Ntt Inc. S/Ads

Thank you very much for attending today despite your busy schedules. From now, we would like to start the briefing on NTT fiscal year 2023 second quarter financial results. I am Hanaki from the IR office, and I will be facilitating this session. I would like to first introduce the attending members on stage. Representing member of the board, President and CEO Shimada. Representing Member of the Board, Senior Executive Vice President Hiroi. Executive Officer, Head of Finance Accounting, Nakamura. Executive Officer, Head of Corporate Strategy Planning, Hattori. Today's briefing is streamed live. We are planning to stream it on our website at a later date. so we seek your understanding beforehand. Please refer to presentation materials posted on our IR website. On the first page, points to be noted is written, so we kindly ask you to please go through them as well. Without further ado, from Presidency Oh Shimada, we'll be explaining the outline of the financial results, followed by Q&A from the floor. Mr. Shimada, please go ahead.

Thank you for joining us despite your busy schedule. I would also like to thank those of you who are connected to us on a remote basis. Allow me to share with you the second quarter results for the fiscal year 2023. Please turn to page four. Operating revenue increased and operating profit declined year on year. Operating revenue reached new record high levels as the second quarter. Operating revenue increased 78.4 billion yen year-on-year, up to 6 trillion 364.6 billion yen, thanks to increased revenue from integrated ICT business and global solution business. Now, after this increase, there is positive impact of roughly 80 billion from the foreign exchange. As for operating profit, this went down by 45.6 billion down to 950.9 billion due to upfront costs related to large-scale system renewal to improve operational efficiency at the regional communication business, as well as increased costs for removal of unnecessary assets in order to reduce the size of the asset. We do not disclose quarterly plans, but both operating revenue and operating profit are in line with our expectations. During the second half, we intend to generate cash and profit by expanding growth investment and slim down non-core assets, as well as carry out cost reduction, and we will work to achieve the annual target of increase in the consolidated operating profit throughout such efforts. As for profit, this declined 25.8 billion yen to 670.8 billion yen due to the drop in operating profit and increase in interest payment. EBITDA declined 34.5 billion yen to 1,673.1 billion yen due to decline in operating profit. Please turn to page five. This is the contributing factors by segment. Starting with the integrated ICT business segment, there was increase year on year due to increase in enterprise business and smart life business. The decline in operating profit relating to upfront investment toward future growth of enterprise business was more than offset by cost efficiency improvement at the consumer communication business. As for regional communication business segment, on top of the decline in fixed-voice revenue, there was also upfront cost in the first half, which I have already alluded to. So both operating revenue and operating profit went down year on year. Both revenue and profit is in line with our expectation, and we will work toward achieving increase in both revenue and profit for the full year basis. As for global solution business, Operating revenue increased year-on-year due to increase in Japanese domestic public sector business and enterprise business and also positive impact on foreign exchange. Operating income increased year-on-year despite the increase in overseas business integration cost due to structural transformation and increase in revenue. As for other business, inclusive real estate and energy, both operating revenue and operating profit declined due to drop in revenue from electricity business and anode energy. Please turn to page six. This shows you the projection for the full year, as we announced back in May of this year. Although as of the second quarter, both operating profit and profit has declined year on year, this is in line with our plan, and through increase in operating profit during the second half, we intend to achieve the annual target, as well as the APS target, which is welcoming its final year in fiscal year 2023. Please turn to page 7. I would like to cover several topics. Please turn to page 8.

First, I would like to explain our initiatives related to autonomous driving. In anticipation of the full-scale deployment of autonomous driving services in Japan, NTD has invested in May Mobility, a company with strength in autonomous driving technology and has obtained exclusive domestic sales rights for May Mobility's automated driving solutions in Japan. by leveraging May Mobility's autonomous driving systems and NTT's high-speed, high-reliable network and IC technologies. NTT will work on various partners to provide autonomous driving services that solve social issues. Please go to page nine. Next, as for the initiatives to expand ION's global business, I will explain establishing of ION Global Promotion Office. With the aim to generate business cases utilizing ION, NTT Data Group established the ION Global Promotion Office in North America and EMEAO. We are aiming for social implementation of ION by training 600 ION technology experts globally by the end of fiscal year 2025. Please go to slide 10. Next, I will explain creating ion data centers through APN. In order to realize decentralized data center, we will conduct tests of APN connections between data centers in the U.S., U.K., and Japan by the end of fiscal year 2023. Decentralized data centers allow for low latency, high capacity and high quality data transmission through multiple facilities as if only one data center was being used for data processing. Moving forward, similar tests will be conducted in countries other than the US and the UK. Page 11 is showing the progress of under the medium-term management strategy is as shown. Please look at page 12. Finally, I would like to explain the number of shareholders. I will report the number of shareholders as of the end of September after the stock split. The right side of the graph shows the number of shareholders at the end of September. The number of shareholders which had previously tended to increase slightly has increased significantly more than 1.5 times. We believe that the stock split has triggered interest in investing in NTT stock, especially among individual shareholders. The age structure of NTT shareholders has also become more diverse, with the percentage of shareholders in their 40s or younger increasing approximately fourfold. This is the explanation regarding the financial results.

Let me share with you our thoughts about NTT law. I would appreciate your patience a little while longer. Please turn to page 2. This relates to the rules and rules that prohibit combination between NTT East and West and DOCOMO. As we have certainly said, it is important that we comply with the competition rules, and we have no plans to integrate NTT East and West with NTT DOCOMO. Let me reiterate that once again. Page 3. In principle... There are two provisions with regard to services. And I believe it is... I believe... Universal service obligation for broadband service set forth under the telecom business law, including fixed line voice service set forth under entity laws, should be integrated with business law like major countries around the world. Also, it is the opinion of Mr. Yamamoto, the former Director General of the Capital Legislation Bureau and Supreme Court Justice, is that there is no legal problem in imposing the responsibility of spreading the telecom law to a wide range of operators and reestablishing exit regulations. That is the view, and please take a look at the next page. Allow me to read. These are the comments from the discussions on the Special Committee on Telecom Policy at the MIC. It revealed the deliberations, reveals discussions that misunderstand the legislative theory. For example, one member of the committee stated that if the national government were to designate a provider of last resort responsibility for universal broadband service, it would be stipulated in the business law. However, it would be difficult to name NTT in the business law. However, it is quite common for a business law to impose legal obligations on providers that meet certain requirements. So, therefore, telecommunications business law designates that those meet the requirements specified by cabinet order as those that possess the necessary equipment and materials to provide nationwide public business telecommunications services as the service providers that must provide universal service. And by devising such a way, it would be conceivable for only entities to be subject to such requirements. Therefore, It is quite possible to establish universal service provisions in business laws even without using the entity law, and that would be a common practice in the business law. Also, it is difficult to agree with the Commissioner's idea that business law is neutral or the entity law is law for the limited field. Since law gives rise and imposes obligations on people in specific fields, it should be as neutral as possible and within the scope that is consistent with the purpose of the law. It would be better to have a single law that covers as many areas as possible, which is consistent with the purpose of the law, so that the public can instantly understand the relationship between the content of the regulations in each order. Therefore, that is the view of the former Director General of the Cabinet Legislative Bureau and Justice of the Supreme Court, Mr. Yamamoto. Please turn to page five. This relates to the provisions in relation to foreign ownership and foreign capital. As far as we're concerned, we believe that only major telecom providers be subject to this regulation. That is what we have consistently mentioned. Even if you regulate only NTT per se, this would not be sufficient to maintain security for Japan as a whole. So therefore, as far as the methodology to realize such situation is concerned, we should focus not just on foreign exchange control law, we should also consider various other laws, inclusive of the telecom business law, and consider this situation in a broad manner. Page six, please turn to the caveat. We talk about 60 million fixed time subscribers. However, Under Article 7 of Telecom Business Law, it stipulates that telecom carriers that provide universal telecommunications services must make efforts to provide services in an appropriate and stable manner. Now, what are some of the universal services set forth under Telecom Business Law? One with the subscriber lines. These are fixed-time telephony services that are based on copper wire. And also in the case, so also, IP phones would be used would actually be an exception. For example, when fiber is more efficient rather than copper wire, then in limited areas, fiber IP phones can be introduced on behalf of subscriber phones. For example, in the case of March 11th earthquake will be one case in point. The other would be wireless fixed line phone and also public phones, which means that all the subscriber phones, correction, it'd be public phones as well as the current subscriber line subscribers numbers of 13.5 million. So it is not 60 million, it should be Please take a look at page 7. This relates to succession of assets from the public corporation days. When the stocks were allocated to the government upon privatization of the company, then the assets are now, the attribution of the assets are now with the shareholders. which is the government. And also, two-thirds of the shares were transferred to the private sector, meaning that the attribution of the shares should be attributed to the private sector shareholders. And also, I believe that there is no special corporation law in countries such as UK, France, and Germany. In the past, there have been successions, and fair and fair access is set forth under business law. Universal services set forth under the business law and others could be addressed by the foreign exchange control law. That is all from my side. I would now like to take your questions.

Thank you. President Shimada, thank you very much. We will now like to open the floor for questions. Regarding the questions, for those of you participating in the venue and for those of you participating online, for those of you who are registered prior to the meetings, we will take your questions first. And for those of you in the room who have questions, please raise your hand. We will bring the microphone to you. For those of you participating online, there's a raise your hand button on your system, so please press that. And if you'd like to ask another question, please press that button once again. When we call upon you for the online participants, we will call your company name and your name. So when you're called upon, please unmute and ask your question. After you have finished your question, until we conclude the answer to your question, please keep your microphone on mute. Now we would like to take your questions. So the person at the center. My name is Masno from Nomura Securities, and I have two questions, and two of them are related to your financial results. The first question is regarding the full-year operating income. The company is saying that it is in line with your plan. So in the plan, It seems that more profit will be generated in the second half. And for those of you who are looking at it from the inside, you're saying it's aligned with the plan. But from the outside people, you will have to generate a lot of profit in the second half. So how are you going to do that is what we think. So in more specific terms, can you explain? For example, if we will have this much of an increase in profit or this much of gains will be created through selling the assets. Can you show the factors that will push up the profit in the second half? Then Shimada would like to answer that question. Probably the most concern you have is NTT East and West. NTT East and West in the first quarter, from the first quarter, their profit level is slightly declining into the negative, declining. So, as I have explained at the start, in an advanced way, the system-related costs have occurred. And this fiscal year, the non-core assets, let's dispose of them, is something that we have been doing from before, and we have been doing it in the first half. So, the real estate properties that we really not be using moving forward, we will be selling them. And also within the group, the real estate that can be leveraged within the group that will be relocated to urban solutions. And we would like to thoroughly work on those initiatives. And through that, NTT East and West, to a certain level, will be transferring over their real estate. And that is planned in the third quarter and fourth quarter. And so considering these initiatives, we understand that we will be reaching the plan or we will be in line with the plan. And as mentioned before, the Hikari net add is declining. So the conventional fixed line decline was absorbed by the Hikari, then was increasing income. However, it is a fact that that part is also starting to struggle as well. Therefore, moving forward at the primary industry, the IoT business, how are we going to generate a new business as such so that we will be able to shift over to a new future growth? And this is where we will need to probably focus moving forward. Regarding this year's profit level, overall, we believe that we will be able to achieve the target if there is any risks. To point out, the Hikari's net ads may decline more than it is declining right now. And if such a situation occurs, there is a slight risk, a potential of slight risk out there. However, we would like to put our full efforts in order to achieve the target. And regarding NTT Dogomo, I believe that there will be detailed explanations given to you later. But basically, the enterprise business and the smart life business are both the first half. required some investment in advance for enterprise of business for the new middle class corporate Wi-Fi services in order to provide that it required advanced investment and for smart life business the card credit card systems Cost is occurring in a front-loaded manner. So in the second half, we believe that we will be generating outcome that will cover those advanced costs that occurred. And we are seeing quite a level of profit in the second quarter. So I'm hoping that that will continue throughout the year. And as for the global solutions, domestically, the business is steadily moving on. And for overseas, due to the FX impact, the revenue is almost flat. And as for the profit level, for Japan, in the latter half of the year, every year we generate a profit. And it is as I have already explained to you. Therefore, for the overseas part of the business, moving forward, the profit will slightly increase. And as for the other segments, this time, the power business, electricity power business, the procurement itself, the environment was difficult. So the sales has gone down. So that amount of profit has also declined. So that's a one-time thing. So for just this year, the sales will drop largely. And in line with that, the profit will also drop as well. However, on the other hand, urban solutions will put even more effort in their business. That is all. Thank you. Thank you very much. The second question is regarding next fiscal year. For a long time, we've been discussing about operating income, and the medium-term target is the EBITDA target. So next fiscal year, when we think about the businesses for next fiscal year, your explanation was, well, are you going to go for the target of EBITDA, or are you going to go with the operating income target? So next fiscal year, what is the drivers for the operating income? And for NTT East and West, you will be migrating the fixed-line copper. So, including this point, how should we think about the profit growth drivers for next fiscal year? As for the medium-term management strategy, the EBTA was set as the financial target. Therefore, for the foreseeable future, we would like to secure the profit to achieve that target. And this is something I mentioned at May. Regarding EPS, numerically, we have not clearly disclosed that. However, we would like to increase it at the same pace that we have been doing up to now. Therefore, we would like to continue that as well. Basically, it all boils down to increasing the profit level. Therefore, regarding this point, next fiscal year, for example, cost reduction measures and others, we will start the review of that from an early stage. Okay, understood. Thank you very much. That concludes my question.

Thank you. We'll take the next question. Yes, we'll go to the person who's sitting next to Mr. Masuno. Thank you. Kikuchi from SMBC Niko Securities. You talked about the next year's projections. So let me change the subject, if I may. It's about the progress in your medium-term management strategy. This is a five-year plan. So one-tenth has already passed, with the sixth month being passed. The EBITDA will reach 3.3 trillion, up to 4 trillion yen. As you work toward achieving the EBITDA target, do you believe that you have made progress so far? I think you've been involved in several investments. You have acquired or you have teamed up with securities companies. Do you believe that such acquisitions can really drive achieving EBITDA target? It's very difficult to envision that. On the other hand, you have programs such as IOWN and also So, can you talk about the progress in your investment and also the progress in terms of your achieving EBITDA? I would appreciate your thoughts. That's my first question. Yes, thank you for your question. Let me talk a little bit about our plans with regard to acquisitions. Originally, we had some progress in mind, but I think this progress of acquisition is slightly slower than what we had envisioned. But I think the overseas investment, because of the economic slowdown in overseas markets, the progress in terms of acquisitions outside Japan is slightly behind the schedule. Hopefully, we will be able to catch up with the plan eventually. Now, to the contrary, in the energy sector, we had the acquisition of GPI. So I think The 80 kilowatt hour by 2030, the target for 2030 has already been achieved, I believe. And also in the recent, we have found that retail customers are now interested in requiring and seeking renewable energy supplying. So I think although the scale may not be that large, I think we should also pursue non-FIT projects as well. As far as I own is concerned, this is making progress in line with a projection. So by 2025, we'll be talking about optical engine. So I own 2.0 revision. I think we're now able to provide that. So we want to work on this in an earnest fashion. So I know that we've caused concern, but we will work hard and hopefully we'll be able to accelerate our progress vis-a-vis the plan. Thank you for your response. Let me turn to my second question. Now, in the medium-term plan, you have focused on EBITDA as the target. Now, we're not accustomed to this. Is this a suitable target for NTT? I am not totally convinced. For example, you want to accelerate overseas acquisition. You also want to invest in data centers. But then, At this moment, when we take a look at your balance sheet, when you do acquisitions, you're going to do so based on debt. And debt financing is now in a negative yield. It's about 5%. In the case of data centers, return on invested capital for data centers in the first 5 to 10 years will be in the first digit, maybe even lower than your dividend. Your interest payment might be higher than the return on invested capital. So even if you make advance investment, even if you take a look at the EBITDA, you might not be able to catch up. I think it is important that you identify the bottom line target. If you can do that, I think as far as we're concerned, we can take comfort. And I think these targets are better to analyze your company. For example, we were at the briefing for the financial results identity data yesterday. And yen carry was roughly $60 million, as Mr. Hirai has been talking about. If that is the level we're talking about, the data center return on invested capital will be lower than the interest rate payment. So in the case, maybe we could focus on pre-tax profit or profit or APS targets. I think it would be better if you can share those with you because this will be more straightforward to the investor community. And I think it will be more conducive for better assessment for your company. So what are your thoughts? Do you have such ideas? Is there a possibility that you could review the situation maybe next spring or so? Thank you for your question. Yes, with regard to the high interest rate outside Japan. Yes. We do believe that this can be a challenging issue. We are aware of the situation. So that is why, in October, we carried out a 100 billion yen carry at that juncture. But aside from that, I think we are now considering possible countermeasures against the rising interest rate. So in not too distant future, hopefully we will be able to disclose such measures that we will be deploying. As you pointed out, at this juncture, the interest cost is going to be quite burdensome outside Japan, and we are aware of that situation. So we are aware that we need to take some countermeasures against this issue. So we do have that recognition. It is a challenge. Thank you very much. Hiroi, I will respond to your question. My name is Hiroi. Let me first turn to the costs at NTD data. For the time being, yes, 100 billion will be carried out. I believe there is room to further expand this going forward. When you take a look at the entity data business, I think this situation will be very clear. They have integrated their business with entity limited and their capital base has become larger. So I believe they're able to weather certain foreign exchange risk as a result of these integrations. So I think there is room to further expand their activities. So going forward, we will continue to carry out our consideration on this point. Also, We have shifted our focus from EPS to EBITDA. But I think you have to adopt a medium-term view if you're going to operate in your business. So you cannot be fixated on short-term bottom line only. It is important that we create resilient capacity to acquire EBITDA. We need to strengthen our ability to generate EBITDA. Our domestic consumer business is now entering a mature phase. So that means that we have, yes, we have been able to increase our EPS, but EBITDA has remained flat. So in order to generate shareholder return for the value, it is important that we expand our capacity to generate higher EBITDA. It is true that the interest rate is high and we'll be utilizing leverage. It's a point that we'll be able, if we're able to pursue repayment, then I believe we'll be able to provide performance that will be appreciated by our shareholder and investor community. And at that juncture, hopefully we'll be able to further expand our shareholder return based on that. So for the time being, it is important that we comply and safeguard the targets in the medium term plan and also generate greater capacity to earn in the medium term. Thank you very much.

We would like to take the next question. Is there anyone who has a question? If not, we would like to receive questions from the participants online. First of all, Mitsubishi UFJ Morgan Stanley Securities, Mr. Tanaka, please unmute and ask your question. This is Tanaka from Mitsubishi UFJ Morgan Stanley Securities. We can hear you. It's okay. That's good. I have two questions. The first question, You mentioned about the other segment. Urban solutions in the second half will be recovering. Specifically speaking, what are they? Can you please share that? This is Hiroi speaking. It's urban development. So basically, the existing rent buildings, income expansion, and we are selling residential houses as a business. So expanding that business is going to be driving the growth of the profit is how we look at it. Okay, understood. The full-year plan for others' business is $70 billion. It's... in line with the last fiscal year, second half profit, and in the power, our business is struggling, so that is going to be sufficient to cover that part. You're talking about the overall other segment, yes. Is your question limited to urban solutions? With the recovery of urban solutions, the overall business segment can be offset. Is that sufficient? Well, for the power business, overall, against the previous year, it is declining in terms of profitability. But for the target for others, urban solutions, profit, and also within the others, there's the other group companies increase in profit. So we will be able to absorb the negative aspect of that. If I may add more, we will be replacing the assets of urban solutions. So of course, due to that, by... reshuffling or replacing the assets, we'll be able to get a certain amount of yield from that. And of course, we may be using a REIT for this. However, we would like to include those activities to secure the profit. Thank you very much. And my second question, to the revision of NTT law, Your competitors are saying 55 trillion yen succession. At the press conference you have explained and I thought, oh, that's true. But let's say that the third party allocation, there's a platform. And since 1984, you have been investing in this network and facilities. But how much? If how much is allocated to the competitors or third party, will it make it a fair investment amount? Well, that I do not know. I don't know how long it's going to take or what the money amount is going to be. But us, basically, the current entity, East and West Assets, by separating it from we are against it. And globally, 99.7% Hikari rollout is not just due to us, but because of the electrical power companies, related companies. Together with them, we have been rolling out this high-level infrastructure is what we believe. Therefore, When we think about the Japanese industrial policies moving forward, the next stage of technologies such as in the ages of APN or 6G, by sophisticating and advancing the network even more, is going to further advance the overall Japan industries and to have an even enriched life for the Japanese people. what we will be doing will contribute to that. So, of course, the R&D labs, the technology will also be incorporated to that. So, basically, we are not thinking of separating these out. Understood. Thank you.

Thank you. Next question, please. From SBI Securities, Mr. Moriyuki, please unmute your microphone and go on to your question. Thank you. Moriaki is my name. Can you hear me? Yes, we hear you clearly, sir. Please go ahead with your question. Yes, thank you for this opportunity. If you could talk about the short-term and long-term. Let me start with the short-term question. NTT West and the NTT West subsidiary firm was involved in the data leakage. I think going forward, this is going to entail compensation. How will such compensation impact in terms of your group companies? Now, despite that compensation issue, do you believe that NTD Estimates will still be able to show recovery for the full year? That's my first question. Thank you. That's my short-term question. Let me talk about the long-term question. There are a lot of views and different perspectives about NTD law. But if NTD law was revised based on your request, Will this entity law revision impact which part of immediate management strategy? If you could give us some clues, I would appreciate that. Thank you so much. Thank you. Let me start with the first question. My name is Hiroi. I would like to respond to your first question. Yes, the incident that took place in the entity was subsidiary firm. The negative impact thereof. We're still analyzing the details. And not everything is definite yet. So it would be difficult to estimate what the impact will be at this juncture. But having said that, once the amount becomes definite, then I think toward the year end, we should consider provision. And I think we need to consider various impact on profitability in the following year. There could be some indirect negative impact on the profitability in the following year. But as far as those potential impacts are concerned, we want to be able to absorb that. Also, as far as we're concerned, despite the compensation issue, There could also be cases where we would be seeking compensation, but in totality, yes, the question will have a negative impact. So it's important that we absorb that and still be able to maintain positive profitability in the following year. Thank you. Let me respond to your second question, Shimada here, with regard to entity law. What will be the impact of the revision of NTT law on the meeting term management strategy? As far as R&D is concerned, the obligation to disclose R&D, if this could be eliminated, this could have significant impact. For example, last week, we announced NTT version of LLM large language model. That large language model that was announced last year entails very small amount of parameters, And despite the small number of parameters, we were still able to offer a certain level of performance. So the model that we announced was very unique in that regard. And this will be commercially available starting from March next year. But under the current rule, naturally, we'll be able to receive the cost from the party. But as far as the substance is concerned, we have to disclose the substance of those research. And when people come to us to request the disclosure, yes, although we'll be able to pay the cost, but we have to disclose the results of our research. So we cannot monopolize our R&D. That will be, of course, that will cause cost and impact as well. And of course, we can adopt the open model, but then the degree of freedom will have to go through various questions. For example, are we going to gain patents or are we going to... pursue a closed model, it has to vary from technology to technology. So therefore, the way in which we pursue business will be different when we consider ion project and when we consider the optical and fiber transistor based on ion in the future. This is going to significantly change the current semiconductor technology. This could actually substitute and replace the current semiconductor technology. So should such technology be forced to be disclosed, that should be considered from the standpoint of national security, economic security. Is this really in the interest of investors and shareholders for NTT? I think with greater freedom, we'll be able to find better partners, and this will be more positive for us when we consider global business operation. So this is one area that we would very much like to change, and that is what we are arguing for. So yes, this will have a positive impact if this should be achieved. That is our recognition of the issue. Thank you, Mr. Moriyuki. Are you satisfied? Thank you.

We would like to take other questions. including those of you in this venue. Are there any other questions? My name is Ando from Daiwa Securities. Well, later on, DocuMobile giving the presentation later, so I'd like to ask the question regarding entity East and West. In the first half, due to two reasons, they had a drop in the profit. The first is the renewal or upgrade of the system. The second is the disposal of the real estate. to get some peace of mind materials, the second half, and a cost for disposal of the real estate. And from next fiscal year onwards, entity east and west, due to no more of these costs occurring, are they going to increase the profit? Or is there a substitution with the IP, moving over to IP for the telephone service? So what kind of a profit can we expect for NTD East and West moving forward? How it is structured? Well, the details will be added later on from other people, but towards our next fiscal year, the so-called digital transformation, DX, or further improving the efficiency, pursuing those two will become the key. And that will be incorporated from this fiscal year to realize that. And that is going to become important. As explained before, the top line itself, increasing that further is going to be difficult or the situation is becoming difficult looking at the fundamental base of businesses. So having the new businesses start and reducing the cost of existing business and to increase the profit will probably be the situation that's going to continue for several years from onwards. This is a difficult task. However, they have been doing such tasks up to now as well. Therefore, The time to consider and review may be longer, so there may be differences there, but they will be working on this. But for the first half, how much profit was generated, this is Nakamura, head of finance and accounting. The first half, as Shimada mentioned, regarding the cost that he mentioned about, There are two factors. The first is system-related costs. And an example, it was mentioned that to dispose of non-core assets for real estate, but there were other several. There are actually the facility disposal or network disposal as well. And all that together is several billion yen is what I would like you to think about this. And that is the incremental compared to the previous year. And if I may add, the entity east and west, the revenue side, responding to the maturity level of the market, if it's a gradual increase, that's fine. If there's a situation that they're behind from the market, they need to focus their efforts on the sales activities. So we have to make sure that what they're doing is no different from how the market is performing. So probably we need to further enhance the sales activities. Thank you very much.

Thank you very much. Are there any other questions? Then we would now like to ask Mr. Moriyuki, connected to us through the... Mr. Moriyuki from SMBC, can you ask your question again? Thank you. Moriyuki here. I would like to ask a follow-up question, if I may. It's about R&D. You talked about how you want the obligation to disclose R&D results would be something that you want. And I think Mr. Takahashi of KDD has said that he would be willing to accept that So I think the top priority for you should be, correction, this top priority is now being agreed between the two parties. So do you believe it's possible to discuss this matter with your competition, or is this discussion going to be at parallel? I think, can you identify some elements that will help you to push up your profit? So what condition are you going to prioritize in your discussion in terms of entity law? No, I'd be more than happy to comment on this matter. So with regard to universal service and the fixed line services, I have put my argument forward in conjunction with this discussion. In the case of universal services, in the case of fixed line, the negative deficit is about 30 billion. But if we add both the subscriber line and public phones, the negative deficit will be roughly 60 billion. So this is a loss-making business. And if this loss-making business could be eliminated, it could be reduced. And in 10 years, I think it's quite clear that the deficit will be around $100 billion in 10 years' time. So how can we absorb that deficit in the fixed-time business? That is going to be a very important point, which will help us to revive NTT East-West performance. So the fact that we're able to start this discussion is very positive, because up until now, Such a discussion was considered to be a taboo, and we were not even able to engage in this discussion on this matter. So it's important that we have the fullest of the discussion on this matter and be able to eliminate any negative deficit factor on our side. If that could be possible, then it's one of the ways to resolve one of our major challenges for our business. I see. If that is the case, as was mentioned by another person, Are you able to focus primarily on this matter? Well, if we could separate fixed time phones, if that's possible, we could do that. But that's not possible in reality. So we cannot... I think we cannot ask people to accept our willingness to be able to separate loss-making business. If there's someone else who'd be willing to take on such business, that'd be nice, but I don't think such a hypothesis would be possible. Okay, thank you very much.

Thank you very much. Are there any other questions? With this, we would like to conclude the briefing session.