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NTT DoCoMo, Inc. (DCM)
F1Q08 Earnings Call
July 27, 2007, 5:00 PM JST
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Takanori Utano - Managing Director of R&D Division and CTO
Kiyoyuki Tsujimura - Managing Director of Product and Services Division
Noriaki Ito - Managing Director of Corporate Strategy and Planning Department
Bunya Kumagai - Managing Director of Marketing Division
Kazuto Tsubouchi - Managing Director of Accounts and Finance Division
Hitoshi Hayakawa - Credit Suisse Securities
Daisaku Masuno - The Nomura Securities Co. Ltd
Atsuo Takahashi - Mizuho Securities Co., Ltd
Yukio Inotsume - Shinko Securities Co., Ltd.
Sakai - Investor Relations
Thank you for your patience. And thank you very much for attending this conference despite your busy schedule.
We would now like to start the meeting announcing the results for the first quarter of the fiscal year ending March '08. I am Sakai [ph] of the IR department, I will be serving as MC for this meeting. Please be advised that this session is broadcast online via phone, for rewrite [ph] service. And later on, on a separate day this will be posted and provided on an on-demand basis from DoCoMo's website.
Now I would like to introduce the participants to this meeting. First of all, Mr. Hirata, Senior Executive Vice President; Managing Director of our R&D Division, Mr. Utano; Managing Director of Product and Services Division, Mr. Tsujimura; Managing Director of Network Division, Mr. Futatsugi; Managing Director of Marketing Division, Mr. Kumagai, Managing Director of Corporate Strategy and Planning Department, Mr. Ito; and Managing Director of Accounts and Finance Division, Mr. Tsubouchi.
The documents that we use today are three sets. First, the earning release. Second, is presentation slide document. And there are three sets of press releases. One is about the discount service, the change in the division or structure to reinforce… to establish a new division to reinforce corporate branding. And we have another Japanese document announcing the changes in executive positions.
Now, after my brief introduction., I would like to have Mr. Hirata begin the presentation and then we would like to entertain your questions. And we will try to finish this session by, shortly after 18:00 o’clock.
And please be advised that this slide here and also the Form 20-F describes the risk factors pertaining to our business.
Now without further ado, we would like to start the presentation. Mr. Hirata, please.
Masayuki Hirata - Senior Executive Vice President
Good afternoon to you all. Today, we would like to announce the results for the first quarter ending March 2008. Thank you very much for attending this meeting. At the outset, I would like to make a brief presentation. And we have the whole staff of our brigade here. So if you have any questions, we would like to entertain whatever you may have.
As Mr. Sakai mentioned, we have the risk factors and these are the cautions relating to the risk factors. And I would like to move on to the presentation.
This is the highlight of our financial results. In the first quarter, operating revenues decreased 2.9% year-on-year and reached ¥1.1829 trillion. Operating income decreased by 25.2% year-on-year to ¥203.9 billion, posting a decrease in both revenues and profits. The operating income for the first quarter represents 26.1% of our full year forecast, which may sound slower than usual years, but the progress, the forecast, if you compare with the business plan, I think we are moving just in line with our business plan. So the profit level for the first quarter is just in line with our earlier predictions. Operating income for the first quarter is ¥69 billion smaller compared to the same period last fiscal year. And I would like to explain the reasons using the following slide.
Operating income has decreased by ¥68 billion. And we already have achieved 26% of the full year forecast. Operating revenues on the other hand decreased by ¥35.7 billion. But in the first quarter of last fiscal year we incurred in revenues the expiring portion of two months carryover service, which accounted for ¥30.6 billion. But this is not the case for this fiscal year. So that has… that is one of the major reasons for the decrease in the first quarter of this fiscal year.
Operating expenses increased by ¥33.2 billion and there are three major reasons behind this. One is the increase in the number of handsets sold. Compared against the last fiscal year, we had increased more than 500,000 units. Actually, the first quarter of last fiscal year was a very quiet period, so we had an increase in the handsets sold this fiscal year in the first quarter, which resulted in an increase of revenue linked expenses.
Secondly depreciation and amortization increased. Because of the increase of capital expenditures during the last fiscal year, this has reflected an increase of the depreciation and amortization in the first quarter of this fiscal year. Also in addition, there was a tax code reform and that is reflected in the change of depreciation methods this fiscal year. Up until recently, we have been remaining 5% of value in the depreciation, but with the reform this time, we are allowed to reduce the residual value to 0%. So, we have reflected this change in a depreciation metric and altogether in the full year, this will have an impact of ¥ 17 billion, but for the first quarter this has affected revenues by ¥4 billion.
The third reason for the increase in expense is the increase of the base stations last fiscal year, which resulted in the expense… an increase in expenses. And also with respect to international roaming, we have to pay the IOT fees to the counterpart. So that’s another reason for the increase in expenses. And also we brought forward the advertisement expenses. We even out the advertisement expenses in usual years, is about this year because of the DoCoMo 2.0 campaign, we have actually simplified [ph] advertisement expenses, which resulted in an increase of operating expenses. So that is why we, our operating expenses increased by ¥33.2 billion year-on-year.