Nippon Telegraph & Telephone (NTT)

We will now start the briefing of NTT's financial results for the three months ended June 30, 2020. Thank you very much for attending despite your busy schedules today. My name is Hanaki from the IR office that I will be serving as the facilitator from this time. First, I'd like to introduce today's attendees. Mr. Hiroyu, Representative Member of the Board, Senior Executive Vice President, Mr. Nakayama, Executive Officer, Head of Finance and Accounting, and Mr. Taniyama, Executive Officer, Head of Corporate Strategy Planning. Today's briefing is streamed live online. We are also planning to stream the video on our website at a later date. We seek your understanding beforehand. As for today's explanation material, please refer to the presentation materials posted on our company website. On the first page, the materials points to be considered as stated, so we kindly ask you to please go through it. After this, Mr. Hiroi, Senior Executive VP, will give you the overview of the financial results, followed by receiving your questions. Mr. Hiroi, please go ahead.

Thank you for the introduction. My name is Hiroi with NTD Holding Company. I have come back from NTD Docomo. I look forward to your kind support at NTT Holding Company going forward. So allow me to start by talking about the status of the results for the first quarter of this fiscal year. We saw operating income profit all increasing year on year for operating revenue and profit. This reached record high level as the first quarter ended. So let me start with the operating revenue. This increased 176.3 billion yen year on year. And the drivers were primarily increased revenue and entity data and entity limited. Now the impact of foreign exchange was roughly 57 billion into positive territory. As for operating income, this also increased like the case of operating revenue. This is also due to the increased revenue and entity data and entity limited. So these are the drivers of growth So operating income went up by 17.1 billion year on year. Let me now talk about the profit. On top of the increase in operating income, we were able to record tax deferred assets. So as a result, profit increased 28.6 billion year on year. So the increase was somewhat large. As for overseas operating income margin, This improved due to increased operating income at NTD Data and also cost reduction at NTD Limited. So this improved by 2.1 percentage points, up to 6.1%. So please go on to the following page. I would like to talk about the contributing factors by segment. Let me start with the integrated ICT business segment. As far as the operating revenue is concerned, enterprise business and smart life business recorded increase in revenue year on year. But there was price reduction in the consumer business, so the segment as a whole recorded decline in the operating revenue. But having said that, this group was offset by cost reduction, so therefore we were able to deliver increase in operating income. Turning now to regional communication business segment here. there was decline in fixed-time voice revenue, and this trend has not changed over time. However, in the previous year, we were able to record gain from sale of real estate, but we do not have such benefit this fiscal year. So compared with the change in operating revenue, the change in operating profit seems somewhat large, but on a full-year basis, we expect increase in both operating revenue and operating income through increased revenue from system integration and other growth service, And on top of that, we expect rigorous cost reduction to be realized. So as a result, for the full year, we expect increase in both operating revenue and operating income. As for global solution business segment, at Entity Data, we enjoyed increased revenue from robust digitalization demand. And also at Entity Limited, we were able to increase revenue from value-added services. And also, we were able to realize cost reduction from structural transformation at entities limited. So, therefore, this segment recorded an increase in both operating revenue and operating income. As for the others, this includes real estate and energy and others. This increased. They were able to increase revenue because operating income from increasing agency business and it was realized. And also, There's increase in revenue from electricity charges reflecting the rising fuel price. But that hasn't had too much impact in terms of the operating income. So that is the highlight of the financial results. So overall, we were able to incorporate DX demand both in and outside Japan. And we have a strong portfolio that can accommodate the increase in DX demand both in and out of Japan. And also, we were able to pursue progress in structural transformation We have to reinforce our portfolio and also generate increase in profit. So that is the assessment of the overall financial results for the first quarter of this year. And let me now turn to some topics, if I may. Please go on to page seven, promotion of medical and healthcare business. Here. We have entered a capital and business partnership with a company called Genesis Healthcare Company, a pioneer in genetic testing, research, and data analysis, and we have acquired 19.0% of this company. We have a company called NTD Life Science, and we were involved in genetic database creation, analysis, as well as genetic testing as well. So we have been involved in this business, but on top of that, we now have the alliance with Genesis Healthcare Company. So, we can add the genetic database from Genesis Healthcare, whereby we'll be able to improve the quality of our service in this area. So we can provide this to pharmaceutical companies as well as to medical institutions. So data analysis, and they will be able to receive data analysis, and also increase revenue from the pharmaceutical companies and medical institutions as a result.

Next, next page please. is regarding the decentralization of the organization. And regarding this, from the resilience perspective, the holding company's function, we have been working on decentralizing it, and we have been reviewing this up to now. And now, in Takasaki City and in Kyoto, we will be establishing the decentralized offices. And we will start the trial from October this year. And next is page 10. This is regarding the field testing for the mass and stable transportation of hydrogen. When hydrogen is transported, NTT's civil engineering work, can it be used or is it reviewed? Based on NEDO's research study request, together with National Institute of Advanced Industrial Science and Technology and Toyota Tsusho, we will be conducting this fuel testing. So the hydrogen power generation, which we are considering right now, by having such a system realized, we will be able to have flexibility in that area, so we would like to participate in this field testing. Next is page 11, New Solutions Development with SAP. At NPT Data, jointly with SAP, they have developed a new cargo shipment message. It will be tracked through IoT sensors to facilitate the insurance procedures. In a more easy way to explain, when cargo is transported, there are cargoes that are fragile. For example, wine or medical, pharmaceutical products. Wine is very vulnerable to vibration, and for pharmaceutical products, they're vulnerable to temperature. So within the cargo, we have placed the IoT sensors, and through that, the temperature, the shock, or the vibration changes. will be able to be sensed. And within that, when the cargo is damaged at some point, at what point do they become damaged? Is it at loading the truck, or unloading, or was it in the ship or vessel? We'll be able to identify within the supply chain process who is going to be responsible for the damage and loss will become more clarified, and so by establishing such a system, the compensation for damage procedures for insurance can be simplified. It's like the drive recording system on a vehicle, and using such a system will lead to improvement and better efficiency. and the logistics and also insurance procedures of business. Lastly, overview of VDM term management strategy initiatives. If you can read through them, that will be appreciated. I would like to skip the detailed explanation. That is all from me. Thank you.