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Nippon Telegraph and Telephone Corp
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We would now like to start the press conference for the announcement of First Quarter Results for Fiscal Year 2022. I'll be serving as the master of ceremonies [indiscernible] NTT Public Relations Office. Allow me to introduce the attendees from our side. Representative Member of the Board, President and CEO, Mr. Akira Shimada. We have with us Executive Officer and Head of Finance Accounting, Mr. Kazuhiko Nakayama; Executive Officer, Head of Corporate Strategy Planning, we with us Mr. Takashi Taniyama. So these are the attendees. Mr. Shimada will explain the financial results, after which we will take questions from your side.
So without further ado, let's begin the press conference. Mr. Shimada, the floor is yours.
Thank you. My name is Shimada from NTT. Thank you for joining us despite your very busy and demanding schedule. We appreciate it. Let me now begin explaining to you the first quarter financial results for fiscal year 2022. Operating revenue, operating income and profit, all increased year-on-year. Operating revenue and profit reached record high level at the first quarter results. As for operating revenue, this increased JPY 176.3 billion year-on-year, up to JPY 3,068.9 billion due to the increased revenue at NTT DATA and NTT Limited. Of this increase in revenue, amount of impact from currency was JPY 57 billion plus.
As for operating revenue, correction, just like operating revenue, operating income increased JPY 17.1 billion year-on-year, up to JPY 503.4 billion due to increased revenue at NTT DATA and NTT Limited. Turning now to profit. This increased JPY 28.6 billion year-on-year, up to JPY 368.6 billion due to increase in operating income as well as one-off upside related to sales of shares at -- correction, upside related to corporate tax. As for overseas operating income margin, this improved 2.1 points up to 6.1% due to increased operating income at NTT DATA and cost reduction through structural transformation at NTT DATA as well as at NTT Limited.
Let me now turn to Page 5. This relates to contributing factors by segment. Let me start with the Integrated ICT business segment. Well, enterprise business and smart life business recorded increase in revenue year-on-year. This segment as a whole recorded decline overall due to the impact of price reduction in consumer business. However, this drop was offset by cost reduction in various businesses. So, we were able to deliver increase in operating income for this segment as well. Turning now to Regional Communication business segment, both operating revenue and operating income declined year-on-year from drop in fixed line voice service revenue because we did not have gain from sale of real estate like we had last year. However, for the full year, we expect increase in both revenue as well as operating income through increased revenue from system integration as well as growth service and very rigorous cost reduction.
As for Global Solutions business segment, operating revenue and operating income increased from robust digitalization demand at NTT DATA and also increased revenue from value-added services at NTT Limited as well as cost reduction from structural transformation at NTT Limited. So, we see increase of both operating revenue and operating income in this segment. As for others, such as Real Estate and Energy business, there is increased revenue and operating income from increased agency business at ENNET and also increasing revenue from electricity charges, reflecting rising fuel price.
Next, let me share with you 5 major topics. Please turn to Page 7. First, let me talk about the Promotion of Medical Healthcare business. We entered a capital and business partnership with Genesis Healthcare Company, a pioneer in genetic testing, research and data analysis. We will be acquiring 19.3% of Genesis Healthcare's shares as a result of this alliance. We will strengthen the genetic database through joint projects between NTT Life Sciences and Genesis Healthcare. And also, we will be improving the quality of data analysis and genetic testing by combining their respective technology. This is due to the strong relationship with Genesis Healthcare and NTT Life Sciences. We will support medical and health care advancement through these efforts.
Please turn to Page 8. Next, Decentralization of the Organization. In the holding company, we will establish offices in Takasaki City, in Gunma, in Kyoto City and Kyoto to begin trial of organizational decentralization from October 2022. In the trial with approximately 200 people, we will identify issues related to business execution, communication and so on, by decentralization and consider these more deeply towards full-scale implementation. Our aim is to achieve sustainable business operations, driven by this initiative.
Please turn to Page 9. Next, Field Testing for the Mass and Stable Transportation of Hydrogen. In order to achieve mass and stable transportation of hydrogen through pipeline, NTT Anode Energy will jointly work with AIST and Toyota Tsusho on development and research related to safety and stability of double pipeline systems in response to our research request from NEDO. Through this initiative, we will study and validate the safety measures to supply hydrogen through pipelines, eventually to plants, commercial facilities and power plants with a view to a society that consumes a large volume of hydrogen to secure means to supply in the community and contribute to the development of smart cities.
Please turn to Page 10. Next, New Solutions Development with SAP. NTT DATA and SAP jointly developed Connected Product, a solution that tracks fragile and sensitive cargo shipment with IoT sensors and facilitate smooth insurance procedures. This enables end-to-end tracking of the cargo in the entire supply chain and simplifies processes for insurance due to damage or delay of the shipment to reduce cost across the whole ecosystem, including insurers and logistics companies. Joint demonstration pilot is now underway with a German insurance company and a Spanish logistic company to run through September 2022. This solution is going to be applied to commercial operations for international insurance and logistics companies. Please refer to Page 11. Finally, overview of the progress made in our midterm management strategy initiatives is shown on this slide.
And this concludes my presentation. Thank you.
We would now like to take questions from the members of the press. First, we'll take questions from the press who are here on site. [Operator Instructions] [ Hatano from Kyoto Press ]. We'd like to go to the gentleman in the white shirt in the front row.
[ Hatano ] from Kyoto Press. I want to ask about the decentralization of your functions. This time, Takasaki and Kyoto were chosen as the destination. What is the reason for you chose these locations as the destination for decentralization efforts?
Yes, the objective of the decentralization of the organization is to enhance the residential sector. So, this is a test. We envisioned the possible direct earthquakes. Of course, we need to iron out with another conventional countermeasures are sufficient and we've been doing scrutinization based on this premise. So, we looked upon the frequency of the past earthquakes. And also, if possible, we wanted to find a location in the inland area of Japan. So, we have several points for assessment, which we came up with. And we chose Takasaki and there's also the distance question. We want to make sure that the location was accessible through bullet trains or Shinkansen. So, we selected Takasaki City and also the engine capital of Kyoto, which was the capital for 1,000 years in the past. We felt that they were quite resilient against the earthquakes and disasters and the frequency of the disasters were very limited for these 2 cities. So, that is why we chose these 2.
If I could ask one other question. I understand that at the holding company, you're pursuing decentralization efforts. Going forward, what about NTT DOCOMO, NTT DATA? Will your business operating companies also be subject to this decentralization? Maybe some of the efforts are already ongoing in your group companies, but are we going to be further spreading the scope of these decentralization efforts?
Thank you for the question. We focus upon the succession of business operations. So, Corporate Strategy Planning department were involved in this process. At the same time, we wanted to make sure that we identify the current status of impact on employees as a result of possible natural disasters. Also, on top of that, if we're going to have dispersion on a remote basis, can we really work on a remote basis through the decentralization. So, that's what we want to check. So, that is how we're going to begin these efforts starting at the NTT holding company. Now, we will observe the results of the efforts at NTT holding company. Now, there are unique features for each business operating company. So, we want to make sure that we can come up with something residents and -- reinforcement, which is suited to the features of the nature of each business operating companies.
We would like to take the next question. Yes, for the gentleman in the black suit in the very bottom.
[ Hatano ]. Well, last month, there was just a major communications failure by KDDI. And as for the roaming, is to be studied more seriously and that was advocated by the government. Any issues or concerns and what should be done from your perspective?
Thank you very much for the question. And just the other day, KDDI's failures, and it's not that well, it is something what just happened to the other company. And we also have experienced a failure in NTT DOCOMO last year. So first of all, currently, the details with respect to this failure, it's not well known in terms of data. And so we would like to really have more information. And as for our own networks, we would like to really review our measures or countermeasures well more seriously and taking the reference from what has been with experience. And what has been discussed is the roaming in case of emergency. And then there have been so many issues pointed out. And so as quickly as possible, we would like to realize the response and we would like to really offer support.
In order to achieve that, the cooperation amongst our peers is important and also the MIC is well going to coordinate and will take the lead.
And so first of all, without spending too much time, we have to really want to implement this. That is the key. So, oftentimes for the callback function is often talked about. And of course, that should be incorporated into discussion and that's okay. But the -- it will take some time and cost. And so reasonably well, there is a need for a certain discussion. And so whatever we can should be well realized as quickly as possible. And I think that's the way we should go about this. And in the IoT era, the network architecture and also the way operations should be done and in autonomous driving and others and thinking about all these new things, we may have to revisit all these. And so we would like to really learn more on this point.
Next question. Yes, the person in the second row.
[ Miyajima ] from Nihon Keizai Shimbun. I would like to ask about the roaming question as well. Well, as far as roaming is concerned, are you going to do just partially for just emergency communication or for general communication? I think that is going to be the determining factor. But what are your thoughts about the cost burden for these roaming services? Mr. Shimada through interviews, you have mentioned that the operator should be bearing the cost. But should the national government be partially sharing the cost, do you believe, for this emergency roaming service?
Well, thank you. I think we have to consider the minimum level of roaming. The cost should be borne by the operators when we're talking about minimum roaming services. And having said that, I'm sure there are various phases and the level of requirements will be varying from stage to stage, I would imagine. So in line with that, I think we need to go with a sufficient response and thinking. But for the time being, initially, in the case of straightforward roaming, I think that will entail some sort of responsibility on the part of the telecom operator. So, it should be the operators who bear the cost for this minimum level of roaming.
If I could ask additional question. For example, how much share cost do you envision? Do you have any calculation or simulation for the cost involved?
Unfortunately, we have not been able to do that at all right now. If I may add, it's not just emergency services. I think we have to consider the scope of roaming beyond just straightforward emergency services. And the situation is quite complicated. We want to avoid congestion. So therefore, if we consider services outside emergency services, it's important that there is no congestion arising as a result of this roaming service. We have to make sure that we avoid that. And also what about the backup. I think we have to consider the possibility of backup services at that juncture. That should be considered as part of the service menu. But that's primarily in relation to the enterprise customers, I would imagine.
If I may, if I could ask one additional question. In July, I think you created a net standard office. It's been just 1 month since the establishment of this office. Can you share with us the spread of this business right now? Can you share with us any concrete numbers?
Yes, on July 1, we created remote standard scheme for organizations with more than 30,000 people. I would imagine that this will steadily increase down the line. Well, the data that I can share with you at this moment. It's been 1 month since people who are working who have moved along without their families. And by the way, this project was primarily in relation to the head office. So, this was most focused primarily on the main office.
The people who move solitarily with other families away from their -- the head office, we had 1,500 last year, last month, but then this declined by 200 after 1 month period. So, I would imagine that for these 200 people who actually were working who moved to different office they had families accompanied and 200 people who would have been working alone without any accompanying family, were reduced in number. However, as for us, the details are concerned, it is not yet very clear. Now steadily, I would imagine that we will be making personal assignments. So, after some time has passed, perhaps we'll be able to share with you more organized numbers since the statistical relation to the remote standard practice. But yes, we're beginning to see results.
We would like to take the next question. Yes, the person wearing jacket in the very first row.
[ Suzuki ] from Asahi. And I do have a question related to roaming. And as for the emergency call and roaming needs to be introduced and as to the exit to that and whether you'll go into enable roaming for the communications other than the emergency call and SoftBank and others. Well, the [indiscernible] really mentioned that this should also be considered at the press conference. And so what is your view on this as to the sort of roaming for other than the purpose of the emergency calls. To what extent are we going into expand this?
And as I have touched upon a little earlier, the congestions of a certain company if it really impacts other companies as well, it would become more serious and major incident. And so if we are to consider roaming for nonemergency calls, and we have to make sure that the congestion would not take place and that will be the minimum requirement for implementing those. And so thinking about those and SMS or short messages, it could be utilized. That could be ways we can think about. But in what scheme or what system and how mutually are we going to really enable that.
Well, we may have to build consensus to a certain degree. And so the MIC is going to arrange opportunity. And so we would like to be engaged in such discussions. But well, the major premise is that we'll prevent the congestion and also to really minimize any of the ripple effect from one congestion to others. And so that would be the requirement that we have to satisfy in the first place.
Next question, please. Yes, the person in the black jacket please.
[ Tachima ] from Yomiuri Shimbun Newspaper. If I could also ask a question about roaming as well. I want to confirm the response to the first question on this topic. With regard to emergency communication, I believe that discussion will be required, but you want to realize this as soon as possible after those deliberations are over. What concrete scope will be possible among the various telecom operators?
Well in a straightforward manner, for international roaming where there is no reverse communication, we're talking about emergency communication. With regard to emergency communication, so we should start from there. That should be the starting point. So, I think we need a consensus as to the scope of operations we should agree upon. That deliberation is required. But that alone should not be sufficient. So, as I mentioned earlier, what about that SMS. If their view is that SMS should be done. And if we could gain the consensus then that would probably be required.
But if it's become too expensive then we have to spend all our money to change the network and this will be very costly. So therefore, what type of cost sharing is required that is specialty part of the discussion at that juncture. So, the greater the scope, the discussions will be more prolonged. So, I think initially we should focus on the minimum services we should start with. So, that is what -- that is the gist of my comment.
And the person in beige jacket.
[ Hariya ] from Nikkan Kogyo. On this call and on a quarterly basis, the operating profit and the net profit has achieved a record high numbers. What are the contributing factors? Was it something you have expected? Or have there any other factors other than what you have expected?
Whether this is in line with our expectation or not. And in terms of our business, the forecast, it is in line with our forecast. And so generally speaking, it is in line with our expectation. As for the domestic businesses, almost we're all on track. And the overseas for businesses, thanks to your support NTT DATA digital demand as well as the limited the high value-added services have been growing. And so the overseas business for segments has really well driven these results that we can say. But on the other hand, as for the overseas businesses, because this was semiconductor-related issue and the backlog has not been reduced to what we have expected and that for the first quarter, rather, we have seen some increase in the backlog.
Of course, we are really well trying to reduce that. But this because of the impact coming from the semiconductor or shortages and others and that the delivery or timing, how would that be resolved in terms of timing. And then, we do still have room to grow our overseas businesses taking care of that.
The second question I have in energy and the sort of electricity cost increase. And as we have tight supply and demand situation of the electricity and what the government is trying to really restart some of the nuclear power plants and to really increase the supply of power, what would be the impact on your businesses from this energy well increase?
Energy supply is a very important issue to look at. And the government is going to make the utmost effort, which is very important and key for us. And then frankly speaking, I would like to very much appreciate their efforts. Now, energy or electricity related. And this year, 20% or so the cost increase has been really factored into our business plan. And as we have just ended the first quarter, it has been increasing by 30% or so. So electricity power cost, we have to really well keep monitoring the trend in energy cost and as well as the impact coming from the depreciation of the yen, we will have some impact on our businesses. And then for a company like us, which consumes a large amount of the electricity, the electricity well price needs to be watched. And so we would like to keep watching that trend.
Next question, please. We have to go back to the person in the front row.
[ Ishigawa ], a freelance journalist. Rakuten Mobile has eliminated the zero yen mobile. What are your thoughts? And how do you see the trends among your customers after they announced the elimination of this model?
So with regard to Rakuten Mobile, they have stopped the zero yen service or terminal. I think this is due to cost. Network business requires cost. So, I think this is a natural behavior on their part considering these situations. Now, turning to DOCOMO, whether or not this is the impact from the elevation of the service at Rakuten Mobile, but I'm not sure if this is direct result in relation to the mobile number portability. But as far as the first quarter results are concerned, we have seen positive impact in terms of number portability. So we we're not sure this positive trend is due to the impact of services at Rakuten Mobile or whether or not this is due to the robust sales and efforts on the part of DOCOMO. I'm sure internally, we have to assess this. It's very difficult to comment on the impact.
What about ahamo, impact at ahamo?
Well, ahamo is enjoying very strong growth.
On the left-hand side, very far left.
[indiscernible] And regional telecommunications, you're seeing the negative growth. And NTT, well, West and East, you have a change of the precedents. And as for the regional companies, what would be the direction they're going to pursue? And what is your expectation? And while [ Saito-san ] has been talking about noncommunications businesses. And so what is your expectation towards what these operating companies.
With respect to NTT West and East, both of them in 2025, while more than 50% of the revenue should come from our non-communications businesses. And also in terms of the regional businesses, they have already started up some of the businesses and JPY 350 billion will be the target by 2025, and that's what they have been discussing. And both for NTT West and East, well, new businesses in agriculture and fishery and also the livestock farming and the feedstock will be changed to the biomass and the transition of the conversion energy. And so they are taking various challenges in the local communities. And so local production for local consumption.
From that perspective, each of the companies is going to start up new businesses in each of the regions.
I think this is the major part of what they are going to do. And the first quarter, as you have just mentioned, because the gain on the sales of the real estate was booked in the previous fiscal year. And because of that, we are seeing a negative growth. But on a full year basis, we are expecting they are going to -- almost probably will be achieving the target for the plan. And so we're taking advantage of each characteristic of the regions and we are -- I am hoping that they would really take on the challenge to develop new businesses in the communities.
Second question, the KDDI will -- for instance, there could be with different responses. And the use of WiFi, it was talked about in 50 Japan. And then when you have this sort of disasters in a given area where they are to make use of it. And can this be the alternative to deal with the failure of a certain carrier. What is your sort of view on this?
More in concrete terms, we have not yet started the discussion and just the other day and there was a question asked earlier. There were special public horns in case of the disasters and that might be used. And also we may need to use for more of WiFi and so inclusive of all these measures, we have been really we're thinking about in case of disasters. Well, these might be applied for the failures or not? And so based upon that kind of understanding, we would like to have some discussions with our competitive peers and I don't really want to talk this too much, but cost sharing and what kind of cost sharing scheme can we come up with and that should also be well discussed and considered.
Next question, the person in the front row, please.
[ Sakaguchi ] from [ Impress ]. I would like to ask a question related to the malfunction of the network at KDDI. I think the public nature of the telecom business became well known. However, the standard this year has changed. NTT [ service ] are showing signs of declining the network services when you from the major manufacturers at the network and the disasters, I think the public phone became very important. I think there are expectations where availability of public phones in the case of disasters. In the face of this malfunction of the network at KDDI, have you changed any thoughts? Have you changed your thoughts about the public phone system?
Thank you for the question. With regard to the use of public phones, yes, there is going to be the need for usage of public phones by the public. Compared to the public phones available right now, what about the new phones in the face of disasters. We offer special services in the case of those disasters. For example, using convenience stores, delivering phones in places like convenience stores. I think that's more numerous in number. When you consider the convenience on the part of the customers, I think we should consider what we have in terms of emergency services available in the face of disasters. Mr. Shibata, the Head of NTT East, has already talked about this possibility. So on top of public phones I think you can also add public phones for emergency services. I think this is more convenient for the customers. So, that is what we would like to consider. Of course, inclusive of whether or not we're going to do this, I think this needs to be a matter which -- this needs to be studied. This matter needs to be studied.
We would like to really make sure that we have -- all the reporters in the venue have asked questions.
[ Nishioka ] from Nikkei Business. KDDI major communication failures. And then your mobile form businesses and IoT for your enterprise clients of your business, have they given any impact to your business? And also with KDDI, it has been talking about declining. And what would be the sort of your impact for your business in this fiscal year?
Most probably, for enterprise for clients, I think what that would be mainly related to the more enterprise for clients. And backup, well, what kind of your backup measures should be we implemented and already where that discussion has started. And if they are only using NTT DOCOMO. Well, then what about the backup measures? And then while the backup measure should be based upon the communication channels were provided by other competitors. And so the network operators need to really think about what kind of proposal they can put forward to their clients. And then in that context, so we would have duplicate SIM, SIM cards and then mutually we're becoming MVNO for other product operators. And so various measures could be considered and to ensure the business continuity of the clients. Well, we have to think about what we can do. And I think that's what we're going to do.
What you have just said is for the enterprise for clients and first of all, rather just setting aside the roaming services, but in parallel, you are thinking of offering proposal to provide a kind of services in parallel.
In terms of services, this could be possible and these line businesses and VPN. And for the enterprise clients, some of the clients do have the backup functions. For example, they do have the dedicated new, well, based upon the NTT DOCOMO and then the backup, it could be for KDDI based. And so already, this is an existing business. So, with the extension of this for existing business, of course, the services for the enterprise clients could well have such options more. And I think this is quite likely. That's what I like to really come back to you.
And for the retail or the consumers, could there be such for services and to really have to provide the redundancy for the consumers?
So, just asking the consumers to have the 2 devices. And if you have 2 SIM cards and if one of the network is down, what they would be able to switch over to another. And even now, they can make themselves avail of such SIM cards. And if you use the service of one company within NTT Group, and then the SIM could be chosen out of the 2. And so in terms of services, these are available, so of course, the customers will need to well pay cost of that. And so it's all up to them to make choices.
We'd now like to take questions who are connected online. [Operator Instructions] So we'll take questions from the media who are connected online. [ Ishino-san], freelance journalist. [Operator Instructions] Ishino-san, I'm afraid we're not receiving any sound from you. We'd like to come back to you later. The Public Relations office will be calling you, so please wait in front of your phone.
So we'd like to go onto the next person online. We'll take the next online question. [ Otsubo-san ] from Sankei Shimbun Newspaper. [Operator Instructions] Our apologies, we are not able to receive any sound from Otsubo-san. The Public Relations office will be calling you soon. Please wait in front of your microphone. We apologize, sir.
Are we connected to Ishino-san?
Let's go on to the next question, [ Hatano-san ] from Nikkei Shimbun. [Operator Instructions]. Our apologies, Hatano-san, the Public Relations Office of NTT will be calling you very soon.
We have received a question from Otsubo-san of Sankei Shimbun through the message function. So let me read this question on his behalf.
If there is no callback function required, then what is the earliest deadline for you to be providing this roaming service?
The discussion hasn't even begun. So, we cannot talk about clear deadlines. It's very difficult to talk about the time line at this juncture as discussion has not even started. Now, this is something that one single company cannot do this alone. So it's important that mobile phone companies and [indiscernible] phone companies get together and talk about this decision. It's inclusive of the Ministry of Internal Affairs and Communications. We hope they will be able to realize this as soon as possible. Thank you. That is my response to your question. Thank you.
And we would like to move to the next question. We have Ishino-san, freelancer at online.
Well, my name is Ishino, freelancer. At this time, for the communications failures, KDDI is going to pay JPY 200 for the unit sort of price as the cost will return back to the customers. I'm sure NTT does have a contractual provision. And in line with the way the users are using their services and some people are saying that, well, it's not sufficient. And if there is in case you have the failure, how are you going to deal with that? And then what would be the compensation that you're going to pay to the users?
Now the failure of KDDI at this time, I would like to refrain from answering. In principle, what you ought to really pay compensation, what are based upon the actual sort of the damages done and then, the -- in line with the provisions of article incorporation. And so it depends on the impact that has caused. And so we have to make a decision depending on the circumstances of pre-billing. And so I would like to refrain from making any comment in relation to KDDI failure.
The second question, the callback, so without callback and then the roaming services and without SIM card and callback for your emergency call and so roaming without that functionalities. And then if you were to do that, to what extent do we need -- do you need to modify the network? Or do you think that it could be well done quite in a short period of time. That's the impression I got. But what will be the time frame you need to do that?
And looking at the current status, if we were to enable the roaming, well, the network does not really support that. And so naturally, we need to modify or change the network. And so it's not that something I can really share and discuss in this press conference. And so certain level of the actions need to be done.
Well, then so some modifications would be necessary, then the callback would be accommodated?
The callback, in order to facilitate that, we have to really arrange and deal with the database and others. So, it's not something we can do it in a very short period of time.
We'd like to go back to Hatano-san from Nikkei Shimbun. We received a question through message. So let me read this question on his behalf.
With regard to your overseas business, what was the impact of weaker yen in terms of your operating profit? And also 6.1% operating margin, how much of that was supported by the weaker yen? That was the question.
Yes, thank you for the question. So in terms of the JPY 176.3 billion, this was the increase in our overall total operating revenue. And about JPY 57 billion was the impact from the foreign exchange and currency. As for operating profit, the impact of the currency was quite limited. Now, turning to overseas revenue, this increased by [ JPY 98.7 billion ]. [indiscernible]. So JPY 57 billion out of [indiscernible] is the impact of the currency. So the increase would have been JPY 42 billion without the foreign currency. There is no impact on operating profit from the weaker currency. So the impact is primarily on operating revenue.
We would like to move on to the next question. And once again, Otsubo-san from Sankei Shimbun [Operator Instructions] So this was not the question, very sorry.
And are there any other questions online?
Thank you. Well then, with this, we would like to conclude the press conference of NTT Holdings. Thank you very much.