Nippon Telegraph and Telephone Corporation (NTT)

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Nippon Telegraph and Telephone Corporation (NTT)

F3Q2011 Earnings Conference Call

February 4, 2011 03:00 AM ET

Executives

Koji Ito – IR

Hiroo Unoura – Senior EVP and Director, Strategic Business Development

Analysts

Atsuo Takahashi - Mizuho Securities

Tetsuro Tsusaka – Barclays

Makio Inui – UBS

Hisataka Soejima – AllianceBernstein

Daisaku Masuno – Nomura Securities

Shinji Moriyuki – Nikko Cordial Securities

Daisuke Oshidari – JP Morgan

Presentation

Koji Ito

Thank you for waiting, ladies and gentlemen. Thank you for joining us despite your very busy and demanding schedule. We’d now like to begin the presentation of the financial results for the nine-month ended December 31st, 2010 by NTT. I’ll be serving as the moderator. My name is Koji Ito with Investor Relations Office.

I’d like to introduce the participants from our side. Senior Executive Vice President, Mr. Unoura; Director of the Corporate Strategy Planning, Mr. Watanabe; Director of Finance and Accounting, Mr. Kobayashi.

Next, we’d like to confirm the materials which have been distributed to you. You will find two sets of materials. One is the copy of the slide presentation entitled, “Financial Results for the Nine-Month Ended December 31st, 2010” and the second is the more voluminous white-colored material.

Now with regard to the forward-looking statements and projected figures contained in the reference material as well as in the Q&A session, please refer to the disclaimer information on page two of the material. We ask that you take a look at this disclaimer information. Also, today’s proceedings will be broadcast live. Also, in addition, the recorded video will be available and uploaded at the Investor Relations website at a later date. It will be available on on-demand basis. We hope that you will understand.

As for today’s program, we intend to have about one hour and half for today’s presentation meeting.

And, now, I’d like to invite Mr. Unoura to give you the highlight of the financial results, after which, we’d like to take your questions.

Hiroo Unoura

Thank you very much. Unoura is my name. Thank you for joining us despite your very busy and demanding schedule. I’d like to provide you with the outline of the financial results for nine-month ended December 31st, 2010.

Operating revenue increased 17 billion Yen on year-on-year basis and reached 7,542.7 billion Yen. The drivers are as follows. One, in relation to the mobile phone that the growth in the base of customers who subscribed the value plan has become much lower, and also the level of decline in fixed line telephone services have become smaller. So the drop in voice service revenue was contained at 219.2 billion Yen.

Second, there was increased marketing and sales of FLET's Hikari as well as increase in packet ARPU for DoCoMo, so therefore IP service revenue increased by 171.3 billion Yen. Also, mergers and acquisitions by NTT Data and also increased provision of fiber under IRU which was won by NTT East has contributed to pitching up the system integration revenue by 32.9 billion Yen.

And, the fourth, is that the upper layer subsidiaries such as NTT Plala and other subsidiaries have contributed 55.2 billion Yen in terms of other operating revenue. As for operating income, it increased a 117.2 billion Yen year-on-year basis and reached 1,065.3 billion Yen.

The reason are as follows. A decline in procurement cost for handsets as well as more efficient distributor commission. So DoCoMo was able to realize 55.8 billion Yen increase in its operating income. Secondly, due to the lessened impact from actuarial gap and decline in personnel expense as well as in other expenses, NTT East has seen 24.9 billion Yen increase and NTT West has seen 24.2 billion Yen increase in their operating income.

Next, as far as the full-year forecast is concerned, as for operating revenue as DoCoMo has already explained, in the fourth quarter, we anticipate decline in its interconnection charges as well as a decline in their handset revenues. So as a result, on a consolidated basis, we anticipate 41.4 billion Yen decline in its fourth quarter – correction, 41.4 billion Yen on the full-year basis. However, at the end of the fiscal year, we will be reflecting 70 billion Yen worth of revenues from Dimension Data which is equivalent to two months. So if we factor this in, we believe that the operating revenue will end up being positive.

Now, as far as operating income is concerned, as you’re aware, the third quarter results have been very strong. So it goes without saying that the full-year projections which we announced at the first half which was 1.180 trillion Yen can be achieved. So we’ll continue to make efforts so that there might be an upside at the end of the fiscal year.

Next, let me turn to contributing factors by segment, starting with regional communications business. As for operating revenue, while there was decline in voice service revenue, on top of IP service revenue, system integration revenue also increased, so therefore operating revenue increased by 16.2 billion Yen on a year-on-year basis.

As for operating expense, due to decline in headcount as well as an lessened impact due to depreciation of actuarial gap, expenses declined by 33.6 billion Yen on a year-on-year basis. So operating income increased by 49.9 billion Yen on a year-on-year basis.

As for long distance and international communications business segment, while the subsidiary firms’ profitability is improving, due to decline in voice service revenue as well as IP service revenue, operating income declined by 10.1 billion Yen on a year-on-year basis.

Read the rest of this transcript for free on seekingalpha.com