NTT DoCoMo, Inc. (DCM)
F3Q10 (Qtr End 12/31/09) Earnings Call Transcript
January 29, 2010 3:00 am ET
Hiro Okado – Head, IR
Ryuji Yamada – President and CEO
Kazuto Tsubouchi – EVP, CFO, Managing Director of Accounts and Finance Department, Responsible for Business Alliance Department
Bunya Kumagai – EVP, Responsible for Consumer Sales
Hironobu Sawake – JPMorgan
Tetsuro Tsusaka – Barclays Capital
Hitoshi Hayakawa – Credit Suisse
Daisaku Masuno – The Nomura Securities
Atsuo Takahashi – Mizuho Securities
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Now let me introduce the participants to this meeting. Mr. Yamada -- Ryuji Yamada, President and CEO. We also have Mr. Kiyoyuki Tsujimura, Senior Executive Vice President; Masatoshi Suzuki, Senior Executive Vice President; Executive Vice President responsible for consumer marketing Mr. Bunya Kumagai; Executive Vice President and CFO, Mr. Kazuto Tsubouchi; Executive Vice President and Managing Director of Corporate Strategy & Planning Department, Mr. Kaoru Kato.
For today’s meeting we will be using two sets of documents. One is the presentation and the other is the earning release. Please confirm that you have the two complete set of documents. For today, in the beginning, we will have a presentation from Mr. Yamada and followed by a Q&A session. We would like to finish this meeting by 6 o’ clock. Please also be aware that this meeting may contain forward-looking statements. And for those potential risks, please see slide number two or Form 20-F with the US SEC.
Now without further ado, we would like to have the presentation from Mr. Yamada.
Good afternoon to you. I am Yamada of NTT DoCoMo, and thank you very much for your continued patronage. We would like appreciate your time today. Now without ado, I would like to present -- begin the presentation regarding the results for the first nine months of the fiscal year ending March 2010. In the interest of time, I would like to speed up.
For the first nine months of the fiscal year ending March 2010, these are the results that we have achieved. As you can see, operating revenues declined by 4% year-on-year to 3,242.4 billion yen. Operating income decreased by 5.9% year-on-year to 702.7 billion yen. We posted a decline in both revenues and income. The reason for this decline in operating income is mainly due to the fact that last year we had an income boosting impact due to the introduction of the new handset purchase method in the prior year. So there was a huge generation of profit in the first half of last fiscal year. The progress of operating income vis-à-vis our full year target is about 84.7% as of the end of December, which was almost in line with our predictions.
Slide number three, these are the highlights of the results. Cellular services revenues and the cost reduction measures and other factors affecting the results. First, the cellular services revenues. Because of the continued popularity of Value Plan, in fact 95% of customers are using the Value Plan today, and that has resulted in a decline in voice revenues. And in order to offset that decline, we believe it is very important for us to increase packet revenues. Packet revenues have been growing steadily due to the expanded uptick of our flat rate plans and also the extended usage of video and other content services.
Second is about our cost reduction efforts in order to cope with the decline in aggregate ARPU. We’ve been taking strategic measures such as the improved efficiency of capital expenditures in order to reduce our costs. Other factors -- these other factors are now accounting for a larger bulk than before, and that is why we have added this item in this slide. The Mobile Phone Protection & Delivery service is one factor that has affected both the results in the revenues and expenses. So it’s the Oak Lawn Marketing inclusion into the consolidated accounts.
Number four. This is about the factors affecting the year-on-year changes in operating income. The first item is the decline in voice revenues, which declined by 187.5 billion yen. In terms of voice ARPU, we posted a decline of 450 yen year-on-year. And this is mainly due to the expanded uptick of Value Plan and the reduction of billable MOU. On the other hand, packet revenues increased by 59.2 billion yen. This is because packet ARPU increased by 70 yen year-on-year from 2,370 yen last year to 2,440 yen for the first nine months of this fiscal year.
Total handset sales decreased by 1.77 million units year-on-year. Accordingly, the handset sales revenues declined by 84.8 billion, and also the cost of handsets sold decreased by 99.6 billion yen. With respect to network-related costs, we have posted a decline of 19.6 billion yen in network-related costs. As I said, Oak Lawn Marketing is now included in our consolidated accounts, and therefore that has affected the ups and downs of other revenues. So accordingly, in total, the operating income for the first nine months was 702.7 billion yen.
Now in particular, I would like to explain more details about the packet revenue increase, the cost reduction, and other factors. If you can flip to the next page, this is about the increase in packet revenues. As you can see towards the very left hand side of the page, the red bar, this is the negative impact due to subscribers migration from Pake-hodai, Packet Pack to Pake-hodai double package. This accounted for a negative impact of 20 billion yen approximately. And quite a large number of subscribers have already joined the two-tier flat-rate Pake-hodai double package.
So this impact is expected to level off going forward. On the other hand, towards the right hand side, we have seen a 60 billion yen increase in the number of -- in the usage of packets. Smartphone and PC data card increased subscription accounted for another 10 billion yen increase of packet revenues and a revenue of i-mode fee also accounted for another 10 billion yen increase. So effectively due to the expanded use of packet service, as you can see on the slide, 70 billion yen additional revenues were generated due to the additional use of packets -- expansion of the use of packets.