Nippon Telegraph & Telephone (NTT)

Thank you very much for gathering today despite your busy schedules. From now, we would like to start NTT's briefing session on the fiscal year 2022 second quarter financial results. My name is Hanaki from the IR office. I will be serving as the facilitator today. At the start, I would like to introduce the attending members on stage. Representative member of the board, President and CEO, Shimada. Representative member of the board, Senior Executive Vice President, Hiroyi. Executive Officer, Head of Finance and Accounting, Nakayama. Executive Officer, Head of Corporate Strategy Planning, Taniyama. Today's briefing session is streamed live We are planning to stream it on our website at a later date, so we seek your understanding beforehand. Regarding today's explanation of materials, please refer to presentation materials posted on our IR website. On the first page, points to be noted are listed, so please go through it as well. From the President's CEO, Shimada, I will explain the outline of the financial results, followed by Q&A from the floor. President Shimada, please go ahead.

Good afternoon. Thank you for joining us at the financial results for the second quarter. Shall we start with page four of the material, please? Operating revenue increased, operating income decreased, and profit increased year on year. Operating revenue and profit reached new record high level as the second quarter. Operating revenue increased 398.5 billion yen year-on-year up to 6,286.2 billion yen due to increase in revenue at NTD Data and NTD Limited. Of this increase, foreign currency accounted for 135 billion yen. As for operating income, although there was positive impact of increased revenue, this was not enough to cover increase in electricity costs. So operating income decreased 12.7 billion yen down to 996.5 billion yen. From the first half, we have taken cost reduction measures to cover rising electricity costs. and we intend to realize the benefits of these measures during the second half of this year, so we want to achieve our annual guidance through these methods. As for profit, it increased $20.8 billion year-on-year, up to $696.6 billion due to one-off positive impact related to corporate tax. As for overseas operating income margin, it increased by 1.1 point, up to 5.8 percent, due to increased profit driven by increased operating revenue at NTD Data and NTD Limited, as well as cost reduction through structural reform at NTD Limited. So that is the situation. Let me now turn to contributing factors by segment. Starting with integrated ICT segment, while there was negative impact from press reduction in the consumer segment, it was offset by increased revenue at enterprise and smart-led businesses, so both operating revenue and operating income increased in this segment. As for regional communication business segment, both operating revenue and operating income decreased because one-off positive factor from the previous year no longer applies, and also because of the unexpectedly high increase in electricity cost. We will accelerate our cost efficiency program and increase revenue from system integration and growth business so that we can achieve our annual guidance of increasing both operating revenue and operating income. As for global solutions business segment, in the case of entity data, while operating revenue continues to grow from robust demand for digitalization due to increase in investment for growth, and also in part from unprofitable project in Japan, operating revenue increased and operating income decreased. As for entity limited, both operating revenue and operating income increased due to increased revenue from value-added services, as well as cost reduction through structural reform. The second as a whole recorded increase in both operating revenue and operating income year-on-year. As for others, real estate and energy, operating revenue increased due to increased electricity agency business at ENET and also increased revenue from electricity business reflecting rising commodity prices. Let me now turn to some of the topics on hand. I would like to introduce five. Please turn to page seven. increase in starting salaries for new graduates. I would like to explain this matter. In order to hire more highly skilled talent, entity group major domestic companies are increasing the standard starting salary from April to fiscal year 2023. Also, we'll begin offering higher salaries based on higher levels of expertise at the time of hiring. Page eight talks about the new They review a solar system for regular employees. This will take place from next April. So we want to have a solar system with promotions based on expertise. Page 9.

Next, I will explain about establishing a new company in the field of human capital. We will establish NTT Human X Corp in December 2022. We will establish a new company that uses human capital data analysis to provide comprehensive support from consulting to system integration. Based on NTT Group's knowledge of pioneering human capital reforms, we will leverage NTT Group's personal data infrastructure and AI analysis to support company work style reforms, environment building, and improvement of Engagement for Career Development of Employees. Next page, please. Next, I will explain about development of technology that enables high-speed wireless underwater communications. As the technology that will enable stable high-speed underwater acoustic communications, we developed two technologies, spatial temporal equalization technology and environmental noise immunity improvement technology. We have established a technology that suppresses the impact of delayed waves caused by sea surface reduction and noise from marine biologies in a shallow water area that is about 30 meters deep, and successfully conducted a transmission test with transmission speed of 1 megabits per second, which is over 10 times of conventional speed underwater over 300 meters of distance. We apply this technology to realize a wirelessly controlled underwater drones. Moving forward, we will proceed in-field demonstration for practical usage and aim for being used in infrastructure inspection of port facilities and fishery industry field for marine environmental survey for aqua farming. Page 11, please. As for the overview of medium-term management strategy initiatives, it's as shown here. However, I will explain three main initiatives. With the objective to further promote NTT Group's XR business, NTT Docomo has started the business of the new company, NTT Konokyu, from October. As announced last May, based on our business integration plan of NTT Data and NTT Limited, NTT Data Inc., No, it's not last year. It is this year. Based on our business integration plan of NTT Data, NTT Data Inc. was established as overseas business company under NTT Data in October. And NTT East and West, to further increase Hikari demand, they are planning to lower wholesale price for wholesale Hikari service during fiscal year 2023. And please refer to page 12. In order to improve capital efficiency and enhance shareholder returns, we have resolved in today's Board of Directors meeting to buy back shares of maximum total amount of 150 billion yen. That is all from my side.