Nippon Telegraph & Telephone (NTT)

Thank you very much for joining us in spite of your busy schedule. We would like to begin NTT Holdings briefing session for the six months ended September 30th, 2025. I am Akaishi from IR. I will be serving as the facilitator. First, let me introduce the speakers. Mr. Shimada, represented member of the board, president and CEO. Mr. Hiroi, represented member of the board, senior executive vice president and CFO. Mr. Nakamura, senior vice president, head of finance and accounting. And Mr. Hattori, senior vice president, head of corporate strategy planning. The announcement will be broadcasted live. and the video will be available on demand later. Also, today, we will skip the earnings presentation and start with the Q&A session. Please refer to our IR website's presentation materials for the documents regarding this presentation. We will take questions from those who are attending in person and then those who are pre-registered attending via the web conference system. Those of you here at the venue, please raise your hand and wait for the microphone. Those of you participating remotely, please press the raise hand button on the web conference system. If you'd like to cancel your question, please click on the same button again. Please first state your media name and your name when you are designated, and please unmute when asked. Please remain unmuted until our response has ended. Now we will start the Q&A session. First, we will take questions from the floor.

For those of you who have questions, please raise your hand. Then the front row on the right-hand side from my side, please go ahead. Thank you. My name is Kikuchi from NBC NICO Securities. Thank you very much. Your company plan, you have not revised the plans, but looking at the contents of it or the breakdown of it, there are quite a bit of change. The data center transfer gain is about $20 billion less than the fiscal year start plan, and SBI's machines, due to the TOB of that, There's an overlap there, too, and entity data TOV has been completed and non-controlled interest is going down, so the profit is going to be boosted upwards. And also at the press conference, Mr. Shimada, you were saying that Docomo in the second half is going to accelerate its reinforcement of the customer base. At the start of the fiscal year, you were saying that the second half, the expenses will be reduced, controlled a bit more was the explanation. So I feel that there's a difference from there. And even though Docomo underperforms, the other areas, there's a buffer about around several times a billion. And I believe in the first half, there wasn't much that was used over there. So there are various changing factors that have occurred. But The content of the plan has not been revised at this point. You're saying it's okay, we're going to completely achieve it, don't be worried about it. If that is the case, that's fine, but it seems that that is actually not the case. So can you explain thoroughly, one by one, that would be greatly appreciated. That's my first question. Kikuchi-san, thank you very much for your question. First of all, What we don't have a clear visibility yet is Dokomo's competitive environment. From the second half of last year, In practice, the MNP as well as the quality issues were the focus point of Mr. Maeda and has been implementing initiatives to respond to that. So no more thinking. You'll think that last year in the second half, a lot of money has already been injected Therefore, compared to the first half of this fiscal year, you may think that the second half will not have an increase in costs, especially on an year-on-year basis. Normally, that will be the situation. However, if you look at the current, most recent competitive arena, the competitors... are seriously responding to the competition. And also for us, this fiscal year, we have in mind that we cannot lose this race. Therefore, if they're going to further strengthen their competitive competition measures, then we have to respond to that. But this is the area that we don't have complete visibility. But on the other hand, how are we going to absorb that cost? This as well, just simply revising the forecast and allocate expenses to this. That's not the case, but utilizing the unutilized assets or reduce the cost where competition occurs. is not the issue. We need to look at the situation in a comprehensive manner. But having said that, on the other hand, selling assets, that is going to require a certain amount of time. Therefore, suddenly, if we try to do it in the fourth quarter, that will be difficult to do. Therefore, in this third quarter period, What kind of competitive environment is going to face us is what we need to see. And depending on that, things will be changing. So for now, we are responding to various things and would like to achieve the goals targets about depending on the environment we don't know what environment and the competition is going to become we don't know various things so we like to keep a very close eye on the third quarter competitive arena and respond to that and for the data center you said one by one so regarding the data center is 26 billion yen less than what we have originally assumed however As Sasaki-san from NTT Data was explaining, actually the order situation is quite strong. And net sales for the second quarter, the domestic unprofitable projects, came about, and there was negative factors both domestically and internationally. However, for domestic and overseas, the order situation is strong. So whether all that is going to cover this negativity, we don't have a clear picture, but they're also reinforcing the sales activities as well, so I'm hoping that they will be able to absorb this. And also... Wholly owning entity data, regarding boosting the bottom line because of that, currently the financial expenses is slightly increasing. So, of course, this is one factor. However, we have not revised it because of this. And regarding the submission SBI or SBI submission, Moving forward, how much of the services can be brought about that will bring synergy to us is the key. And so within Docomo, it is thoroughly being reviewed. Well, not just Docomo, but SBI's machine, NetBank as well, they want to grow. So together with them, this part is being considered and reviewed. And, of course, I would like them to come out with a certain outcome. Well, the key is the mobile business is a consumer-side competitive environment. That is going to be the key. Thank you very much. So that means that looking at various situations, you will consider selling assets. Well, you have done quite a bit of that two years ago. And... There are assets that will generate profit. Are there any left? Because you've done it two years ago. What we did two years ago is the asset of entity east and west. So for Docomo business also has various assets on hand. So within Docomo group, I want them to think. of what can be done. Thank you very much. My second question is about the finance part. Regarding the business, I want to take a deep dive later for each company, but the finance part, Then you have issued foreign bonds the other day, and I thought that you would provide us with explanation after everything's done, like the entity data's TOB expenses and SBI's machine net bank's TOB. That will be covered with Docomo's asset sales and data center investment. So from next fiscal year onwards, the necessary capital, what we are concerned about, the shareholders' return, which is the dividend and share buybacks. Six months ago, you were saying that the direction of policy is not going to change and will be continued. And is that really possible? And also, when you wholly owned Tokomo through TOB, the cash flow at the holding company had about $900 billion, and you were going to pay back your debt and shareholders' return investment. With that amount, you were able to make it through somehow. But currently, with NTT non-consolidated, how much of cash flow are you expecting? And that cash flow... Do you have to repay your debt? I think that's a discussion point. I think you don't have to repay and lower the leverage. But what kind of allocation of cash are you thinking of to maintain shareholder returns or maintain investment? I would like you to share your views. So Hiroi is speaking. I would like to answer your question. Well, this fiscal year, Entity Data has been wholly owned, and SBI Simishin NetBank, we have acquired them, so cash-wise is quite tight. And also looking at Entity Docomo's performance with the cash flow that is recorded. They are using the surplus of the cash flow for responding to the competition. So I think we'll be at the bottom and tight situation in terms of our cash flow this fiscal year, making investments for growth and increasing cash. is what we're aiming for. EBITDA is 4 trillion yen is the target we have, and we are progressing towards that. So once we see the effect of the investment in the medium term, this gap is going to be fulfilled, and the financial position is going to improve. But in terms of the soundness of the financial situation and balancing that with the shareholder return, Basically, what we are doing right now is the share buyback and the dividend level. Basically, we are continuing to increase the dividend. We believe we will be able to solidly maintain that. And this fiscal year and next fiscal year, for a little bit, they will have a tight cash flow situation. And, of course, we can think of utilizing debt. But basically, the current credit rating of a single A-, we would like to maintain that rating and to do things so that we don't cause trouble for the bondholders or bond investors as well. That is how we would like to manage the financial position. That is all. Thank you. Thank you very much.

Thank you. We will take the next question in the front row. Left-hand side, please. I must know from Nomura, I have a question for each segment. Starting with the global solutions overseas data center, Earlier, entity data president made a press announcement. I believe that we can accelerate investment. I believe that more risk should be taken to accelerate investment. I felt that the president was a bit cautious. Do you have any thoughts about accelerating investment for data? Well, We want to accelerate. To be honest, we do want to accelerate our investment. But there's the construction capacity that needs to be factored in. So construction speed and also are we going to do this with our own equity? That is another question. If we're going to tap into the funds from third party, then that will give us more power. And that is something that we are studying. We studied that possibility earlier, but the environment did not work out. Now the current environment is more favorable to involving third party investment. So we will consider that in more earnest. And in terms of the construction speed, it does depend on the location. But we would like to accelerate investment globally in a way that is well-balanced. And, of course, we have to enhance projects with higher profits. For example, in India, the return is quite high. And so we would like to focus in areas where the return is higher. In terms of the construction capacity, that is a physical impediment. In terms of funding from equity investors, Lowering the equity ratio or involving third party is not that favorable. Rather, increasing debt through project finance rather than lowering the equity ratio, that would be our hope. We have no idea about, we don't think about increasing equity or decreasing equity ratio. We're just talking about using third-party funds for investment. So it's not like a third-party joint venture. No, that is not the case. Thank you. My second question is regarding Docomo. One year ago at the IRJ, when the medium-term plan was presented, Docomo's consumer business operating profit was to rise. And the premises for that was that the sales promotion will be made more efficient for the year-ended March 27. But looking at the current situation, the promotion efficiency is actually declining significantly. And so if the competitive landscape doesn't change, I believe that the current sales promotion efficiency will continue into the next fiscal year. So if your competitors don't reduce the sales promotion, what's going to happen in the next fiscal year? So the final year of the medium-term plan. Well, this may be similar to my answer to Kikuchi-san earlier. You are right that the scenario has changed somewhat from what we had imagined it to be one year ago. So our sales promotion cost is about the same as our competitors'. In the past, Docomo was able to keep the sales promotion cost lower than our competitors. So what happened as a result of that was that our market share was going down. So now we are expanding about the same level of marketing cost as our peers. Now, will the current stage just continue? If that is the case, then, of course, we will need to revisit the scenario. So reducing the marketing costs just by ourselves would mean that we reduce market share, the customer base share. itself so we need to think about the balance but the overall market is also seeing cost increase across different items and how we absorb that cost increase is a struggle for not just us but for all our competitors so what kind of the competitive landscape we will see going forward is needs to be watched and by closely observing that, I'm sure that I'll be able to better answer your question. Then accounting-wise, even if Docomo sells some of its assets, then, for example, we exclude that. And the data center sales, that is also excluded as well. So going up or down, that will not have a bearing on how it is valued. I think we need to show that Docomo recovers on its value. normalized basis. Lastly, for the regional communication business, can we say that the recovery is on track? I'm sure that the quarterly result is not sufficient, but the second quarter results didn't seem that satisfactory. Do you think that the structural reform is on track? In terms of entity east and west, basically the situation is on track. NTT West had some profit decline factors which we had communicated to you before. There are assets that needed to be reduced from the books which have become unnecessary. And these were already in the plan. So for making efficiency introduction of AI at the call centers and using more AI in the support teams, all of that is on track. So for the NTT East and West, I'm not worried about the projections. Thank you very much, Dr. Jeffrey. Thank you very much.