Nippon Telegraph & Telephone (NTT)

Thank you for joining us despite your busy schedule. I'd like to start the presentation of financial results ended March 2023 as well as financial forecast for the fiscal year ending March 2024 as well as the outline of the new interim plan. which was announced today. I'll be serving as the moderator today. My name is Hanaki of IR Office. Thank you so much for your cooperation. I would like to introduce the attendees from our side. First, representative member of the board and president, the CEO, Mr. Shimada. Thank you. Shimada is my name. Representative member of the board, senior executive vice president, Mr. Hirui. Hirui is my name. Thank you very much. Senior Vice President, Head of Finance and Accounting, Mr. Nakayama. Senior Vice President and Head of Corporate Strategy Planning, Mr. Taniyama. These are the attendees from our side. And today, to the beloved distribution of the video, and also at a later date, we intend to make the video available over our web as well. We would appreciate your understanding beforehand. The majorities during the press meeting today will be presentation materials that are uploaded on our IR site. Also on page one, there is a statement about forward-looking statements. We would appreciate your reading through page one. With regard to the supplementary data that's announced at $1,300 today, there was a typo on page one. So we'd like to correct the typo. On page one, there's reference to EBITDA margin. And under the column for EBITDA margin column, that projection should be corrected to 3,390 billion yen, so we would like to make the correction at this juncture. And also, we made the rectification to TSE back at 1,630 hours. Please confirm this at a later date. Thank you. So now we'd like to invite Mr. Shimada to talk about the financial highlights, after which we'll take questions from the floor. So, Mr. Shimada, the floor is yours. Thank you. I'm the President and CEO. Thank you so much for joining us. We appreciate your interest in our company. So first of all, let me share with you the financial results for fiscal year 2023. Now, we'd like to take as many questions as possible, so I will actually skip. I will be very brief in my initial presentation. So please turn to page 4. Page 4. Operating revenue and operating income profit all increased year-on-year. This is the fiscal year 2032 consultative results highlights. And all of them reached record high levels. As for operating revenue, this grew 979.7 billion yen, year-on-year, and reached 13,238.2 billion due to increase in global solution business revenue and increase in revenue from electricity business that ended. Now, the impact upon currency was roughly 280 billion yen. The operating income increased 60.4 billion euro a year, up to 829 billion, as increase in express delivery was offset by increase in operating revenue and cost reduction. As for profit, this increased 32 billion and reached 1,213.1 billion from increase in operating income. As for overseas operating income margin, this improved 0.9% up to 7.2% due to increase in profit based on increased revenue as well as cost reduction driven by structural transformation, and we achieved medium-term financial target of 7% one year ahead of the original schedule. Next, page 5. This relates to contributing factors per segment. Integrated asset business segment. There was negative impact from price reduction in consumer communication segment, but this was covered by increase in revenue in enterprise business as well as smart life business, as well as cost reduction. So this recorded increase in both operating revenue and operating income year on year. As for regional communication business, there was the one-off cost increase factor in the previous fiscal year is no longer present. But on top of more than expected increase in electricity costs and the delay in cost reduction as entity was due to large-scale malfunction in August, both operating revenue and operating income dropped year-on-year. As for global solution business segment, operating revenue and operating income increased year-on-year due to increase in revenue from robust demand for digital services as well as increase in value-added services at entity-limited. in other segment due to increase in revenue from electricity, reflecting jump in the fuel price activity and its operating revenue and operating income both increased. So let me now turn to the forecast for fiscal year 2023. Operating revenues will decrease year over year, while operating income and profit will increase year on year. That is the forecast summary for fiscal year 2023. Operating income and profit will continue to reach record high levels. and will aim to reach EPS of 370 yen, although the impact of increasing electricity costs is uncertain. As for operating revenue, it is expected to decrease year-on-year due to foreign-extended economic revenue from electricity businesses, but our plan is to aim for increasing revenue in main business segments after excluding this impact. As for operating income, while the impact from rising electricity costs is uncertain, we expect operating income will increase in 2020, 12 billion euro a year based on increase in profit in group companies such as Stockholm. As for profit, despite increasing interest payments, profit will increase 41.9 billion euro a year based on increase in operating income. Turning now to forecast summary by segment for fiscal year 2023. Let me start by mentioning integrated ICT business segment. On top of growth in enterprise business and smart life business, downward pressure on revenue was eased due to increasing the number of users signing up to medium to large data bucket plan in the consumer communication business. As well as cost efficiency, so Docomo as a whole will see increase in both operating revenue and operating income. Turning now to regional communication segment, we expect increase in both operating revenue and income as cost-efficiency measures that were delayed will now be implemented at NTT West as well as expanded growth business at NTT East and West and cost-efficiency. As for global solution business segment, while there is negative impact from currency, operating revenue and operating income is expected to grow year-on-year from robust demand for digital services and also cost reduction through structural transformation. As for the other business, operating revenue is suspected to decline year-on-year as a result from dropping revenue from exclusive business based on more appropriate sales volume at entity and it. Although the decline will be pushed down, will push the operating income, we expect operating income will increase year-on-year due to increased profit in the urban solution business. And we're making very strong progress against the medium-term plan as for EPS, this reach 248 yen as of fiscal year-over-year, which will exceed the plan of 340 yen. We aim to reach EPS of 270 yen, which is the financial target for this year, will be achieved. Now, expanding the new military management strategy, we will shift to new financial targets and the current target, excluding EPS, will all be shifting to new financial targets containing the new strategy plan. Now, this is the reference material. This is self-explanatory, so I will not explain this page. So let me now go on to talk about the new media terms management strategy, which is entitled as follows. New Value Creation and Sustainability 2027. Powered by IOWN. This is the subtitle of our new meeting term management strategy. This will be a five-year plan covering fiscal year 2023 up until fiscal year 2027. It is a five-year plan. The fundamental principles of the new plan are as follows. Innovating a sustainable future for people and planet. That will be the principle for this new strategy.

Next page, please. In order to achieve the aforementioned, we will increase our investment in growth areas. We will invest approximately 8 trillion yen in growth areas over the next five years, an increase of 50% from the previous level. Therefore, we must also generate the cash capability for the future. EBITDA, which is being planned to survive, is targeted to increase by 20%, so approximately 4 trillion yen in fiscal year 2027. Next, I'd like to talk about the various pillars. The first pillar is entity as a creator of new value and accelerator of a global sustainable society. The second and third pillars are the framework to support the first pillar. The second pillar is upgrading the customer experience and the first pillar is improving the employee experience. The nine initiatives that comprise these pillars will now be explained. First is NTT as a creator of new value and accelerator of a global sustainable society. The first initiative is creation of new value through ION. As a solution to the increasing power consumption resulting from the expanding use of AI, NTT will establish NTT Innovative Devices Corporation in June 2023. With the aim of accelerating the commercialization of photonics electronic convergence devices, the company will start with a capital injection of 30 billion yen and will consider increasing gradually. In addition, to accelerate ION R&D and commercialization including 6G, we will invest 100 billion yen in fiscal year 2023 for ION R&D as a whole. In addition, the company will continue to invest funds to accelerate the commercialization of service and digital twin computing. The second initiative is data-driven creation of new values. In order to strengthen our personal business centered on individual customers, we will strengthen Docomo's smart life business and aggressively invest more than 1 trillion yen over the next five years in growth areas. For example, we will expand and upgrade services in various fields such as finance, healthcare and medical services and analyze various data obtained through these services to provide more personalized and optimized services. Next, I would like to talk about the strengthening of the use of DX and data in society and industry. We will globally deploy solutions, services and platform services for corporate customers utilizing technologies such as AI, robotics, Ion, digital twin and security to transform the industries that support our daily lives and society. will invest more than 3 trillion yen in this field over the next five years. Next is the expansion and upgrading of data centers, which are important platforms for a data-driven society. ATG Group will further expand its data center infrastructure, which is currently the world's third largest, and introduce Ion technology to this end, will invest more than 1.5 trillion yen over the next five years. to double our data center capacity from the current 1,100 megawatt. Next stage, please. The third initiative is the realization of the Circle Economy Society. We will promote green solutions realized through the combination of green energy and ICT and invest approximately 1 trillion yen over the next five years. In addition, to expand our renewable energy power generation business, we will realize a stable supply of locally produced, optimized and efficient electricity for local consumption by utilizing solar battery CMS and other technologies.

Next, let me talk about creating circular economy-oriented business. On top of renewables, we want to pursue recycling of waste in various industries so that we'll be able to realize a sustainable society through recycling of materials. Also, based on leverage of IOM, 5G, IoT, AI, and robots, we will contribute to improved efficiency, value addition in the primary industry, as well as industrial development and regional revitalization as well. Please. We now talk about progression toward net zero. Looking ahead to 2040, with regard to anti-degree innovation toward 2040, we would like to expand this to scope three on top of expanding into scope one and two. The fourth pillar relates to further strengthening of business foundations. We would like to leverage... are reluctant from and lessons from the past failures. We will make our network systems more resilient towards large-scale failures of cyber attacks in order to strengthen local infrastructure. And also, we will be enhancing our countermeasures towards ever-intensifying severe natural disasters. We will be investing roughly $160 billion by fiscal year 2025 toward this area. Next pillar, further to relate to upgrading the customer experience. We will have to photograph fusion of research and development with a market-focused strategy. We will be combining and strengthening our R&D capabilities with our market analysis and alliance capabilities. and it will create R&D marketing strategy division under a data holding company structure. On top of product-oriented R&D reinforcement, we will also be collaborating with various customers and partners globally, and we will be covering all the way from R&D up until product delivery and also pursue alliance with various partners going forward. That is our plan. The sixth initiative relates to strengthening of services that emphasize customer experience. We will see stakeholders as potential customers, and we will be placing importance on customer experience first. So we will track customer journey. We will also be providing agile service. We will continue to improve and update services. And we would like to offer new experiences and impressions that will exceed customer expectations so that entity group will continue to be selected by the customers. Next pillar relates to improving employee experience or EF. So the seventh initiative relates to open and innovative corporate culture. We will place emphasis on customer first, but at the same time we will be pursuing a culture which is open collaboration and trial and error, and also we will continue to reinforce our initiative in relation to diversity and inclusion as well. The aid relates to supporting career growth. supporting employee career growth and increasing investment in human capital to drive business growth. For example, based on the personal system, based on expertise which was introduced in April last year or this year, we will support employee acquiring external qualifications as well as expand many of training programs in 18 areas as well as strengthen career consulting functions that provide career design advice. will also support total career development through support related to various life events, including childbirth, child-rearing and nursing as well.