so we kindly ask you to please go through them. Today's briefing will be streamed live via our company's IR website and plan to be streamed on our website later. We seek your understanding. After this, President and Mr. Sawada will explain the financial results outlined and others. Then we will open the floor for questions. Mr. Sawada, please.

Good afternoon, ladies and gentlemen. Thank you for joining us despite your busy schedule. We appreciate your kind attendance and participation. Before I start the explanation, may I offer my sincere sympathies to those who are affected by COVID-19 as well as to those people who are affected by the heavy rainfall that took place in July of 2020. I would now like to take the floor and briefly talk about the consolidated financial results as well as the forecast for this fiscal year. So, please turn to page four of the material. Page four, please. This talks about the status of consolidated results for the first quarter. We experienced a decline in both operating revenue and operating income. Operating revenue dropped by 5.1% year-on-year. The decline in overseas was quite large, standing at 8% decline. Domestic revenues dropped by 3.8% year-on-year. As for operating income, we were able to cover the drop in revenue through various cost reduction, so operating income dropped by 1.5% year-on-year. We were able to keep the decline in operating income to 1.5%. Now, as for impact of COVID-19 on our first quarter results, the negative impact on revenue was 70 billion yen and negative impact on operating income was 10 billion yen. Let me now talk about the contributing factors by segment. Please take a look at this chart. Let's start with the mobile communication business. This was already announced by Docomo previously. Operating revenue dropped, and operating income grew year on year. The reduction in handset sales revenue, as well as in global roaming revenue, and drop in mobile communication service revenue due to expanded impact from the new rate plan was offset by cost reduction, so operating income increased year on year. Turning now to regional communication business on the right-hand side. The top shows operating revenue, the bottom shows operating income. Voice service revenue as well as hospital-related revenue dropped due to the impact of COVID-19. There was also loss from retirement of unnecessary fixed asset. And also there was cost for developing environment to respond to COVID-19. So operating income in this segment dropped year on year. As for long distance and international communication business, well, there's declining operating revenue due to COVID-19 and foreign currency. Operating income grew year on year due to freezing of measures, as well as cost reduction from structural reform, which was undertaken overseas last year. As for data communication segment, this was already announced earlier by NTT Data. There is increase in operating revenue but decline in operating income. This is primarily due to the impact of COVID-19, so a decline in operating income year on year. As for the other business, NTT Urban Solutions. There is impact from COVID-19, but due to expanded consolidation, operating revenue increased year on year. Operating income remained more or less at the same level as that of the previous year. Let me now turn to the overview of fiscal year 2020 financial forecasts. Please take a look at the overview which is indicated on this page. Let me talk about the impact from COVID-19. On operating revenue, there's going to be a decrease of 350 billion yen and a decrease of 70 billion yen in operating income as a result of COVID-19. So what are the causes of this impact? What is the backdrop? We are assuming that in Japan, there will not be any reissuance of state of emergency declaration. and economic activity is expected to gradually recover following the lifting of the state of emergency in May. So we are anticipating gradual recovery in the domestic economy. That is the assumption for this forecast. As for overseas, While we see a similar trend per se, there are variances from country to country. So while recovery is expected to gradually occur overseas as well, the recovery is expected to be slower than in Japan, particularly in places such as Europe and in the United States. So as a result, operating revenue expected to decrease significantly by approximately 400 billion yen compared to fiscal year 2019. Operating income, operating profit will increase compared to fiscal year 2019, covered by approximately 80 billion yen of reduction in capital investment and 100 billion yen reduction in cost. So we are anticipating an increase in operating income. as well as in profit year on year this fiscal year. So let me talk about some concrete numbers which are indicated on the following page. Please take a look at this list. Operating revenue, 11.5 trillion yen, a decline of roughly 400 billion yen year on year. Of the 350 billion yen impact of COVID-19, domestic impact is roughly 180 billion yen and overseas impact is roughly 170 billion yen. So domestic and overseas contribute 50% roughly in terms of the impact on operating revenue. Turning to operating income, We are anticipating increase of close to 30 billion yen, and we are anticipating 1.5 trillion yen. The impact is on operating income from COVID-19 is larger on domestic business. As for net profit, slight increase. And EPS is expected to increase very slightly. Next page, please. This is the financial forecast summary by company. So how would each company fare in terms of the forecast summary? This is the list. So please take a look at the horizontal line. Operating revenue, operating income. Docomo number has already shown operating revenue decline, but operating income will increase. As for NTD East and West. Both will experience increase in both operating revenue and operating income. That is the plan that is in place for Entity East and West. For Entity West, they will achieve increase in both operating revenue and operating income for the first time since the establishment of the company. As for Entity East, This is an increase in both operating revenue and operating income for the first time since 2010. For one thing, this is due to increase in revenue from expanded net increase in the fiber sales, and also due to contributions from cost reduction, and also increase in activities from the subsidiaries. So that is the situation. As for long-distance and international communication segment, We carried out restructuring in reorganization last year. So we cannot do year-on-year comparison. So that is why we're showing you the performance of the segment. So we're anticipating decline in operating revenue, but increase in operating income. And impact from structural reform will play into this picture. As for entity data, as was already announced previously, decline in operating revenue as well as in operating income. So due to COVID-19 and also due to the structural reform that has taken place in the United States, In terms of operating revenue, it is expected to decline for the first time since the company was first established in 1988. That is the forecast at this juncture for NTT data. As for NTT Urban Solutions, they expect an increase in revenue but decline in operating income. Real estate revenue will expand due to consolidation, but operating income is expected to decline.

Next page, please. By segment summary, I already explained at the individual operating company explanation before, so I would like to skip this. Now I'd like to move on to topics. Over here, too, I would like to take up enough time to receive your questions. So I would like to just briefly like to explain about that we will be shifting our focus on the remote work, and we'll be having a system to support that in October. And the remote world is what we are seeking for to realize. We would like to provide the services that will support realizing such a remote world, and we are thinking of providing seven services, especially a safe service and also function-wise that has a competitive superiority against the competitors, so for the online conferences or the local government's work processes, automation tools. And also, a service providing that conversation will be realized through glass panels or acrylic panels called window talk. Next page, I would like to touch upon the overview of the medium-term management strategy initiative progress. The 5G technology, at least one antenna, has been installed in all of the prefectures in Japan at the end of June. And also, the first attempt as a group entity, Group Green Bond, has been issued in June also. So for the rest of the information, I would like you to take a look later. That is all from my side. Thank you very much.