Form 6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR

15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of October, 2016

Commission File Number: 001-31221

Total number of pages: 66

 

 

NTT DOCOMO, INC.

(Translation of registrant’s name into English)

 

 

Sanno Park Tower 11-1, Nagata-cho 2-chome

Chiyoda-ku, Tokyo 100-6150

Japan

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  x Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    NTT DOCOMO, INC.
Date: October 28, 2016     By:  

/s/ KATSUYUKI TAKAGI

     

Katsuyuki Takagi

Head of Investor Relations

Information furnished in this form:

 

1.

Earnings release for the six months ended September 30, 2016

2.

Results presentation for the first six months of the fiscal year ending March  31, 2017


Table of Contents
LOGO     LOGO
Earnings Release   October 28, 2016  
For the Six Months Ended September 30, 2016   [U.S. GAAP]  

 

Name of registrant:    NTT DOCOMO, INC. (URL https://www.nttdocomo.co.jp/)
Code No.:    9437
Stock exchange on which the Company’s shares are listed:    Tokyo Stock Exchange-First Section
Representative:    Kazuhiro Yoshizawa, Representative Director, President and Chief Executive Officer
Contact:    Koji Otsuki, Senior Manager, General Affairs Department / TEL +81-3-5156-1111
Scheduled date for filing of quarterly report:    November 4, 2016
Scheduled date for dividend payment:    November 22, 2016
Supplemental material on quarterly results:    Yes
Presentation on quarterly results:    Yes (for institutional investors and analysts)

(Amounts are rounded off to the nearest 1 million yen.)

1. Consolidated Financial Results for the Six Months Ended September 30, 2016 (April 1, 2016 - September 30, 2016)

(1) Consolidated Results of Operations

(Millions of yen, except per share amounts)

 

     Operating Revenues     Operating Income     Income Before Income
Taxes and Equity in Net
Income (Losses) of Affiliates
    Net Income Attributable to
NTT DOCOMO, INC.
 

Six months ended September 30, 2016

     2,288,344         3.3     585,597         26.6     581,164         28.4     405,407         27.8

Six months ended September 30, 2015

     2,214,987         1.9     462,574         15.8     452,562         12.0     317,135         22.2

(Percentages above represent changes compared to the corresponding period of the previous year)

 

(Note)    Comprehensive income attributable to    For the six months ended September 30, 2016:    369,362 million yen      19.6
   NTT DOCOMO, INC.:    For the six months ended September 30, 2015:    308,774 million yen      20.1

 

     Basic Earnings per Share
Attributable to
NTT DOCOMO, INC.
     Diluted Earnings per Share
Attributable to
NTT DOCOMO, INC.
               

Six months ended September 30, 2016

     108.32 (yen)         —           

Six months ended September 30, 2015

     81.70 (yen)         —           

(2) Consolidated Financial Position

(Millions of yen, except per share amounts)

 

     Total Assets      Total Equity
(Net Assets)
     NTT DOCOMO, INC.
Shareholders’ Equity
   Shareholders’
Equity Ratio
   NTT DOCOMO, INC.
Shareholders’ Equity
per Share
 

September 30, 2016

     7,208,360         5,460,885       5,427,836    75.3%      1,459.00 (yen)   

March 31, 2016

     7,214,114         5,343,105       5,302,248    73.5%      1,409.94 (yen)   

2. Dividends

 

     Cash Dividends per Share (yen)  
     End of the
First Quarter
     End of the
Second Quarter
     End of the
Third Quarter
     Year End      Total  

Year ended March 31, 2016

     —           35.00         —           35.00         70.00   

Year ending March 31, 2017

     —           40.00            

Year ending March 31, 2017 (Forecasts)

           —           40.00         80.00   

 

(Note)   

Revisions to the forecasts of dividends: None

3. Forecasts of Consolidated Financial Results for the Fiscal Year Ending March 31, 2017 (April 1, 2016 - March 31, 2017)

(Millions of yen, except per share amounts)

 

     Operating Revenues     Operating Income     Income Before
Income

Taxes and
Equity in Net
Income (Losses) of
Affiliates
    Net Income
Attributable to
NTT DOCOMO, INC.
    Basic Earnings per
Share Attributable to
NTT DOCOMO, INC.
 

Year ending March 31, 2017

     4,610,000         1.8     940,000         20.0     936,000         20.3     655,000         19.4     176.68 (yen)       

(Percentages above represent changes compared to the corresponding previous year)

 

(Note)   

Revisions to the forecasts of consolidated financial results: Yes


Table of Contents

* Notes:

 

  (1)      Changes in significant subsidiaries:    None
 

(Changes in significant subsidiaries for the six months ended September 30, 2016 which resulted in changes in scope of consolidation)

  (2)      Application of simplified or exceptional accounting:    None
  (3)      Changes in accounting policies
  i.      Changes due to revision of accounting standards and other regulations:    None
  ii.      Others:    Yes
  (Refer to “2. (3) Change in Accounting Policies” on page 12.)   
  (4)      Number of issued shares (common stock)   
  i.      Number of issued shares (inclusive of treasury stock):    As of September 30, 2016:    3,958,543,000 shares
     As of March 31, 2016:    3,958,543,000 shares
  ii.      Number of treasury stock:    As of September 30, 2016:    238,287,350 shares
     As of March 31, 2016:    197,926,250 shares
  iii.      Number of weighted average common shares outstanding:    For the six months ended September 30, 2016:    3,742,803,807 shares
     For the six months ended September 30, 2015:    3,881,483,821 shares

* Presentation on the status of quarterly review procedure:

This earnings release is not subject to the quarterly review procedure as required by the Financial Instruments and Exchange Act of Japan. As of the date when this earnings release was issued, the quarterly review procedure on financial statements as required by the Financial Instruments and Exchange Act of Japan had not been finalized.

* Explanation for forecasts of operations and other notes:

1. Forecast of results

Forward-looking statements in this earnings release, such as forecasts of results of operations, are based on the information currently available and certain assumptions that we regard as reasonable, and therefore actual results may differ materially from those contained in, or suggested by, any forward-looking statements. With regard to the assumptions and other related matters concerning forecasts for the fiscal year ending March 31, 2017, refer to “1. (3) Prospects for the Fiscal Year Ending March 31, 2017” on page 11 and “5. Special Note Regarding Forward-Looking Statements” on page 20, contained in the attachment.

2. Resolution of share repurchase up to prescribed maximum limit

The forecasts of “Basic Earnings per Share Attributable to NTT DOCOMO, INC.” for the fiscal year ending March 31, 2017 are based on the assumption that DOCOMO will repurchase up to 220,000,000 shares for an amount in total not to exceed ¥500,000 million, as resolved at the board of directors’ meeting held on January 29, 2016.


Table of Contents

CONTENTS OF THE ATTACHMENT

 

     page

Contents of the Attachment

     1

1. Information on Consolidated Results

     2-11

(1) Operating Results

     2-9

(2) Financial Review

     10

(3) Prospects for the Fiscal Year Ending March 31, 2017

     11

2. Other information

     12

(1) Changes in Significant Subsidiaries

     12

(2) Application of Simplified or Exceptional Accounting

     12

(3) Change in Accounting Policies

     12

3. Consolidated Financial Statements

     13-18

(1) Consolidated Balance Sheets

     13

(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

     14-15

(3) Consolidated Statements of Cash Flows

     16

(4) Notes to Consolidated Financial Statements

     17-18

4. Appendix

     19

Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

     19

5. Special Note Regarding Forward-Looking Statements

     20

 

1


Table of Contents

LOGO

Earnings Release for the Six Months Ended September 30, 2016

 

1. Information on Consolidated Results

(1) Operating Results

i. Business Overview

The environment surrounding our business has changed significantly. In Japan’s telecommunications market, competition has intensified due to the government’s pro-competition policy, market entry by Mobile Virtual Network Operators (MVNOs) and other factors. In addition, technical advancements in areas including cloud services, IoT*, big data and artificial intelligence (AI), and new policy developments such as the full liberalization of the electricity retail market, have brought about active competition and collaboration with new players from other industries, accelerating competition in new markets that transcend the conventional boundaries of the telecommunications business.

Amid these changes in the market environment, positioning the current fiscal year ending March 31, 2017 (FY2016) as the year in which we intend to make “a vibrant leap toward further growth” beyond income recovery, we aim to achieve the various medium-term target indicators we announced for the fiscal year ending March 31, 2018 (FY2017) one year ahead of the schedule. In connection with our management of our business, we are promoting the two pillars of “reinforcement of our telecommunications business” and “expansion of our smart life business and other businesses” centered on our “+d” value co-creation strategy, through which we pursue the creation of new values by evolving our collaborative activities with a wide range of external partners.

In the three months ended September 30, 2016, we further enriched our “Kake-hodai & Pake-aeru” billing scheme in order to allow users to enjoy the use of a larger volume of data. As part of our “+d” initiatives, we worked with our partners to create new value by engaging in activities such as expanding the number of stores where “dPOINTs” can be given and used in order to promote the utilization of “dPOINTs” and launching an over-the-counter insurance consultation service dubbed “DOCOMO Insurance Consultation” at docomo Shops, as well as promoting initiatives using AI, drone and other technologies.

For the six months ended September 30, 2016, despite a decrease in equipment sales revenues and a negative impact on mobile communications services revenues caused by the further expansion of our “Kake-hodai & Pake-aeru” billing scheme, operating revenues increased by ¥73.4 billion from the same period of the previous fiscal year to ¥2,288.3 billion, mainly due to the recovery of telecommunications services revenues as a result of the growth of the packet consumption of our “Kake-hodai & Pake-aeru” billing plan subscribers, the expansion of smartphone use and the demand for tablets and other products purchased as a second mobile device for individual use, and the growth in the number of “docomo Hikari” users, as well as the growth of our smart life business and other businesses such as “dmarket” and other content services.

Operating expenses decreased by ¥49.7 billion from the same period of the previous fiscal year to ¥1,702.7 billion, owing primarily to a decline of depreciation expenses as a result of our change in depreciation method used, a decrease in cost of equipment sold and initiatives to pursue further cost efficiency, despite an increase in expenses associated with the expansion of “docomo Hikari” revenues and the growth of revenues from our smart life business and other businesses.

As a result, operating income increased by ¥123.0 billion from the same period of the previous fiscal year to ¥585.6 billion for the six months ended September 30, 2016.

Income before income taxes and equity in net income (losses) of affiliates was ¥581.2 billion, and net income attributable to NTT DOCOMO, INC. increased by ¥88.3 billion from the same period of the previous fiscal year to ¥405.4 billion for the six months ended September 30, 2016.

 

*

Abbreviation for Internet of Things. A concept that describes a world in which everything is connected to the Internet, enabling remote control and management of devices, etc.

 

2


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LOGO

 

  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

Consolidated results of operations for the six months ended September 30, 2015 and 2016 were as follows:

<Results of operations>

 

     Billions of yen  
     Six months ended
September 30, 2015
    Six months ended
September 30, 2016
    Increase
(Decrease)
 

Operating revenues

   ¥ 2,215.0      ¥ 2,288.3      ¥ 73.4         3.3

Operating expenses

     1,752.4        1,702.7        (49.7      (2.8
  

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

     462.6        585.6        123.0         26.6   

Other income (expense)

     (10.0     (4.4     5.6         55.7   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

     452.6        581.2        128.6         28.4   

Income taxes

     136.0        178.7        42.7         31.4   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before equity in net income (losses) of affiliates

     316.6        402.5        85.9         27.1   

Equity in net income (losses) of affiliates

     1.6        3.3        1.8           111.1   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

                             318.2                              405.8        87.6         27.5   

Less: Net (income) loss attributable to noncontrolling interests

     (1.0     (0.4     0.6         60.9   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income attributable to NTT DOCOMO, INC.

   ¥ 317.1      ¥ 405.4      ¥ 88.3         27.8   
  

 

 

   

 

 

   

 

 

    

 

 

 

EBITDA margin*

     34.8     35.9     1.1 point         —     
  

 

 

   

 

 

   

 

 

    

 

 

 

ROE*

     5.8     7.6     1.8 point         —     
  

 

 

   

 

 

   

 

 

    

 

 

 

 

*

EBITDA and EBITDA margin, as we use them in this earnings release, are different from EBITDA as used in Item 10(e) of Regulation S-K and may not be comparable to similarly titled measures used by other companies. For an explanation of our definitions of EBITDA, EBITDA margin, ROE, see “4. Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures” on page 19.

<Operating revenues>

 

     Billions of yen  
     Six months ended
September 30, 2015
    Six months ended
September 30, 2016
    Increase
(Decrease)
 

Telecommunications services

   ¥ 1,382.3      ¥ 1,474.5      ¥ 92.2         6.7

Mobile communications services revenues

     1,366.5        1,417.0        50.5         3.7   

Voice revenues

     413.6        435.4        21.8         5.3   

Packet communications revenues

                             952.9                               81.6                28.6               3.0   

Optical-fiber broadband service and other telecommunications services revenues

     15.8        57.5        41.7         264.6   

Equipment sales

     416.8        380.1        (36.7      (8.8

Other operating revenues

     415.8        433.7        17.9         4.3   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total operating revenues

   ¥ 2,215.0         ¥ 2,288.3         ¥ 73.4         3.3
  

 

 

   

 

 

   

 

 

    

 

 

 

 

Note:

 

Voice revenues include data communications revenues through circuit switching systems.

<Operating expenses>

 

     Billions of yen  
     Six months ended
September 30, 2015
    Six months ended
September 30, 2016
    Increase
(Decrease)
 

Personnel expenses

   ¥ 144.3      ¥ 145.1      ¥ 0.8         0.6

Non-personnel expenses

     1,135.3        1,132.1        (3.3      (0.3

Depreciation and amortization

     297.1        220.5        (76.6      (25.8

Loss on disposal of property, plant and equipment and intangible assets

     22.5        24.8        2.2         9.9   

Communication network charges

                             132.9                             158.7                25.8             19.4   

Taxes and public dues

     20.2        21.5        1.3         6.3   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total operating expenses

   ¥ 1,752.4         ¥ 1,702.7         ¥ (49.7      (2.8 )% 
  

 

 

   

 

 

   

 

 

    

 

 

 

 

3


Table of Contents

LOGO

 

  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

ii. Segment Results

Telecommunications Business—

<Results of operations>

 

     Billions of yen  
     Six months ended
September 30, 2015
     Six months ended
September 30, 2016
     Increase
(Decrease)
 

Operating revenues from telecommunications business

   ¥ 1,807.0       ¥ 1,856.6       ¥ 49.6         2.7

Operating income (loss) from telecommunications business

     420.2         524.7         104.6         24.9   

Despite a decrease in equipment sales revenues and the negative impact on mobile communications services revenues caused by the further expansion of our “Kake-hodai & Pake-aeru” billing scheme, operating revenues from telecommunications business for the six months ended September 30, 2016 increased by ¥49.6 billion, or 2.7%, from ¥1,807.0 billion for the same period of the previous fiscal year to ¥1,856.6 billion, as a result of the growth of the packet consumption of our “Kake-hodai & Pake-aeru” billing plan subscribers, the expansion of smartphone use and the demand for tablets and other products purchased as a second mobile device for individual use, and the growth in the number of “docomo Hikari” users, of which there were 2.53 million as of September 30, 2016.

Operating expenses from telecommunications business decreased by ¥55.0 billion, or 4.0%, from ¥1,386.8 billion for the same period of the previous fiscal year to ¥1,331.9 billion due primarily to a decrease in depreciation expenses as a result of our change in depreciation method used, a decrease in cost of equipment sold and initiatives to pursue further cost efficiency, despite the increase in expenses associated with “docomo Hikari” revenues.

Consequently, operating income from telecommunications business was ¥524.7 billion, an increase of ¥104.6 billion, or 24.9%, from ¥420.2 billion for the same period of the previous fiscal year.

<<Key Topics>>

 

 

In August 2016, as an initiative aimed at facilitating users’ migration to smartphones, we launched the “smartphone debut discount” program, which provides first-time smartphone users with discounts on basic monthly charges for up to 24 months. The total number of subscriptions using smartphones and tablets amounted to 34.09 million as of September 30, 2016.

 

 

In September 2016, we added to our “Kake-hodai & Pake-aeru” billing scheme a new option, called “Ultra Pack,” to allow both families and individual users to enjoy video and other large-capacity content without having to worry about their data volume. The number of “Kake-hodai & Pake-aeru” subscriptions as of September 30, 2016 totaled 33.42 million, recording an increase of 9.64 million from September 30, 2015.

 

 

The total number of “docomo Hikari” subscriptions grew to 2.53 million as of September 30, 2016 as a result of stepped up promotions including the “new installation fee waiver campaign,” etc.

 

 

To promote the construction of a more convenient mobile telecommunications network, we expanded the area coverage of our “PREMIUM 4G” service to 1,240 cities across Japan and 38,100 base stations as of September 30, 2016. Toward the goal of further expanding the area coverage of our LTE service, we increased the total number of LTE-enabled base stations to 149,600 stations nationwide.

 

4


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LOGO

 

  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

Number of subscriptions by services and other operating data are as follows:

<Number of subscriptions by services>

 

                                                                           
     Thousand subscriptions  
        September 30,   
2015
        September 30,   
2016
     Increase
(Decrease)
 

Mobile telecommunications services

     68,494         72,943                     4,449         6.5

Including: “Kake-hodai & Pake-aeru” billing plan

     23,777         33,416         9,639         40.5   

Mobile telecommunications services (LTE(Xi))

     34,504         41,281         6,777         19.6   

Mobile telecommunications services (FOMA)

     33,989         31,662         (2,328      (6.8

 

Note:

Number of subscriptions to Mobile telecommunications services, Mobile telecommunications services (LTE(Xi)) and Mobile telecommunications services (FOMA) includes Communication Module services subscriptions.

<Number of handsets sold>

 

                                                                   
     Thousand units  
     Six months ended
September 30, 2015
    Six months ended
September 30, 2016
    Increase
(Decrease)
 

Number of handsets sold

     12,041        13,450        1,408         11.7

Mobile telecommunications services (LTE(Xi))

         

New LTE(Xi) subscription

     3,973        4,829        857         21.6   

Change of subscription from FOMA

     1,832        1,221        (611      (33.3

LTE(Xi) handset upgrade by LTE(Xi) subscribers

     3,528        4,450        922         26.1   

Mobile telecommunications services (FOMA)

         

New FOMA subscription

     1,181        1,696        515         43.6   

Change of subscription from LTE(Xi)

     54        39        (15      (28.3

FOMA handset upgrade by FOMA subscribers

     1,474        1,215        (259      (17.6
  

 

 

   

 

 

   

 

 

    

 

 

 

Churn rate*

     0.58     0.58     —           —     

 

*

“Churn rate” is calculated excluding the subscriptions and cancellations of subscriptions of Mobile Virtual Network Operators (MVNOs).

<Trend of ARPU and MOU>

 

                                                                   
     Yen  
     Six months ended
September 30, 2015
    Six months ended
September 30, 2016
    Increase
(Decrease)
 

Aggregate ARPU

   ¥ 4,100      ¥ 4,380      ¥ 280         6.8

Voice ARPU

     1,180        1,240        60         5.1   

Data ARPU

     2,920        3,140        220         7.5   

Packet ARPU

     2,890        2,980        90         3.1   

“docomo Hikari” ARPU

     30        160           130         433.3   
  

 

 

   

 

 

   

 

 

    

 

 

 

MOU (minutes)

     131           136        5         3.8

 

Notes:

 

1.      

 

Definition of ARPU and MOU

 

a. ARPU (Average monthly Revenue Per Unit):

Average monthly revenue per unit, or ARPU, is used to measure average monthly operating revenues attributable to designated services on a per user basis. ARPU is calculated by dividing telecommunications services revenues (excluding certain revenues) by the number of active users to our wireless services in the relevant periods, as shown below under “ARPU Calculation Method.” We believe that our ARPU figures provide useful information to analyze the average usage per user and the impacts of changes in our billing arrangements. The revenue items included in the numerators of our ARPU figures are based on our U.S. GAAP results of operations.

b. MOU (Minutes of Use):

Average monthly communication time per user.

2.

 

ARPU Calculation Methods

 

Aggregate ARPU= Voice ARPU + Packet ARPU + “docomo Hikari” ARPU

 

- Voice ARPU 

  

:

  

Voice ARPU Related Revenues (basic monthly charges, voice communication charges) / Number of active users

 

- Packet ARPU

  

:

  

Packet ARPU Related Revenues (basic monthly charges, packet communication charges) / Number of active users

 

- “docomo Hikari” ARPU 

  

:

  

“docomo Hikari” ARPU Related Revenues (basic monthly charges, voice communication charges) /Number of active users

3.

 

Active Users Calculation Method

Sum of number of active users for each month ((number of users at the end of previous month + number of users at the end of current month) /2) during the relevant period

 

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LOGO

 

  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

4.

The number of “users” used to calculate ARPU and MOU is the total number of subscriptions, excluding the subscriptions listed below:

  a.

Subscriptions of communication module services, “Phone Number Storage,” “Mail Address Storage,” “docomo Business Transceiver” and wholesale telecommunication services and interconnecting telecommunications facilities that are provided to Mobile Virtual Network Operators (MVNOs); and

  b.

Data Plan subscriptions in the case where the customer contracting for such subscription in his/her name also has a subscription for “Xi” or “FOMA” services in his/her name

Revenues from communication module services, “Phone Number Storage,” “Mail Address Storage,” “docomo Business Transceiver” and wholesale telecommunications services and interconnecting telecommunications facilities that are provided to Mobile Virtual Network Operators (MVNOs) are not included in the ARPU calculation.

Smart life business—

<Results of operations>

 

     Billions of yen  
     Six months ended
September 30, 2015
     Six months ended
September 30, 2016
     Increase
(Decrease)
 

Operating revenues from smart life business

   ¥ 246.3       ¥ 250.4       ¥ 4.1         1.6

Operating income (loss) from smart life business

     33.4         37.0         3.5         10.6   

Operating revenues from smart life business for the six months ended September 30, 2016 were ¥250.4 billion, an increase of ¥4.1 billion, or 1.6%, from ¥246.3 billion for the same period of the previous fiscal year, due mainly to an expansion of content services revenues such as “dmarket” and other content services.

Operating expenses from smart life business were ¥213.4 billion, an increase of ¥0.5 billion, or 0.2%, from ¥212.9 billion for the same period of the previous fiscal year, driven primarily by an increase in expenses associated with the growth in content services revenues such as “dmarket” and other content services.

As a consequence, operating income from smart life business was ¥37.0 billion, an increase of ¥3.5 billion, or 10.6%, from ¥33.4 billion for the same period of the previous fiscal year.

<<Key Topics>>

 

 

In July 2016, we launched a new service, “dliving,” which offers a broad range of livelihood support services, rebranding our conventional home affairs assistance service, “Home Anshin Partner,” by adding new services and features such as child care support service that can be utilized at discounted rates and a feature that enables users to check on their home electricity usage on a daily basis.

 

 

The combined “dmarket” subscriptions* as of September 30, 2016 reached 15.34 million, an increase of 1.39 million from September 30, 2015. Among the various “dmarket” services, “dmagazine” has been recording brisk sales with its total subscriptions growing to 3.31 million, an increase of 0.80 million from September 30, 2015.

 

 

In July 2016, in order to allow enterprises to provide their own translation services, we started offering “Hanashite Hon’yaku for Biz Premium,” a translation platform that provides users with one-stop access to “voice recognition,” “machine translation” and “voice synthesis” features.

 

*

The total number of users using “dTV,” “danime store,” “dhits,” “dkids,” “dmagazine,” “dgourmet,” “dhealthcare pack” and “dliving” services under a monthly subscription arrangement.

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

Other businesses—

<Results of operations>

 

     Billions of yen  
     Six months ended
September 30, 2015
     Six months ended
September 30, 2016
     Increase
(Decrease)
 

Operating revenues from other businesses

   ¥ 173.5       ¥ 193.4       ¥ 19.9         11.5

Operating income (loss) from other businesses

     9.0         23.9         14.9         166.5   

Operating revenues from other businesses for the six months ended September 30, 2016 amounted to ¥193.4 billion, an increase of ¥19.9 billion, or 11.5%, from ¥173.5 billion for the same period of the previous fiscal year, driven mainly by an increase in the number of subscriptions for our “Mobile Device Protection Service” and the growth of revenues relating to IoT businesses.

Operating expenses from other businesses were ¥169.5 billion, an increase of ¥5.0 billion, or 3.0%, from ¥164.6 billion for the same period of the previous fiscal year, as a result of rises in expenses associated with the expansion of revenues from our “Mobile Device Protection Service” and other services.

Consequently, operating income from other businesses was ¥23.9 billion, an increase of ¥14.9 billion, or 166.5%, from ¥9.0 billion for the same period of the previous fiscal year.

<<Key Topics>>

 

 

In August 2016, we started offering “optional features (English version)” on our “natural-language dialogue platform” that provides conversational features to the user interfaces of robots and smartphones for enterprises using artificial intelligence. With the addition of this capability, the platform can interpret content input in English and respond in English without having to be translated into Japanese.

 

 

In September 2016, as a new initiative aimed at promoting the use of ICT in agriculture in Niigata City, we entered into a collaboration agreement on a drone verification project with Niigata City, vegetalia,inc., Autonomous Control Systems Laboratory Ltd. and Aerosense Inc., with the goal of developing the methodologies for rice paddy monitoring and cultivation management, as well as pine tree withering prevention and maintenance management of forest reserves planted along the coast.

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

iii. CSR Activities

We aspire to help build a society in which everyone can share in a prosperous life of safety and security, beyond borders and across generations. We believe it is our corporate social responsibility (“CSR”) to fulfill the two aspects of (i) “Innovative docomo,” to solve various social issues in the fields of IoT, medicine, healthcare, education and agriculture through the “co-creation of social values,” an initiative that we plan to pursue together with various partners to create new services and businesses, and (ii) “Responsible docomo,” to thoroughly ensure fair, transparent and ethical business operations as a foundation for the creation of such values. Accordingly, we will strive to realize a sustainable society while expanding our own businesses.

DOCOMO was selected as a component of Dow Jones Sustainability Asia Pacific Index, which is the part of Dow Jones Stability Indices, one of the world’s leading indices for ESG*1 investment. Also, DOCOMO was selected as a component of FTSE4Good Index.

The principal CSR actions undertaken during the three months ended September 30, 2016 are summarized below:

<Innovative docomo>

 

 

In August 2016, we entered into a collaboration agreement with Sendai City for the purpose of promoting the development of a sustainably vibrant town through three types of initiatives: “disaster prevention and mitigation,” “regional revitalization” and “feasibility test of near-future technology” which uses a drone and others.

 

 

In September 2016, in a joint effort with Kobe City, we commenced the “Kobe City-DOCOMO urban monitoring service (verification trial)” using BLE tags*2 for monitoring children in collaboration with 41 companies including railway and taxi operators, as an initiative under the “business collaboration agreement for the use of ICT and Data” that we concluded with Kobe City for the purpose of solving various social issues in the regional communities.

<Responsible docomo >

 

 

Starting September 2016, as a measure to enhance the safety and peace of mind of customers, we started handling “flood information” provided by the Ministry of Land, Infrastructure, Transport and Tourism on our “Area Mail” emergency alert service to enable users to evacuate without delay in the event of a disaster. We also added a translation feature to the “disaster and evacuation information” issued by municipalities so that such information can be properly delivered to foreigners in a way that is easy to understand.

 

 

We set up a charity website to support the people and areas affected by the torrential rain and other harms caused by Typhoon No. 10 of 2016, and collected donations using “docomo Kouza” accounts and “dPOINTs.”

 

 

In September 2016, under the “Village Social Entrepreneur” program that assists entrepreneurs in tackling social challenges, we decided to provide support through our proprietary and other programs to two organizations, “Nobinobito” (an organization engaged in the support activities for children with developmental disorders) and “End-of-Life Care Association of Japan” (a general incorporated association engaged in the development of human resources, organizations and communities that can provide terminal care within daily life).

 

 

We held a total of approximately 4,200 sessions of “Smartphone and Mobile Phone Safety Class” garnering a cumulative participation of approximately 0.79 million people during the six months ended September 30, 2016. The classes enlighten participants on rules and manners of using smartphones and mobile phones, and inform them as to how to respond to troubles that may arise with their use.

 

*1:

An investment method that is named after and focuses on the three elements of “Environment,” “Social” and “Governance.”

*2:

Abbreviation for Bluetooth Low Energy. One of the extended specifications of Bluetooth that enables communication with reduced power consumption.

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

iv. Trend of Capital Expenditures

<Capital expenditures>

 

     Billions of yen  
     Six months ended
September 30, 2015
     Six months ended
September 30, 2016
     Increase
(Decrease)
 

Total capital expenditures

   ¥ 219.5       ¥ 246.1       ¥ 26.6         12.1

Telecommunications business

     210.2         237.6         27.5         13.1   

Smart life business

     6.1         5.8         (0.3      (4.7

Other businesses

     3.2         2.6         (0.6      (17.6

We pursued more efficient use of capital expenditures and further cost reduction, and expanded the area coverage of our “PREMIUM 4G” service to construct a more convenient mobile telecommunications network. As a result, the total amount of capital expenditures increased by 12.1% from the same period of the previous fiscal year to ¥246.1 billion for the six months ended September 30, 2016.

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

(2) Financial Review

i. Financial Position

 

    Billions of yen  
    September 30,
2015
    September 30,
2016
    Increase
(Decrease)
    (Reference)
March 31, 2016
 

Total assets

  ¥ 7,236.2      ¥ 7,208.4      ¥ (27.9     (0.4 )%    ¥ 7,214.1   

NTT DOCOMO, INC. shareholders’ equity

    5,553.0        5,427.8        (125.2     (2.3     5,302.2   

Liabilities

                1,647.2                    1,724.9        77.7        4.7                     1,854.8   

Including: Interest bearing liabilities

    223.6        222.5        (1.2     (0.5     222.2   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity ratio (1) (%)

    76.7     75.3     (1.4)point            —          73.5

Debt to Equity ratio (2) (multiple)

    0.040        0.041        0.001        —          0.042   

 

Notes:

 

(1)

    

Shareholders’ equity ratio = NTT DOCOMO, INC. shareholders’ equity / Total assets

 

(2)

    

Debt to Equity ratio = Interest bearing liabilities / NTT DOCOMO, INC. shareholders’ equity

ii. Cash Flow Conditions

 

     Billions of yen  
     Six months ended
September 30, 2015
    Six months ended
September 30, 2016
    Increase
(Decrease)
 

Net cash provided by operating activities

   ¥                      617.9      ¥                      671.7      ¥ 53.9        8.7

Net cash used in investing activities

     (319.4     (425.3     (105.9     (33.1

Net cash provided by (used in) financing activities

     (139.2     (238.3     (99.1     (71.2

Free cash flows (1)

     298.5        246.4        (52.0     (17.4

Free cash flows excluding changes in investments for cash management purposes (2)*

     298.4        341.6        43.3        14.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Notes:

 

(1)

    

Free cash flows = Net cash provided by operating activities + Net cash used in investing activities

 

(2)

    

Changes in investments for cash management purposes = Changes by purchases, redemption at maturity and disposals of financial instruments held for cash management purposes with original maturities of longer than three months

 

*

See “4. Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures” on page 19.

For the six months ended September 30, 2016, net cash provided by operating activities was ¥671.7 billion, an increase of ¥53.9 billion, or 8.7%, from the same period of the previous fiscal year. This was due mainly to an increase in cash inflows from customers in relation to collections of installment receivables for customers’ handset purchases, which are included in decrease in receivables for sale.

Net cash used in investing activities was ¥425.3 billion, an increase of ¥105.9 billion, or 33.1%, from the same period of the previous fiscal year. This was due mainly to increases in cash outflows for purchases of short-term investments and short-term bailment for consumption to a related party.

Net cash used in financing activities was ¥238.3 billion, an increase of ¥99.1 billion, or 71.2%, from the same period of the previous fiscal year. This was due mainly to an increase in cash outflows for payments to acquire treasury stock.

As a result of the foregoing, the balance of cash and cash equivalents was ¥360.2 billion as of September 30, 2016, an increase of ¥5.8 billion, or 1.6%, from the previous fiscal year end.

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

(3) Prospects for the Fiscal Year Ending March 31, 2017

The environment surrounding our business has changed significantly. In Japan’s telecommunications market, competition has intensified due to the government’s pro-competition policy, market entry by Mobile Virtual Network Operators (MVNOs) and other factors. In addition, technical advancements in areas including cloud services, IoT, big data and artificial intelligence (AI), and new policy developments such as the full liberalization of the electricity retail market, have brought about active competition and collaboration with new players from other industries, accelerating competition in new markets that transcend the conventional boundaries of the telecommunications business.

Amid these changes in the market environment, in connection with our management of our business, we are promoting the two pillars of “reinforcement of our telecommunications business” and “expansion of our smart life business and other businesses” centered on our “+d” value co-creation strategy, through which we pursue the creation of new values by evolving our collaborative activities with a wide range of external partners. Because we expect these endeavors to have a positive impact on our business, considering our recent business condition, we have decided to revise our forecasts announced on April 28, 2016.

Operating revenues are estimated to be ¥4,610.0 billion, a decrease of ¥10.0 billion, or 0.2%, compared to the original forecasts, due mainly to a greater-than-expected decrease in equipment sales revenues, despite an increase in telecommunications services revenues resulting from the expansion of our smartphone user base and a growth of demand for tablets and other devices purchased as a second mobile device for individual use, and an increase in optical-fiber broadband service and other telecommunications services revenues due to the projected growth of “docomo Hikari” users.

On the expenses side, although we project an increase in expenses associated with the expansion of “docomo Hikari” revenues, operating expenses are projected to be ¥3,670.0 billion a decrease of ¥40.0 billion, or 1.1%, owing to the greater-than-expected progress in our cost efficiency improvement efforts, as well as a decrease in cost of equipment sold.

In view of the foregoing, we have revised upward our operating income forecasts for the fiscal year ending March 31, 2017 by ¥30.0 billion, or 3.3% from the original forecasts to ¥940.0 billion.

 

     Billions of yen  
     Year ending
March 31, 2017
(Original Forecasts)
    Year ending
March 31, 2017
(Revised Forecasts)
    Increase
(Decrease)
    Year ended
March 31, 2016
(Actual Results)
 

Operating revenues

   ¥ 4,620.0      ¥ 4,610.0      ¥ (10.0      (0.2 )%    ¥ 4,527.1   

Operating income

     910.0        940.0        30.0         3.3        783.0   

Income before income taxes and equity in net income (losses) of affiliates

     914.0        936.0        22.0         2.4        778.0   

Net income attributable to NTT DOCOMO, INC.

     640.0        655.0        15.0         2.3        548.4   

Capital expenditures

     585.0        585.0        —           —          595.2   

Free cash flows excluding changes in investments for cash management purposes*

     600.0        640.0        40.0         6.7        598.7   

EBITDA*

                       1,398.0                          1,438.0        40.0         2.9                          1,454.6   

EBITDA margin*

     30.3     31.2     0.9 point         —          32.1

ROE*

     11.9     12.1     0.2 point         —          10.3

 

*

EBITDA and EBITDA margin, as we use them in this earning release, are different from EBITDA as used in Item 10(e) of Regulation S-K and may not be comparable to similarly titled measures used by other companies. For an explanation of our definition of free cash flows excluding changes in investments for cash management purposes, EBITDA, EBITDA margin, and ROE, see “4. Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures” on page 19.

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

2. Other Information

(1) Changes in Significant Subsidiaries

None

(2) Application of Simplified or Exceptional Accounting

None

(3) Change in Accounting Policies

Change in depreciation method

Previously, DOCOMO principally used the declining-balance method for calculating depreciation of property, plant, and equipment. Effective April 1, 2016, DOCOMO adopted the straight-line method of depreciation. Data traffic has recently grown due to increased use of smartphones. As a way of addressing the rising data traffic, DOCOMO provides LTE-Advanced services, using the carrier aggregation technology which enables higher speeds and capacities for the LTE services. With the introduction of the carrier aggregation technology, DOCOMO is able to use its frequencies more efficiently, bringing stability to DOCOMO’s operation of its wireless telecommunications equipment. As a result, DOCOMO believes that the straight-line depreciation method better reflects the pattern of consumption of the future benefits to be derived from those assets being depreciated. The effect of the change in the depreciation method is recognized prospectively as a change in the accounting estimate pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 250, “Accounting Changes and Error Corrections.”

The change in depreciation method caused a decrease in “Depreciation and amortization” by ¥69,430 million and ¥36,049 million for the six months ended September 30, 2016 and for the three months ended September 30, 2016, respectively. “Net income attributable to NTT DOCOMO, INC.” increased by ¥47,490 million and ¥24,657 million for the six months ended September 30, 2016 and for the three months ended September 30, 2016, respectively. “Basic and Diluted earnings per share attributable to NTT DOCOMO, INC.” increased by ¥12.69 and ¥6.61 for the six months ended September 30, 2016 and for the three months ended September 30, 2016, respectively.

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

3. Consolidated Financial Statements

(1) Consolidated Balance Sheets

 

     Millions of yen  
     March 31, 2016     September 30, 2016  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   ¥ 354,437      ¥ 360,211   

Short-term investments

     5,872        100,976   

Accounts receivable

     237,040        193,243   

Receivables held for sale

     972,851        960,631   

Credit card receivables

     276,492        310,262   

Other receivables

     381,096        390,779   

Allowance for doubtful accounts

     (17,427     (20,059

Inventories

     153,876        151,221   

Deferred tax assets

     107,058        78,132   

Prepaid expenses and other current assets

     108,898        124,460   
  

 

 

   

 

 

 

Total current assets

     2,580,193        2,649,856   
  

 

 

   

 

 

 

Property, plant and equipment:

    

Wireless telecommunications equipment

     5,084,416        5,112,357   

Buildings and structures

     896,815        901,601   

Tools, furniture and fixtures

     468,800        467,275   

Land

     199,054        199,187   

Construction in progress

     190,261        202,436   

Accumulated depreciation and amortization

     (4,398,970     (4,432,870
  

 

 

   

 

 

 

Total property, plant and equipment, net

     2,440,376        2,449,986   
  

 

 

   

 

 

 

Non-current investments and other assets:

    

Investments in affiliates

     411,395        374,023   

Marketable securities and other investments

     182,905        174,101   

Intangible assets, net

     615,013        601,866   

Goodwill

     243,695        237,442   

Other assets

     479,103        472,249   

Deferred tax assets

     261,434        248,837   
  

 

 

   

 

 

 

Total non-current investments and other assets

     2,193,545        2,108,518   
  

 

 

   

 

 

 

Total assets

   ¥ 7,214,114      ¥ 7,208,360   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Current portion of long-term debt

   ¥ 200      ¥ 200   

Short-term borrowings

     1,764        2,170   

Accounts payable, trade

     793,084        686,591   

Accrued payroll

     53,837        57,315   

Accrued income taxes

     165,332        124,167   

Other current liabilities

     205,602        218,858   
  

 

 

   

 

 

 

Total current liabilities

     1,219,819        1,089,301   
  

 

 

   

 

 

 

Long-term liabilities:

    

Long-term debt (exclusive of current portion)

     220,200        220,100   

Accrued liabilities for point programs

     75,182        68,672   

Liability for employees’ retirement benefits

     201,604        206,225   

Other long-term liabilities

     137,983        140,553   
  

 

 

   

 

 

 

Total long-term liabilities

     634,969        635,550   
  

 

 

   

 

 

 

Total liabilities

     1,854,788        1,724,851   
  

 

 

   

 

 

 

Redeemable noncontrolling interests

     16,221        22,624   
  

 

 

   

 

 

 

Equity:

    

NTT DOCOMO, INC. shareholders’ equity

    

Common stock

     949,680        949,680   

Additional paid-in capital

     330,482        327,512   

Retained earnings

     4,413,030        4,686,815   

Accumulated other comprehensive income (loss)

     14,888        (21,157

Treasury stock

     (405,832     (515,014

Total NTT DOCOMO, INC. shareholders’ equity

     5,302,248        5,427,836   

Noncontrolling interests

     40,857        33,049   
  

 

 

   

 

 

 

Total equity

     5,343,105        5,460,885   
  

 

 

   

 

 

 

Total liabilities and equity

   ¥ 7,214,114      ¥ 7,208,360   
  

 

 

   

 

 

 

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

 

     Millions of yen  
     Six Months Ended
September 30, 2015
    Six Months Ended
September 30, 2016
 

Operating revenues:

    

Telecommunications services

   ¥ 1,382,307      ¥ 1,474,493   

Equipment sales

     416,844        380,108   

Other operating revenues

     415,836        433,743   
  

 

 

   

 

 

 

Total operating revenues

     2,214,987        2,288,344   
  

 

 

   

 

 

 

Operating expenses:

    

Cost of services (exclusive of items shown separately below)

     587,647        632,236   

Cost of equipment sold (exclusive of items shown separately below)

     386,337        364,123   

Depreciation and amortization

     297,107        220,538   

Selling, general and administrative

     481,322        485,850   
  

 

 

   

 

 

 

Total operating expenses

     1,752,413        1,702,747   
  

 

 

   

 

 

 

Operating income

     462,574        585,597   
  

 

 

   

 

 

 

Other income (expense):

    

Interest expense

     (545     (357

Interest income

     385        291   

Other, net

     (9,852     (4,367
  

 

 

   

 

 

 

Total other income (expense)

     (10,012     (4,433
  

 

 

   

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

     452,562        581,164   
  

 

 

   

 

 

 

Income taxes:

    

Current

     144,300        129,670   

Deferred

     (8,320     49,025   
  

 

 

   

 

 

 

Total income taxes

     135,980        178,695   
  

 

 

   

 

 

 

Income before equity in net income (losses) of affiliates

     316,582        402,469   
  

 

 

   

 

 

 

Equity in net income (losses) of affiliates (including impairment charges of investments in affiliates)

     1,582        3,340   
  

 

 

   

 

 

 

Net income

     318,164        405,809   
  

 

 

   

 

 

 

Less: Net (income) loss attributable to noncontrolling interests

     (1,029     (402
  

 

 

   

 

 

 

Net income attributable to NTT DOCOMO, INC.

   ¥ 317,135      ¥ 405,407   
  

 

 

   

 

 

 

Per share data

    

Weighted average common shares outstanding – Basic and Diluted

     3,881,483,821        3,742,803,807   
  

 

 

   

 

 

 

Basic and Diluted earnings per share attributable to NTT DOCOMO, INC.

   ¥ 81.70      ¥ 108.32   
  

 

 

   

 

 

 

Consolidated Statements of Comprehensive Income

    
     Millions of yen  
     Six Months Ended
September 30, 2015
    Six Months Ended
September 30, 2016
 

Net income

   ¥ 318,164      ¥ 405,809   

Other comprehensive income (loss):

    

Unrealized holding gains (losses) on available-for-sale securities, net of applicable taxes

     (7,037     (5,316

Unrealized gains (losses) on cash flow hedges, net of applicable taxes

     (43     (58

Foreign currency translation adjustment, net of applicable taxes

     (981     (31,736

Pension liability adjustment, net of applicable taxes

     (233     640   
  

 

 

   

 

 

 

Total other comprehensive income (loss)

     (8,294     (36,470
  

 

 

   

 

 

 

Comprehensive income

     309,870        369,339   
  

 

 

   

 

 

 

Less: Comprehensive (income) loss attributable to noncontrolling interests

     (1,096     23   
  

 

 

   

 

 

 

Comprehensive income attributable to NTT DOCOMO, INC.

   ¥ 308,774      ¥ 369,362   
  

 

 

   

 

 

 

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

Consolidated Statements of Income

 

     Millions of yen  
     Three Months Ended
September 30, 2015
    Three Months Ended
September 30, 2016
 

Operating revenues:

    

Telecommunications services

   ¥ 707,053      ¥ 744,784   

Equipment sales

     215,500        214,355   

Other operating revenues

     215,570        220,535   
  

 

 

   

 

 

 

Total operating revenues

     1,138,123        1,179,674   
  

 

 

   

 

 

 

Operating expenses:

    

Cost of services (exclusive of items shown separately below)

     298,744        327,757   

Cost of equipment sold (exclusive of items shown separately below)

     210,806        209,146   

Depreciation and amortization

     151,535        110,823   

Selling, general and administrative

     249,860        245,642   
  

 

 

   

 

 

 

Total operating expenses

     910,945        893,368   
  

 

 

   

 

 

 

Operating income

     227,178        286,306   
  

 

 

   

 

 

 

Other income (expense):

    

Interest expense

     (233     (117

Interest income

     206        136   

Other, net

     (15,200     (453
  

 

 

   

 

 

 

Total other income (expense)

     (15,227     (434
  

 

 

   

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

     211,951        285,872   
  

 

 

   

 

 

 

Income taxes:

    

Current

     74,007        60,413   

Deferred

     (10,649     28,634   
  

 

 

   

 

 

 

Total income taxes

     63,358        89,047   
  

 

 

   

 

 

 

Income before equity in net income (losses) of affiliates

     148,593        196,825   
  

 

 

   

 

 

 

Equity in net income (losses) of affiliates (including impairment charges of investments in affiliates)

     (38     2,349   
  

 

 

   

 

 

 

Net income

     148,555        199,174   
  

 

 

   

 

 

 

Less: Net (income) loss attributable to noncontrolling interests

     (204     (621
  

 

 

   

 

 

 

Net income attributable to NTT DOCOMO, INC.

   ¥ 148,351      ¥ 198,553   
  

 

 

   

 

 

 

Per share data

    

Weighted average common shares outstanding – Basic and Diluted

     3,881,483,812        3,731,635,498   
  

 

 

   

 

 

 

Basic and Diluted earnings per share attributable to NTT DOCOMO, INC.

   ¥ 38.22      ¥ 53.21   
  

 

 

   

 

 

 

Consolidated Statements of Comprehensive Income

    
     Millions of yen  
     Three Months Ended
September 30, 2015
    Three Months Ended
September 30, 2016
 

Net income

   ¥ 148,555      ¥ 199,174   

Other comprehensive income (loss):

    

Unrealized holding gains (losses) on available-for-sale securities, net of applicable taxes

     (8,767     6,505   

Unrealized gains (losses) on cash flow hedges, net of applicable taxes

     (20     14   

Foreign currency translation adjustment, net of applicable taxes

     5,735        (23,631

Pension liability adjustment, net of applicable taxes

     (207     499   
  

 

 

   

 

 

 

Total other comprehensive income (loss)

     (3,259     (16,613
  

 

 

   

 

 

 

Comprehensive income

     145,296        182,561   
  

 

 

   

 

 

 

Less: Comprehensive (income) loss attributable to noncontrolling interests

     (239     (401
  

 

 

   

 

 

 

Comprehensive income attributable to NTT DOCOMO, INC.

   ¥ 145,057      ¥ 182,160   
  

 

 

   

 

 

 

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

(3) Consolidated Statements of Cash Flows

 

     Millions of yen  
     Six Months Ended
September 30, 2015
    Six Months Ended
September 30, 2016
 

Cash flows from operating activities:

    

Net income

   ¥ 318,164      ¥ 405,809   

Adjustments to reconcile net income to net cash provided by operating activities-

    

Depreciation and amortization

     297,107        220,538   

Deferred taxes

     (8,320     49,025   

Loss on sale or disposal of property, plant and equipment

     11,685        14,785   

Inventory write-downs

     2,244        5,916   

Impairment loss on marketable securities and other investments

     448        2,043   

Loss on sale of a subsidiary

     13,117        —     

Equity in net (income) losses of affiliates (including impairment charges of investments in affiliates)

     (1,582     (3,340

Dividends from affiliates

     9,434        8,354   

Changes in assets and liabilities:

    

(Increase) / decrease in accounts receivable

     53,872        42,588   

(Increase) / decrease in receivables held for sale

     (27,892     12,220   

(Increase) / decrease in credit card receivables

     (10,515     (18,317

(Increase) / decrease in other receivables

     (34,714     (10,365

Increase / (decrease) in allowance for doubtful accounts

     1,852        2,670   

(Increase) / decrease in inventories

     (26,094     (3,431

(Increase) / decrease in prepaid expenses and other current assets

     4,797        (19,632

(Increase) / decrease in non-current receivables held for sale

     3,793        23,675   

Increase / (decrease) in accounts payable, trade

     (85,060     (40,657

Increase / (decrease) in accrued income taxes

     73,261        (41,105

Increase / (decrease) in other current liabilities

     19,933        11,566   

Increase / (decrease) in accrued liabilities for point programs

     (7,715     (6,510

Increase / (decrease) in liability for employees’ retirement benefits

     4,340        4,644   

Increase / (decrease) in other long-term liabilities

     4,573        7,054   

Other, net

     1,137        4,190   
  

 

 

   

 

 

 

Net cash provided by operating activities

     617,865        671,720   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property, plant and equipment

     (216,622     (210,559

Purchases of intangible and other assets

     (92,593     (112,859

Purchases of non-current investments

     (1,734     (1,306

Proceeds from sale of non-current investments

     1,466        3,216   

Purchases of short-term investments

     (3,611     (65,911

Redemption of short-term investments

     3,707        10,706   

Short-term bailment for consumption to a related party

     —          (40,000

Other, net

     (10,027     (8,573
  

 

 

   

 

 

 

Net cash used in investing activities

     (319,414     (425,286
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from short-term borrowings

     144,841        12,543   

Repayment of short-term borrowings

     (143,619     (12,098

Principal payments under capital lease obligations

     (732     (609

Payments to acquire treasury stock

     (0     (109,182

Dividends paid

     (135,836     (131,558

Cash distributions to noncontrolling interests

     (2,387     (3,500

Other, net

     (1,499     6,073   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (139,232     (238,331
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (173     (2,329
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     159,046        5,774   

Cash and cash equivalents as of beginning of period

     105,553        354,437   
  

 

 

   

 

 

 

Cash and cash equivalents as of end of period

   ¥ 264,599      ¥ 360,211   
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information:

    

Cash received during the period for:

    

Income tax refunds

   ¥ 7,774      ¥ 662   

Cash paid during the period for:

    

Interest, net of amount capitalized

     431        203   

Income taxes

     79,029        170,722   

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

(4) Notes to Consolidated Financial Statements

i. Note to Going Concern Assumption

There is no corresponding item.

ii. Significant Changes in NTT DOCOMO, INC. Shareholders’ Equity

None

iii. Segment Information

DOCOMO’s chief operating decision maker (the “CODM”) is its board of directors. The CODM evaluates the performance and makes resource allocations of its segments based on the information provided by DOCOMO’s internal management reports.

DOCOMO has three operating segments, which consist of telecommunications business, smart life business and other businesses.

The telecommunications business includes mobile phone services (LTE(Xi) services and FOMA services), optical-fiber broadband service, satellite mobile communications services, international services and the equipment sales related to these services. The smart life business includes video and music distribution, electronic books and other services offered through DOCOMO’s “dmarket” portal, as well as finance/payment services, shopping services and various other services to support our customers’ daily lives. The other businesses primarily includes “Mobile Device Protection Service,” as well as development, sales and maintenance of IT systems.

Accounting policies used to determine segment operating revenues and operating income (loss) are consistent with those used to prepare the consolidated financial statements in accordance with U.S. GAAP.

Segment operating revenues:

 

     Millions of yen  
     Six months ended
September 30, 2015
    Six months ended
September 30, 2016
 

Telecommunications business-

    

External customers

   ¥ 1,806,391      ¥ 1,856,239   

Intersegment

     617        384   
  

 

 

   

 

 

 

Subtotal

     1,807,008        1,856,623   

Smart life business-

    

External customers

     240,533        243,488   

Intersegment

     5,778        6,880   
  

 

 

   

 

 

 

Subtotal

     246,311        250,368   

Other businesses-

    

External customers

     168,063        188,617   

Intersegment

     5,453        4,788   
  

 

 

   

 

 

 

Subtotal

     173,516        193,405   
  

 

 

   

 

 

 

Segment total

     2,226,835        2,300,396   

Elimination

     (11,848     (12,052
  

 

 

   

 

 

 

Consolidated

   ¥ 2,214,987      ¥ 2,288,344   
  

 

 

   

 

 

 

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

     Millions of yen  
     Three months ended
September 30, 2015
    Three months ended
September 30, 2016
 

Telecommunications business-

    

External customers

   ¥ 928,017      ¥ 961,580   

Intersegment

     367        119   
  

 

 

   

 

 

 

Subtotal

     928,384        961,699   

Smart life business-

    

External customers

     125,018        121,327   

Intersegment

     2,906        3,792   
  

 

 

   

 

 

 

Subtotal

     127,924        125,119   

Other businesses-

    

External customers

     85,088        96,767   

Intersegment

     2,552        1,827   
  

 

 

   

 

 

 

Subtotal

     87,640        98,594   
  

 

 

   

 

 

 

Segment total

     1,143,948        1,185,412   

Elimination

     (5,825     (5,738
  

 

 

   

 

 

 

Consolidated

   ¥ 1,138,123      ¥ 1,179,674   
  

 

 

   

 

 

 
Segment operating income (loss):   
     Millions of yen  
     Six months ended
September 30, 2015
    Six months ended
September 30, 2016
 

Telecommunications business

   ¥ 420,169      ¥ 524,737   

Smart life business

     33,441        36,975   

Other businesses

     8,964        23,885   
  

 

 

   

 

 

 

Consolidated

   ¥ 462,574      ¥ 585,597   
  

 

 

   

 

 

 
     Millions of yen  
     Three months ended
September 30, 2015
    Three months ended
September 30, 2016
 

Telecommunications business

   ¥ 207,748      ¥ 254,327   

Smart life business

     16,565        19,772   

Other businesses

     2,865        12,207   
  

 

 

   

 

 

 

Consolidated

   ¥ 227,178      ¥ 286,306   
  

 

 

   

 

 

 

Segment operating income (loss) is segment operating revenues less segment operating expenses.

As indicated in “2. (3) Change in Accounting Policies,” previously, DOCOMO principally used the declining-balance method for calculating depreciation of property, plant, and equipment. Effective April 1, 2016, DOCOMO adopted the straight-line method of depreciation. As a result, compared with the depreciation method used prior to April 1, 2016, operating income for the Telecommunications business segment, Smart life business segment, and Other businesses segment for the six months ended September 30, 2016 increased by ¥69,329 million, ¥52 million and ¥49 million, respectively. Operating income for the Telecommunications business segment, Smart life business segment, and Other businesses segment for the three months ended September 30, 2016 increased by ¥35,978 million, ¥40 million and ¥31 million, respectively.

DOCOMO does not disclose geographical information because the amounts of operating revenues generated outside Japan are immaterial.

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

4. Appendix

Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

The reconciliations for the year ending March 31, 2017 (Revised Forecasts) are provided to the extent available without unreasonable efforts.

i. EBITDA and EBITDA margin

 

     Billions of yen  
     Year ending
March 31, 2017
(Revised Forecasts)
    Year ended
March 31, 2016
    Six months ended
September 30, 2015
    Six months ended
September 30, 2016
 

a. EBITDA

   ¥ 1,438.0      ¥ 1,454.6      ¥ 771.4      ¥ 820.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization

     (449.0     (625.9     (297.1     (220.5

Loss on sale or disposal of property, plant and equipment

     (49.0     (36.5     (11.7     (14.8

Impairment loss

     —          (9.1     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     940.0        783.0        462.6        585.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense)

     (4.0     (5.0     (10.0     (4.4

Income taxes

     (278.0     (211.7     (136.0     (178.7

Equity in net income (losses) of affiliates

     —          (5.1     1.6        3.3   

Less: Net (income) loss attributable to noncontrolling interests

     (3.0     (12.9     (1.0     (0.4
  

 

 

   

 

 

   

 

 

   

 

 

 

b. Net income attributable to NTT DOCOMO, INC.

     655.0        548.4        317.1        405.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

c. Operating revenues

     4,610.0        4,527.1        2,215.0        2,288.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA margin (=a/c)

     31.2     32.1     34.8     35.9

Net income margin (=b/c)

                     14.2                     12.1                     14.3                     17.7
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Note:

 

EBITDA and EBITDA margin, as we use them, are different from EBITDA as used in Item 10(e) of regulation S-K and may not be comparable to similarly titled measures used by other companies.

ii. ROE

 

     Billions of yen  
     Year ending
March 31, 2017
(Revised Forecasts)
    Year ended
March 31, 2016
    Six months ended
September 30, 2015
    Six months ended
September 30, 2016
 

a. Net income attributable to NTT DOCOMO, INC.

   ¥ 655.0      ¥ 548.4      ¥ 317.1      ¥ 405.4   

b. Shareholders’ equity

     5,393.3        5,341.2        5,466.5        5,365.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

ROE (=a/b)

                     12.1                     10.3                     5.8                     7.6
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Notes:

 

Shareholders’ equity (for annual period) = The average of NTT DOCOMO, INC. shareholders’ equity, each as of March 31, 2016 (or 2015) and 2017 (or 2016).

Shareholders’ equity (for six months) = The average of NTT DOCOMO, INC. shareholders’ equity, each as of March 31, 2016 (or 2015) and September 30, 2016 (or 2015).

iii. Free cash flows excluding changes in investments for cash management purposes

 

     Billions of yen  
     Year ending
March 31, 2017
(Revised Forecasts)
    Year ended
March 31, 2016
    Six months ended
September 30, 2015
    Six months ended
September 30, 2016
 

Net cash provided by operating activities

   ¥ 1,225.0      ¥ 1,209.1      ¥ 617.9      ¥ 671.7   

Net cash used in investing activities

     (585.0     (375.3     (319.4     (425.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flows

     640.0        833.9        298.5        246.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Changes in investments for cash management purposes

     —          235.1        0.1        (95.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flows excluding changes in investments for cash management purposes

                   640.0                        598.7                       298.4                        341.6      
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Note:

 

Changes in investments for cash management purposes were derived from purchases, redemption at maturity and disposals of financial instruments held for cash management purposes with original maturities of longer than three months.

Net cash used in investing activities includes changes in investments for cash management purposes for the year ended March 31, 2016 and September 30, 2016 (or 2015)

The effect of changes in investments for cash management purposes is not taken into account when we forecasted net cash used in investing activities for the year ending March 31, 2017 due to the difficulties in forecasting such effect.

 

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  DOCOMO Earnings Release    Six Months Ended September 30, 2016  

 

5. Special Note Regarding Forward-Looking Statements

This earning release contains forward-looking statements such as forecasts of results of operations, management strategies, objectives and plans, forecasts of operational data such as the expected number of subscriptions, and the expected dividend payments. All forward-looking statements that are not historical facts are based on management’s current plans, expectations, assumptions and estimates based on the information currently available. Some of the projected numbers in this report were derived using certain assumptions that were indispensable for making such projections in addition to historical facts. These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those contained in or suggested by any forward-looking statement. Potential risks and uncertainties include, without limitation, the following:

 

(1)

Changes in the market environment in the telecommunications industry, such as intensifying competition from other businesses or other technologies caused by Mobile Number Portability, development of appealing new handsets, new market entrants, mergers among other service providers and other factors, or the expansion of the areas of competition could limit the acquisition of new subscriptions and retention of existing subscriptions by our corporate group, or it may lead to ARPU diminishing at a greater than expected rate, an increase in our costs, or an inability to optimize costs as expected.

 

(2)

If current and new services, usage patterns, and sales schemes proposed and introduced by our corporate group cannot be developed as planned, or if unanticipated expenses arise the financial condition of our corporate group could be affected and our growth could be limited.

 

(3)

The introduction or change of various laws or regulations inside and outside of Japan, or the application of such laws and regulations to our corporate group, could restrict our business operations, which may adversely affect our financial condition and results of operations.

 

(4)

Limitations in the amount of frequency spectrum or facilities made available to us could negatively affect our ability to maintain and improve our service quality and level of customer satisfaction and could increase our costs.

 

(5)

Other mobile service providers in the world may not adopt the technologies and the frequency bands that are compatible with those used by our corporate group’s mobile communications system on a continuing basis, which could affect our ability to sufficiently offer international services.

 

(6)

Our domestic and international investments, alliances and collaborations, as well as investments in new business fields, may not produce the returns or provide the opportunities we expect.

 

(7)

Malfunctions, defects or imperfections in our products and services or those of other parties may give rise to problems.

 

(8)

Social problems that could be caused by misuse or misunderstanding of our products and services may adversely affect our credibility or corporate image.

 

(9)

Inadequate handling of confidential business information including personal information by our corporate group, contractors and others may adversely affect our credibility or corporate image.

 

(10)

Owners of intellectual property rights that are essential for our business execution may not grant us a license or other use of such intellectual property rights, which may result in our inability to offer certain technologies, products and/or services, and our corporate group may also be held liable for damage compensation if we infringe the intellectual property rights of others. In addition, the illicit use by a third party of the intellectual property rights owned by our corporate group could reduce our license revenues actually obtained and may inhibit our competitive superiority.

 

(11)

Events and incidents caused by natural disasters, social infrastructure paralysis such as power shortages, the proliferation of harmful substances, terror or other destructive acts, the malfunctioning of equipment, software bugs, deliberate incidents induced by computer viruses, cyber-attacks, equipment misconfiguration, hacking, unauthorized access and other problems could cause failure in our networks, distribution channels, and/or other factors necessary for the provision of service, disrupting our ability to offer services to our subscribers and such incidents may adversely affect our credibility or corporate image, or lead to a reduction of revenues and/or increase of costs.

 

(12)

Concerns about adverse health effects arising from wireless telecommunications may spread and consequently adversely affect our financial condition and results of operations.

 

(13)

Our parent company, NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT), could exercise influence that may not be in the interests of our other shareholders.

 

*

Names of companies, products, etc., contained in this release are the trademarks or registered trademarks of their respective organizations.

 

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FY2016/1H Results Presentation

docomo

October 28, 2016


Table of Contents

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Results Highlights

Key Financial Data, Segment Results

Telecommunications Business,

Smart Life Business & Other Businesses

Revised FY2016 Full-Year Guidance

New Initiatives for Child-Raising Families


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FY2016/1H Results Snapshot

U.S.

GAAP

YOY increase in both operating revenues/income

Financial data

Operating revenues:    ¥2,288.3billion (Up 3.3% year-on-year)

Operating income:    ¥585.6 billion (Up 26.6% year-on-year)

Operating income by segment

Telecommunications business: ¥524.7 billion (Up 24.9% year-on-year)

Smart life business:    ¥37.0 billion (Up 10.6% year-on-year)

Other businesses:    ¥23.9 billion (Up 166.5% year-on-year)

Consolidated financial statements in this document are unaudited

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Selected Financial Data

U.S.

GAAP

(Billions of yen)    FY2015/1H

(1)    FY2016/1H

(2)    Changes

(2)—(1)

Operating revenues    2,215.0 2,288.3+73.4

Operating expenses    1,752.4 1,702.7-49.7

Operating income    462.6 585.6+123.0

(Excluding irregular11 factors)     (517.6)(+55.0)

Net income attributable to NTT DOCOMO, INC.    317.1 405.4+88.3

Capital expenditures    219.5 246.1+26.6

Adjusted free cash flow*2    298.4 341.6+43.3

*1: Excludes the impact on operating income caused by the change in depreciation method, etc. and the impact on operating income caused by “Zutto Carryover”, etc.

2: Adjusted free cash flow is calculated excluding the effects of changes in investment derived from purchases, redemption at maturity and disposals of financial instruments held for cash management purposes with original maturities of longer than three months.


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Results by Segment

U.S.

GAAP

FY2015/1H FY2016/1H Changes

(Billions of yen) (1) (2) (2) – (1)

Telecommunications Operating revenues 1,807.0 1,856.6 +49.6

business Operating income 420.2 524.7 +104.6

Smart life Operating revenues 246.3 250.4 +4.1

business Operating income 33.4 37.0 +3.5

Other Operating revenues 173.5 193.4 +19.9

businesses Operating income 9.0 23.9 +14.9

<Ref.> Smart life Operating revenues 419.8 443.8 +23.9

business and

Other businesses Operating income 42.4 60.9 +18.5

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Key Factors behind Changes in Operating Income

Decrease in network- related

Decrease in selling    Down 48.5

expenses*1:

(Billions of yen)(Billions of yen)

Increase in / other operating revenues:

517.6 Increase in mobile communications services revenues: Up 50.5      DDwn 26.9

    Increase in other operating expenses: Up 25.7

    Decrease in 585.6 462.6 Increase in optical-fiber broadband service revenues, etc.:

Up 41.7 revenues: Down 36.7 Selling revenues and expenses: Down 9.9 Income impact from the change of depreciation method, etc.: Up 50.0

Income impact from

“Zutto Carryover”, etc.: Up 18.0

1: Sum of cost of equipment sold and commissions to agent resellers

*2: Sum of depreciation/amortization, loss on disposal of property, plant and equipment and intangible assets, and communication network charges 5 FY15/1HFY16/1H


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Operational Performance (1)

(Millions subs)

Mobile telecommunications services Total smartphone tablet Churn rateuserssubscriptions

72.94

68.49 30.75

30.75 0.58% 34.09

0.58% FY15/1H FY16/1H FY15/1H FY16/1H FY15/1H FY16/1H 6


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Operational Performance (2)

(Millions subs)

“Kake-hodai & Pake-aeru”    “docomo Hikari”

new billing plan subs    optical-fiber broadband subs

33.42

FY15/1HFY16/1H

FY15/1H    FY16/1H


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Enrichment of Billing Service

2014 2015 2016

For

“docomo

feature phone”

users

Š “Kake-hodai Light (feature phone)” plan

For high-usage Š “Keitai Pack”

customers

Š “Ultra Pack,” “Ultra Share Pack”

For long-term

customers Š Introduction of two selectable discount programs:

“Zutto DOCOMO Discount Course” &“Free Course”

For low-usage Š Expansion of “Zutto DOCOMO Discount,” Reward points for contract renewal

customers

Š “Share Pack 5,” Expanded applicability of “Kake-hodai Light” plan

For low voice call

usage customers

Š “Kake-hodai Light” plan

Enrichment of

new billing plan

Š “Data L Pack,” “Packet Carryover,” Extended usage period of data top up

Launch of

New billing plan Š”Kake-hodai & Pake-aeru,” “Zutto DOCOMO Wari,” “U25 Ouen Wari”

2014 Jun. Sep. 2015 Sep. 2016 Mar. Jun. Sep. Oct. 8


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| NTT

ARPU/MOU

Trend of improvement continues

Voice ARPU Packet ARPU docomo Hikari ARPU FY13/2Q

MOU

(Minutes)    11/ (Yen) FY14/2Q FY15/2Q

134 FY16/2Q

136

For an explanation of ARPU and MOU, please see the slide “Definition and Calculation Methods of ARPU and MOU” in this document.

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New Products

2016-2017 Winter/Spring ModelsSimple, yet high-quality, affordable and convenient    GOOD DESIGN

MONO MO-OlJ W AWARD 2016

LTE-enabled docomo feature phones

Original Compact mobile Wi-Fi router

smartphone

VoLTE-enabled waterproof phones

Compatibility with ultra-high speed of up to 682Mbps

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New Services

MierudenwaSwitch mode Switch mode “Mierudenwa”

Automatically converts a caller’s spoken words to text

Support Desk: 03-XXXX-XXXX

Understand.

My name is Suzuki. Thank you for calling

For confirmation purpose, may I have your name?

Can I now ask your phone number? Trial service started October 19, 2016

11

Service in Japanese only.


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LTE Network149,600

Total no. of LTE base stations: 115,400Expanded to 1,240 cities across Japan

370Mbps service using 3.5GHz band: Rolled out in 82 cities across Japan PREMIUM 4G-enabled base stations: 7,700

PREMIUM

38,100

FY15/1H

FY16/1H

The transmission speeds described herein are theoretical maximum downlink rates specified in the technical standard and the actual rate may vary depending on the propagation conditions, etc.

Two frequency bands of 3.5GHz and 1.7GHz are used for the provision of 370Mbps service, which is available in 50 cities nationwide.

(The maximum downlink speed provided in areas other than Tokyo, Nagoya and Osaka is 332.5Mbps, for which the two frequency bands of 3.5GHz and 2GHz are used. The 332.5Mbps service has been rolled out in 32 cities nationwide.)

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Network: Planned Advancements

2014    2015 20162020

Bringing the next stage of evolution to “speed” and “comfort”

PREMIUM

up to lGbps

Further

sophistication

5G

682Mbps

256QAM

4X4 Ml MO

500Mbps

256QAM

370Mbps

3.5GHz band TDD+FDD

300Mbps

225Mbps    

PREMIUM 4G

Service

launch

375Mbps

FDD

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Cost Efficiency Improvement

(Billions of yen)

FY16/1HFY16/1HFY16 (Initial guidance)

IQ actual: -25    

2Q actual: -18    

-43     

\    

-80

Focus areas:

[Network]

Capital expenditures, maintenance outsourcing cost, etc.

[Marketing]

Sales tools, etc.

[Other]

R&D, information system, etc.

The numbers above are the amount of cost reduction compared to the FY2015 level. Smart Life Business & Other Businesses: Operating Income

Steadily progressing

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(Billions of yen)(Billions of yen)

60.9

42.4 i    

120.0    

FY15/1H    

FY16 (Initial guidance)

FY16/1H

Principal services, etc:

Smart life business

Content services Finance/Payment services Group companies

Other businesses

Enterprise solutions

Support services for customers’ peace of mind, etc. 15    


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Content Services “d market” “Anshin Pack” 15.34

15.82

(Million subs) 13.95

12.15

dTV” “dhits” “dmagazine” “danime store” “dgourmet” “dkids” “dhealthcare pack” “dliving” “Anshin Net Security”

“Anshin Remote Support”2

“Mobile Device Protection Service”*

FY15/1H

FY16/1H

FY16/1H

FY15/1H

Anshin Remote Support” and “Mobile Device Protection Service” are included in the “Support Services for Customers’ Peace of Mind”. 16


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Finance/Payment Services

(Million subs) “d CARD” “d CARD Gold”

Over 1.7 million subs

16.97

15.92 NEW “d CARD PREPAID”

To start

accepting applications

from late November 2016

NEW

iD/d CARD to work on Apple Pay

Started Oct. 25, 2016

Easy set-up

FY15/1H FY16/1H using “d CARD app”

The total “d CARD” subscriptions represent the combined subscriptions to “d CARD” and “d CARD mini” 17


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| NTT

“dPOINT” Loyalty Program

22 alliance partners11,100

Animate

20,900

No. of “dPOINT” merchants

A0KI’

COSMETICS

At service launch (Dec. 2015)

Oct. 2016

18    


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Promotion of +d

No. of +d partners: Grew to 164

164

TakashimayaPanasonicTakashimayaPanasonic

2Q2Q33

1919~FY15.2Q    3Q 4QFY16.1Q

No. of “+d” partners: The number of partners that have created new value by integrating DOCOMO’s business assets with their own assets


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+d Initiatives: Drones

Community development using ICT

Concluded collaboration agreement for use of drones for disaster prevention/mitigation and verification trial on near-future technology

Announced Aug. 29, 2016

Productivity improvement in agriculture/forestry

+d+dVegetation Science & TechnologyVegetation Science & TechnologyConcluded collaboration agreement on a drone verification project for maintenance/management of rice paddies and forest reserves planted along the coastAnnounced Sep. 21, 2016Concluded collaboration agreement on a drone verification project for maintenance/management of rice paddies and forest reserves planted along the coastAnnounced Sep. 21, 2016

Proxy shopping service

+d+dVerification trial using cellular drones in long-distance, beyond-visual-range flights to start in Fukuoka City in November 2016Announced Oct. 19, 2016Verification trial using cellular drones in long-distance, beyond-visual-range flights to start in Fukuoka City in November 2016Announced Oct. 19, 2016

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+d Initiatives: 2020 .AI.loT

For smooth communication with foreign visitors to Japan

Yokosuka CityYokosuka City+d+dJoint verification trial with Yokosuka City of “word translation” and “interview translation” apps in the city’s shopping arcades

Announced Jul. 6, 2016

Translation platform to enterprise users

“Hanashite Hon’yaku for Biz Premium” Provision and commercialization of DOCOMO’s translation techniques for oversea travel insurance apps targeting foreign travelers to Japan

Announced Jul. 14, 2016

Development of new loT platform technologies

Verification of usability/feasibility in the field of transport services of a platform that aggregates and standardizes various loT data

Announced Oct. 20, 2016


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Share Repurchase

Period for share repurchase: Feb. 1—Sep. 30, 2016 ?    Aggregate no. of shares repurchased: Approx. 161.23 million shares*

(Approx. 40.36 million shares)*

Aggregate price of shares repurchased: Approx. ¥416.7 billion

(Approx. ¥109.2 billion)*

Remaining share repurchase authorization: Approx. 83.3 billion

(through Dec. 31, 2016)

The cumulative number of shares repurchased based on a resolution adopted by the Board of Directors on Jan. 29, 2016.

2222The numbers in the parentheses under the aggregate number of shares repurchased and aggregate price of shares repurchased above represent the number and price of shares repurchased on the Tokyo Stock Exchange during the period in FY2016/1H.

| NTT


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FY2016 Full-Year Guidance <Revised>

(Billions of yen)    FY2016 Initial guidance

(i)    FY2016

Revised

guidance

(2)    Changes

(2)~(1)

Operating income

(Excl. impact from change of depreciation method, etc.)    910

(860)    940

(880)    +30

(+20)

Net income attributable to NTT DOCOMO, INC.    640 655+15

Capital expenditures    585 5850

Adjusted free cash flow*    600 640+40

Cost efficiency improvement    -80 -100-20

*: Adjusted free cash flow is calculated excluding the effects of changes in investment derived from purchases, redemption at maturity and disposals of financial instruments held for cash management purposes with original maturities of longer than three months.


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Key Factors Behind

Revision docomo of Operating income

2424[Reference]

(Billions of yen)    Compared to Initial guidance Compared to previous year

Telecommunications business*    +20 +51

Increased customer returns

(Over a 12-month period)

Cost efficiency improvement • Baseline growth    -10 (-70 -110)

+20

+10    -70

(-110)

+100

+21

Smart life business & Other businesses*    0 +46

Impact from change of depreciation method, etc.    +10 +60

Total    +30 +157

* Excluding impact from change of depreciation method, etc.


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Toward 2020 and Beyond

More fun, more peace of mind, more benefits and affordability

Bring more fun and Always there for you Provide solutions to

abundance to everyday life anytime, anywhere various social issues

Service creation/evolution “Change” Promotion of

Reinforcement of all foundations

Evolution of Network/R&D Sound financial

customer contacts (IoT, AI/5G/Services) structure

25


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FY2016/1H Summary

Recorded increase in both operating revenues/income. FY2016/1H operating income: ¥585.6 billion.

Operating income from telecommunications business: ¥524.7 billion.

ARPU continued to recover due to expanded uptake of “Kake-hodai & Pake-aeru” billing plan, etc.

Operating income from Smart life business and Other businesses: ¥60.9 billion. Content, finance/payment services, etc., achieved steady growth.

Coverage of PREMIUM 4G expanded to 1,240 cities nationwide.

500Mbps and 682Mbps services planned for launch.

Further network advancements planned in view of 5G. No. of “+d” partners grew to 164, promoting initiatives in the areas of IoT, AI, 2020 and “d POINT” loyalty program, etc.

Increased customers returns to over ¥110 billion (over a 12-month period) through enrichment of billing service, e.g., launch of “Ultra Pack” and “docomo Child Raising Support Program,” etc.

Raised cost efficiency improvement target by ¥20 billion to ¥100 billion. Full-year operating income guidance revised upward to ¥940 billion.

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Results Highlights

Key Financial Data, Segment Results

Telecommunications Business, Smart Life Business & Other Businesses

Revised FY2016 Full-Year Guidance

New Initiatives for Child-Raising Families


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Enrichment of Billing Service

2014 2015 2016

For

“docomo

feature phone”

users

Š “Kake-hodai Light (feature phone)” plan

For high-usage Š “Keitai Pack”

customers

Š “Ultra Pack,” “Ultra Share Pack”

For long-term

customers Š Introduction of two selectable discount programs:

“Zutto DOCOMO Discount Course” &“Free Course”

For low-usage Š Expansion of “Zutto DOCOMO Discount,” Reward points for contract renewal

customers

Š “Share Pack 5,” Expanded applicability of “Kake-hodai Light” plan

For low voice call

usage customers

Š “Kake-hodai Light” plan

Enrichment of

new billing plan

Š “Data L Pack,” “Packet Carryover,” Extended usage period of data top up

Launch of

newbilling plan Š”Kake-hodai & Pake-aeru,” “Zutto DOCOMO Wari,” “U25 Ouen Wari”

2014 Jun. Sep. 2015 Sep. 2016 Mar. Jun. Sep. Oct. 28


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New Initiatives

| NTT| NTTBilling structure that allows customers to use services at affordable rates for a long period of time by selecting a plan appropriate for the different stages of life

+

Initiatives that provide support to child-raising families

NEW 1    Launch of “docomo Child Raising Support Program”

NEW 2    Addition of “Kids Keitai Plus” rate plan

NEW 3    Launch of “Maternal & Child Health Handbook App”

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NEW 1“docomo Child Raising Support Program”

DOCOMO provides support for making family memories

Privilege 1Privilege 13,000 “d POINTS” every year

in child’s birthday month

Privilege 2Privilege 2Free storage of photos/videos

on “docomo cloud” (55GB)

Privilege 3Privilege 3Free photo album

made with stored photos

‘docomo Child Raising Support Program”

Applications accepted at nearby docomo Shops!


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| NTT

docomo

“docomo Child Raising Support Program”

Privilege 1Privilege 13,000 “d POINTS” every year in child’s birthday month

UseUsepresentpresentpoints for birthday or for a party!

TakasliimayaTakasliimayad fashion

Combi Shop

delivery

*    The*The*    The*Thegiveaway points expires in 6 months (limitation is applied to the period and purpose of use of points is limited). Points will be awarded every year until the child’s graduation from elementary school image above is conceptual.


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NEWNEW1 1

“docomo Child Raising Support Program”

Share the fun of photos of your children with

your family!

Privilege 3

Privilege 2 Create a photo album*2

Safe storage (55GB)

on “docomo Cloud”*1

Use photo album

at home, or give it

Upload photos Can be viewed as a present!

and videos on smartphones,

tablets or PCs

*1: In addition to the standard free -of-charge capacity of 5GB that can be used for photo collection or data storage box, “Cloud Capacity Option Plus 50GB service ”(usually ¥400/month)

will be provided for free up to child’s graduation from elementary school.

*2: Monthly charge for “Photo Collection Plus” (¥280/month) will be waived for up to 13 months after subscription to “docomo Child Raising Support Program.” 32


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Program Launch Campaign

period: ThroughJan. 9, 2017period: ThroughJan. 9, 2017Let’s go on a family vacation campaign     

Through

Win “dtravel” coupons worth up to ¥100,000

Total ¥10 million worth of “dtravel” coupons to be offered!

1: The campaign above can be applied only by customers who have subscribed to “docomo Child Raising Support Program. 33


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NEW 2

Billing Plan for Kids Keitai

For enhanced safety of children

and peace of mind of parents

“Kids Keitai Plus”

¥500/month*1

In emergencies To find a child’s current location*2 To receive an alert informing

you of a child’s return home*3

“Tomoru”—a device compatible

with “Linking” technology:

*1: Monthly rate for a two-year contract. Service can be canceled without any cancellation fee after completing the first two-year contract.

Handset charge is not included in the monthly rate. The service can be used by adding a line to the existing “Kake-hodai & Pake-aeru” subscription.

*2: A separate subscription to “Imadoco Search” service (¥200/month) under the parent line is required.

*3: Purchase of a separate device, “Tomoru,” is required to use this service. “Tomoru”™ is a trademark of Braveridge, Co. Ltd. 34


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NEWNEW3 3

Maternal & Child Health Handbook App

Provide support for pregnancy, child birth and child-

raising using digital records and information

“Maternal & child health handbook app”

Direct delivery of Delivery of columns,

Digitized health information from Q&A in accordance with

records local government child’s developmental stage

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Child-Raising Support Services for Peace of Mind and Convenience

Plan to add more child-raising support services in the future

DOCOMO Child Raising Support ProgramDOCOMO Child Raising Support ProgramEnhanced safety and peace of nr for childrenEnhanced safety and peace of nr for childrenmindmind

More to be added in future

Develop children’s ability to thinkDonations to “Fund to Support Children’s Future” using “dPOINT’SDevelop children’s ability to thinkDonations to “Fund to Support Children’s Future” using “dPOINT’SProvide support from the stage of pregnancy to child raising with digital records and information


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NEW 1

“docomo Child Raising Support Program”

NEW 2NEW 2Planned for launch Nov. 1, 2016

“Kid’s Keitai Plus” rate plan

NEW 3

Launched Oct. 28, 2016Launched Oct. 28, 20163737“Maternal and Child Health Handbook App”


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The new of today, the norm of tomorrow

3838 Danger ahead! Smartphone-distracted walking


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Appendices


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Services, etc., Included in Each Reportable Segment

Telecommunications business

Mobile communications services

Xi services (LTE) *FOMA services (3G) • International services ’Sales of handset/equipment for each service, etc.

Optical fiber broadband service and other telecommunications services *Optical-fiber broadband services * Satellite communications services, etc.    

Smart life business

Content services

“dmarket” • “Anshin Net Security” * “Sugotoku Contents” • “Cloud Storage Option” etc. Finance/Payment services

Credit service    • Proxy bill collection • “d Mobile Payment“etc.

Group companies

Oak Lawn Marketing, Inc. ABC Cooking Studio, Co. Ltd. • docomo Healthcare, Inc.    etc.

Other businesses

Enterprise solutions

Enterprise loT solutions    • System development/sales/maintenance services etc.

Support services for customers peace of mind

“Mobile Device Protection Service” * “Anshin Remote Support”    etc.


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Definition and Calculation Methods

of ARPU and MOU

i. Definition of ARPU and MOU

a. ARPU (Average monthly Revenue Per Unit):

Average monthly revenue per unit, or ARPU, is used to measure average monthly operating revenues attributable to designated services on a

per user basis. ARPU is calculated by dividing telecommunications services revenues (excluding certain revenues) by the number of active users

of our wireless services in the relevant periods, as shown below “ARPU Calculation Method.” We believe that our ARPU figures provide useful

information to analyze the average usage per user and the impacts of changes in our billing arrangements. The revenue items included in the

numerators of our ARPU figures are based on our U.S. GAAP results of operations.

b. MOU (Minutes of Use):

Average monthly communication time per user.

ii. ARPU Calculation Methods

Aggregate ARPU = Voice ARPU + Packet ARPU + “docomo Hikari” ARPU

- Voice ARPU : Voice ARPU Related Revenues (basic monthly charges, voice communication charges)

/ No. of active users

- Packet ARPU : Packet ARPU Related Revenues (basic monthly charges, packet communication charges)

/ No. of active users

- “docomo Hikari” ARPU : “docomo Hikari” ARPU Related Revenues (basic monthly charges, voice communication charges)

/ No. of active users

- In addition, the sum of Packet ARPU and “docomo Hikari” ARPU is referred to as Data ARPU.

iii. Active Users Calculation Method

Sum of No. of active users for each month ((No. of users at the end of previous month + No. of users at the end of current month) / 2) during the

relevant period

Note:

1. The number of “users” used to calculated ARPU and MOU is the total number of subscriptions, excluding the subscriptions listed below:

a. Subscriptions of communication modules services, “Phone Number Storage,” “Mail Address Storage,” “docomo Business Transceiver” and

wholesale telecommunications services and interconnecting telecommunications facilities that are provided to Mobile Virtual Network

Operators (MVNOs); and

b. Data Plan subscriptions in the case where the customer contracting for such subscription in his/her name also has a subscription for “Xi” or

“FOMA” services in his/her name.

2. Revenues from communication module services, “Phone Number Storage,” “Mail Address Storage,” “docomo Business Transceiver” and

wholesale telecommunications services and interconnecting telecommunications facilities that are provided to Mobile Virtual Network

Operators (MVNOs) are not included in the ARPU calculation.

ARPU and MOU calculation methods were changed beginning with the results presentation for the first three months of the fiscal year ended March 31, 2016. Conventional ARPU calculation method is as below:

ARPU (conventional calculation): (Voice revenues + Packet revenues + Revenues accounted for in Smart ARPU)/ No. of subscriptions after subtracting communication modules and MVNO subscriptions, etc. 41


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Special Note Regarding Forward-Looking Statements

This presentation contains forward-looking statements such as forecasts of results of operations, management strategies, objectives and plans, forecasts of operational data such as the expected number of subscriptions, and the expected dividend payments. All forward-looking statements that are not historical facts are based on management’s current plans, expectations, assumptions and estimates based on the information currently available. Some of the projected numbers in this presentation were derived using certain assumptions that were indispensable for making such projections in addition to historical facts. These forward- looking statements are subject to various known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those contained in or suggested by any forward-looking statement. Potential risks and uncertainties include, without limitation, the following:

Changes in the market environment in the telecommunications industry, such as intensifying competition from other businesses or other technologies caused by Mobile Number Portability, development of appealing new handsets, new market entrants, mergers among other service providers and other factors, or the expansion of the areas of competition could limit the acquisition of new subscriptions and retention of existing subscriptions by our corporate group, or it may lead to ARPU diminishing at a greater than expected rate, an increase in our costs, or an inability to optimize costs as expected.

If current and new services, usage patterns, and sales schemes proposed and introduced by our corporate group cannot be developed as planned, or if unanticipated expenses arise the financial condition of our corporate group could be affected and our growth could be limited.

The introduction or change of various laws or regulations inside and outside of Japan, or the application of such laws and regulations to our corporate group, could restrict our business operations, which may adversely affect our financial condition and results of operations.

Limitations in the amount of frequency spectrum or facilities made available to us could negatively affect our ability to maintain and improve our service quality and level of customer satisfaction and could increase our costs.

Other mobile service providers in the world may not adopt the technologies and the frequency bands that are compatible with those used by our corporate group’s mobile communications system on a continuing basis, which could affect our ability to sufficiently offer international services.

Our domestic and international investments, alliances and collaborations, as well as investments in new business fields, may not produce the returns or provide the opportunities we expect.

Malfunctions, defects or imperfections in our products and services or those of other parties may give rise to problems.

Social problems that could be caused by misuse or misunderstanding of our products and services may adversely affect our credibility or corporate image.

Inadequate handling of confidential business information including personal information by our corporate group, contractors and others may adversely affect our credibility or corporate image.

Owners of intellectual property rights that are essential for our business execution may not grant us a license or other use of such intellectual property rights, which may result in our inability to offer certain technologies, products and/or services, and our corporate group may also be held liable for damage compensation if we infringe the intellectual property rights of others. In addition, the illicit use by a third party of the intellectual property rights owned by our corporate group could reduce our license revenues actually obtained and may inhibit our competitive superiority.

Events and incidents caused by natural disasters, social infrastructure paralysis such as power shortages, the proliferation of harmful substances, terror or other destructive acts, the malfunctioning of equipment, software bugs, deliberate incidents induced by computer viruses, cyber-attacks, equipment misconfiguration, hacking, unauthorized access and other problems could cause failure in our networks, distribution channels, and/or other factors necessary for the provision of service, disrupting our ability to offer services to our subscribers and such incidents may adversely affect our credibility or corporate image, or lead to a reduction of revenues and/or increase of costs.

Concerns about adverse health effects arising from wireless telecommunications may spread and consequently adversely affect our financial condition and results of operations.

Our parent company, NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT), could exercise influence that may not be in the interests of our other shareholders.

Names of companies, products, etc., contained in this presentation are the trademarks or registered trademarks of their respective organizations.

42