NTT DOCOMO, Inc (DCM)

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NTT DoCoMo, Inc. (DCM)

F3Q12 Earnings Call

January 30, 2013 3:00 am ET

Executives

Kazunori Yamamoto – Managing Director-Investor Relations

Kaoru Kato – President and Chief Executive Officer

Analysts

Tetsuro Tsusaka – Morgan Stanley

Yoshiyuki Kinoshita – Merrill Lynch

Hitoshi Hayakawa – Credit Suisse

Kei Takahashi – Mizuho Securities

Shinji Moriyuki – SMBC Nikko Securities

Oshida – JPMorgan

Presentation

Kazunori Yamamoto

Thank you very much for waiting. And we thank you very much for attending this meeting despite your busy schedule. We will now like to commence NTT DOCOMO Analyst Meeting announcing the results for the first nine months of the fiscal year ending March 2013. I am Yamamoto, Head of IR. I will be presiding this meeting.

Please be advised that this session is broadcast live via the Internet and also on smartphones. Also, a recorded video of this meeting will be posted on DOCOMO's website for distribution on-demand. Please be advised of these.

Now I will like to introduce the participants from NTT DOCOMO. Here with us are Mr. Kaoru Kato, President and CEO; Senior Executive Vice President, Mr. Kazuto Tsubouchi; Senior Executive Vice President, Mr. Fumio Iwasaki; Executive Vice President, Responsible for Consumer Sales, Mr. Takashi Tanaka; Executive Vice President and Managing Director of Corporate Strategy & Planning Department, Mr. Yoshizawa; and Senior Vice President and Managing Director of Accounts & Finance Department, Mr. Sato.

We will be using three sets of documents for this meeting; one is the earnings release, the other one is the presentation slides for the financial results, and the other one is the press release entitled, NTT DOCOMO to Launch Public Tender Offer for MAGASeek.

For today's meeting, we will start off with a presentation by Mr. Kato announcing the results for the first nine months. Then we will like to move on to the Q&A session, and we’ll try to finish the meeting by 6 o'clock.

Also, there might be potential risk pertaining to the forward-looking statements. For more details please look at the last slide of the presentation.

Now, without further ado, I would like to call Mr. Kato to deliver our presentation. Please start the presentation.

Kaoru Kato

Good afternoon to you. I am Kato of NTT DOCOMO. Thank you very much for allowing us your precious time to attend this press conference – this meeting. And also, I would like to thank all of you watching this session over the Internet.

Now, I’d like to start the presentation Page 2. As you see on the index, there are three parts in Slide number 2. I’d like to talk about the results for the first nine months. Operating revenues was ¥3,379.8 billion up 6.2% or ¥196.6 billion year-on-year; operating income was ¥702.2 billion, down 5.6% year-on-year or ¥41.6 billion year-on-year. So we achieved an increase in revenues but a decrease in income.

Regarding the highlights of the results, due to the expanded uptick of smartphones and Xi and the expanded usage packet revenues increased 7.7% year-on-year to ¥1,476.9 billion. Total handset sales increased by 14% year-on-year and reached 17.57 million units. Number of smartphone sold was 9.69 million units, up 75.2% year-on-year. So, we steadily expanded the user base of smartphones.

Xi subscribers have been growing at pace faster than expected and in fact roughly quadrupled compared to the level of March 31 and reached 8.68 million subscribers.

Slide 3, the overview of the financial results. I have already mentioned the operating revenues and operating income in the previous slide. Regarding our net income for the quarter, actually we posted an increase of ¥21.9 billion year-on-year. This was due mainly to the impact of the reversal of the differed tax asset owing to the revision of the tax code. EBITDA margin decreased by 3 points due to the increase in revenues, but a decrease in income.

As far as free cash flow is concerned because of the increase of customers buying the handset is installments and also because of the additional CapEx for our Xi network, free cash flow decreased by ¥286.6 billion.

Now this shows the changes in operating income. The brownish part represents the revenues. First, about the revenue side. Our voice revenues decreased by ¥114.9 billion, because of the decrease in billable MOU. Packets revenues on the other hand increased by ¥142.3 billion because of the increase of Xi subscribers and smartphone sales and boosted usage. The monthly support discount had a negative impact –incremental negative impact of ¥128.6 billion compared to the same period of the previous fiscal year.

Other revenues increased by ¥69.1 billion due to the increase of revenues of some subsidiaries and the protection service, mobile phone protection service. Equipment sales revenues increased by ¥228.7 billion.

One the expenses side, the equipment sales expenses, which is the sum of the cost of equipment sold and the commission to agent retailers increased by ¥116.3 billion year-on-year because of the increase of the handset sales. Other expenses increased by ¥129.1 billion because of the increase of subsidiary related expenses of ¥51.8 billion and the increase of amortization and depreciation of ¥30.7 billion. As a consequence, operating income decreased by ¥41.6 billion year-on-year.

Slide number five, total handset sales. For the three months period over the third quarter, we sold 5.73 million units and for the total of nine months, we sold 17.57 million units making a steadfast progress towards our full-year target and we were able to increase the sales of smartphone due to the increase of models with the release of winter collection. Towards the fourth quarter, we will further increase and reinforce our smartphone sales, so that we can achieve our full-year target of 23.8 million units of total handset sales.

Net additions and number portability here, we have been announcing these numbers on a monthly basis and as you may very well know, the number of portals have been larger than expected for the months of October and November, especially November was a tough month and we posted a net decrease. However, after the release of the winter collection in December, also because of the effects of the promotional measures, the key products are reporting brisk sales, so we are seeing signs of recovery in our competitiveness.

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