Nippon Telegraph and Telephone Corporation (NTT)

NTT 
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Nippon Telegraph and Telephone Corporation (NTT)

F3Q12 Earnings Conference Call

February 6, 2012 03:00 AM ET

Executives

Koji Ito – IR

Hiroo Unoura – Senior EVP and Director, Strategic Business Development

Analysts

Tetsuro Tsusaka – Morgan Stanley

Atsuo Takahashi – Mizuho Securities

Daisaku Masuno – Nomura Securities

Daisuke Oshidari – JP Morgan

Shinji Moriyuki – SMBC Nikko Securities

Hiroshi Yamashina – BNP Paribas

Hitoshi Hayakawa – Credit Suisse

Presentation

Koji Ito

Thank you very much for taking your time to attend this Analyst Meeting this afternoon. We would like to start the Analyst Meeting to report NTT’s Financial Results for the nine months ended December 31, 2011. I shall be serving as the moderator. My name is Ito from IR office.

Let me first introduce to you the attendees of this meeting. Representative Director, Senior Executive Vice President, Unoura; Director and Senior Vice President, Director of Corporate Strategy and Planning Department, Watanabe; Director and Senior Vice President, Director of Finance and Accounting Departments, Kobayashi.

Now, I want you to confirm whether you have got all the materials in hand. There are two documents, slide presentation copy titled Financial Report for the nine months ended December 2011 and the other one is white thick booklet.

Now regarding forward-looking statements and projected figures contained in the materials are referred to during presentation and Q&A session, please notice and read a written disclaimer at the back of the cover page of the slide material. And today’s Analyst Meeting will be live broadcast on the company’s IR website. And the recorded video will be delivered on demand at a later date. So I want to have your understanding about this arrangement.

And we are planning to spend about 90 minutes or one hour and a half for this meeting. Now first, Mr. Unoura will give you the outline of the third quarter results before entertaining your questions.

Hiroo Unoura

Thank you very much, my name is Unoura. Thank you very much for joining us despite your business schedule. And despite the very bad weather outside. Then without further adieu I would like to provide you with the highlights of the financial results for the nine months ended December 31, 2011. Please open page three.

I’d like to begin with the highlights and the forecast. As for operating revenue, because of the contribution of global business revenues from Dimension Data and so forth, it reached 7,783,700,000 yen, representing an increase of 241 billion yen on a year-on-year basis.

Turning to operating income, we saw decline in profits at NTT DOCOMO, NTT East and West. So, therefore operating income declined 55.9 billion yen on a year-on-year basis and reached 1 trillion and 9.4 billion yen. As for achieving the consolidated operating income target of 1.25 trillion yen, well we’re concerned about the downward trend of revenue at NTT East and West which has become very difficult, starting from the fourth quarter we would like to realize cost control in line with the revenue trend.

And we would like to secure further increase in companies whereby we see upward trend in revenue and profit and also in companies where we see downward trend in its profit, we will make an effort to improve the structure. And as a result people like to achieve the annual profit target as far as forecast are concerned.

Due to the changes in the corporate tax law, net income has been revised downwards from 545 billion yen to 465 billion yen representing a downward revision of 80 billion yen. As for net income for individual companies, we have carried out review. As for details, please refer to page 23, at your leisure. Then, we would like to talk about the situation pertaining to contributing factors by segment, please turn to page nine.

Page 9, talks about contributing factors by segment, let me start from mobile. NTT DOCOMO has already announced its financial results so therefore I will not talk about this. As for Data Communications, we see expanded impact from increased number of consolidated subsidiaries such as Key which was acquired at the end of the last fiscal year. As a result data communications are increase of 31.3 billion yen and operating income also increased by 5.4 billion yen, 5.6 billion yen correction. We believe that fully our target can be reached.

As for long distance and international communication business, operating revenue increased by 323.4 billion yen on year-on-year basis due to the fact that Dimension Data became a subsidiary. Also Dimension Data itself when they close their books at the end of September 2011 was able to achieve a very strong growth of more than 10% in both operating revenue and operating income. This is after the adjustment of DU exchange rate.

As for operating income, on top of the five, the Dimension Data became a subsidiary NTT Communications was able to achieve reduction in access charge as well as cost reduction. So therefore it increased by 23.7 billion yen on a year-on-year basis. So, for these segments we would like to realize further increase in profit going forward.

Turning now to regional communication business, operating revenue has downward trend in voice revenue and also IP Service revenue increased and also telephone equipment sales revenues did not go as much as we had anticipated. So therefore, operating revenue declined by 135.2 billion yen and also operating income also declined substantially by 57 billion yen, on a year-on-year basis in particular at NNT East due to the impact of the earthquake the purchase of equipments was behind. And so, therefore as a result, revenues from telephone equipment sales were also behind.

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