Nippon Telegraph & Telephone (NTT)

Thank you very much for attending today despite your busy schedules. We would like to start the briefing session of NTD's FY24 financial results and a financial forecast for fiscal year 2025. I am Hanaki from the IR office and will be the facilitator for today. At first, I will introduce today's attending members. Shimada, representative member of the board, president and CEO. Hiroi, representative member of the board, senior executive VP, CFO. Nakamura, senior VP, head of finance and accounting. Hattori, senior VP, head of corporate strategy. Today's briefing session will be streamed live. We are planning to stream this on our website at a later date, so we seek your understanding beforehand. As for the materials used today, please refer to presentation material posted on our company IR website. On the first page of the materials are items to be noted, so we kindly ask you to read through them as well. At first, President Zio Shimada will explain the overview of our financial results, followed by receiving your questions. Without further ado, Mr. Shimada, please.

Thank you for your attendance. I'd like to provide you with explanations about the financial results for fiscal year 2024 as well as financial forecasts for fiscal year 2025. Please turn to page four. This shows you the consolidated results highlights for fiscal year 2024. Operating revenue increased, operating profit and profit decreased. Operating revenues reached new record high levels. Opera revenue increased 330.2 billion yen year-on-year and reached 13,704.7 billion yen due to increasing revenue at Entity Data Group as well as smart life business at Docomo. Of this increase, impact of foreign exchange was approximately 140 billion yen. As for profit, despite increase in profit at NTT Data Group and also at Smart Life Business due to decline in mobile and fixed-line telecommunication service revenue and Docomo's initiatives to strengthen its customer base and network quality, as well as reaction to the impact of streamlining of non-core assets in the previous year, EBITDA was 3 trillion 239.3 billion yen down 178.9 billion yen year-on-year. Operating profit was 1 trillion 649.6 billion yen down 273.3 billion yen year-on-year. Profit went down 239.5 billion yen year-on-year and was 1 trillion yen due to drop in operating profit and also rebound from gains on stock sales in the previous year. Now, allow me to turn to contributing factors by segment, starting from integrated ICT business. This recorded growth despite decline in mobile communication service revenue, mainly due to growth in finance and payment in the smart life business. Now, despite the increase in profit in smart life business, as well as measures to improve our profitability, profit decreased year on year due to measures to strengthen customer base and also efforts to improve network quality. But the efforts to strengthen customer base has led to steady results in MNP or mobile number portability, especially in the second half. Turning now to regional communication business. Operating revenue and profit both declined due to decline in network revenue and also reaction to the impact of streamlining of non-core assets implemented in the previous year. Fiber service net additions increased year on year due to stronger sales of 10 gigabit plans and also all unit plans for the condominium market. Let me now talk about global solutions business segment. In this segment, revenue increased due to capturing demand for digitalization in Japan and also the impact of foreign exchange. In line with that, we've been able to realize increasing operating profit year-on-year as well as the others. There was increasing revenue year-on-year due to expansion of data center engineering at NTT Urban Solutions. However, profit declined due to impact of declining profits from the sales of assets in the previous year. Let me now turn to forecast for fiscal year 25. We expect that there will be increase in both revenue and operating profit in fiscal year 25. With regard to operating revenue, we are aiming for record high through increase in revenue at the global solution segment and also integrated ICT business. As for EBITDA, operating profit and profit, we're aiming to expand profit over a medium term through measures to strengthen customer base and also improve competitiveness, such as network quality, as well as expanding profit in growth businesses, such as smart life and also enterprise business, and also transferring outcome of successful investments to REITs. And we plan to achieve year-on-year growth. So, as a result, we are aiming to achieve year-on-year growth through those measures. We believe the fiscal year 2025 will be a year where various measures toward delivery of medium-term goals during fiscal year 2027 will be accelerated, and we will actively undertake various measures to achieve medium-term profit expansion. Let me talk about continuing factors. Let's start with integrated ICT segment. We project increase in revenue but decline in profit, while there is increase in growth areas such as smart life and enterprise business. Also, measures to strengthen customer base and also improve network quality will be continued, as well as measures to reduce future cost burden. We intend to improve medium-term profit by creating strong customer base with the launch of new bid plan in June. In the regional communications segment, we project increase in both revenue and profit. While there is decrease in fixed voice service revenue and decline due to measures to reduce future cost burden at NTT West, profit from optical service revenue and also system integration is expected to grow. So as a result, we will be able to realize both increase in both revenue and profit. Turning that to global solution business, revenue profit is expected to grow due to increased revenue from DX demand, as well as sales of data center leveraging rates. In the others category, we expect to increase the revenue but decline in profit. While revenue is increasing due to expanded housing sales and antiterapy solutions, there is also a reaction to sales of assets and energy carried out last fiscal year. So that is why we expect to increase the revenue but decline in profit.

Next, I will explain our initiatives for achieving our medium-term goals. Since announcing our medium-term management strategy with the view of expanding future profits, we have continued to actively invest in growth areas such as data centers and smart life. In fiscal year 2025, which marks the halfway point towards achieving the financial target set for fiscal year 2027, we will continue to make high-level growth investments to ensure the steady execution of approximately 8 trillion yen in growth investments announced in our Median Term Management Strategy. Towards fiscal year 2027, by surely realizing the results of our growth investments to date, we will accelerate profit growth. In addition, we will also aim for expanding domestic and overseas enterprise business by leveraging synergies within the group, Fundamental cost structure reforms through the use of AI and other initiatives will be further strengthened to achieve profit growth and achieve the EBITDA target for FY2027. Next, I will explain four topics. First, I will explain the review of corporate governance. To further strengthen our global business, we plan to appoint Mr. Patricio Mapilli, who has management experience at a global ICT company and advisory expertise in business execution as a new director. As announced in March, in order to further enhance discussions on management policies and strategies, and to further strengthen the monitoring functions of the board of directors. We plan to transition from a company with an audit and supervisory board to a company with an audit and supervisory committee. Through these measures, we will further enhance our governance structure. The credentials for Patricio Mapelli, who is scheduled to take up his new position, are as shown. Next, I will explain shareholder returns. At today's Board of Directors meeting, we have resolved the increase in the annual dividend forecast for the fiscal year 2025 by ¥0.1 from FY24 to ¥5.3. As a result, dividends are expected to increase for the 15th consecutive year since 2011. Additionally, to enhance capital efficiency and strengthen shareholder returns, we will implement a share buyback program with a total purchase amount up to 200 billion yen. We will now explain the status of our shareholders. As shown in the left graph, the number of shareholders has increased to 2.68 million. approximately three times the number before the stock split, setting a new record high. In terms of the age distribution, the number of shareholders in their 20s to 50s has increased significantly, leading to greater diversity in the shareholder base. In addition, as shown in the right graph, the percentage of voting rights held by individuals has also increased. Progress under the medium-term management strategy since February is as shown. This concludes my explanation. Thank you.