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Thank you for joining us. I'd like to start the presentation of the fiscal year 2023 third quarter results for NTG. My name is Hanaki of the Investor Relations Office, our office of NTG. I'll be the facilitator today. I'd like to introduce the attendees from our side. The President Member of the Board and Senior Curriculum Vice President, Mr. Hirui. Executive Officer, City Vice President, Head of Finance and Accounting, Mr. Nakamura, Executive Officer, City Vice President, Head of Corporate Strategy Planning, Mr. Hattori are the attendees from our side. Please be advised that today's meeting is being broadcast live. At a later date, we're planning to have on-demand based distribution over the web. Please take a look at the Investor Relations website for the presentation materials to be used for the meeting today. Also, please, you'll find comments with regard to future legal statements on page one of the material. We would like for you to read to that page. Thank you. So today we'd like to invite Mr. Hiroi to talk about the outline of the financial results, after which we'll take questions from the floor. So, Mr. Hiroi, the floor is yours. Thank you very much. My name is Hiroi. Thank you for attending today. Before we start, the presentation, I would like to express our sincerest and deepest sympathies toward those people who were affected by the Note of Minnesota Earthquake 2024, as well as to their families. We sincerely hope for the earliest possible recovery and reconstruction of the affected area. NTT Group intends to continue to make efforts toward the recovery and restoration of the affected areas. So let me then start the presentation of the fiscal year 2023 third quarter results. Please turn to page four. This is the outline of the financial results. Operating revenue increased. Operating profit declined year on year. Operating revenue reached new record high level as the third quarter. Operating profit and profit recorded increased for the third quarter on a standalone basis, although on a cumulative basis they have recorded a decline. As for operating revenue, revenue from electricity business declined 190 billion yen since Enet curbed their power purchase due to the rise in procurement cost. Integrated ICT business segment and global solution business recorded increase in revenue. So operating revenue increased 144.3 billion yen year on year up to 9,716.9 billion yen. Now, of this increase, impact from currency was roughly 120 billion yen. As for operating profit, regional communication segment faces challenges related to fiber net ads and voice traffic because COVID-related demand has run its course. There is also increase in cost related to removal of unnecessary assets for the purpose of streaming assets. So operating profit went down 34.6 billion yen year on year to 1,486.2 billion yen. As far as the annual plan is concerned, There were some unexpected costs such as cost related to security from disaster. And so going forward, these costs are expected to increase. So we expect the facilitation of cost reduction measures. So we'll also be zooming down non-core assets. So therefore, we'll aim to achieve increase in operating profit portfolio, which is the target for the consolidated plan. As for profit. This declined $21.4 billion to $1,011.1 billion due to drop in operating profit and increase in interest payment. As for EBITDA, EBITDA declined $16.2 billion to $1,571.7 billion due to decline in operating profit. Please turn to the next page that shows you some figures by segment. Let's start with integrated ICT business. Enterprise business, smart life business, and consumer communication business all recorded an increase in revenue on a year-on-year basis. Now, as for operating profit, there was decline in smart life due to some reactions to the new factors in the previous year. However, there was increase in profit in enterprise business in line with increase in revenues and also due to increase in consumer communication business based on cost efficiency. Operating profit increased year-on-year. As for regional communication segment, as was mentioned earlier, on top of declining fixed-voice revenue, we also expect most of the increase through slimming down of non-core assets will be reflected during the fourth quarter. So operating revenue and operating profit both decline year on year during the third quarter. As far as the end of plan is concerned, as I mentioned earlier, Achieving the target for regional communication segment will seem challenging since disaster recovery cost is expected, but we'd like to cover the cost as much as possible through the reduction of non-core assets and cost reduction measures. So we would like to make efforts so that we'll be able to cover any decline in this area. Let me now turn to global solution business segment. There was increased year-on-year due to increased revenue in the public finance and enterprise sector here in Japan. Also, we saw increased global businesses as well. So, therefore, operating revenue increased year-on-year. There was impact from currency to the fact of $100 billion correction. That's for operating revenue. There's this increase due to structural transformation and also impact of increased revenue. So that indicates we were able to record increase in operating profit in this segment. As for the other segment, as I talked about earlier, operating revenue declined near as ENET curbed the power purchase due to rising procurement costs. So revenue from electricity business went down. As for profit, this declined because of the impact from ENET. So therefore, we saw decline in profit because of the impact in terms of the probability of the electricity business. Now, for the quarter onwards, we will continue to monitor the situation very closely. And let's make sure that the profit from electricity sales will be minimized, will be maximized. And we'll be able to make sure that we'll be able to minimize any impact for the market situation. Now, let me turn to this page. Let me talk about the outlook for operating profit for fiscal year 2023. During the first and the second quarter, primarily in the regional communication segment, we saw a decrease in profit year on year as per active cost was necessary in order to reduce assets. But we saw steadfast improvement in profit in each quarter through cost reduction measures. So by each quarter, we're seeing improvement. So third quarter results, the third quarter recorded increase in profit year-on-year on a standalone basis. During the fourth quarter, we expect base profit to expand due to expansion in growth areas and further cost reduction. We also expect increase in profit through reduction of non-core assets. So while the situation remains challenging with expenses for disaster recovery, we will anticipate the consolidated profit target. Let me now turn to topics, page eight.

We will use this in order to realize distributed data center. Well, within this fiscal year at NTT group, major data centers will be connected via APN within this fiscal year. Furthermore, from 2024, this will be further expanded to cover the regional data centers so that we can construct what is called distributed data centers. leveraging the properties of APN by connecting data centers located in remote locations in real time, it becomes possible to utilize them as if it would operate as a single data center. Next, on page nine, I would like to explain our new initiatives undertaken jointly with Tokyo Electric Power Holdings, or TEPCO Group. We entered into agreement with TEPCO Power Grid to establish a new company. In the Inzai-Shiroi area of Chiba Prefecture, we plan to develop a data center aiming to launch service in the second half of 2026. Also, with Tokyo Electric Power Company Holdings, we established a limited liability company in November 2023 to operate a battery storage business in Tsumagoi-Gunma Prefecture. We will aim to launch service in 2025. We will continue to utilize the assets and know-how pertaining to the power and telecommunications business that we respectively own and aim to create new value and realize a sustainable society. Next, let me turn to page 10. This is our new initiatives in the area of new green transformation. We created a new solutions brand called NTTG to strengthen initiatives in the GX field. Also, we launched a green energy business integration platform to help renewable energy producers with their GX initiatives and establish a new platform. And in addition, with respect to the visualization of platform for CO2 and other emissions, we successfully increased the number of suppliers introduced in the platform to around 1,000 companies aiming to realize carbon neutrality up to Scope 3. Next, on page 11, Let me explain here how we are supporting the areas affected by the Noto Peninsula earthquake. We restored our communications service and conducted some 300 on-site visits to evacuation centers, including non-designated centers, to provide mobile phones, Starlink and Wide Star II service, Docomo satellite phone service. As a temporary public telephone for disaster cases, we provided pre-installed type phones in 171 locations and additional portable satellite equipment in 23 locations in response to the request of the evacuees. Furthermore, for those staying in the shelters for a long period of time, we started video service and online medical consultation service to care for their physical and mental health. Going forward, we will work together with the local governments and create consultation desks to address the concerns and challenges of evacuees and those affected by the disaster. This shows, on page 12, this shows the number of our shareholders. Let me share with you the number of shareholders as of December 31st after the stock split. The graph on the right shows the number of shareholders as of December 31st. After the announcement of the stock split, the number of shareholders increased significantly, and compared to the level of March end, it has increased to 1.7 times. Those under age 40 quadrupled. So as you can see, the age composition also diversified as a result of the stock split. On page 13, this is the progress. of our actions in the medium-term management strategy implementations. I won't go into details, so please read them through by yourselves. That's all for myself. Thank you very much for your attention.

We now like to go on to the Q&A session. For the questions, for those of you who have registered in advance and who are connected to the web conference system right now, if you have any questions, please use the raise hand button on top of the web conference system. If you wish to cancel your question, please push the raise hand button once again. When we designate the questioner, please, we'll be calling out your name as well as your affiliation. We'll ask you to unmute your microphone. When we ask you to do so, please unmute your microphone. As there'll be response from our side, please remain unmuted until the question is over. So we're not allowed to take questions. From Nomura Securities, Masano-san, the floor is yours. Mr. Masano, please, from Nomura Securities. Thank you. Can you hear my voice? Yes, we hear you clearly, sir. Thank you very much. I would like to ask several questions, if I may. For the profit for the fourth quarter, you mentioned earlier that the situation is very difficult, but you are likely to aim at achieving the aim. Are you talking about the regional communication segment? Are you talking about consulting bases? Are you talking about being able to achieve the target for this particular or for the overall consultative basis? If that's the case, you need an increase in profits if you are to achieve the consultative target. How do you intend to increase your profit by this much? In which segments are you intending to increase your profit? I appreciate your explanation. Now, of course, I would mention there's going to be 6 billion in profit from the sales of real estate at entities. Can you please explain how you intend to increase your operating profit between the fourth quarter? Thank you for your question. Yes, we're talking about consolidated as well as regional communication segment overall. So I think both in regional communication segment and consolidated basis, we want to achieve the target. But then, of course, there is a difference in nuance when we talk in the case of the regional communication segment, Yes, we will be carrying out sales of real estate, but yes, the foundation remains very difficult and challenging. Of course, we want to achieve the target in the regional communication segment, but the situation is very harsh still. On a consolidated basis, yes. Of course, it depends on how much recovery we can make in the regional communication segment, but there are other segments which are available, so hopefully we'll be able to drive an offset any decrease to other segments. So we want to make sure that we achieve the target on a consistent basis at the end of the full year. Thank you. Okay, thank you. What about this sale of proceeds, process of sales of real estate? How much amount are you anticipating? Will that, as a part of the third quarter, or will all the impact from the sales of real estate be reflected in the fourth quarter? You only have two months left until the end of the year. I cannot give you concrete numbers, but yes, part. Yes, we are making preparations. Some of the profit was realized during the third quarter, but most will be reflected during the fourth quarter. Yes, that's how you should understand the situation. Okay, thank you very much. Next, let me ask the following. You talked about additional costs. Also, during the press conference, there was mention about of roughly disaster recovery-related costs. They talked about costs for security costs. Will that be mostly this year? Most of them will be selected to be next fiscal year. So these temporary costs, what are your thoughts about the temporary costs? Thank you for the question. Yes, we cannot prejudge the outcome. We cannot be complacent. The situation remains so fluid. Now, going forward, we need to respond to various customers' requirements. And so it's up to the situation pertaining to the customers' requirements. So how much impact will there be? We're not yet sure. That is not visible at this moment. But having said that, with regard to this matter on hand, there's likely to be many potential negative impacts from the current circumstances. So enterprise business revenue is likely to be affected because there's going to be some reduction in the transactions. That is likely to be reflected both in this year as well as in the next fiscal year as well. Also, there are many temporary costs as well. For example, we need to address customers' needs. We need to talk to those customers, and we're not sure what will happen, but there might be cases where we need to make some payment of cost. So how can we fund these costs in a reasonable manner by the end of the fiscal year? So depending on that, the profits for the fiscal year and next fiscal year will be affected, but I think it is still to make a concrete response on this matter. Thank you very much. Thank you. What about the upside? I'll talk about some of the upside elements. The energy during the fourth quarter is likely to be not affected by the unique special factors. So you're likely to drive profit in the fourth quarter. Integrated ICT business, enterprise business, and integrated solutions business is doing well. So that is likely to have positive impact for the fourth quarter. Also NTT Limited. data center-related asset sales will be reflected in the fourth quarter, so you're likely to enjoy proceeds from the sales. So can I talk about the upside, which can cover the downside? Can you talk about some of the upside elements as well? Okay, thank you for that question. Yes, as you pointed out, Mr. Massano, for us, we have some growth business, such as integrated ICT business. That's part of our growth business. And also global solution is also another growth business for us. As far as Tocomo is concerned, They're doing very well in terms of smart life business. They're doing very well in terms of the smart life and enterprise business, and they're trying to drive the growth in both of these elements. On the global front, as we pointed out, the data center sales proceeds is likely to kick in during the fourth quarter. So through all these elements, we're likely to reinforce our profit. Also, DX is doing very well here in domestic markets. And we're doing well in terms of revenue profit from DX here in Japan, so we hope we'll be able to add on further operating profit from this business. So through that, we'll be able to make recovery in the consolidated basis and achieve the consolidated profit target at the end of the day. Thank you. That's all from my side. Thank you.

Thank you, Mr. Masuno. Now I would like to move on to the next question. SMBC Nikko Securities, Kikuchi-san, please begin your question. Thank you. I also have two questions. In relation to some questions, this may be somewhat overlapping. So on page six, regarding the streamlining of your non-core assets, meaning that this will be the real estate disposal for NTT East and West mainly, or are there any other assets in mind like for example data centers I don't think you'll call it non-course or the disposal of data centers may not be indicated by this is that correct well yes it's all about interpretation actually so mainly when it comes to the streamlining of non-core assets it's made basically about not only you know the entity east and west but if it relates to non-core assets for each business. So basically it's about real estate disposal. And data center as sales. For this matter, data center business is currently our core business. We are focusing on that. So it's just part of the reshuffling of the portfolio. So we will dispose them as part of that. So it's about how to count the profits as a result of that. Okay. So just as a brief confirmation, it's basically about real estate. So you don't really refer to any different type of assets such as receivables, for example. it's basically a real asset that you're talking about here is that is that the point is that the case that's a point of confirmation and also on the page six um it doesn't really make sense yeah about 60 billion or so it's like it sounds like this is about 60 billion is that the size the right size that i can think about well um i think real estate uh you can interpret that this is basically real estate and uh Rather than trying to size this bar here of profit, it's very difficult for me to comment on the detailed numbers, so please allow me not to make any comments regarding that matter. Okay, so thank you. So the second question regarding regional communications business on a consolidated basis, that is going to have a very difficult impact. And in the first half you recorded a decrease in profit for regional communications. Going into next fiscal year, Do you think the situation will come back to the level before COVID-19 so the decline from voice revenues will be covered by the cost reduction? Would it be possible to achieve that or do you think this after COVID situation many things have changed and therefore do you think the situation will remain in the next fiscal year onwards as well. And also related note, PSTN will now be converted into IP network. So that will be completed by the end of this fiscal year, I believe. So if you have foreseen the impact on the business, please let us know. This relates to regional communications, I believe, and also NTT communications also. So if you can also comment on the magnitude of that impact, that would be appreciated. Well, first of all, regional communications business, the structure of this business is that, as Kikuchi-san just rightly pointed out, with COVID-19, remote work became a commonplace and, of course, of course, the net additions of the Hikari business was quite favorable. And in the beginning, in the early part of COVID-19, the voice revenues expanded. So that was a positive impact coming out from COVID, but this is no longer the case. The positive impact has already disappeared. So as you already pointed out, things are going to return to the pre-COVID situation. The Hikari net additions, actually when you look at the trend, the growth is decelerated even before the level before COVID-19. So we will have to review the cost structure so that we can take initiatives so that we can achieve a sustainable growth. So for 2024, we will step up the initiatives in order to achieve that target. And as you know very well, the net additions of optical fiber has slowed down in terms of the growth pace. So if that has a deceleration in growth, that will have a negative impact in next fiscal year. So the revenue growth will be slower. So therefore, we believe 2024 will still be a very difficult timeframe for us. So NT East and West will have to make steady actions in order to address this issue. And in addition, regarding PSTN migration, yes, PNSTN migration, thankfully, as of January, as of the new year, we were able to switch over without any accident at the new year's timeframe. And this PNSTN migration impact, the specific impact from PSTN migration, I cannot comment on the numbers, but I think you are already aware Regional communications positive impact to some extent and NTT communications signed. NTT communications because the network composition will change and therefore that will have a negative impact on NTT communications. In the integrated ICT business segment, the negative impact will be absorbed with the integrated ICT business. So that is the backbone of our business plan or profit plan going forward. Thank you. That's all for myself. Thank you.

Thank you. Next question. From City Group Securities, Tsuruho-san. The floor is yours, Mr. Tsuruho of City Group Securities. Thank you very much. This is Tsuruo. Your voice is a bit faint. Can you try again? Thank you. Tsuruo from Citigroup Securities. Thank you very much for this opportunity. I'd like to ask my first question. I'd like to ask about cost reduction. I'd like to confirm about the outlook for your cost reduction going forward. Based on the supplementary material, we're able to confirm the pace of cost reduction. $45 billion in the first quarter. So that's the concentration. So can you give us a breakdown of the cost reduction for each quarter, if you could give us a rough image? Also, page six, you said there was further cost reduction. So can you talk about some upside or increase in cost reduction? That's my first question. Thank you. Yes, thank you. With regard to cost reduction, With regard to entity east and west, we have a cost reduction menu. So should we respond on this point? But isn't this about cost reduction for overall company in relation to the midterms map plan? I thought that's what these numbers implied. Isn't that the case? Of course, whichever is fine. I'll leave it up to you to respond to this question, sir. Thank you. Okay, thank you for that. Point taken. Basically, NTT East and West and Docomo Group are the main players involved in this picture. At NTT East and West, they are involved in maintenance of fair facilities. Those have asset maintenance costs, which they're trying to reduce. So consignment expense to vendors as well as maintenance costs, they will continue to make efforts to reduce these costs. So that's NTD East and West. As for NTD DoCoMo, they have a wide variety of different cost reduction measures at this moment, especially in the recent. They're trying to improve the cost structure. In the past, call centers which were distributed to different regions are not being consolidated. And also, support for various agents are now being consolidated, are not being reduced because these centers are also being consolidated. So these cost reduction measures are now ongoing as well at DOCOMO. So that is likely to have a positive contribution to the picture. Thank you. Can you talk about further cost reduction measures that is mentioned on this page? In terms of midterm plan, they believe that there's an upside to the cost reduction. Are you prepared to see any upside for the fourth quarter in terms of further cost reduction against the midterm plan target? Well, as far as the fourth quarter is concerned, There's the cost reduction menu, which we had already envisaged, and we want to implement these measures in a surface manner. So, yes, there's going to be further contribution from cost reduction during the fourth quarter because of that. So that's how you should understand the situation. Now, there might be a shortfall. That's the case, as I mentioned earlier. We'll be covering that through real estate. We want to make sure that we're able to cover the situation at the end of the day. Okay, thank you very much for that. Let me turn to my second question. This is a more broad question about the capital allocation. Now, entity law is now being discussed in various forms, and I think stage by stage the discussion is progressing with regard to shared buyback. Is it possible to have increased flexibility with regard to shared buyback in the light of the ongoing discussion with regard to entity law? Can you share with us your views? Can you talk about the CAPEX in relation to IOWN as well? That's a new project. So can you talk about the basic principle with regard to CAPEX going forward? I would appreciate your comment. Thank you. That's all for my question. Thank you. If you could respond, please. Okay, thank you. With regard to entity law discussion and the share buyback, I just think there's a direct link between these two elements. So with regard to capital allocation, there is no restrictive element with regard to capital allocation set forth under the NTT law. That is not our recognition. But what is the capital allocation talking about, for example, in terms of under NTT law, there is no restriction pertaining to capital allocation that goes beyond our parameters. And there is no restriction pertaining to various capital transactions. As far as we're concerned, we don't see any problems pertaining to the current law, and we want to continue on with the shared buyback in line with the current policy. Let me see, what was the other question you raised? Yes, it's about IOWN. Yes, thank you for the clarification. Yes, we are very much focused on development underway in the context of IOWN, and so we have a company called Entity Innovative Device. and this is a company which was established, and we are making capital introduction there, and they're making various investments for R&D. So that being the case, we want to continue to pursue the development based on this structure. There's no change in our policy. Now, did you want to ask about entity law, impact from entity law? I don't think there's any impact from the Tsugashan when we go to entity law. So we go to CapEx overall, we go to Ion, We're working ION 2.0 and ION 3.0. We're pursuing device development in this context, and so we're trying to roll out new APN, and we'll be making investment into those areas. So we'll actively continue to make investment in these ION-related projects. Now, having said that, we've got the CAPEX. We're going to expand our CAPEX, and we're going to invest equity investment in these areas naturally. We have to consider the impact on the profit on a short-term and medium-term basis. It's important that we have sustainable profit-generating structure. It's important that we'll be able to generate profit while we continue to pursue R&D. So please understand that that is our position. Okay, thank you very much.

Thank you. Moving on to the next question, which will be from Daiwa Securities. Mr. Hando, the floor is yours. Can you hear me? Yes, we hear you. Please begin. Thank you. This is a detailed question, actually two questions, so sorry. Regarding the regional communication segment, for the fourth quarter, three months standalone profit, this is, you just returned to the same level last year, you just managed to do so. In the second half of the year, I think, in the first half of the year, you struggled in terms of the profit vis-à-vis the last fiscal year. So what's the reason behind this recovery? And in the fourth quarter, can we expect a further improvement? Of course, there's another earthquake impact, but the general trend, excluding the impact of the real estate, can we confirm that we are on the recovery trend and can see further improvement? In the first half of the year, you talked about the system renewal and also the evacuating the buildings from the land. Did they make a positive contribution to the performance? And also the system integration revenue has started to show some increase. Is this sustainable? So from the outside point of view, those are things that stand out to me. So if you could comment and analyze these factors, that would be appreciated. Well, for regional communications business, if you look at it, to be honest with you, the revenue trend has not really changed that much. Cost side, rather, expenses and also the write-offs, those have been suppressed. So that's the big picture. Actually, the write-off, has been controlled and also on the expenses side, as you rightly pointed out, the internal system expenses has been increasing, but all included, we have been able to absorb this with other elements, especially in the facility related expenses. We have been able to work on cost reduction and that has paid out. So if you could appreciate that way, that would be appreciated. is expanding, and of course all the companies are now making efforts to increase their revenues in this front. Usually in the third quarter to the fourth quarter, the revenues are on the uptrend, on the increasing trend in the usual circumstances, but we would like to maintain this current level, and all the companies are striving towards that goal, but whether that is sustainable, of course there are fluctuations quarter to quarter, That is a general trend. That's it for myself. Thank you. And my second question. East and West, their profit level this fiscal year seems to be challenging according to your explanation, but you tried to cover that up with the performance of other companies. which part is going to grow on a year-to-year basis it's conspicuous that the other business on the fourth quarter in the fourth quarter it was negative previously but this is going to turn positive this fiscal year in the fourth quarter so that I think is the factor behind this recovery but the other business other segments, maybe this is real estate, so I think it might be possible for you to generate profits, but energy, you are going to control that business. So sorry for this very detailed question, but what can we anticipate in this field? For the others segment, For the profit income, the urban solution has a big impact. Actually, this is a real estate business, and anode energy is also having a big impact. Urban solution for this term, because they are going to expand a cyclical business, and therefore the revenue is expanding, profit is expanding, and also in the fourth quarter this trend will be maintained. On the other hand, anode energy, Well, in the beginning of the presentation, I touched upon this. The baseline profit, the electricity business, because of the legal framework, and this is operated as a framework, so therefore the profit can be steadily expected and be generated on a steady fashion. mainly enterprises or these users, when it comes to retail business to these enterprises and other general customers, there will be fluctuations in profit, and that is becoming larger than before. The fluctuation is becoming larger than before. As for the entire year's business, we secure the energy in the beginning of the year, and that price is actually fixed at that point. But as we run the course of the year, electricity demand fluctuates, and then if there's extra energy, we will just sell these electricity to the market, and that could potentially be positive or potentially be negative, depending on the circumstances. In 2022, we were able to achieve a significant positive performance, but this fiscal year, We were not able to achieve a significant positive upside, and there is a possibility that this will turn negative this fiscal year depending on the market circumstances. So getting into the fourth quarter, we still believe that this will perform unsteadily, and we have to anticipate some instability here. So this other segment, profit outlook, will be challenging in your view. The other segment in the fourth quarter, to some extent, we will have to say that this is challenging. I think you can interpret that way. Thank you.

Thank you very much. Next question from Mizuho Securities. Horisan, the floor is yours. Horisan from Mizuho Securities, please. Thank you. My name is Horisan from Mizuho Securities. I have just one question. If I could once again ask about the global data center business outlook and your operations, I would appreciate your thoughts about the operation of your global data centers. Now, the global operating companies, their stake is roughly about 55 percent. NCD data has roughly 55 percent in the global data center business. The domestic data center is more complicated, and there are cases where NCD Limited is not involved. Outside Japan, it mostly relates to NTD Limited. You talked about data center today. Also last year, last fall on NTD R Day, you gave a presentation about data center. NTD data was not involved, although they are the main player. NTD, global business center, and also NTD Limited. But even if the global operating profit for that should increase if the data center is not going to improve. So therefore, you're not going to have a good evaluation by the analysts. So there's Gen-I. And I think even if you want to practically utilize this, if you want to do this based on entity data balance sheet, because when the EM became weak and also because of interest rate went up in the U.S., it led to instability. In the case of entity balance sheet, I think you have more capacity compared to entity data balance sheet. So maybe entity holding companies should be more active in making investments compared to other group operating companies. And if you want to catch up to Equinix and data reality, should you not make more active investment? I think you seek IPO eventually. So who's the main player in this picture? It's not yet clear. Will this situation be continuous down the road? So if you could create a more streamlined structure for data center business that is more clear to those of us who are outside to your group. Yesterday we listened to NTT Data's presentation. They said that they don't think it changes it right now, but they're willing to have discussions with NTT on this matter. So what about NTT? What is your position with regard to NTT Data Center? What is the best structure in terms of your data center business for the group as a whole? That's my question. Thank you. Yes, thank you. With regard to the promotion of data center business, What is the relationship between entity holding company and entity data? I think that is your question. So to get to the bottom line first, entity data and entity holding company, we'll always discuss very closely and make sure that both of us are able to expand and grow our data center business. So for this very big... lofty goal, we are always in discussion on a daily basis. As you pointed out, for entity space balance sheet, yes, there is room for further investment with regard to the data balance sheet. Such investment could be quite a burden, so there could be breaks on any investment by entity data with regard to data centers. So with regard to entity data, and also for the investor community as a whole, what I'm going to say is relevant. But how we see the business, that needs to be explained. So on a single-year basis, we provide you with PL, and I know that you focus on the bottom line for a single-year PL, but with regard to data center investment, it is going to be a long, it's going to be a prolonged process. So in the initial phase of the investment, as you pointed out, yes, there's going to be burdens of interest rate as well as depreciation and amortization. It is true that there are some burdens in the initial phase of the investment into data center business. However, future growth, we cannot be complacent when it comes to, we cannot be lax when it comes to investment in data center. So it's important that down the road we actually recoup the investment as we go further down the value chain of data center investment. And with regard to how we see data segment, If we see this as a single segment based on system integration, that should not be the case. We should not be focused on just one single segment. We should see this as an asset-owning department. We are a more broad-based company. Unless we see the company in a holistic manner, we cannot realize growth. So I hope that the market players will also see our business structure in that manner If you can value our business in that manner, we would be very grateful if you can give us your further understanding. Have I responded to your question? Yes, we take note of your comment. Thank you very much.

Thank you. Are there any other questions? If you have any questions, please indicate by please pressing the raise hand button. All right, then it seems that we have exhausted all the questions, so we would now like to finish this presentation session at this juncture. Now we would like to continue with the NTT DoCoMo presentation, so participants, if you could kindly stay on the connection and stand by. Thank you. Thank you very much for today. Thank you. So, Thank you. so so Now we would like to start NTT Docomos, Third quarter results presentation for the fiscal year ending March 2024 or fiscal 2023. I am the head of IR. My name is Akaishi. I'll be serving as the MC today. Today's presentation is broadcast live via Voices, and this will be distributed on the web later, so please be advised of that. Also, for the presentation materials, We will be using the presentation material that is stored in the IR site of NTT Rokumo. Let me introduce the participants from NTT Rokumo today. We have the Senior Executive Vice President, Mr. Kuriyama. We also have Executive Vice President and General Manager of Accounts and Finance, Mr. Kobayashi. and Senior Vice President and General Manager of Corporate Strategy and Planning Department, Mr. Tsuboya. So the three gentlemen are participating today. Now, with respect to the proceedings, we'll first have an explanation from Mr. Kuriyama regarding the outline of the financial results, after which we'll be entertaining your questions. We expect to finish the entire session at around half past 5 o'clock PM Japan time. Now, we would like to start the presentation. Mr. Kuriyama, the floor is yours. Good afternoon, this is Kudaiyama from NTT DoCoMo. Please bear with me. Before starting the results presentation, I would like to express my sincere sympathy to those affected by the 2024 Noto Peninsula earthquake as well as their families. I pray for the earliest recovery and restoration of the disaster-stricken areas. NTAT Docoma Group will also make continuous efforts towards the recovery and restoration of the disaster-stricken areas. All right, now let me begin the explanation of the results for the third quarter of fiscal 2023. This is the results highlight for the third quarter of 2023. operating revenues increased by ¥94.5 billion year-on-year and reached ¥4,518.8 billion. We achieved record high revenues in history. The operating profit increased by ¥13.5 billion year-on-year and reached ¥902.2 billion, which is also another record high. The profit added to the shareholders of NTG Docomo Inc. Because of the impact of the one-time income after reduced taxes, corporate taxes resulting from the sale of subsidiary in the previous year, the operating profit decreased by 15.9 billion yen and reached 627.5 billion yen. But without this one-time factor, we have effectively achieved an increase in profit. Next, the results by segment operating revenues. was affected positively by the Smart Life growth and also the enterprise business, which is our growth area, and also because of the growth of communications business because of consumer communications business because of increased handset sales. So we achieved growth in all segments. For the details of the operating profit in each business, I would like to explain this in the following page. These are the factors behind the year-on-year changes in operating profit. First, regarding enterprise business, we achieved a 7.6 billion increase in profit. integrated solutions and mobile all these existing businesses expanded and which resulted in revenue growth and also as a result of efficiency improvement that we were able to cover up the cost increases for area quality improvement as far as the smart life business is concerned existing businesses such as finance and payment continue to grow and also we conducted a cost efficiency improvement across organizations, across different services. Also, the negative impact year-on-year for the growth investment was finished in the first half of the year. Therefore, in reality, we have been able to achieve a profit level which is effectively a year-on-year increase. I said effectively because in the previous fiscal year, in the third quarter, we optimized bad debt provisions for the credit business. So if we exclude these one-time impact, we recorded a negative impact. And consumer telecommunications business achieved the increase of 15.5 billion in profit. The mobile ARPU is gradually coming to a halt in terms of its downtrend because of the expanded adoptions of mid to large voice, large bucket plan. But we continue to see the negative impact of voice decline after COVID. and also because of the customer returns, mobile communication revenues are declined. We have also worked on the network improvement and also were able to achieve revenue growth because of the equipment sales balance of payment improvement and also as a result of cost efficiency improvement.

Next, let me talk about the enterprise business.

As for enterprise business, the integrated solutions was the pillar of our growth, and we achieved an increase of 8% year-on-year, and it reached $502.4 billion. In particular, in the third quarter, we have introduced our focus area, which is the IoT solutions. IoT solutions, in fact, achieved a year-on-year growth of 13%, a very high growth. In order to solidify this growth, As part of the initiatives undertaken for the IoT solutions area, we have started the high-precision positioning service, mobile GNSS, in October of last year, using a very ultra-compact devices. We have newly developed a GoTo small GNSS receiver handset. This is easy to carry, easy to attach, and it realizes high-precision positioning of people and various objects. This high-precision positioning service among the IoT solution is expected to achieve very rapid growth, and Docomo Business is focusing on this business. Going forward, we will continue to reinforce our solutions and promote DEX in many different areas going forward.

Next, let me talk about the smart life business. Finance and payment transactions increased steadily and reached $9,750 billion, which represents a 20% increase year-on-year. To further strengthen our financial services, we have completed the procedures for Capital Alliance with Monarchs Group and Monarchs Incorporated back in January, and we've launched Business Alliance in earnest. Through initiatives leveraging the assets of the two companies, we'd like to create synergy and strengthen Docomo economic sphere and achieve revenue growth as well as profit contribution as soon as possible. Let me now talk about the improvement of quality experienced by customers in mobile applications. We completed implementation of measures through December as planned, resulting in significant improvement of communication service quality, and we are aware of the concern that we caused to the society at large. In various spots nationwide, downlink throughputs have improved 170% compared to the situation prior to the implementation of these measures. On major railway lines, it is now possible to view video without inconvenience even during heavy rush hour during commuting times. So as a result, we saw significant reduction in negative opinions concerning communication quality. For further quality improvement for customers, Continual facility improvement and increase in future demand will be required. We will also gain sophisticated application utilization data, and we will work to achieve early detection and early improvement in areas that need those measures. Last but not least, I would like to explain our initiatives for the recovery and restoration in relation to Noto Peninsula earthquake. Dokomo has garnered support from all over Japan, and we have worked toward service recovery and delivery of support to evacuation centers. At any given day, we had a maximum of 600 people working in these initiatives. Except for parts of Wajima City, which remains difficult to access, we have restored 96% through emergency restoration initiatives. The challenge posed by this disaster was secure communication in areas for the suspension of communication services, but satellite service owned by Docomo, which is called White Star, and shipboard-based station in collaboration with KDDI made significant contribution in securing communication in these areas. Also, we're working emphatically to offer comprehensive services for the care of body and mind of disaster victims in addition to restoration of communication network, such as online follow-up medical examination by connecting evacuees with their home doctors, and local mobile phone services that offer communication methods to evacuees who may have lost their phones. As an operator that is responsible for life-related infrastructure, we'll leverage the takeaways from this disaster and build a network that is more disaster resilient and recoverable networks We will reinforce existing facilities through redundancy of transmission lines, reduction of the size and weight of portal-based stations, and will actively use new technologies such as low-orbit standardized possibilities of HAPS and endeavor to enhance communication service resilience overall. So that's all for the presentation of three recorded results for the fiscal year 2023. Thank you for your kind attention.

Now we would like to entertain the questions. For questions, we will take questions from those who have made a preregistration to the web conferencing system. We would like to accommodate as many questions as possible from as many people as possible, so we may ask you to limit the number of questions to two questions per one questioner. Thank you very much for your understanding. Now, if you have any questions, please raise the raise hand button. Please press the raise hand button on the web conferencing system. If you want to cancel your question, please press the raise hand button once again. We will nominate the questioner and please let us, we will call out the company name and your name. If your name is called, please unmute and begin your question on the web conferencing system. And until we finish our answer, please Do not unmute your microphone. So now we would like to entertain a question. The first question is from Mr. Ando of Daiwa Securities. Please unmute yourself and begin your question. This is Ando. Can you hear me? Yes, I hear you. Please begin. I have two questions. Well, both relate to consumer communications. First of all, regarding R2, well, It's very difficult for the ARPU to come up again, so maybe it might be right to say that this is flattish. So this ARPU performance, how do you analyze the reason behind this flattish growth? You have introduced new billing plans, and also we talked about the voice So if you can just talk about the biggest element affecting the ARPU for the last three months or so, if you can give us your evaluation, that would be appreciated. Ando-san, thank you very much for the question. Regarding the ARPU, well, first of all, in July, Irumo Billing Plan was introduced, and although we cannot call it a second brand, but this is focused on the low-usage customers, including youngsters as well as senior citizens, with the aim of expanding our customer base. So that has also affected YARPU. IRIMO is quite well-received, and this has been very effective to acquire new customers, but this is not really favorably affecting the business boosting the ARPU, including Irumo, but also including Eximo. Our billing plan, if that permits to a broader user base, I think we'll try to expand the ARPU thereafter by permitting these billing plans. The other thing that I wanted to mention was that the voice revenues recovery has been slow after COVID-19. While the overseas customers are now returning to Japan as travelers, but the voice service in Japan have not returned to the pre-COVID level, so that is another factor that is why the performance is weaker vis-à-vis our initial assumption. A follow-up question on that. So that context, based on that context, so then do you foresee that the, what is the possibility of ARPA returning next fiscal year? Well, for next fiscal year, I don't think we can foresee the ARPU bottoming out next fiscal year. Securing customer base and the improvement of ARPU, we are now at the stage of trying to achieve them both. So we'll try to solidify that and then aim for the recovery of ARPU and ARPU hitting a bottom sometime next fiscal year. Okay, thank you. My second question also relates to consumer communications in this waterfall chart. The equipment balance of payments of recovery or improvement is what's written here. I have seen the same graph in the second quarter earnings score as well. So I am trying to subtract the number and try to calculate the year-on-year performance. And as a result, it seems that in the last three months This has been one of the major factors for the profit growth in the last three months or so. So the improved equipment balance of payments, is that the major factor? Or was the cost reduction factor more of a bigger factor? So if you can elaborate on this, that would be appreciated for the improved performance of consumer communications. This is Kobayashi. Yes, the improved equipment balance of payment is the biggest factor. We are working on cost efficiency improvement on a continual basis, but these are just absorbing the cost increases. So the rest of the performance improvement comes from improved equipment balance of payments. Compared to the first quarter, second quarter, on a year-on-year basis, actually the improvement in the third quarter was larger compared to the first and second quarters, according to my calculation. So if that is the case, then on a year-on-year basis, the improved equipment balance of payments accelerated, if you will, because that seems to be the case for my calculation. So is that the right interpretation? If that is the case, does the balance of payments of equipment, is that improving? Yes, the equipment balance of payments is on the improvement trend. Yes, that is correct. So the wholesale unit price is improving, that is for sure. But on the other hand, then, that is not really effective for customer acquisition. That's another challenge that we are facing on the other hand. Thank you. Thank you for that.

Thank you. Next question from SMBC Niko Securities. Kikuchi-san, please unmute your microphone and then go on with your question. Kikuchi-san, the floor is yours. Please go ahead. Thank you. Kikuchi here. Thank you very much. Can you hear me, by the way? Yes, we hear you clearly. Thank you. Please go ahead with your question. Thank you. Ando-san asked for consumer communication segment, so let me ask about the enterprise business segment, if I may. Well, in terms of the synergy effect, it was very visible in the initial phase after the integration, but I think in the recent, the synergy from this integration has not become very visible. Local business, you have changed, established a new brand, so you're making activities in earnest. Was there some coverage reason behind this? Yes, I suppose this is a company, so we had to question whether or not there was synergy to begin with. So what is the current situation as far as the integration process is concerned? And as we get into the next fiscal year, I know that you still have set very large targets. What type of synergies do you intend to generate after this integration in the next fiscal year? That's my first question. Thank you. I take my Docomo and the communications integration synergy. Yes. Yes, . So that's the integration. That's the synergy I wanted to ask. Okay, thank you. As far as the enterprise is concerned, integrated solution is enjoying the greatest growth. As far as mobile, we see synergy. So we see growth in this area as well. With regard to integrated solution, security network solution, And so contact center-related work style solution is increasing. The other is the IoT solution. In all of these, we're seeing that inclusive mobile network operation, we see strong synergies. So these are really pushing the – so there's really the drivers for growth. So we see continued synergy as a result of the integration among these group companies. As for the costs, We have mentioned that in terms of facilities and in terms of operations, we have had discussions, and we see steadfast improvement. We want to make sure that these efforts can be sustained. We want to make sure that these synergies can be sustained. Thank you very much. That's all. Thank you. By March 26, you are anticipating synergy of 20 billion yen, right? But I think, are you not losing steam? before you can actually achieve this target? I think you're losing steam. Maybe this was a stretch of a target? Or are you making progress in line? Do you believe that you can achieve this target in line with your plan? Yes, we believe we can achieve this at this moment. There are some positive upsides and also the factors related to PSTN. We anticipate a $20 billion impact from PSTN integration. migration last year and correction next year we'll see even more and then beyond that we'll see likely to lose but I think we're on track as far as these targets are as far as these targets are concerned okay thank you for that so 100 million synergy this year and then 200 million in the following year that's the synergy impact so by March 25 you believe that you'll be able to have significant synergy impact well I'm afraid we cannot talk about numbers in the future Okay, I take your point, thank you. My second question is in addition to PSTN. I want to confirm, is it $10 billion this year, next fiscal year it's about $30 billion, or would you like to see larger impacts as a result of PSTN migration? For next fiscal year, we want to refrain from commenting, but this year $20 billion, next year it's certainly above $20 billion, so that's how you should see the numbers. Okay, first of all, $20 billion in reduction in revenue, But there should be impact on profit as well. Is that the case? This margin will be very high. This will have an impact on the margin. Okay. Thank you very much.

All right. So moving on to the next question. This will be from Mr. Masuno of Nomura Securities. Please unmute and begin your question. This is Masuna from Nomura Securities. I have two questions, one regarding consumer communications, the other one is relating to enterprise business. First question, the service revenues, mobile service revenues, compared to one year ago, the revenue reduction, one first quarter, second quarter, third quarter, actually the revenue decline has been broadening. was offset by the improved cost efficiency. So I mode and SP mode, the net increase was only about 10,000 or so, slightly over 10,000 or so. So this operation, I think, I think the net additions are not really decreasing, so are you going to continue this operation going forward, or do you think that there's a better way of operating the business? That's about consumer business. Smart life business, in terms of operating profit, did we have an irregular factor in that last fiscal year? So can you comment on these points? You're talking about the number of subscribers and also about the ARPU. As for subscribers, this is also affected by the population decline, but in the competitive landscape, we are also affected by the competition. But rather than that, the ARPU impact is larger, in my view, compared to our assumptions. We are not able to increase ARPU as much as what we had anticipated, but we are working on the... streamlining of operations and of course the equipment balance of payments improvement so that we can achieve a sustainable increase of profits by working on these elements. So sorry, but the Then initiatives for increasing subscribers, what are you contemplating? As for the subscriber number, the youngsters and also the senior citizens, those are the opportunities, especially the youngsters, the young age group, those are going to be forming a customer base in the future, so we have to secure them properly. With the introduction of AHAMO, we have been able to secure high usage customers, but we would like to acquire young customers with the Iruma plan. And as I talked about this, the billing plans, I think, for the mobile service, I think we already have a competitive menu on hand. But by also working on the equipment, balance of sheet, balance of payment improvement, because our handset prices were not really competitive in the past, so we have decided to implement measures on the handset prices as well. Thank you very much. Regarding the enterprise business, integrated solutions, their revenue growth compared to one year ago in the first quarter plus 1%, second quarter plus 7%, and third quarter plus 17%. So you have achieved a steadfast increase in growth. So now, at last, you have been able to achieve a double-digit growth. So what is the background on this, and how will this fare in the months ahead? As for the context, as for the background, as it has been questioned by some other people in the DoCoMo and communications side, operations, including all these points, we have been able to achieve synergies in the operations of communications and Docomo, and the human resources who were shifted from Docomo to communications, they are now getting accustomed to the business and be able to exert their capabilities. That's another thing. And last year, mobile and fixed line was combined as a set, so we have started offering our integrated network service, and those are now well received by customers, and that's another factor. Also, last year, I'm sorry, this year. Since last year, AI has become a boom, so the contact centers of our business is now seeing very brisk demands, and Tsutsumi was launched by NTT Groups, and this is well received by customers as well, so on the service side as well, and also the process side, all these are having a synergistic effect. all together. So if this is going to be sustainable, we have to sustain this. That's my answer. And I think given the current situation, we are well positioned to sustain this going forward. Okay, thank you. That's all for myself.

Thank you very much. Are there any other questions? Anyone with questions at this juncture? If not, We will be willing to take questions from those who have already asked questions beforehand. So would anyone want to ask additional questions? Would anyone want to ask second questions? If that is the case, please push the raise hand button. You're welcome to ask questions the second round as well. Please unmute your microphone and then go on with your question. The floor is yours, sir. Thank you. I'm going to ask an additional question. If I could ask about the enterprise business. Well, you have large customers, you also have small SMEs. I believe you're tackling both large customers as well as SMEs. When we make this type of distinction, what is the current situation? Can you talk about the situation pertaining to these two different categories of clientele? Okay, allow me to give you the breakdown. The integrated solution is basically oriented at large companies, So that's the synergy. So that's how we generate synergy. We focus on Docomo alone. Mobile communication network is doing very well. So we're able to add application and devices on top of this network. So we're now able to offer these solutions. And also, IoT-related business. This Docomo is now able to introduce that into the communication sales integrated on a combined basis is very strong. Now, we're doing the same with SMEs in certain cases, but ARPU is somewhat affected by the discount. But even against this backdrop, I think we're able to have flat operating profit. And going forward, we'll be able to do better going forward. So hopefully we'll be able to provide solutions to SMEs based on these types of infrastructures. That is going to be the challenging issue for the next fiscal year. That is all. Thank you. Thank you for that. Thank you.

All right. So next. From Nemuro Securities, Mr. Masuno, please unmute the microphone and begin your question. Mr. Masuno, can you hear us? Please unmute and make your statement. Yes, thank you, thank you. Related to my previous question, smart life offering profit for the third quarter, if you just single out the three-month period on a year-on-year basis, you have recorded a decline. Is this because the last year's same quarter performance was so high? But that's still the same as the second quarter level. So was there a one-time factor, one-time expenses in the third quarter only? such as investment. Can you elaborate on that point? And what is going to happen with the fourth quarter? If you can give us some outlook, that would be appreciated. This is Kobayashi. In the third quarter, as Kuriemasa mentioned in his presentation, provision was too high so we made a reversal so if we exclude that impact I think the smart life business would have been positive and achieved a year-on-year growth but also in the fourth quarter I think the profit growth would be much stronger in the fourth quarter because so smart life on a four-year basis is expected to achieve year-on-year increase in profit on a four-year basis 53.7 billion in the second quarter and the third quarter. So it's about, all in all, about 50 billion yen or so in the three quarters. That's the profit level. So if you don't have any one-time factor in the end of the year, so can we expect that this level will be sustained in the fourth quarter as well? In the last three months of the year, you have to achieve 7 billion yen or so. Otherwise, you won't be able to achieve the full-year target. Well, as I just mentioned, in the last fiscal year there was a negative factor and that's the reverse case, the opposite case of the fourth quarter. Negative factor last fiscal year and this fiscal year fourth quarter, if we can grow at the same pace, the incremental versus last fiscal year will be much greater. So in the first nine months, 126 billion yen, and 235 billion yen is the four-year target. So I think you have to achieve 7 billion yen or so in the real strength. you should be able are you designing to achieve this with the service growth or not only the service growth but on the last fiscal year there was incremental expenses last fiscal year but those one-time factor will not be the case this fiscal year so cost will come down at the same time revenue will also increase so we will be delivering both in the fourth quarter so the third quarter you didn't have that kind of one one-time factor, and if it's $500.75 billion in the fourth quarter, I think, is that what you're saying? This is Kuriyama. Smart life, achievability of the four-year target. The smart life will make efforts also on a company-wide basis at the entire Docomo group. We will try to achieve the top profit target at the entire company level. All right, thank you. Thank you. That's all for myself. All right. Any further questions?

Thank you. If not, then we would like to conclude the session as we have run out of questions. So we would like to conclude the presentation of the third quarter results for fiscal year 2023 by Docomo. We appreciate your attention and your attendance. Thank you very much.