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Naoki Akaishi: Thank you very much for joining us in spite of your busy schedule. We would like to begin NTT Holdings briefing session for the 6 months ended September 30, 2025. I am Akaishi from IR. I will be serving as the facilitator. First, let me introduce the speakers. Mr. Shimada, Representative Member of the Board, President and CEO; Mr. Hiroi, Representative Member of the Board, Senior Executive Vice President and CFO; Mr. Nakamura, Senior Vice President, Head of Finance and Accounting; and Mr. Hattori, Senior Vice President, Head of Corporate Strategy Planning. The announcement will be broadcasted live, and the video will be available on demand later. Also today, we will skip the earnings presentation and start with a Q&A session. Please refer to our IR website presentation materials for the documents regarding this presentation. We will take questions from those who are attending in person and then those who are preregistered attending via the web conference system. [Operator Instructions]. Now we will start the Q&A session.
Naoki Akaishi: First, we will take questions from the floor. [Operator Instructions]. In the front row, on the right-hand side from my side.
Satoru Kikuchi: My name is Kikuchi from SMBC Nikko Securities. Your company plan, you have not revised the plans. But looking at the contents of it or the breakdown of it, there are quite a change. The data center transfer gain is about JPY 20 billion less than the fiscal year start plan and SBI Sumishin due to the TOB of that, there's an overlap there, too. And NTT DATA, TOB has been completed, and noncontrolled interest is going down. So the profit is going to be boosted upwards. And also at the press conference, Mr. Shimada, you were saying that DOCOMO in the second half is going to accelerate its reinforcement of the customer base. At the start of the fiscal year, you were saying that the second half, the expenses will be controlled a bit more. It was the explanation. So I feel that there is a difference from there. And even though DOCOMO underperforms, the other areas, there's a buffer about around several -- [ JPY 10 billion ]. And I believe in the first half, there wasn't much that was used over there. So there are various changing factors that have occurred, but the content of the plan has not been revised at this point. You're saying, "It's okay. We're going to completely achieve it. Don't be worried about it." If that is the case, that's fine. But it seems that, that is actually not the case. So can you explain thoroughly one by one, that will be greatly appreciated. That's my first question.
Akira Shimada: Kikuchi-san, thank you very much for your question. First of all, what we don't have a clear visibility yet is DOCOMO's competitive environment. From the second half of last year, in practice, the MNP as well as the quality issues were the focus point of Mr. Maeda and has been implementing initiatives to respond to that. So no more thinking. You think that last year in the second half, a lot of money has already been injected, therefore, compared to the first half of this fiscal year, you may think that the second half will not have an increase in cost, especially on a year-on-year basis. Normally, that will be the situation. However, if you look at the current most recent competitive arena, the competitors are seriously responding to the competition. And also for us, this fiscal year, we have in mind that we cannot lose this race. Therefore, if they're going to further strengthen their competitive -- competition measures, then we have to respond to that. But this is the area that we don't have a complete visibility. But on the other hand, how are we going to absorb that cost? This as well, just simply revising the forecast and allocate expenses to this. That's not the case, but utilizing the unutilized assets or reduce the cost where competition is not the issue. We need to look at the situation in a comprehensive manner. But having said that, on the other hand, selling assets, that is going to require a certain amount of time. Therefore, suddenly, if we try to do it in the fourth quarter, that will be difficult to do. Therefore, in this third quarter period, what kind of competitive environment is going to face us is what we need to see. And depending on that, things will be changing. So for now, we are responding to various things, and we would like to achieve the targets. But depending on the environment, we don't know what the environment of the competition is going to become. We don't know various things. So we would like to keep a very close eye on the third quarter competitive arena and respond to that. And for the data center, you said one by one. So regarding the data center is JPY 26 billion less than what we have originally assumed. However, as Sasaki-san from NTT DATA was explaining, actually, the order situation is quite strong. And net sales for the second half -- second quarter, the domestic unprofitable projects came about, and there was negative factors, both domestically and internationally. However, for domestic and overseas, the order situation is strong. So whether all that is going to cover this negativity, we don't have a clear picture, but they're also reinforcing the sales activities as well. So I'm hoping that they will be able to absorb this. And also, wholly owning NTT DATA, whether that will -- regarding boosting the bottom line because of that, currently, the financial expense is slightly increasing. So of course, this is one factor. However, we have not revised it because of this. And regarding the Sumishin SBI or SBI Sumishin, moving forward, how much of the services can be brought about that will bring synergy to us is the key. And so within DOCOMO, it is thoroughly being reviewed -- well, not just DOCOMO, but SBI Sumishin Net Bank as well. They want to grow. So together with them, this part is being considered and reviewed. And of course, I would like them to come out with a certain outcome. Well, the key is the mobile business is a consumer side competitive environment. That is going to be the key.
Satoru Kikuchi: So that means that looking at various situations, you will consider selling assets. Well, you have done quite a bit of that 2 years ago. And there are assets that will generate profit? Are there any left, because you've done it 2 years ago?
Unkown Executive: What we did 2 years ago is the [ sale of ] asset of NTT EAST and WEST. So DOCOMO business also has various assets on hand. So within DOCOMO Group, I want them to think of what can be done.
Satoru Kikuchi: My second question is about the finance part. Regarding the business, I want to take a deep dive later for each company. But the finance part, then you have issued foreign bonds the other day. And I thought that you will provide us with explanation after everything is done, like the NTT DATA's TOB expenses and SBI Sumishin Net Bank's TOB that will be covered with DOCOMO's asset sales and the data center investment. So from next fiscal year onwards, the necessary capital -- what we are concerned about is the shareholders' return, which is the dividend and share buybacks. 6 months ago, you were saying that the direction and policy is not going to change and will be continued. And is that really possible? And also, when you wholly owned DOCOMO through TOB, the cash flow at the holdings company, you had about JPY 900 billion, and you were going to pay back your debt and shareholders' return investment. With that amount, you were able to make it through somehow. But currently, with NTT nonconsolidated, how much of cash flow are you expecting? And that cash flow, do you have to repay your debt? I think that's a discussion point. I think you don't have to repay and lower the leverage. But what kind of allocation of cash are you thinking of to maintain shareholder returns or maintain investment? I would like you to share your views.
Takashi Hiroi: So Hiroi is speaking. I would like to answer your question. Well, this fiscal year, NTT DATA has been wholly owned, and SBI Sumishin Net Bank, we have acquired them. So cash-wise, it is quite tight. And also looking at NTT DOCOMO's performance with the cash flow that is recorded, they are using the surplus of the cash flow for the -- responding to the competition. So I think we will be at the bottom and a tight situation in terms of cash flow this fiscal year, making investments for growth and increasing cash is what we're aiming for. EBITDA is JPY 4 trillion, is the target we have. And we are progressing towards that. So once we see the effect of the investment in the medium term, this gap is going to be fulfilled, and the financial position is going to improve. But in terms of the soundness of the financial situation and balancing that with the shareholder return, basically, what we are doing right now is, the share buyback and the dividend level, basically, we are continuing to increase the dividend. We believe we will be able to solidly maintain that. And this fiscal year and next fiscal year for a little bit, we will have a tight cash flow situation. And of course, we can think of utilizing debt. But basically, the current credit rating of A-, we would like to maintain that rating and to do things so that we don't cause trouble for the bondholders or bond investors as well. That is how we would like to manage the financial position. That is all.
Naoki Akaishi: We will take the next question in the front row, left-hand side, please.
Daisaku Masuno: I'm Masuno from Nomura. I have a question for each segment. Starting with the Global Solutions overseas data center. Earlier, NTT DATA President made a press announcement. I believe that we can accelerate investment. I believe that more risk should be taken to accelerate investment. I felt that the President was a bit cautious. Do you have any thoughts about accelerating investment for DATA?
Akira Shimada: Well, we want to accelerate. To be honest, we do want to accelerate our investment. But there's the construction capacity that needs to be factored in. So construction speed and also, are we going to do this with our own equity? That is another question. If we're going to tap into the funds from third party, then that will give us more power. And that is something that we are studying. We studied that possibility earlier, but the environment did not work out. Now the current environment is more favorable to involving third-party investment. So we will consider that in more earnest. And in terms of the construction speed, it does depend on the location, but we would like to accelerate investment globally in a way that is well balanced. And of course, we have to enhance projects with higher profit. For example, in India, the return is quite high. And so we would like to focus in areas where the return is higher. In terms of the construction capacity, that is a physical impediment. In terms of funding, from equity investors, lowering the equity ratio or involving third party is not that favorable, rather increasing debt through project finance rather than lowering the equity ratio. That would be our hope. We have no idea about -- we don't think about increasing equity or decreasing the equity ratio. We're just talking about using third-party funds for investment. So it's not like a third-party joint venture. No, that is not the case.
Daisaku Masuno: My second question is regarding DOCOMO. One year ago, at the IR Day, when the medium-term plan was presented, DOCOMO's consumer business operating profit was to rise. And the premises for that was that the sales promotion will be made more efficient for the year ended March '27. But looking at the current situation, the promotion efficiency is actually declining. And so if the competitive landscape doesn't change, I believe that the current sales promotion efficiency will continue into the next fiscal year. So if your competitors don't reduce the sales promotion, what's going to happen in the next fiscal year? So the final year of the medium-term plan?
Akira Shimada: Well, this may be similar to my answer to Kikuchi-san earlier. You are right that the scenario has changed somewhat from what we had imagined it to be 1 year ago. So our sales promotion cost is about the same as our competitors. In the past, DOCOMO was able to keep the sales promotion cost lower than our competitors. So what happened as a result of that was that our market share was going down. So now we are expanding about the same level of marketing cost as our peers. Now with the current status continue, if that is the case, then, of course, we will need to revisit the scenario. So reducing the marketing cost just by ourselves would mean that we reduce market share, the customer base itself. So we need to think about the balance. But the overall market is also seeing cost increase across different items, and how we absorb that cost increase is a struggle for not just us, but for all our competitors. So what kind of the competitive landscape you will see going forward is -- needs to be watched. And by closely observing that, I'm sure that I'll be able to better answer your question. Then accounting-wise, even if DOCOMO sells some of its assets, then, for example, we exclude that. And the data center sales, that is also excluded as well. So going up or down, that will not have a bearing on how it is valued. I think we need to show that DOCOMO recovers on its normalized basis.
Daisaku Masuno: Lastly, for the regional communication business, can we say that the recovery is on track? I'm sure that the quarterly result is not sufficient, but the second quarter results didn't seem that satisfactory. Do you think that the structural reform is on track?
Akira Shimada: In terms of NTT EAST and WEST, basically, the situation is on track. NTT WEST had some profit decline factors, which we had communicated to you before. There are assets that needed to be reduced from the books, which have become unnecessary. And these were already in the plan. So for making efficiency, introduction of AI at the call centers and using more AI in the support teams, all of that is on track. So for the NTT EAST and WEST, I'm not worried about the projections.
Naoki Akaishi: [Operator Instructions] The person in the second row, please.
Kazuki Tokunaga: Tokunaga from Daiwa Securities. I have two questions. The first is regarding the new Takaichi administration. Looking at the media report and looking at the Minister of MIC's press conference, they are going to work on the amendment of NTT law. However, having said that, up to now, quite a bit has been considered. And it seems that it has settled down once. So moving forward, what else can be considered is something that I cannot imagine. Therefore, at this point, for your company regarding NTT law, what you are seeking for? Or do you have any expectations for the new government is my first question.
Akira Shimada: How the NTT law should be, as you have mentioned, Tokunaga-san, with the amendment that was done in the last 2 years, we believe that it has been moved forward quite a bit, is how we look at it. The major issue that remains, if I may say, is the total volume regulation, meaning that only have that imposed on NTT and is NTT the only one that should abide that due to securities manner -- securities reasons. And as Masuno-san mentioned, to improve the efficiency of NTT EAST and WEST, how they should do their work or how the organization should be, how they should conduct their work this time, there was quite of a deregulation done. So regarding the organization, changes are still remaining for improving efficiency. But within the law, it's stipulated that the discussions will resume 3 years from now. So there is no necessity at this point to rush on things at this point. However, at this point, what we would like the government to consider is regarding universal service provision. Well, the rule itself has been amended. But regarding the detailed how the system should be designed is not completed. So more than the amendment of the NTT law itself, but what has been amended this year -- up to this year, the content of that, we need to accelerate working on the details of that.
Kazuki Tokunaga: The second question is kind of a follow-up question to Masuno-san. So there's -- in two parts. Regarding NTT DOCOMO, there may be a possibility of a scenario change and NTT EAST and WEST are in line as the plan. But I'm actually looking at a different direction. NTT DOCOMO, maybe July and September was tough. But in October, the MNP is turning positive. So in terms of the customer acquisitions, I believe that for the mobile communications, it's going to come back. But compared to the IR Day that was done -- IR Day, maybe the profit recovery level is quicker than that. So the first point is that the changes of scenario for DOCOMO, which KPIs is it? The revenues? The profit? And the second question is, including the rate change of NTT EAST and WEST, maybe we should not expect a large increase in profitability.
Akira Shimada: So first of all, regarding NTT DOCOMO and NTT EAST and WEST, Tokunaga-san, regarding DOCOMO, you are a bit optimistic. But as Shimada mentioned before, that's different from how we look at it because the market competitive environment is quite intense. In October, the MNP has recovered, as you have mentioned. But at DOCOMO side, the marketing activities have been reinforced, and that's been increasing. And as a result of that, they're gaining the numbers. And we believe that this situation is going to continue, or we have to look at it that this is going to continue. So regarding NTT DOCOMO, in terms of the revenues and profits, we cannot be optimistic about it. But regarding NTT EAST and WEST, it is true that regarding the rate increase, we are implementing initiatives so that we'll be able to do so. But as we have assumed at the beginning of the fiscal year, the revenue and also the cost efficiency initiatives are progressing as planned. So I don't think there is a major change. And this fiscal year, GIGA School -- as we see in GIGA School and others, there's a large-scale investment, and that is done by the regional areas' sales rep for NTT EAST and WEST. And actually, that is bearing fruits, and that is contributing to the operating profit. That is the current situation. Thank you very much.
Naoki Akaishi: We will now ask the members. [Operator Instructions] Okumura-san from Okasan Securities.
Yusuke Okumura: I'm Okumura from Okasan. Can you hear me?
Unkown Executive: Yes.
Yusuke Okumura: I have two questions. First, regarding the data center business. This may be a question that I should pose to NTT DATA, but about JPY 90 billion book value asset was sold at about 2x the price. But the total IRR of these assets -- what was the total IRR? And also, the data center book value is around JPY 2 trillion now. So what is the unrealized value -- unrealized profit from this? Should we assume that it's about JPY 1 trillion? And also regarding the data center portfolio, what is the utilization rate? Or what is the contract period? Can you provide some KPIs for investors?
Takashi Hiroi: So this Hiroi speaking. In terms of the data center REIT, IRR, we are not able to provide concrete numbers, but we are aiming for pricing that is aligned to the investors' perspective. So we believe that a fair valuation is being realized. And in terms of our entire data center business, what is the total value? What is something that we can provide better color on? Well, we are promoting more disclosure on the data center business. Data center valuation, there is a market for that. So EBITDA and profit-based multiple. So some kind of a total value can be assumed for our assets. And perhaps you can reference that in order to value the data center business as a whole.
Yusuke Okumura: Now in terms of my second question, in terms of the creation of synergy with NTT DATA, I'd like to ask about the revisions to your medium-term plan. What kind of discussions are ongoing? So the synergy of having NTT DATA as a 100% subsidiary, will you just be updating EBITDA or the leverage ratio? Or will you be introducing new KPIs, like EPS? Or will you be considering balance sheet restructuring or changing the medium-term targets? Are you having those wide-ranging discussions? Can you share with us what is being discussed?
Akira Shimada: This is Shimada. We are still in the process of discussing the synergy. And I actually mentioned this in the press conference. We need to first review NTT DATA's medium-term plan. And President Sasaki of NTT DATA also mentioned in terms of the global synergy that can be harnessed as a group. That is one very important factor. So NTT DATA's medium-term plan will be announced in spring next year. And the consolidated business plan will also be revisited at that time. So at this time, numerical targets or contents, how much we will review the medium-term plan, it is too premature to say because we need to have more concrete items to be able to provide more color on this.
Yusuke Okumura: I apologize for asking a premature question.
Naoki Akaishi: I would like to take a question from Morgan Stanley MUFJ Securities, Mr. Tsusaka.
Tetsuro Tsusaka: This is Tsusaka from Morgan Stanley. Can you hear my voice?
Unkown Executive: Yes.
Tetsuro Tsusaka: I have one question regarding the mobile business and also a question related to the NTT DATA. Regarding the mobile business, before, you were not spending money than your competitors, but you are spending now at the same level as competitors, and you're still losing. And I think this is quite of a serious situation. And the other point is listening to Mr. Maeda's presentation for NTT DOCOMO, it seems that various things are being in place or prepared. However, didn't feel something that will stand out as becoming the core for them. So as a holding company, the strategy of NTT DOCOMO, are you making a decision that is really going well? Or if there is a question -- if your question towards the NTT DOCOMO's strategies, towards NTT DOCOMO directly, are you in a position that you can instruct them directly as a holding company? Or are you taking such an action to them is what I'd like to know? And the second question is related to NTT DATA. And at the NTT DATA, the President of NTT, Sasaki-san, was saying that it's global. And Shimada-san, you mentioned that it's global as well. And for global center business, you hold the #3 position globally. So you have quite of a solid presence there. But for the other businesses, I don't think they -- you can say that they have succeeded overseas, well, numerically -- from the new number perspective. So the reason why you are focusing on global -- the data center being a global business is fine. I understand that very well. But for the other businesses, that being global, I feel that there's no track record that has been achieved, is how we can see it. So how should we think about that?
Akira Shimada: First of all, Mr. Tsusaka, thank you very much. Regarding the mobile business, whether a discussion is done or not, we are having a discussion with them. Because we are having the discussion, that is why the direction has been changed since last fiscal year, basically. They need to solidly and surely protect their customer base. And as I mentioned before, without spending cost or money and just damage their existing customer base, there's no future for the business. Therefore, we wanted them to thoroughly respond to the situation. For the second quarter, actually, the [ Elmos 0.5 giga ] was stopped as a plan, and there's an impact of that. And in fact, we slightly lost against the competitors. But as of October, MNP is net positive now. And the second quarter situation, I think, is a temporary situation, is how I look at it. But what's more important than that is regarding quality. We need to improve the quality, especially because everybody now is watching a lot of video. So the challenge is in the metropolitan areas, around the railway routes. We need to work on that, and we need to increase the number of base stations. However, today, it was said that in the second half that they're going to increase the construction process by threefold, but that needs to continue into next fiscal year. And also the 5G base station that has become old needs to be new, and we are replacing that to a new one. And that needs to be completed through this fiscal year and next fiscal year. So those are the two key points. And we are aligned with DOCOMO on this. And they are thinking of various cost reductions, but these are the necessary costs that needs to be spent. So for this year and next fiscal year as well, in terms of implementing new equipment and facilities is something that is necessary. Therefore, how are we going to overcome this situation and have a bright prospect for FY '27. Of course, I don't know the numbers for FY '27 yet. However, these type of factors will come about, and we are aware of that, and we are continuing our discussions on it. And regarding NTT DATA, at the global discussion, recently, the demand for AI is coming about quite strongly. And the tech services customers, conventional tech service customers is where the AI demand is coming from, especially South Europe, like Spain, Italy, in that region, the needs is heightening. In Germany, unfortunately, the automobile industry is not doing well. So there's an impact from that. And the U.K., performance is coming back slightly. And in the United States -- well, the U.S.A. is about the same situation like Southern part or Southern Europe. So we do have expectations to a certain extent in those regions. So the product itself is transforming and having the customer base is quite valuable. So in the areas other than data center business, to turn it around into a positive business, I want the business to be managed in that way. Thank you very much.
Naoki Akaishi: Thank you very much. So we have exceeded the allocated time. We would like to take one more question either from the floor or remotely. Since there seems to be no further questions, we would like to conclude NTT Holdings presentation. Next will be from NTT DOCOMO. So please stay in your seats. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]