Nippon Telegraph & Telephone (NTT)

We will now start the briefing session on fiscal year 2024 second quarter financial results of NTT. I am Hanaki from the IR office and will serve as the facilitator today. First, I will introduce today's attendees. Shimada, Representative Member of the Board, President and CEO. Hiroi, Representative Member of the Board, Senior Executive Vice President. Nakamura, Executive Officer, Head of Finance and Accounting. Hattori, Executive Officer, Head of Corporate Strategy and Planning. Today's briefing session is streamed live. We are planning to stream it on our website at a later date, so we seek your understanding beforehand. As for today's explanation materials, please refer to presentation materials posted on our company IR website. The first page shows the points to be noted, so please go through it as well. Now, President and CEO Shimada will explain the outline of the financial results, followed by Q&A from you. Mr. Shimada, please go ahead.

Thank you. I'd like to present to you the second quarter results for fiscal year 2024. Thank you so much for joining us today. We appreciate your attendance. Please turn to page four of your material. First, operating revenue increased, operating profit decreased, and profit also decreased, but EBITDA increased year on year. Operating revenue reached new record high level as the second quarter. Also, second quarter operating profit is now in positive territory on a standalone basis. As for operating revenue, this increased 226.1 billion yen and reached 6,519.6 billion yen. Of this increase, positive impact of the currency was roughly 100 billion yen. As for operating profit, while entity data's group profit increased and smart life business expanded, fixed line communication service revenue continued to decline, and Docomo implemented measures to reinforce its customer base. So operating profit decreased 30.7 billion yen down to 120.3 billion yen year on year. but the projection for the second quarter on a certain basis was not indicated, but based on the internal plan, the performance actually exceeded our internal plan for the second quarter. Also, as a result of marketing reinforcement, net addition for fiber service increased year on year in the first half, and there are now signs of improvement in the mobile number portability performance. We will continue to reinforce customer base and improve network quality and accelerate cost efficiency improvement and expansion of the enterprise business to deliver the consolidated profit plan. Now, due to the decline in operating profit and reaction to the proceeds from sales of stock in the previous year, profit decreased 116.1 billion yen down to 554.8 billion yen. As our cash generating ability improved due to increase in revenue from growth areas such as data center, EBITDA increased 12 billion yen year on year and went up to 1,685.6 billion yen. Please turn to page 5. This shows you contribution factors per segment, starting with integrated ICT business segment. Although mobile communication service revenue declined, growth in finance and payment in smart life business enabled increase in operating profit, operating revenue year on year. Also, while smart life business profit increased, the segment open profit decrease due to customer-based reinforcement measures. As I mentioned earlier, we'll implement customer-based reinforcement measures, network quality improvement, and we'll further improve cost efficiency in order to deliver the annual plan. Turning now to regional communication business segment. Operating revenue and profit both declined due to drop in network revenue and increase in disaster recovery expense. As for net ads for fibers, this is now impassive territory because of marketing reinforcement of 10 giga plan as well as the success of bulk internet agreement. Both operating revenue and profit are in line with our expectations. We will continue to pursue business selection and focus, and actively undertake fundamental review of our cost structure, such as transformation of our operations. As for global solution business segment, operating revenue increased year on year from increase in public finance and enterprise sector in Japan, as well as the favorable impact from foreign exchange. Operating profit increased driven by increase in profit in Japan, as well as increase in overseas data center profit and drop in structural transformation cost. In other segment, operating revenue and profit both increased year-on-year due to increase in data center engineering revenue at NTD Urban Solutions. Next, I'd like to cover some topics, if I may. Let me first start with the initiatives with Toyota Motor Corporation in the mobility field, which we announced at the joint press conference in the recent. Let me talk about this particular initiative with Toyota Motor Company. Next. Initiatives to promote autonomous driving services. In November 2023, Entity acquired an investment in a company called Main Mobility in the United States. Also in August 2024, Entity was decided to invest in a company called Navy Mobility in France to promote the social implementation of autonomous driving services. We're implementing initiatives in various locations in order to achieve safer and more secure autonomous driving services, including Japan's first regular operation of autonomous vehicles on roadways in Aichi Prefecture. If you'd like to share the video of the initiative in Nagoya, please take a look at this video.

The operation will start today and next March 17th. Until the next year, so March 17th, we would like to do this testing operation. Next, I would like to explain about achieving the world's first international ion-APN connection. Adding to existing IOWN AP and connections between data centers within Japan and overseas, in August 2024, we achieved the world's first international connection, connecting Japan and Taiwan across the distance of approximately 3,000 kilometers. By connecting a long distance with low latency and no jitter communication, will enable us to provide international data backup and replication services in the future. Next, I would like to explain about the land-based aquaculture initiatives. NTT Green and Food plans to begin operating one of the largest land-based shrimp aquaculture facilities in Japan in Iwata City, Shizuoka Prefecture in this December. Together with the production volume of Kaiko Yukinoya Godo Gaisha, which became a subsidiary in August, we plan to become the largest land-based shrimp aquaculture producer in Japan. Various initiatives are ongoing in each group company. Therefore, as an entity group, we will continue to solve challenges faced by the fisheries industry, improve added values, and contribute to industrial development and regional revitalization. Green and food. After the flounder aquaculture, this is going to be their second initiative. Next, as for the progress under the medium-term management strategy since this August is as shown here. Next is regarding dividend. It has been increasing continuously, as shown, however, given the amendment to the NTT Act. This April, we will move the interim dividend payment date to an earlier date. We plan the payment to start to be at November 29th. Last year, it was December 18th, so it has been moved up quite a bit. Next is regarding the share buybacks. Within up to 200 billion yen amount that was resolved, we have conducted share buyback of 88.3 billion yen as end of October, and the progress rate is approximately 40% and progressing as planned. Lastly, I would like to explain the state of shareholder count. This has been explained in our last financial results announcements. However, since then, there was a further increase, and as of the end of September, the number of shareholders has grown by 2.7 times compared to prior to the stock split to 2.44 million, setting a new record high. As shown in the right-hand pie chart, the diversification of age composition is also progressing, which means that various generations of age are holding our shares. This concludes my