Nippon Telegraph & Telephone (NTT)

Thank you very much for participating despite your busy schedules today. From now, we would like to start the briefing on NTT fiscal year 2022 third quarter financial results. My name is Hanaki from the IR office. I will be the facilitator today. First of all, I would like to introduce today's attending members. Representative member of the board, Senior Executive VP Hiroi, Executive Officer, Head of Finance and Accounting Nakayama, Executive Officer, Head of Corporate Strategy and Planning, Taniyama. Today's briefing audio is streamed live. We are planning to stream this on our website at a later date, so we seek your understanding beforehand. As for today's materials, please refer to presentation materials on our IR website. On the first page, points to be noted are listed, so we kindly ask you to go through them. Without further ado, Senior Executive Vice President Hiroi will explain the outline of the financial results, followed by taking questions from the floor. Mr. Hiroi, please go ahead.

Thank you very much. This is Hiroi speaking. I would like to share with you the financial results for the nine-month end of December 31, 2022. So, please turn to page four of your slide presentation material. This shows you the status of the consolidated results. Operating revenue increased year-on-year, operating income decreased, and profit increased year-on-year. So this is the same trend following from the second quarter. As for operating revenue and profit, this reached new record high level as the third quarter result. Operating revenue increased by 649.4 billion yen year-on-year up to 572.6 billion yen due to increasing revenue in the global solution business segment. Now, of this increase, impact from foreign exchange of currency was roughly 220 billion yen. While increase in operating revenue boosted our operating income, they could not cover the increase in electricity costs, especially in the regional communication sector, so operating income declined. The decline was 18.8 billion yen year on year, And the number was 1,520.8 billion yen. Now toward the meeting the annual target, we're already promoting various measures to reduce costs, to cover the increase in electricity costs, which is the main factor. So through these measures, we intend to achieve the annual plan. Turning now to bottom line, the profit. This went up 2.2 billion yen year on year. As we have been explaining since the first quarter, there was decline in the non-recurring factors such as corporate tax burden, so therefore profit went up 2.2 billion yen year-on-year and reached 1,032.5 billion yen. As for overseas operating income margin, in line with the increase in profit, we also had cost reduction related to structural transformation, so this increased 1.0 point and reached 6.4% overall. Let me now turn to contributing factors by segment. Let me start with the integrated ICT business segment. Now there was negative impact from price reduction in consumer communication and the reduction in mobile communication service revenue continues. However, there's a comfortable increase in enterprise business and smart life business. We also had cost reduction efforts. So both operating revenue and operating income increased in the integrated ICT business segment. As for regional communication business segment, as I have already explained earlier, there was the impact from increasing electricity costs, and also with regard to fiber service, remote work and online cross-related demand has more or less run its course. And also, we did not have the one-off positive factor or non-recurring factor such as the Olympic Games and the Olympic Games last year. So therefore, both operating revenue and operating income declined in this sector. At the risk of repeating myself, in the case of regional communication business segment, on top of we see some very challenging impact from the electricity cost increase. However, throughout the year, we will work to reduce costs and also we see expanding revenue from sustainability question and growth business. So as we move toward the year end, we hope to expand revenue from this segment. So we want to reach the annual guidance, which is increasing both revenue and income. That is what we hope to achieve. Turning now to global solution business segment. As far as this segment is concerned, we see increased revenue from strong demand for digital services. So in and out of Japan, we see increased revenue from digital services. Also, Trinity Entities Limited, they have expanded their high-value services. And also, global business, global operating companies have worked to realize social transformation through cost reduction. So both operating revenue and operating income increased in this segment year on year. Now, as for the other segment, we have seen increase in electricity and business at Ennett. And also, as we have been explaining, we see increase in revenue from electricity fees reflecting the rise in commodity price. So we're able to pass on the cost to our customers and revenue in this segment is increasing. So in this segment we see increase in both operating revenue and operating income. Let me now turn to some of the topics on hand. Please turn to page seven of your material. Let me start with the initiatives to resolve food and environmental issues. As far as our efforts in this area is concerned, we will form a planning company in furtherance of establishing a green food business with a company called Regional Fish Institute Limited. And we intend to do this in March. Well, what type of business will this be involved in? Please take a look at the chart and the diagram. There are two parts to this. So we have the land-based aquaculture. So We will be involved in land-based agriculture system, and also we'll be also harvesting algae on land as well. Enrich the Fish Institute is a company with genome editing in relation to land-based agriculture system. They're able to accelerate the growth of the fish. They're able to increase the flesh meat of the fish. Now, on our side, we have technology in relation to genome editing of algae, the technology to accelerate the growth and the harvesting of algae. So we'll be able to cultivate and accelerate the cultivation of algae, which means that the ability to absorb CO2 can expand. They have the ability to fixate CO2 that they absorb. So by accelerating COVID cultivation, we'll be able to use algae as the feed for fish. And by using this in the land-based agriculture system, it means that we'll be able to further expand to the size of the land-based agriculture system. So that is the system which we hope to establish down the line. So as the first step toward this end, we'll be establishing a green food business with the Regional Fish Institute, and we're going to set up a planning company. And we plan to establish a joint venture between the planning company and Regional Fish Institute in the first half of fiscal year 2033. This will be the company that will actually be involved in this business on the ground So that is how we would like to start the business. So through these initiatives, we hope to resolve various social issues, reduction of global environmental impact, reach the best fishing industry, and so forth. And through this, we hope to be able to respond to food shortages that we see around the world. So that is what we would like to contribute toward down the line.

Next on page eight, initiatives in the space business. For this initiative, with us and Space Compass, have established a company to promote the space business. And in order to, for the early realization of a global rollout of this, we have concluded a partnership agreement with Skyloom Global Corporation. What this means originally is that, as you can see on this diagram, the so-called, the LEO, the Low Earth Orbit Satellite. This is something that a satellite used for Earth observation, and from here to the surface of Earth, they will transmit data, but it's only during the limited time length and only limited data capacity. But for us, the GEO, the Geostationary Orbit Satellite, by using that, we... will provide the optical data relay service. So through this geo to the surface of Earth, we will provide a high-speed transmission data service. And it will become possible with a large data capacity as well. So together with this Skyloom Global Corporation, we will work together with Skyloom we will launch three geostationary orbit satellites. And to begin with, at the end of fiscal year 2022, we will start this business, and we will launch one geo over Asia and gradually expand the business globally. And next, on page nine, this is the status for remote working units. Last July, we have introduced the work system with working remotely as a standard. And it's about six months have passed since then, and I would like to report the status. The employees eligible for the system, we started as 30,000, and currently it's 40,000. So we have expanded the eligible employees by 10,000. And by using this working system, how many employees are posted away from their family were reduced was about 400. In actual numbers, the employees posted away from their families was reduced by 900, and there were 500 employees who have newly started being posted away from their family. So, as a total, overall, 400 employees were reduced for being posted away from their families. And the next page, this time we have conducted the survey for working remotely of our employees, and the results are shown on page 10. Having this work system with working remotely as standard, we were able to improve the flexibility of working and the productivity is also improving. So we would like to expand the scope of the eligible employees and promote this initiative. And lastly, on page 11, we are showing the progress of the medium-term management strategy initiative and showing the third quarter progress. So we would like you to go through them. That is all for my briefings. Thank you.