As filed with the Securities and Exchange Commission on June 26, 2008

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Kabushiki Kaisha NTT DoCoMo

NTT DoCoMo, Inc.

		Sanno Park Tower
		11-1, Nagata-cho 2-chome
		Chiyoda-ku, Tokyo 100-6150
Japan		Japan
(Jurisdiction of incorporation or organization)		(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock		New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None
(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of March 31, 2008, 42,627,927 shares of common stock were outstanding, comprised of 42,313,607 shares and 31,432,000 ADSs (equivalent to 314,320 shares).

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ   Accelerated Filer o   Non-Accelerated Filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP þ International Financial Reporting Standards as issued by the International Accounting
Standards Board o Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

 

 

TABLE OF CONTENTS

		Page
PART I
Item 1. Identity of Directors, Senior Management and Advisors			3
Item 2. Offer Statistics and Expected Timetable			3
Item 3. Key Information			3
Item 4. Information on the Company			13
Item 4A. Unresolved Staff Comments			73
Item 5. Operating and Financial Review and Prospects			73
Item 6. Directors, Senior Management and Employees			100
Item 7. Major Shareholders and Related Party Transactions			107
Item 8. Financial Information			108
Item 9. The Offer and Listing			109
Item 10. Additional Information			111
Item 11. Quantitative and Qualitative Disclosures about Market Risk			123
Item 12. Description of Securities Other Than Equity Securities			126
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies			127
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			127
Item 15. Controls and Procedures			127
Item 16A. Audit Committee Financial Expert			127
Item 16B. Code of Ethics			127
Item 16C. Principal Accountant Fees and Services			128
Item 16D. Exemptions from the Listing Standards for Audit Committees			129
Item 16E. Purchases of Equity Securities by Issuer and Affiliated Purchasers			130
Item 17. Financial Statements			131
Item 18. Financial Statements			131
Item 19. Exhibits			132
Exhibit 1.1
Exhibit 1.3
Exhibit 8.1
Exhibit 12.1
Exhibit 12.2
Exhibit 13.1
Exhibit 13.2
Exhibit 15.1
Exhibit 15.2

Special Note Regarding Forward-looking Statements

This annual report 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 subscription, 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 are 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.

As competition in the market becomes more fierce due to changes in the business environment caused by Mobile Number Portability (“MNP”), new market entrants, competition from other cellular service providers or other technologies, and other factors, could limit our acquisition of new subscriptions and retention of existing subscriptions, or may lead to diminishing ARPU or an increase in our costs and expenses.

2.

Current and new services, usage patterns, and sales schemes introduced by our corporate group may not develop as planned, which could affect our financial conditions and limit our growth.

3.

The introduction of or changes in various laws or regulations 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.

5.

The W-CDMA technology that we use for our 3G system and/or mobile multimedia services may not be introduced by other overseas operators, which could limit our ability to offer international services to our subscribers.

6.

Our domestic and international investments, alliances and collaborations may not produce the returns or provide the opportunities we expect.

7.

As electronic payment capability and many other new features are built into our cellular phones, and services of parties other than those belonging to our corporate group are provided through our cellular handsets, potential problems resulting from malfunctions, defects or loss of handsets, or imperfection of services provided by such other parties may arise, which could have an adverse effect on our financial condition and results of operations.

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 other factors, 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 the right to license or otherwise use such intellectual property rights on acceptable terms or at all, which may limit our ability to offer certain technologies, products and/or services, and we may also be held liable for damage compensation if we infringe the intellectual property rights of others.

11.

Earthquakes, power shortages, malfunctioning of equipment, software bugs, computer viruses, cyber attacks, hacking, unauthorized access and other problems could cause systems failures in the networks required for the provision of service, disrupting our ability to offer services to our subscribers and may adversely affect our credibility or corporate image.

12.

Concerns about wireless telecommunications health risks may 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.

Our actual results could be materially different from and worse than as described in the forward-looking statements. Important risks and factors that could cause our actual results to be materially different from as described in the forward-looking statements are set forth in Item 3.D. and elsewhere in this annual report.

PART I

As used in this annual report, references to “DOCOMO”, “the company”, “we”, “our” , “our group” and “us” are to NTT DoCoMo, Inc. and its subsidiaries except as the context otherwise requires.

“The year ended March 31, 2008” refers to our fiscal year ended March 31, 2008, and other fiscal years are referred to in a corresponding manner.

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. Selected Financial Data

The following tables include selected historical financial data as at and for the fiscal years ended March 31, 2004 through 2008. The data as at and for the fiscal years ended March 31, 2004 through 2008 in the table is derived from our audited consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). You should read the selected financial data below in conjunction with Item 5 of this annual report and our audited consolidated financial statements and notes thereto which are included elsewhere in this annual report.

Selected Financial Data

		As of and for the year ended March 31,
		2004				2005				2006				2007				2008				2008
		(in millions, except per share data)
Income Statement Data
Operating revenues:
Wireless services		¥	4,487,912			¥	4,296,537			¥	4,295,856			¥	4,314,140			¥	4,165,234			$	41,715
Equipment sales			560,153				548,073				470,016				473,953				546,593				5,474
Total			5,048,065				4,844,610				4,765,872				4,788,093				4,711,827				47,189
Operating expenses			3,945,147				4,060,444				3,933,233				4,014,569				3,903,515				39,094
Operating income			1,102,918				784,166				832,639				773,524				808,312				8,095
Other income (expense) (1)			(1,795	)			504,055				119,664				(581	)			(7,624	)			(76	)
Income before income taxes, equity in net income (losses) of affiliates and minority interests			1,101,123				1,288,221				952,303				772,943				800,688				8,019
Income taxes			429,116				527,711				341,382				313,679				322,955				3,234
Income before equity in net income (losses) of affiliates and minority interests			672,007				760,510				610,921				459,264				477,733				4,785
Equity in net income (losses) of affiliates, net of applicable taxes (2)(3)			(21,960	)			(12,886	)			(364	)			(1,941	)			13,553				135
Minority interests			(40	)			(60	)			(76	)			(45	)			(84	)			(1	)
Net income		¥	650,007			¥	747,564			¥	610,481			¥	457,278			¥	491,202			$	4,919
Per Share Data
Basic and diluted earnings per share		¥	13,099			¥	15,771			¥	13,491			¥	10,396			¥	11,391			$	114.08
Dividends declared and paid per share		¥	1,000			¥	2,000			¥	3,000			¥	4,000			¥	4,400
Dividends declared and paid per share (4)		$	8.72			$	18.65			$	25.54			$	34.03			$	44.07
Balance Sheet Data
Working capital (5)		¥	493,679			¥	1,047,597			¥	558,459			¥	568,988			¥	533,465			$	5,343
Total property, plant and equipment, net			2,702,505				2,682,429				2,777,454				2,900,653				2,834,607				28,389
Total assets			6,262,266				6,136,521				6,365,257				6,116,215				6,210,834				62,202
Total debt (6)			1,091,596				948,523				792,405				602,965				478,464				4,792
Total liabilities			2,557,510				2,228,468				2,312,120				1,953,748				1,933,050				19,360
Total shareholders’ equity			3,704,695				3,907,932				4,052,017				4,161,303				4,276,496				42,829

		As of and for the year ended March 31,
		2004				2005				2006				2007				2008				2008
		(in millions, except per share data)
Other Financial Data
Depreciation and amortization expenses and loss on sale or disposal of property, plant and equipment			756,002				781,096				774,137				801,046				830,784				8,320
Net cash provided by operating activities			1,710,243				1,181,585				1,610,941				980,598				1,560,140				15,625
Net cash used in investing activities			(847,309	)			(578,329	)			(951,077	)			(947,651	)			(758,849	)			(7,600	)
Net cash used in financing activities			(705,856	)			(672,039	)			(590,621	)			(531,481	)			(497,475	)			(4,982	)
Margins (percent of operating revenues):
Operating income margin			21.8	%			16.2	%			17.5	%			16.2	%			17.2	%			17.2	%
Net income margin			12.9	%			15.4	%			12.8	%			9.6	%			10.4	%			10.4	%

Exchange Rate Data

The following table shows the exchange rates for Japanese yen per $1.00 based upon the noon buying rate in New York City for cash transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York:

Fiscal Year ended March 31,		High				Low				Average (1)				Period-end
2004			120.55				104.18				112.94				104.18
2005			114.30				102.26				107.28				107.22
2006			120.93				104.41				113.15				117.48
2007			121.81				110.07				116.92				117.56
2008			124.09				96.88				114.31				99.85
Calendar Year 2007
December			114.45				109.68				112.45				111.71
Calendar Year 2008
January			109.70				105.42				107.82				106.74
February			108.15				104.19				107.03				104.19
March			103.99				96.88				100.76				99.85
April			104.56				100.87				102.68				104.53
May			105.52				103.01				104.36				105.46
June (through June 13, 2008)			107.94				104.41				106.19				107.92

We have translated selected Japanese yen amounts presented in this annual report solely for your convenience. The rate we used for such translations was $1.00 = ¥99.85, which was the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York on March 31, 2008. The noon buying rate for Japanese yen on June 13, 2008 was $1.00 = ¥107.92.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risks Relating to Our Business and the Japanese Wireless Telecommunications Industry

As competition in the market becomes more fierce due to changes in the business environment caused by Mobile Number Portability, new market entrants, competition from other cellular service providers or other technologies, and other factors, could limit our acquisition of new subscriptions, and retention of existing subscriptions may lead to diminished ARPU, or may lead to an increase in our costs and expenses.

Market changes such as the introduction of Mobile Number Portability (MNP) and the emergence of new service providers are resulting in increasing competition with other service providers in the telecommunications industry. For example, other mobile service providers have introduced new products and services including 3G handsets, music player handsets, music distribution services, and fixed-rate services for voice communications limited to specified recipients, e-mail, and new installment sale methods for handsets. There are also providers that now offer or may in the future offer services such as combined billing, aggregated point programs, and services offering free calls between fixed-line and cellular phones in conjunction with fixed-line communications, which may be more convenient for customers.

At the same time, there may be increased competition resulting from the introduction of other new services and technologies, especially low-priced and flat-rate services, fixed-line or mobile IP phones, high-speed fixed-line broadband Internet service and digital broadcasting, wireless LAN, and so on or an integration of the services.

In addition to competition from other service providers and technologies, there are other factors increasing competition among mobile network operators in Japan such as saturation in the Japanese cellular market, changes to business and market structures due to the entry of new competitors in the market, , including MVNOs*, changes in the regulatory environment, and increased rate competition.

Under these circumstances, the number of net new subscriptions we acquire may continue to decline in the future and may not reach the number we expect. Also, in addition to difficulty acquiring new subscriptions, we may not be able to maintain existing subscriptions at expected levels due to increased competition among cellular service providers in the areas of rates and services. Furthermore, in order to capture new subscriptions and maintain existing subscriptions, we may need to incur higher than expected costs. In this fiercely competitive environment, in order to provide advanced services and increase convenience to our customers, we have made various rate revisions such as the introduction in June 2004 of “Pake-hodai”, which is a flat-rate packet transmission service for FOMA i-mode, the introduction of a new unified rate plan for FOMA services and mova services in November 2005 that users find simple and easy to understand, the introduction in March 2006 of a new rate plan that enables users to apply Pake-hodai to all FOMA services, the introduction in March 2007 of “Pake-hodai Full”, a service that enables subscribers with full-browser handsets to view not only i-mode but also PC websites and video for a flat monthly rate, the introduction in August 2007 of “Fami-wari MAX 50” and “Hitoridemo Discount 50,” which give a uniform 50% discount on basic monthly charges, regardless of length of continuous service, and the introduction in April 2008 of a new rate plan that allows users in the same “Family Discount” group to make free domestic calls to each other 24 hours a day. However, we cannot be certain that these measures will enable us to acquire new and maintain existing subscribers. Furthermore, these rate revisions are expected to lead to a certain decline in ARPU, but if the trend of subscribers using “Family Discounts” and switching to flat-rate services increases more than we expect, our ARPU may decrease more than we expect, which may have a material adverse effect on our financial condition and results of operations.

Current and new services, usage patterns, and sales schemes introduced by our corporate group may not develop as planned, which could affect our financial condition and limit our growth.

We view the expansion of AV traffic such as video phones using 3G handsets, the development and expansion of new services such as credit services useful in everyday life and business through i-mode FeliCa, and increased revenue through the expansion of data communications as important to our future growth. However, a number of uncertainties may arise to prevent the development of these services and constrain our growth. In particular, we cannot be certain that:

•

We will be able to find the partners and content providers needed to provide the new services and forms of usage we are introducing and persuade a sufficient number of vendors and other establishments to install i-mode FeliCa readers;

•

We will be able to provide planned new services and forms of usage as scheduled and keep costs needed for the deployment and expansion of such services within budget;

•

The services and installment sale and other methods we offer and plan to offer will be attractive to current and potential subscribers and there will be sufficient demand for such services;

•

Manufacturers and content providers will create and offer products including handsets for our 3G system and handsets and programming for our 3G i-mode services at appropriate prices and on a timely basis;

•

Our current and future data communications services including i-mode and other services will be attractive to existing and potential subscribers and achieve continued or new growth;

•

Demand in the market for mobile handset functionality will be as we expect and as a result our handset procurement costs will be reduced; and

•

We will be able to commence services with improved data communication speeds enabled by HSDPA (High Speed Downlink Packet Access, a high-speed packet transmission technology utilizing Wideband Code Division Multiple Access, or W-CDMA) technology planned.

If the development of our new services or forms of use is limited, it may have a material effect on our financial condition and results of operations.

The introduction or change of various laws or regulations 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.

The Japanese telecommunications industry has been undergoing regulatory reform in many areas including rate regulation. Because we operate on radio spectrum allocated by the Government, the mobile telecommunications industry in which we operate is particularly affected by the regulatory environment. Various governmental bodies have been recommending or considering changes that could affect the mobile telecommunications industry, and there may be continued reforms including the introduction or revision of laws or regulations that could have an adverse effect on us. These include:

•

Revision of the spectrum allocation system such as reallocation of spectrum and introduction of an auction system;

•

Measures to open up some segments of telecommunication platform functions such as authentication and payment collection to other operators;

•

Rules that could require us to open our i-mode service to all content providers and Internet service providers or that could prevent us from setting or collecting i-mode content fees or putting i-mode service on cellular phone handsets as an initial setting;

•

Regulations to prohibit or restrict certain content or transactions or mobile Internet services such as i-mode;

•

Measures which would introduce new costs such as the designation of mobile phone communications as a universal service and other changes to the current universal service fund system;

•

Regulations to increase handset competition such as SIM*1 unlocking regulations;

•

Fair competition measures to promote new entry by MVNOs

•

Introduction of new measures to promote competition based on a review of the designated telecommunications facilities system(dominant carrier regulation); and

•

Other measures including competition safeguard measures directed toward us, NTT East and NTT West to enhance competition that would restrict our business operations in the telecommunications industry.

It is difficult to predict with certainty if any of the above changes will be proposed to the relevant laws and regulations and, if they are made, the extent to which our business will be affected. However, the implementation of one or more of the changes described above or other changes to laws and regulations could materially 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.

One of the principal limitations on a cellular communication network’s capacity is the available radio frequency spectrum it can use. We have limited spectrum and facilities available to us to provide our services. As a result, in certain parts of metropolitan Tokyo and Osaka, such as areas near major train stations, our cellular communication network operates at or near the maximum capacity of its available spectrum during peak periods, which may cause reduced service quality. In addition, the quality of the services we provide may also decrease due to the limited processing capacity of our base stations and switching facilities during peak usage periods if our subscription base dramatically increases or the volume of content such as images and music provided through our i-mode service significantly expands. Also, in relation to our 3G service, packet transmission flat fee service for 3G i-mode, and our flat-rate service that enables subscribers to view full-browser PC websites and video, an increase in the number of subscriptions and traffic volume of our subscribers may go substantially beyond our projections, we may not be able to process such traffic with our existing facilities and our quality of service may decline.

Furthermore, with an increasing number of subscriptions and traffic volume, our quality of service may decline if we cannot obtain the necessary allocation of spectrum from the Government for the smooth operation of our business.

We may not be able to avoid reduced quality of services despite our continued efforts to improve the efficiency of our use of spectrum through technology and to acquire new spectrum. If we are not able to successfully address such problems in a timely manner, we may experience constraints on the growth of our mobile communications services or lose subscribers to our competitors, which may materially affect our financial condition and results of operations.

The W-CDMA technology that we use for our 3G system and/or mobile multimedia services may not be introduced by other overseas operators, which could limit our ability to offer international services to our subscribers.

For our 3G system, we currently use W-CDMA technology. W-CDMA technology is one of the global standards for cellular telecommunications technology approved by the International Telecommunications Union (ITU) as part of its efforts to standardize 3G cellular technology through the issuance of guidelines known as IMT-2000. We may be able to offer our services, such as global roaming, on a worldwide basis if enough other mobile operators adopt handsets and network facilities based on W-CDMA standard technology that is compatible with ours. We expect that the companies we have invested in overseas, our overseas strategic partners and many other mobile operators will adopt this technology.

Also, we have technology alliances with overseas operators in relation to i-mode services and we are aggressively promoting the spread and expansion of i-mode services by overseas operators.

However, if a sufficient number of other mobile operators do not adopt W-CDMA technology or there is a delay in the introduction of W-CDMA technology, we may not be able to offer global roaming services as expected and we may not be able to offer our subscribers the convenience of overseas service. Also, if adoption of W-CDMA technology abroad is not conducted sufficiently and the number of i-mode subscribers among our strategic partners and the usage of i-mode service by those subscribers does not increase sufficiently, we may not realize the benefits of economies of scale we currently expect in terms of purchasing network facilities and offering handsets and contents developed for our services at appropriate prices. Also, we cannot be sure that handset manufacturers or manufacturers of network equipment will be able to appropriately and promptly adjust their handsets and network equipment if we need to change the handsets or network we currently use due to a change in W-CDMA technology as a result of activities conducted by standard-setting organizations.

If W-CDMA technology and i-mode services do not develop as we expect and we are not able to improve the quality of our overseas services or enjoy the benefits of global economies of scale, this may have an adverse effect on our financial condition and results of operations.

Our domestic and international investments, alliances and collaborations may not produce the returns or provide the opportunities we expect.

One of the major components of our strategy is to increase our corporate value through domestic and overseas investments, alliances and collaborations. We have entered into alliances and collaborations with other companies and organizations overseas which we believe could help us achieve this objective. We are also promoting this strategy by investing, entering into alliances with and collaborating with domestic companies and investing in new business areas.

However, there can be no assurance that we will be able to maintain or enhance the value or performance of our past or future investments or that we will receive the returns or benefits we expect from these investments, alliances and collaborations. Our investments in new business areas outside of the mobile telecommunication business may be accompanied by challenges beyond our expectations, as we have little experience in such new areas of business.

In recent years, the companies in which we have invested have experienced a variety of negative developments, including severe competition, increased debt burdens, significant volatility in share prices and financial difficulties. To the extent that these investments are accounted for by the equity method and to the extent that the investee companies have net losses, our financial results will be adversely affected by our pro rata portion of these losses. If there is a loss in the value of our investment in any investee company and such loss in value is other than a temporary decline, we may be required to adjust the book value and recognize an impairment loss for such investment. Also, a business combination or other similar transaction involving any of our investee companies could require us to realize impairment loss for any decline in the value of investment in such investee company. In either event, our financial condition or results of operations could be materially adversely affected.

As electronic payment capability and many other new features are built into our cellular phones, and services of parties other than those belonging to our corporate group are provided through our cellular handsets, potential problems resulting from malfunctions, defects or loss of handsets, or imperfection of services provided by such other parties may arise, which could have an adverse effect on our financial condition and results of operations.

Various functions are mounted on the mobile handsets we provide, and if we cannot appropriately deal with technological problems that may arise with respect to current or future handsets or the malfunction, defect or loss of handsets, our credibility may decline and our corporate image may be damaged, leading to an increase in cancellations of subscription or an increase in expenses for indemnity payments to subscribers and our financial condition or results of operations may be affected. New issues may arise which are different from those related to mobile communications services which we have been providing, especially with i-mode handsets with FeliCa capabilities that can be used for electronic payment and credit transactions. Events that may lead to a decrease in our credibility and corporate image, or an increase in cancellations of subscriptions and indemnity payments for subscribers include the following:

•

Breakdown, defect and malfunction of our handsets;

•

Loss of information, e-money or points due to a breakdown of handsets or other factors;

•

Illegal use of information, e-money, credit functions and points by third parties due to a loss or theft of handsets;

•

Illegal access to and use of user records and balances accumulated on handsets by third-parties; and

•

Inadequate and inappropriate management of e-money, credit functions or points by companies with which we make alliances or collaborate.

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

We may face an increase in cancellations of existing subscriber contracts and difficulty in acquiring new subscriptions due to decreased credibility of our products and services and damaged corporate image caused by inappropriate use of our products and services by unscrupulous subscribers.

One example is unsolicited bulk e-mail sent through our e-mail services, including i-mode service and short mail. Despite our extensive efforts to address this issue by protecting our subscribers from incurring any economic disadvantage caused by unsolicited bulk e-mails including notifying our subscribers via various brochures, providing unsolicited bulk e-mail filtering functions with our handsets and pursuing actions against companies which distribute large amounts of such unsolicited bulk e-mails, the problem has not yet been rooted out. If our subscribers receive a large amount of unsolicited e-mail, it may cause a decrease in customer satisfaction and damage our corporate image, leading to a reduction in the number of i-mode subscriptions.

Mobile phones have been used in crimes such as the “it’s me” fraud, whereby callers request an emergency bank remittance pretending to be a relative. To combat these misuses of our services, we have introduced various measures such as more strict identification confirmation at points of purchase and ended new contracts for pre-paid mobile phones as of the end of March 2005 because pre-paid mobile phones are easier to use in criminal activities. However, in the event criminal usage increases, mobile phones may be regarded as a problem and lead to an increase in cancellation of contracts.

In addition, as our handsets and services become more sophisticated, new issues may arise when subscribers are charged fees for packet transmission at levels higher than they are aware of as a result of using handsets without fully recognizing over use of packet transmission in terms of frequency and volume. Also, there are issues concerning manners for phone usage in public places such as in trains and aircraft and the occurrence of car accidents caused by the use of mobile phones while driving. Further, from the perspective of encouraging sound development of the Internet society, we have introduced a filtering service that limits access to harmful web sites that can have a negative impact on minors. However, with regard to this service, there has been a wide range of debate, involving MIC, Internet content providers, and others, and the matter has become a social issue. These issues may similarly damage our corporate image.

To date, we believe that we have properly addressed the social issues involving mobile phones. However, it is uncertain whether we will be able to continue addressing those issues appropriately in the future as well and if we fail to do so, we may experience an increase in cancellation of existing subscriber contracts or fail to acquire new subscribers as expected, and this may affect our financial condition and results of operations.

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

In April 2005, the Law concerning the Protection of Personal Information (the “Personal Information Protection Law”) came into force in Japan and protection of personal information became an important issue at companies that handle personal information. We possess information on numerous subscribers in the telecommunications, credit, and other businesses, and to appropriately and promptly address the Personal Information Protection Law, we have set up an “information security department” to put in place comprehensive security management across the company such as thorough management of subscriber information, employee education, supervision of subcontractors and by strengthening technological security.

However, in the event an information leak occurs despite these security measures, our credibility may be significantly damaged and we may experience an increase in cancellation of subscriber contracts, an increase in indemnity costs and slower increase in additional subscriptions, and our financial condition and results of operations may be adversely affected.

Owners of intellectual property rights that are essential for our business execution may not grant us the right to license or otherwise use such intellectual property rights on acceptable terms or at all, which may limit our ability to offer certain technologies, products and/or services, and we may also be held liable for damage compensation if we infringe the intellectual property rights of others.

For the Group to carry out its business, it is necessary to obtain licenses and other rights to use the intellectual property rights of third parties. Currently, the group is obtaining licenses from the holders of the rights concerned by concluding license agreements. We will obtain the licenses from the holders of the rights concerned if others have the rights to those intellectual property rights which are necessary for us to operate our business in the future. However, if we cannot come to agreement with the holders of the rights concerned or mutual agreement concerning the granted rights cannot be maintained afterwards, there is a possibility that we will not be able to provide specific technologies, products or services of the group. Also, if the group receives claims of violation of intellectual property rights from others, we may be forced to expend considerable time and cost in reaching a resolution, and if such claims are recognized, we may be liable to pay damages for infringement of the rights concerned, which may adversely affect our financial condition and results of operations.

Earthquakes, power shortages, malfunctioning of equipment, software bugs, computer viruses, cyber attacks, hacking, unauthorized access and other problems could cause systems failures in the networks required for the provision of service, disrupting our ability to offer services to our subscribers and may adversely affect our credibility or corporate image.

We have built a nationwide network including base stations, antennas, switching centers and transmission lines and provide mobile communication service using this network. In order to operate our network systems in a safe and stable manner, we have various measures in place such as redundant systems. However, despite these measures, our system could fail for various reasons including hardware problems, network damage caused by earthquakes, power shortages, typhoons, floods, terrorism and similar phenomena and events. These system failures can require an extended time for repair and as a result, may lead to decreased revenues and increased repair costs, and our financial condition and results of operations may be adversely affected.

There have been instances in which millions of computers worldwide were infected by viruses through the Internet. Similar incidents could occur on our mobile communications network. If such a virus entered our network or handsets through such means as hacking, unauthorized access, or otherwise, our system could fail and our mobile phones become unusable. In such an instance, the credibility of our network and customer satisfaction could decrease significantly. Although we have enhanced our security systems to block unauthorized access and remote downloading in order to provide for unexpected events, such precautions may not make our system fully prepared for every event. In addition, our network could be affected by software bugs, incorrect equipment settings and human errors which are not the result of malfeasance, but also cause system failures or breakdowns.

In the event we are unable to properly respond to any such events, our credibility or corporate image may be reduced, and we may experience a decrease in revenues as well as significant repair costs, which may affect our financial condition and results of operations.

Concerns about wireless telecommunications health risks may adversely affect our financial condition and results of operations.

Media and other reports have suggested that electric wave emissions from wireless handsets and other wireless equipment may adversely affect the health of mobile phone users and others such as by causing cancer and vision loss and interfering with various electronic medical devices including hearing aids and pacemakers, and also may present increased health risks for users who are children. While these reports have not been conclusive, and although the findings in such reports are disputed, the actual or perceived risk of wireless telecommunications devices to the health of users could adversely affect us through increased cancellation by existing subscribers, reduced subscriber growth, reduced usage per subscriber or litigation, and may also potentially adversely affect our corporate image, financial condition and results of operations. The perceived risk of wireless devices may have been elevated by certain wireless carriers and handset manufactures affixing labels to their handsets showing levels of electric wave emissions or warnings about possible health risks. Research and studies are ongoing and we are actively attempting to confirm the safety of wireless telecommunications, but there can be no assurance that further research and studies will not demonstrate a relation between electric wave emissions and health problems.

Furthermore, although the electric wave emissions of our cellular handsets and base stations comply with the electromagnetic safety guidelines of Japan, including guidelines regarding the specific absorption rate of electric waves, and the International Commission on Non-Ionizing Radiation Protection, the guidelines of which are regarded as an international safety standard, the Electromagnetic Compatibility Conference of Japan has confirmed that some electronic medical devices are affected by the electromagnetic interference from cellular phones as well as other portable radio transmitters. As a result, Japan has adopted a policy to restrict the use of cellular services inside medical facilities. We are working to ensure that our subscribers are aware of these restrictions when using cellular phones. There is a possibility that modifications to regulations, new regulations or restrictions could limit our ability to expand our market or our subscription base or otherwise adversely affect us.

Our parent company, Nippon Telegraph and Telephone Corporation (NTT), could exercise influence that may not be in the interests of our other shareholders.

As of March 31, 2008, NTT owned 64.8% of our outstanding voting shares. While being subject to the conditions for fair competition established by the Ministry of Posts and Telecommunications (“MPT”, currently the Ministry of Internal Affairs and Communications, or “MIC”) in April 1992, NTT retains the right to control our management as a majority shareholder, including the right to appoint directors. Currently, although we conduct our day-to-day operations independently of NTT and its other subsidiaries, certain important matters are discussed with, or reported to, NTT. As such, NTT could take actions that are in its best interests, which may not be in the interests of our other shareholders.

Risks Relating to the Shares and the ADSs

Future sales of our shares by NTT or by us may adversely affect the trading price of our shares and ADSs.

As of March 31, 2008, NTT owned 64.8% of our outstanding voting shares. Under Japanese law, NTT, like any other shareholder, generally is able to dispose of our shares freely on the Tokyo Stock Exchange or otherwise. Additionally, our Board of Directors is authorized to issue 143,260,000 additional shares generally without any shareholder approval. The sale or issuance or the potential for sale or issuance of such shares could have an adverse impact on the market price of our shares.

There are restrictions on your ability to withdraw shares from the depositary receipt facility.

Each ADS represents the right to receive 1/100th of a share of common stock. Therefore, pursuant to the terms of the deposit agreement with our depositary, The Bank of New York, in order to withdraw any shares, a holder of ADSs must surrender for cancellation and withdrawal of shares, ADRs evidencing 100 ADSs or any integral multiple thereof. Each ADR will bear a legend to that effect. As a result, holders of ADSs will be unable to withdraw fractions of shares from the depositary or receive any cash settlement in lieu of withdrawal of fractions of shares. In addition, although the ADSs themselves may be transferred in any lots pursuant to the deposit agreement, the ability to trade the underlying shares may be limited.

Holders of ADRs have fewer rights than shareholders and have to act through the depositary to exercise those rights.

Holders of ADRs do not have the same rights as shareholders and accordingly cannot exercise rights of shareholders against us. The Bank of New York, as depositary, through its custodian agent, is the registered shareholder of the deposited shares underlying the ADSs, and therefore only it can exercise the rights of shareholders in connection with the deposited shares. In certain cases, we may not ask The Bank of New York to ask holders of ADSs for instructions as to how they wish their shares voted. Even if we ask The Bank of New York to ask holders of ADSs for such instructions, it may not be possible for The Bank of New York to obtain these instructions from ADS holders in time for The Bank of New York to vote in accordance with such instructions. The Bank of New York is only obliged to try, as far as practical, and subject to Japanese law and our Articles of Incorporation, to vote or have its agents vote the deposited shares as holders of ADSs instruct. In your capacity as an ADS holder, you will not be able to bring a derivative action, examine the accounting books and records of the company, or exercise appraisal rights.

U.S. investors may have difficulty in serving process or enforcing a judgment against us or our directors, executive officers or corporate auditors.

We are a limited liability, joint stock corporation incorporated under the laws of Japan. Most of our directors, executive officers and corporate auditors reside in Japan. All or substantially all of our assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon us or these persons or to enforce against us or these persons judgments obtained in U.S. Courts predicated upon the civil liability provisions of the Federal securities laws of the United States. There is doubt as to the enforceability in Japan, in original actions or in actions for enforcement of judgment of U.S. courts, of liabilities predicated solely upon the federal securities laws of the United States.

Rights of shareholders under Japanese law may be different from rights of shareholders in jurisdictions within the United States.

Our Articles of Incorporation, our Board of Directors’ regulations and the Corporation Law of Japan (“Corporate Law” or “Kaishaho”) govern our corporate affairs. Legal principles relating to such matters as the validity of corporate procedures, directors’ and officers’ fiduciary duties and liabilities, and shareholders’ rights under Japanese law may be different from those that would apply to a company incorporated in a jurisdiction within the United States. You may have more difficulty in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in a jurisdiction within the United States.

Item 4. Information on the Company

A. History and Development of the Company

We are a joint stock corporation incorporated and registered under the laws of Japan in August 1991 under the name of NTT Mobile Communications Planning Co., Ltd., and, in April 1992, we were renamed NTT Mobile Communications Network, Inc. We changed our name to NTT DoCoMo, Inc. on April 1, 2000. Our corporate head office is at Sanno Park Tower, 11-1, Nagata-cho 2-chome, Chiyoda-ku, Tokyo 100-6150, Japan. Our telephone number is 81-3-5156-1111. We have no agent in the United States in connection with this annual report.

Our parent company is Nippon Telegraph and Telephone Corporation, or NTT, the holding company of NTT group. NTT group constitutes one of the world’s leading telephone operators. We were incorporated as a subsidiary of NTT in August 1991 and took over NTT’s wireless telecommunications operations in July 1992. In July 1993, in accordance with the agreement between NTT and the MPT, we transferred wireless telecommunications operations (other than those in the Kanto-Koshinetsu region which remained with us) to our eight regional subsidiaries.

The following diagram shows our corporate organization and includes our principal subsidiaries and affiliates as of March 31, 2008. Unless otherwise indicated, we own 100% of the voting securities of the subsidiaries included in the diagram. The percentages in parenthesis represent our group’s holdings in these subsidiaries and affiliates.

For a discussion of recent and current capital expenditures, please see “Capital Expenditures” in Item 5.B. We have had no recent significant divestitures or any significant divestitures currently being made.

B. Business Overview

Overview

We are Japan’s leading mobile telecommunications services provider. We offer a range of high-quality, high-mobility telecommunications services such as third generation (3G) and second generation (2G) cellular services, and other specialized wireless telecommunications services, including satellite telephone services. Our core business is cellular phone services, and the total number of 2G and 3G subscriptions was approximately 53.39 million and our estimated domestic market share was 52.0% as of March 31, 2008. We are one of the largest cellular phone service operators in the world as measured by total number of cellular subscriptions.

For the year ended March 31, 2008, we had operating revenues of ¥4,711,827 million and operating income of ¥808,312 million, representing an operating margin of 17.2%. Our net income was ¥491,202 million, which was equivalent to net income per share of ¥11,391.36. Our management currently believes that we have sufficient financial flexibility and strength to pursue our strategic plans.

Although our basic services continue to be voice services, we are increasingly focusing on the development of wireless data transmission and mobile multimedia services such as our i-mode mobile Internet service and our 3G services. We introduced i-mode services, one of the world’s first handset-based Internet access services, in February 1999. As of March 31, 2008, 47.99 million cellular subscriptions had signed up for i-mode services, a 0.42 million subscription increase from the 47.57 million subscriptions as of March 31, 2007. i-mode is an optional service available to cellular voice services offered on our nationwide 2G and 3G networks which allows users to send and receive e-mail, access online services including banking services and airline and ticket reservations, access an array of information from i-mode servers and execute and settle retail transactions directly through their handsets. Almost all handsets which we currently sell are i-mode compatible, thus allowing our customers to choose whether or not to subscribe to i-mode service. The introduction of i-mode services enhanced our business in many ways, including encouraging our cellular phone users to use data transmission more, significantly increasing data revenue, expanding our market share, increasing the number of subscriptions, creating new sources of income and strengthening our brand image.

We have introduced other services to promote and capture the increasing demand for mobile multimedia services. These include services that allow Internet access through the combination of a cellular phone and a laptop computer or personal digital assistant, more commonly known as a PDA. Other services include music and video content distribution services, mobile e-commerce services and location-based pinpointing services through the global positioning system, or GPS, and cellular network. We are also promoting wireless data communication and have released products such as PDAs and card type wireless Internet access devices which are used for laptop PCs and PDAs. In addition to expanding the market for person-to-person communications such as i-mode, we are creating a market for ubiquitous machine-to-machine communications such as remote monitoring of vending machines. We are promoting the use of videophones as a communication tool and other applications and services which integrate cellular services into users’ daily lives through the use of external interfaces such as IrDA, QR code and contactless ICs. IrDA is a short-range data communications standard that uses infrared rays and QR Code is a two-dimensional code for expressing vertical and horizontal alphanumeric characters, Japanese characters, images, etc. We promote our Osaifu-Keitai service on a commercial basis using contactless ICs, to create new usage opportunities by linking our handsets with other business platforms such as electronic money, membership certificates and point programs, etc. We also introduced a new brand for mobile credit payment services and issued a new conventional credit card that can be used in conjunction with this mobile credit payment service.

We offer our cellular phone services on our nationwide 2G and 3G networks. Our 2G and 3G networks cover essentially all of the population of Japan (we calculate population coverage ratios by dividing the population within our “coverage area”—determined by whether the local government offices of cities, towns and villages, such as the city hall, are within the service area of the network—by the total population in Japan). We are concentrating on meeting customer needs by improving quality in service areas and building additional facilities in conjunction with higher communications demand.

Our 2G network is based on the Personal Digital Cellular, or PDC, telecommunications system. PDC is a Time Division Multiple Access, or TDMA, based system that supports both voice and data communications and a full range of supplementary services including, among others, call waiting, voice mail, three-party calling and call forwarding. Voice transmissions on our 2G network are offered at 11.2 Kbps. We provide circuit switching data transmission at 9.6 Kbps. We also use a version of PDC that we refer to as PDC-P for our packet-switched network. PDC-P allows data transmission at up to 28.8 Kbps for our “DoPa” packet transmission and i-mode services.

We previously offered voice and data transmission services on our PHS network, but the services were terminated on January 7, 2008.

Although we had further upgraded our 2G network and systems, such as the 2G PDC, PDC-P and PHS networks, in order to more fully exploit the potential demand for mobile multimedia, we introduced a 3G network and system on a fully commercial basis in October 2001. We believe that the introduction of 3G services marked the start of a full-scale mobile multimedia era by increasing the speed and sophistication with which music, video and other high volume data can be downloaded to mobile phone handsets and other communication devices. We developed and established our 3G system based on Wideband Code Division Multiple Access, or W-CDMA, a high performance technology using broadband capabilities that allows variable-speed, multi-rate transmissions and supports high-quality voice transmissions and high-speed data communications, video and other multimedia services including mobile computing. We have developed our 3G wireless telecommunications system in connection with 3G standardization efforts of the International Telecommunications Union, or ITU. For a discussion of the 3G standardization efforts and the status of 3G development and deployment, please see “3G Network- 3G Standardization Efforts” in this Item 4.B.

Our 3G system provides high quality voice transmission services, circuit switched data services (at 64 Kbps) and high-speed packet transmission services (at up to 384 Kbps), and serves as a platform for FOMA i-mode services. FOMA HIGH-SPEED, which uses the same system, provides high-speed packet transmission services at speeds of up to 7.2 Mbps. As of March 31, 2008, the number of FOMA subscriptions was 43.95 million, approximately 1.24 times the 35.53 million subscriptions we had as of March 31, 2007, and approximately 1.87 times the number of subscriptions we had as of March 31, 2006. Our FOMA population coverage ratio reached 100% on March 29, 2007.

We have also been promoting the adoption by mobile operators around the world of 3G services using W-CDMA technology, which is one of the global technology standards for mobile telecommunications, and mobile multimedia services, including i-mode. Through these efforts, we aim to:

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Increase revenues from international roaming services, license agreements and consulting services;

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Earn dividends revenues and capital gains from investments; and

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Expand our revenue sources into cellular phone-related businesses.

Through these revenue generation activities as well as cost reduction activities, such as joint procurement of handsets and other equipment, we seek to strengthen our competitiveness and improve our earnings in a globalizing telecommunications market.

To achieve our international strategic objectives, we have made investments in telecommunication operators overseas, including Far EasTone Telecommunications Co., Ltd. (“FET”), Hutchison Telephone Company Limited (“HTCL”), KT Freetel Co., Ltd. (“KTF”), Philippine Long Distance Telephone Company (“PLDT”), Guam Cellular & Paging (“Guam Cellular”), and U Mobile Sdn Bhd (“U Mobile”). We have established alliances through which we have licensed the technologies of our popular i-mode data communications and wireless Internet access services to many other mobile network operators in the Asia-Pacific region and Europe. In April 2006 we formed an alliance in the Asia-Pacific region with a total of six mobile network operators, including FET, Hutchison Telecommunications (Hong Kong) Limited, KTF, PT Indosat Tbk, and StarHub Ltd., to enhance each member’s competitiveness in international roaming and corporate mobile services. In December 2006, Smart Communications, Inc. joined the alliance, and it was officially named the Conexus Mobile Alliance (“Conexus”). In addition, in November 2007, with Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited (both covering India) joining the alliance, and with Guam and the Northern Mariana Islands being added to its coverage area, Conexus became one of the largest mobile network operator alliances in the Asia-Pacific region with approximately 170 million subscribers in eleven countries and regions. Going forward, we will work with Conexus members to improve the convenience of international roaming services in each country and region. Furthermore, through our investments in and alliances with other cellular phone businesses, we have established footholds for our advanced technologies and services in many parts of the world. For additional information regarding our international investments and alliances, see “- Global Businesses – International Investments and Licensing Agreements”.

We conduct cutting-edge research and development both in and outside of Japan on what we believe is the largest scale of any wireless operator in the world. We organize our research and development efforts through our R&D division, which includes a department that operates as a comprehensive research center, carries out research in a variety of fields, such as network, wireless and multimedia research. To assist us in our W-CDMA development as well as the research and development of additional advanced technology, we established our NTT DoCoMo R&D Center in Yokosuka Research Park in 1998. We believe that the R&D Center is an example of our commitment to the development of cutting-edge services, products and technologies and will continue to position us as a provider of advanced technology for mobile communications. Currently at the R&D Center, we are striving to further expand mobile communication services and are engaging in the development of HSDPA, HSUPA and Super 3G, as well as in fundamental research for 4G. For further explanation on our research and development, see “3G Network” in this Item 4B.

We benefit from the strong positive perception in Japan of the DOCOMO brand name. We also benefit from the strong positive perception of the brand name of NTT, our controlling shareholder. To market our services and products throughout Japan, we have established an extensive nationwide distribution, after-sales service and support network comprised primarily of independent agents, which, as of March 31, 2008, included 2,233 DOCOMO Shops (which exclusively offer our products and services), 336 primary retailers and 9,768 secondary and tertiary retailers.

Corporate Social Responsibilities (CSR)

We aim to contribute to society by carrying out our business activities with sincerity and living in harmony. To fulfill our Corporate Social Responsibility (CSR) as a mobile network operator, we are engaged in a wide range of activities, believing that it is our mission to tackle cellular phone-related social issues, allow each and every user including the elderly and the handicapped to share in the convenience of cellular phones, respond to earthquakes and other natural disasters, and take actions against global environmental concerns that are becoming increasingly serious.

Among these activities, those that are directly related to the products and services offered by DOCOMO group have been promoted under the “DOCOMO Anshin Mission” aimed at providing peace of mind to our customers. The concrete actions undertaken during the fiscal year ended March 31, 2008, include the following:

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For a safer, healthier and more secure society

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Held approximately 2,400 sessions of “DOCOMO Mobile Phone Safety Program” seminars nationwide during the fiscal year ended March 31, 2008, to provide children with tips on safe and proper phone usage manners, and further promoted and encourage the use of Access Restriction Service (Filtering Service).

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Established the “DOCOMO Anshin Hotline”, a dedicated call center, to provide consultation for billing plans and various services to help reduce anxiety regarding the use of cellular phones by children.

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Universal design products and services

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To enable the elderly and the disabled to use mobile phones in their daily activities with greater convenience, provided a touring seminar called “Mobile Phone Usage Program” (a total of 41 classes in the Kanto-Koushinetsu area for the fiscal year ended March 31, 2008).

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The cumulative number of sales of the “Raku Raku Phone” series, which has been well received by many customers since its introduction in 1999, exceeded 10 million units nationwide in April 2007, and had reached 12.89 million units as of the end of March 31, 2008.

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We were awarded the “1997 Prime Minister’s Commendation for Contributors to the Promotion of Barrier-Free Environments” in recognition of our efforts to create a universal design for our products and services enabling easy use by all.

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Global environmental conservation initiatives

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Deployed optical extension stations (hikari haridashi-kyoku) (a base station where the child device is placed at a location different from the main device (parent station), and is connected to the parent device by optical cable), and deployed high-efficiency power supply equipment and high-efficiency air conditioning equipment, as part of our efforts to facilitate energy savings at our communication facilities.

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Collected used cellular handsets (approximately 65 million units on a cumulative basis), and continued our forest improvement initiatives by adding five more locations to the “DOCOMO Woods” Campaign (Reforestation Project) (36 locations on a cumulative basis).

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Social contribution activities

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To assist the education of children, constructed a total of 10 schools in Thailand, and carried out programs aimed at fostering the health and well-being of young talent by sponsoring various sports clinics.

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Participated in “Product Red” (an initiative that creates a flow of donations from private businesses to a global fund), donating one percent of the monthly billing amount from our customers who used our “FOMA M702 iS (RED)” as to fight HIV/AIDS in Africa.

Actions for Disaster Damage Prevention

Cellular phones serve as an important communications infrastructure indispensable to people’s everyday life, and are expected to fulfill a significant role in the event of earthquakes, storm and flood damages or other natural disasters, providing means for communications for rescue activities and/or national and local government institutions. Believing that taking appropriate measures for disaster damage prevention is an important part of our Corporate Social Responsibilities (CSR) as a cellular phone operator, we set forth “three principles for disaster damage prevention”, and have worked to construct a communications network highly resistant against natural disasters, and to secure and enhance the safety and reliability of our networks.

Moreover, we established a Business Continuity Plan, which places emphasis not only on the restoration and protection of our communication network but also on the maintenance of the business operations of the Company. In the Business Continuity Plan, each organization prioritizes their business activities to designate the order in which such activities are to be restored to resume normal business operations at the earliest possible opportunity within a previously designated target time period. We intend to continually update the plan, including reflecting the results of education, training and monitoring of the plan.

Three principles for disaster damage prevention

•		Enhancement of System Reliability
		To ensure that our mobile communications systems function properly in the event of a disaster, we have reinforced our facilities and equipment by applying earthquake resistant reinforcement to our buildings/antenna towers, anchoring our machines/equipment and strengthening their earthquake resistance, accommodating cables in shielded tunnels, and laying our communication cables underground. We have also endeavored to enhance the reliability of our networks by providing backups to our facilities and circuits through the use of multiple/dual routes or loop structure in our relay transmission lines (middle-distance transmission lines), using redundant configurations in our communication facilities or installing them in dispersed locations, and increasing the use of communications satellites.
•		Securing important communications
		As a designated public institution that is required to cooperate with national/local government institutions in their disaster damage prevention efforts, we have established a priority telephone system allowing institutions engaged in disaster damage prevention activities to use our circuits with higher priority in the event of a disaster. We have also strived to ensure that important communications are protected by ensuring efficient network control and lending cellular phones and/or other devices to municipal governments and/or other institutions in the event of a disaster.
•		Early recovery of communications services
		With the goal of recovering mobile communications services at the earliest possible time following a disaster, we have employed various measures, including the preparation of hardware such as the deployment of mobile base station equipment, and mobile power supply vehicles and the securing of restoration materials, as well as the creation of operation manuals for disaster situations, organizing “Disaster Management Headquarters” and conducting drills for disaster damage prevention.

Organizational Structure for Disaster Damage Prevention

We will establish “Disaster Management Headquarters” at our head office or branches, depending on the scale of the disaster or damages. The “Disaster Management Headquarters” will collect information through collaboration with other companies in the DOCOMO Group or NTT Group that have not been affected by the disaster, to develop and coordinate the restoration work, relief plans, etc. Each team in the “Disaster Management Headquarters” will lead and supervise the restoration/relief efforts. Depending on the magnitude of the disaster, we will cooperate with the Cabinet Office, Ministry of Internal Affairs and Communications, and/or emergency management organizations of the national government, to assist the restoration efforts and other actions undertaken by the Government. We will also supply information to our subscribers by providing the media with concrete explanations on the damages and/or restoration status.

To introduce some of the various actions we have undertaken to respond to disasters during the fiscal year ended Mar. 31, 2008, we began offering the “Emergency Reports ‘Area Mail’”, which delivers emergency earthquake reports from the Meteorological Agency and other messages to compatible cellular phones in specified areas, without impact from network congestion.

In the Niigata Chuetsu Offshore Earthquake of July 2007, we promptly deployed mobile power supply vehicles and motor power generators to base stations where the power was out, to ensure service in coverage areas. After the earthquake, we provided such services as free cellular phone rental and recharging at evacuation shelters.

Our Services

We offer a variety of services to support our subscribers’ needs for wireless voice and data communications. In addition to the cellular voice services we have traditionally offered, we are increasingly focusing on mobile multimedia services, such as i-mode, and our 3G services called “FOMA”, which stands for Freedom of Mobile Multimedia Access. We are continuing to develop a lifestyle infrastructure for cellular phones and are enhancing services such as GPS and credit cards.

Cellular Services

Our core business is our cellular services. For the year ended March 31, 2008, our cellular services, including associated equipment sales, accounted for approximately 98.6% of our consolidated operating revenues. We offer mova service, on our 2G network, compatible with voice and data communication. We also offer FOMA service, on our 3G network, with voice and high-speed data communication which is compatible with various services such as videophone and video content downloading.

In order to provide additional options and services for the convenience of our subscribers and to increase revenues through value-added services, we also offer cellular subscribers a number of standard optional features including voice mail, call forwarding, and call waiting. In September 2003, we introduced the “Melody Call” service which allows users to set music as their ring tone and to play music for incoming callers. In March 2007, the number of Melody Call subscriptions surpassed 10 million. In December 2004, we introduced the “Option Pack Discount” under which, by signing up for voice mail, call waiting, Melody Call, and call forwarding at the same time, users see the basic monthly usage charges lowered from ¥600 to ¥400. In addition, in May 2007, we began offering a new service called “2in1”. “2in1” is a service that allows subscribers to easily switch between the two telephone numbers and e-mail addresses by using a “mode” function (A mode, B mode, dual mode) on one cellular phone. In March 2008, it became possible to use “2in1” under two different names, such as a personal name and business name, a new “2in1” rate plan was established, and “2in1” functions were expanded, including transfer of continuous use periods and DOCOMO points, enabling subscribers even greater convenience when enjoying the “2in1” functions.

Cellular (mova) Services

We offer cellular voice and data transmission services on networks that are accessible by virtually the entire population of Japan. Our primary cellular voice services are offered on our nationwide 800 MHz digital network. We also offer cellular voice services on a 1.5 GHz network, covering primarily Tokyo, Osaka and Nagoya areas and certain neighboring areas. The nationwide 800 MHz network and the 1.5 GHz network are our 2G network. We have elected to terminate our cellular phone services using the 1.5 GHz radio band (City Phone services) on June 30, 2008 (we ceased accepting new applications on September 30, 2004). We also ceased accepting new applications for our prepaid cellular phone services (Pre-Call services) on March 31, 2005.

Cellular (FOMA) Services

FOMA services are our third generation, or 3G, wireless voice and data transmission services. FOMA services use advanced technology which allows us to offer faster and higher quality services to our customers. In June 2006, the percentage of FOMA subscriptions among all cellular subscriptions surpassed 50%. By the end of the year ended March 31, 2008, subscriptions reached approximately 43.95 million. Over the coming years, we expect further shifts in our subscribers from mova services to FOMA services.

Our basic strategy is to expand our FOMA services. We believe that our FOMA services are well-suited for both ordinary users and business users because of FOMA’s advanced features, including clear voice quality, high data communication speeds, video transmission capabilities and diversified billing plans for packet transmission.

One of the primary advantages of our FOMA services is the increased quality and speed at which services are available. Additionally, these new services offer the ability to simultaneously handle both voice communications and data packet transmissions so that subscribers can continue talking while sending and receiving data. FOMA services that we currently offer include videophone, video mail, high-speed Internet connection services, FOMA i-mode services and mobile computing and various information based services.

Since we launched our FOMA services in October 2001, we have continuously strived to provide a diverse array of services and contents that make full use of high-speed and wide-band communications capabilities, develop a broad lineup of handsets, provide rate and discount plans that customers find easy to use, expand coverage areas and enhance communications quality.

In November 2001, we launched our “i-motion” video-clip distribution service which enables users to obtain video-content at a speed of up to 384 Kbps. In May 2003, we launched commercial service of “V-Live” which enables FOMA users to access streaming video live and archived video, with contents including music, sports, news, animation, and travel information. In November 2005, we launched our “Push Talk” service, which allows real time group conversations for up to five speakers, simultaneously.

i-mode

i-mode services are wireless Internet access services based on a data transmission system that organizes data into bundles called packets prior to transmission. Our i-mode handsets allow subscribers to send and receive data through our i-mode server to and from the Internet while also providing users with the full range of cellular voice services. i-mode is an optional service available to mova and FOMA subscribers which allows users to send and receive e-mail, access online services such as banking services and airline and ticket reservations, access an array of information from i-mode servers and execute and settle retail transactions directly through their handsets. Almost all cellular handsets which we currently sell are i-mode compatible, thus allowing our customers to choose whether or not to subscribe to i-mode service. We introduced i-mode to take advantage of the growth in demand for data transmission services. The introduction of i-mode services encouraged our cellular phone users to use data transmission more and thereby changed the way cellular phones are used in Japan.

Basics of i-mode Services

Our i-mode services consist of four main components: the i-mode handset, the i-mode packet network, the i-mode server and content providers.

The base of i-mode services is the handset itself. An i-mode handset is a standard cellular handset with i-mode related equipment that includes a display screen, a color-browser and the ability to transmit and receive data packets at up to 28.8 Kbps using our 2G network, at up to 384 Kbps using our 3G network, or at up to 7.2MB using our HSDPA network. The physical appearance of i-mode handsets is almost identical to standard handsets, except for a slightly larger display screen to accommodate various i-mode functions, such as the Internet browser. The browser can read a subset of HTML, which is the standard language for the Internet. Almost all of the cellular handsets we currently sell are i-mode compatible and most are equipped with built-in cameras. Most new customers subscribe to receive i-mode services together with cellular phone services.

From the i-mode handset, data are transmitted to a packet network. mova i-mode is based on the PDC mobile packet transmission system and uses the same packet network as our packet transmission service, which is called “DoPa”. The packet network acts as a relay station between the handset and the i-mode server. FOMA i-mode is based on our 3G network which also supports voice communication services for our FOMA subscribers.

The i-mode server functions as the gateway between our network and the Internet. The function of the i-mode server is data distribution, e-mail transmission and storage, i-mode customer management, content provider management and information charging. The i-mode server is also connected to certain banks and other information providers either by leased lines or through the Internet.

The final and most important element of i-mode services is content. Content is provided by content providers through i-mode portal menu sites and other voluntary web sites. On February 22, 1999, when i-mode services were introduced, i-mode users had access to 67 content providers. Since then, the number of content providers has increased. As of March 31, 2008, there were 3,013 content providers and 12,260 i-mode portal menu sites.

i-mode Services

Typical services that may be accessed through an i-mode handset include:

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e-mail;

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games and other entertainment;

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music distribution/video clips/e-books;

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social network services

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online shopping (CDs, books, tickets, others)/auctions;

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news, weather and sports information;

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mobile banking;

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other financial services, such as DCMX, iD and other credit card services and information and online stock quotes and trading;

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maps and travel information;

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community guides, living information, safety and healthcare information; and

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telephone directories.

In July 2001, we began offering an area-specific information service called “i-area”, which provides weather, dining, traffic and other types of information directed to our i-mode users. “i-area” is a service that automatically selects and displays i-mode content relating to the current whereabouts of an i-mode user. Users do not select service areas since the base stations automatically recognize their general location. Our “open i-area” service allows any content provider to relay i-area information to users.

To broaden the capabilities of i-mode, and in cooperation with Sun Microsystems, Inc., in January 2001 we introduced a new series of i-mode handsets with Java that enables users, through their handsets alone, to run programs and play games, and SSL capabilities that enable users to access advanced intranets and other information. We also introduced i-appli services and content specifically for our Java-based handsets.

In June 2002, we introduced “i-shot” service for our mova services, which allows users to transmit digital still images taken with mobile phones that feature built-in digital cameras. Users can send images through our nationwide circuit switch network, which provides a more economical means of transmitting large amounts of data compared to a packet network. There is no subscription fee for i-shot service. Users pay a per transmission charge, which depends on the size of the data being sent and other conditions.

In September 2005, we also launched “i-channel,” a service for FOMA subscribers with i-mode handsets that automatically delivers and displays the latest information such as news, weather, entertainment, sports, horoscopes, and more. In January 2008, the number of “i-channel” subscribers exceeded 15 million.

In August 2006, we launched the Music Channel, a service that, requiring only advance settings by a user, automatically distributes music programming of up to an hour in length to FOMA users with HSDPA compatible handsets late at night and enables users to listen to the programming at any time during the day. In November 2007, the service also began offering distribution of video programs, and we changed the name of the service to the Music & Video Channel.

In October 2006, we launched a search-by-keyword function for i-mode menu sites, to provide even greater convenience for i-mode customers. At the same time, partnering with non-i-mode sites, we also launched services enabling the search of non-i-mode menu sites using a customer’s preferred search engine. In January 2008, we formed a partnership with Google Inc. (“Google”) that includes providing search services, search-related advertisements, and applications for use by i-mode subscribers. We continue to endeavor to enhance search services and improve their convenience.

In April 2008, we overhauled “iMenu”, the i-mode portal site. Through this renewal, we redesigned the site for greater convenience and added search functions in collaboration with Google on the top screen for iMenu, available without charges for packet transmission (charges apply for access from overseas). We provide news and weather information on the same top screen.

We plan to continue adding new and attractive i-mode services in the future.

We also provide consulting services to and invest in i-mode content providers through a subsidiary, DoCoMo.com Inc. Together with Dentsu Inc., Japan’s largest advertising agency, and NTT Advertising, Inc., in June 2000 we established D2 Communications Inc., which serves as an advertising agency for the i-mode platform.

To cope with the issue of voluminous unsolicited bulk e-mails sent to our i-mode users, we have taken a number of measures since 1997. Among other measures, we have enabled users to block all e-mail sent to them from particular addresses, blocked e-mails sent to large numbers of invalid e-mail addresses, and enabled users to restrict incoming e-mail to user-designated domains. In March 2002, we began to provide priority connection service for highly reliable data transmissions and in October 2003, we restricted the number of i-mode e-mails that can be transmitted from a single handset in a day to no more than 1,000 transmissions. In December 2003, we upgraded our services for blocking spam from domains being passed off as belonging to mobile service operators. In September 2004, we launched a new function to address spam e-mails from SMSs, short message services, and upgraded this function in August 2005 to restrict the number of SMS e-mails that can be sent from a single handset to fewer than 200 per day. Because i-mode users are having an increasing number of opportunities to make e-mail transmissions, in November 2007 this limit was raised to fewer than 500 per day. Also in November 2007, in addition to the existing lineup of spam countermeasures, we began offering anti-spoof functions—a function for refusing e-mail having fraudulent sender information and a “domain designation and refusal” function that enables users to refuse to receive e-mail containing designated domain names in the sender address—and because in the wake of the variety of anti-spam functions being offered, the settings required to enable these functions had become complicated and numerous, we began providing a simplified e-mail settings function to facilitate their use, by beginners and children in particular. In January 2008, because there were cases where users using anti-spam functions were, because of their settings, unable to receive e-mails from mailing lists and forwarded e-mails, we began providing an “addressee-designated” function enabling reception of such e-mails.

We also started offering new ring tones that help prevent receipt of unwanted calls from unknown numbers.

To enable younger users to use i-mode services with greater peace of mind and safety, in February 2008, we began implementing efforts to promote the use of access restriction services. These access restriction services are “Kids’ i-mode Filter”, “i-mode Filter”, and time restrictions, and they enable settings that prevent access to dating sites and other sites that children under the age of 18 are not allowed to visit. While we have previously engaged in activities to promote awareness and use of access restriction services, so that younger users can use mobile phones with peace of mind, as a further measure in this regard, we have amended our access restriction services application method, so that unless a parent or guardian declares that use is unnecessary, all underage users will be required to use the “Kids’ i-mode Filter”.

i-mode Services Overseas

As part of the overseas operations of i-mode, in the fiscal year ended March 31, 2007, the Bulgarian company Cosmo Bulgaria Mobile E.A.D (“Globul”), in September 2006, launched i-mode services. In the fiscal year ended March 31, 2008, COSMOTE Romanian Mobile Telecommunications S.A. (“Cosmote Romania”) in Romania and Hutchison Telephone Company Limited in Hong Kong, in May 2007, and Smart Communications Inc., in March 2008, started i-mode services in the Philippines.

India’s Hutchison Essar Ltd., which had executed an i-mode license agreement with us, had made preparations for a service launch by the end of fiscal year 2007, but because of changes to its business environment, Hutchison Essar determined that the provision of i-mode services would be difficult, and in May 2007 it dissolved its agreement with us. In addition, Australia’s Telstra Corp., Russia’s MTS and Germany’s e-plus, all of which had executed i-mode license agreements with us and had been providing i-mode services, terminated the provision of such services due to their own respective changes in strategy. As a result, i-mode services are now available in 16 countries and regions, including Japan. As of the end of March 2008, i-mode subscribers totaled approximately 7 million outside Japan in the following markets: the Netherlands, Taiwan, Belgium, France, Spain, Italy, Greece, Israel, the U.K. (including Northern Ireland), Ireland, Singapore, Bulgaria, Romania, Hong Kong and the Philippines.

We also continued our efforts to develop new lineups of i-mode compatible handsets for overseas use. In September 2007, we developed application software that will enable foreign i-mode operators to offer greater handset variety to their customers, and following by deployment by Bulgaria’s Globul, operators such as Italy’s Wind Telecommunicazioni S.p.A. (“Wind”), Romania’s Cosmote Romania and the Philippine’s Smart have commenced sales of handsets loaded with i-mode application software.

Osaifu-Keitai (i-mode FeliCa) Services

In July 2004, we launched our Osaifu-Keitai (i-mode FeliCa) service on a commercial basis using the contactless ICs, to create new usage opportunities by linking our handsets with other business platforms such as electronic money, membership certificates and point programs, etc. “Osaifu-Keitai” refers to mobile phones equipped with a contactless IC chip, as well as useful functions and services enabled by the IC chip. With these functions, a mobile phone can be utilized as an electronic wallet, a credit card, an electronic ticket, a membership card, and an airline ticket, among other things.

The total user base of Osaifu-Keitai handsets compatible with i-mode FeliCa was 10 million subscriptions in December 2005, surpassed 20 million subscriptions in March 2007, and reached approximately 28.6 million subscriptions as of the end of March 2008. The number of shops providing this service has increased steadily, reaching approximately 608,000 as of the end of March 2008. With the advent of our mobile credit service “iD/DCMX”, the “Mobile Suica” service, which incorporates the “PASMO” multi-carrier commuter pass and which can now be used for bullet trains, the electronic money “Edy” and “nanaco” and other settlement services offered by a number of providers, we believe the Osaifu-Keitai will become an integral part of our customers’ lifestyles, and that these services will promote customer use of the Osaifu-Keitai.

In September 2005, we began providing “ToruCa”, an additional function of the Osaifu-Keitai. The “ToruCa” function enables a user to download promotional coupons and store information onto a mobile phone, simply by waving an Osaifu-Keitai enabled handset in front of a dedicated reader/writer machine at merchants.

Cellular Subscribers

The number of our subscriptions including mova and FOMA services has grown by approximately 770,000 in the most recent fiscal year to approximately 53.39 million as of March 31, 2008, which represents a market share of 52.0% including EMOBILE, a 2.4% decrease from the end of the previous fiscal year. We believe that our cellular subscriber growth has been attributable primarily to (i) nationwide growth and popularity of cellular services, (ii) the liberalization of the handset market and significant declines in handset prices and improved technology which have resulted in advanced, light-weight handsets, (iii) the expansion and enhancement of our networks, (iv) significant declines in tariffs and our competitive pricing, (v) our reputation for quality products and services and (vi) the introduction of new, value-added cellular services such as i-mode.

As a result of favorable sales of FOMA handsets such as the 904i series handsets, available since May 2007, the 704i series handsets, available since July 2007, the 905i series handsets, available since November 2007, and the 705i series handsets, available since January 2008, in September 2007 FOMA subscriptions exceeded 40 million. The number of subscriptions as of the end of March 2008 was approximately 43.95 million. Average monthly minutes of use (MOU) per FOMA subscriber for the year ended March 31, 2008 totaled 156 minutes.

Subscription growth for i-mode services in the four years ended March 31, 2008 was approximately 4 million. The DOCOMO cellular subscription numbers, including i-mode subscription numbers, for the years ended March 31, 2005, 2006, 2007 and 2008 are as follows:

		Year ended March 31,
		2005				2006				2007				2008
		(in thousands)
DOCOMO cellular subscriptions			48,825				51,144				52,621				53,388
mova subscriptions			37,324				27,680				17,092				9,438
FOMA subscriptions			11,501				23,463				35,529				43,949
i-mode subscriptions			44,021				46,360				47,574				47,993
i-mode subscriptions (FOMA)			11,353				22,914				34,052				41,213
i-mode subscriptions (mova)			32,667				23,446				13,522				6,780
DOCOMO estimated market share of total subscriptions			56.1%				55.7%				54.4%				52.0%
DOCOMO subscription growth rate			5.4%				4.7%				2.9%				1.5%
DOCOMO average monthly churn rate (1)			1.01%				0.77%				0.78%				0.80%

The number of cellular subscriptions for the year ended March 31, 2008 includes Communications Module Service subscriptions. These subscriptions were included in the number of cellular subscriptions beginning with the results for the six months ended September 30, 2004 in order to be consistent with the definition of subscribers applied by other mobile operators in Japan. Relevant items in the full-year results for the fiscal years ended March 31, 2004 have been modified by adding Communications Module Service Subscriptions to the previously announced numbers.

Revenues and Tariffs for Cellular Services

Our cellular revenues are generated primarily from basic monthly plan charges, usage charges for outgoing calls, revenues from incoming calls and charges for optional value-added services and features. We set our own rates in accordance with the Telecommunications Business Law and government guidelines, which currently allow wireless telecommunications operators to set their own tariffs without government approval.

Over the past few years, as the competition for subscribers has increased, tariff rates and monthly charges have been significantly reduced and certain other fees eliminated entirely. Currently, our cellular subscribers pay (i) an activation fee of ¥3,000, (ii) a fixed monthly plan charge based upon the “plan” chosen, (iii) usage or per call charges which vary according to duration and the particular plan chosen and (iv) additional monthly service fees for miscellaneous value-added services.

One of our basic strategies has been to focus on offering subscribers usage plans and discount services tailored to their usage patterns. As a result, we offer a variety of different monthly plans targeted at different segments of the market. These plans include basic usage plans for ordinary usage and heavy usage plans. In addition, almost all plans include a certain amount of prepaid usage (i.e., free minutes) per month for fixed rates. Prepaid amounts can be credited against telephone calls, packet transmissions, Push Talk (FOMA), video phone (FOMA), SMS (FOMA), short mail (mova), and international communications. Prepaid amounts are first allocated to voice minutes. To the extent that voice minutes do not exhaust the prepaid amount, it is then credited against i-mode use. Additionally, we offer various discounts, including discounts for families, long-term subscriber discounts and heavy-volume user discounts. The prepaid usage amount will not change even after the discounts are applied to monthly charges. We also provide “Charge Notice Service” which sends a notice via i-mode mail, mopera mail or Internet mail (a choice of up to two) when the total amount of charges for the month has exceeded the amount subscribers have set in advance (¥5,000 or over, in ¥1,000 increments).

Charges for 64 Kbps circuit switched data service, such as for FOMA video phones, are approximately 1.8 times that of standard voice charges. The fee structure for FOMA packet transmission services is based on the volume of data transmitted and varies between ¥0.015 per packet to ¥0.1 per packet, depending on which plan users choose (if no choice is made, ¥0.2 per packet). Charges for mova packet transmission are ¥0.3 per packet.

For families that have more than one subscription, we offer the “Fami Wari” discount service, which provides discounts both on basic monthly charges and on charges for communication between family members. The “Fami Wari” discount plan offers a 25% discount on basic monthly charges and a 30% discount for communication charges for domestic calls and videophone communications between family members.

We also offer the “Ichinen Discount”, which provides discounts on basic monthly charges according to the number of years of the subscription, starting with the second year. (The new discount plan is called “New Ichinen Discount”.)

In November 2003, we commenced a billing service that automatically carries over any unused prepaid amounts for up to two months. The rollover plan, called “Nikagetsu Kurikoshi”, applies to all mova and FOMA subscribers, including those using other discount services.

Effective February 2005, we commenced a service under which the benefits of our “Nikagetsu Kurikoshi” and “Fami Wari” services were combined, and unused free minutes under the “Nikagetsu Kurikoshi” service are available for sharing by subscribing family members. This enables family members to use their minutes without waste, and makes use of this service even more of a bargain. This service applies to all mova and FOMA subscribers.

In November 2005, we revised the billing plans for FOMA and mova voice services, making them easier for subscribers to understand. Under these new plans, the charges for FOMA and mova services were made uniform, “call charge classifications” were eliminated, and the unit for call charges was set at a uniform 30 seconds. Previous billing plans were complicated, as charges were different for FOMA and mova services and “call charge classifications” were used, under which charges were different depending on the time of the call, the type of phone the other party was using, and the distance between caller and receiver.

In addition, when a customer uses the new “Ichinen Discount” billing plan, beginning with the second year, the discount rate on basic monthly usage fees increases according to the number of years of the subscription, gradually increasing to a 25% discount after the 10th year.

In December 2005, we introduced the “Fami-Wari Wide”, a family discount plan, targeting children at junior high school age or younger, seniors aged 60 or older and “Hearty” discount subscribers, which combine with the Family Discounts to provide even greater savings. On March 1, 2006, we introduced “Fami-Wari Wide Limit”, under which subscribers can set a limit for amount of out-going use.

In August 2007, we introduced “Hitoridemo Discount 50”, a discount plan for subscribers who do not use the Family Discounts but have a single subscription. Under this plan, subscribers committing to a two-year contract will immediately receive a 50% discount on basic monthly charges. Also, we began offering “Fami-wari Max 50”, which also offers subscribers committing to a two-year contract an immediate 50% discount on basic monthly charges. In April 2008, for FOMA subscribers who have contracted for the “Fami-wari Max 50” service, communications among members of the same “Family Discount” group, which had been subject to a 30% discount, became free of charge, and the 30% discount for intra-group videophone communications was increased to a 60% discount.

In November 2007, in conjunction with the introduction of the new “Value Course” handset purchase method, we began offering the new “Value Plan”, which applies to subscribers who have chosen the “Value Course”. Under this plan, when a subscriber purchases a 905i series handset or any later model, that subscriber will be eligible to select the “Value Plan”, under which basic monthly charges (prior to application of other discounts) will be ¥1,680 lower (including tax) than standard plans.

In June 2007, for our corporate customers, we began offering the “Office Discount” plan. Corporate customers which have two to 10 DOCOMO mobile phone subscriptions under the same corporate name are eligible for a 25% discount on basic monthly charges and a 30% discount on intra-group communication charges. Corporate customers using this service who also subscribe to the “Nikagetsu Kurikoshi” plan can share their unused free minutes among group members.

In September 2007, for subscribers contracting under a corporate name who commit to a two-year subscription, we began offering a new discount service called “Office Discount Max 50”, which offers an immediate and uniform 50% discount on basic monthly charges.

In June 2008, we expanded discounts for corporate customers subscribing to FOMA service with the “Office Discount” and “Office Discount Max 50” plans and for corporate customers who have been subscribing to DOCOMO services for at least ten years and are currently on the “Office Discount” and “Ichinen Discount” or “New Ichinen Discount” plans. Under the expanded discounts, domestic calls among “Office Discount” group employees are free (formerly discounted by 30%), 24 hours a day, and videophone communication charges are discounted by 60% (formerly discounted by 30%).

In June 2005, we established new rate plans primarily for corporate customers who used FOMA data communication devices. Thereafter, to make data communications easier for customers, we implemented new plans and communication charge reductions and expanded available free minutes. In October 2007, so that our subscribers could engage in data communications without worrying over communication charges, we established two flat-rate discount plans, “Flat-rate Data Plan HIGH-SPEED”, and in conjunction with the termination of PHS service, “Flat-rate Data Plan 64K,” which can easily serve as a service replacing “@FreeD^®”, the PHS flat-rate data communication service. “Flat-rate Data Plan HIGH-SPEED” is capable of data communications at speeds of up to 7.2Mbps for downlink, and provides a better environment for mobile data communications.

In March 2008, in conjunction with the introduction of the new “Value Course” handset purchase method for FOMA data transmission handsets, we began offering a new rate plan “Value Plan”, which applies to subscribers who have chosen the “Value Course”. Under this plan, when a subscriber purchases a FOMA N2502 HIGH-SPEED handset or later model, that subscriber will be eligible to select the “Value Plan”, under which basic monthly charges (prior to application of other discounts) will be ¥735 lower (tax included) than in standard data plans. In September 2008, for subscribers of “Flat-rate Data Plan HIGH-SPEED” and “Flat-rate Data Plan 64K”, we plan to launch a new service called “2 Year Waribiki” (tentative name), which allows subscribers who commit to a two-year contract to immediately receive a discount of up to ¥3,780 on basic monthly charges.

In June 2008, with the goal of providing an environment where customers can easily use our cellular phones, in order to help the disabled be more active participants in society, we revised the “Hearty Discount” rate for basic monthly and other charges.

We believe that our variety of easy-to-understand plans, prices and discounts has helped us remain competitive in retaining existing subscribers and attracting new subscribers.

i-mode Revenues and Fees

i-mode users are charged according to the volume of data they transmit and not for the length of time they are online or the distance over which the data are transmitted. The use of i-mode incurs a fee in addition to the standard monthly charges for FOMA, mova, and voice services. With regards to charges for the additional i-mode functions, so that subscribers can more easily use their mobile phones to connect to the Internet, we have provided Internet connection services at monthly charges that are lower than those of other carriers. However, the cost of providing services has increased because of the improved convenience resulting from the enhanced web pages (viewable for free) that introduce new services and content and explain pricing plans, anti-spam measures and other enhanced functionality to enable peace of mind and safety, and facility enhancement to address the increase in data communication traffic in the wake of the popularity of services that distribute video, music and other large files. In such an environment, we have made an effort to achieve greater efficiency and reduced costs, but to be able to provide even more superior i-mode services going forward, starting in June 2008, we raised the basic monthly charges for i-mode services from ¥200 to ¥300. The basic charge for one packet (128 bytes) of i-mode packet transmission varies according to the packet billing plan selected by the user, but is priced between ¥0.015 and ¥0.2 per packet. The basic charge for mova users to send data transmissions is equal to ¥0.3 per packet (128 bytes). Therefore, a short e-mail of about 20 full characters can be sent for as little as ¥1 and a longer e-mail of 250 full characters would be approximately ¥5. Also, for new Java-related services, users are charged according to the size of the application to download various applications such as games, stock charts, maps and cartoons.

In addition to transmission charges, there are also information charges payable to content providers when subscribers use certain i-mode sites. For example, access to the Nikkei Money & Sports service and CNN, which provides world news, each costs ¥300 per month. We bill subscribers for content provider fees together with communication charges, and receive from the providers a commission of the information charges for our billing and collection services.

In June 2004, we introduced a new flat rate i-mode packet transmission service called “Pake-hodai”, which offers unlimited access to i-mode Internet service and i-mode mail for a flat monthly charge of ¥3,900, for users of our FOMA i-mode service. At the start of this service, only subscribers of some high-call plans were eligible to subscribe to the plan. However, we began offering “Pake-hodai” with all new FOMA (voice) billing plans on March 1, 2006.

By introducing this plan, we added value for our users and expanded use of miscellaneous i-mode contents by freeing customers from concerns about their monthly bill. The charges for packet transmissions other than i-mode communications in Japan (such as browsing the web via devices connected to a 3G handset) on the “Pake-hodai” plan have been set at ¥0.02/packet.

In March 2007, we launched a new flat rate i-mode packet transmission service called “Pake-hodai full,” which provides FOMA i-mode subscribers with, in addition to i-mode services, full-browser viewing of PC websites and videos for a flat monthly fee. In May 2007, subscribers to flat-rate i-mode packet transmission services (“Pake-hodai” and “Pake-hodai full”) exceeded 10 million. In April 2007, in addition to FOMA M1000, we also launched “Biz-hodai,” a flat rate non-i-mode domestic packet communications service for the handsets equipped with the Microsoft Windows Mobile operating system (OS).

Cellular System Usage

We track subscriber usage of our cellular services with two measures, average MOU and average monthly revenue per unit (ARPU). MOU measures the average amount of connection time per month per unit among our subscribers. ARPU is used to measure average monthly operating revenues attributable to designated services on a per unit basis. ARPU is calculated by dividing various revenue items included in operating revenues from our wireless services, such as monthly charges, voice communication charges and packet communication charges from designated services that are charged consistently each month, by the number of active subscriptions to the relevant services. Accordingly, the calculation of ARPU excludes revenues that are not representative of monthly average usage such as activation fees. We believe that our ARPU figures provide useful information to analyze the trend of monthly average usage of our subscribers over time and the impacts of changes in our billing arrangements. Additional discussions of MOU and ARPU are included in Item 5.A. of this annual report.

MOU (FOMA+mova) decreased to 138 minutes per month for the year ended March 31, 2008 from 144 minutes in the prior fiscal year. ARPU (FOMA+mova) decreased to ¥6,360 in the year ended March 31, 2008 from ¥6,700 in the prior fiscal year.

Aggregate ARPU (FOMA + mova) continues to decline moderately because of rate reductions and shifts in usage. During the period from the beginning of the fiscal year ended March 2007 to the end of the fiscal year ended March 2008, voice ARPU declined while data ARPU increased slightly. The reasons for the decline in voice ARPU include rate reductions (expansion of basic charge discounts as a result of expansion of family discounts, the introduction of new sales models, and the expansion of Ichinen Discount) and changes in customer usage patterns (declining MOU and optimization of rate plans). Use of data services such as i-mode, however, is increasing, and the data ARPU is increasing steadily.

The following tables set forth selected information concerning MOU and ARPU data for our wireless services in three categories, (FOMA + mova), (FOMA) and (mova):⁽¹⁾

MOU and APRU (FOMA + mova)

		Year ended March 31,
		2006				2007				2008
MOU (FOMA+mova)			149				144				138
Aggregate ARPU (FOMA+mova)		¥	6,910			¥	6,700			¥	6,360
Voice ARPU (FOMA+mova)			5,030				4,690				4,160
Packet ARPU (FOMA+mova)			1,880				2,010				2,200
i-mode ARPU (FOMA+mova)			1,870				1,990				2,170

Aggregate ARPU (FOMA+mova): Voice ARPU (FOMA+mova) + Packet ARPU (FOMA+mova)

Voice ARPU (FOMA+mova) : Voice ARPU (FOMA+mova) Related Revenues (monthly charges, voice transmission charges) / No. of active cellular phone subscriptions (FOMA+mova)

Packet ARPU (FOMA+mova) : {Packet ARPU (FOMA) Related Revenues (monthly charges, packet transmission charges)+ i-mode ARPU (mova) Related Revenues (monthly charges, packet transmission charges)}/ No. of active cellular phone subscriptions (FOMA+mova)

i-mode ARPU (FOMA+mova)⁽²⁾ : i-mode ARPU (FOMA+mova) Related Revenues (monthly charges, packet transmission charges) / No. of active cellular phone subscriptions (FOMA+mova)

No. of active subscriptions used in ARPU/MOU calculations are as follows:

		FY Results : Sum of No. of subscriptions* for each month from April to March
*		subscriptions = (No. of subscriptions at the end of previous month + No. of subscriptions at the end of current month) / 2

MOU and ARPU (FOMA)

		Year ended March 31,
		2006				2007				2008
MOU (FOMA)			202				175				156
Aggregate ARPU (FOMA)		¥	8,700			¥	7,860			¥	6,990
Voice ARPU (FOMA)			5,680				5,070				4,340
Packet ARPU (FOMA)			3,020				2,790				2,650
i-mode ARPU (FOMA)			2,980				2,750				2,610

Aggregate ARPU (FOMA) : Voice ARPU (FOMA) + Packet ARPU (FOMA)

Voice ARPU (FOMA): Voice ARPU (FOMA) Related Revenues (monthly charges, voice transmission charges) / No. of active cellular phone subscriptions (FOMA)

Packet ARPU (FOMA): Packet ARPU (FOMA) Related Revenues (monthly charges, packet transmission charges) / No. of active cellular phone subscriptions (FOMA)

i-mode ARPU (FOMA)⁽²⁾ : i-mode ARPU (FOMA) Related Revenues (monthly charges, packet transmission charges) / No. of active cellular phone subscriptions (FOMA)

No. of active subscriptions used in ARPU/MOU calculations are as follows:

		FY Results : Sum of No. of subscriptions* for each month from April to March
*		subscriptions = (No. of subscriptions at the end of previous month + No. of subscriptions at the end of current month) / 2

MOU and ARPU (mova)

		Year ended March 31,
		2006				2007				2008
MOU (mova)			122				104				82
Aggregate ARPU (mova)		¥	5,970			¥	5,180			¥	4,340
Voice ARPU (mova)			4,680				4,190				3,590
i-mode ARPU (mova)			1,290				990				750

Aggregate ARPU (mova) : Voice ARPU (mova) + i-mode ARPU (mova)

Voice ARPU (mova) : Voice ARPU (mova) Related Revenues (monthly charges, voice transmission charges) / No. of active cellular phone subscriptions (mova)

i-mode ARPU (mova)⁽²⁾ : i-mode ARPU (mova) Related Revenues (monthly charges, packet transmission charges) / No. of active cellular phone subscriptions (mova)

No. of active subscriptions used in ARPU/MOU calculations are as follows:

		FY Results : Sum of No. of subscriptions* for each month from April to March
*		subscriptions = (No. of subscriptions at the end of previous month + No. of subscriptions at the end of current month) / 2

PHS Services

Our PHS (Personal Handyphone System) services were wireless voice and data transmission services similar to our cellular services but offered using different technology and a different network. PHS was originally introduced by the NTT Personal Group in July 1995. We took over the PHS business from the NTT Personal Group in December 1998. Since that time, we implemented a variety of strategies to improve the performance of our PHS business. However, with the subsequent popularity of inexpensive ADSL and optical fiber fixed-line flat rate data communication services, the introduction of flat-rate packet transmission services using mobile phones, and the increasingly fast data transfer rates, the business environment changed rapidly, and on April 30, 2005, we stopped accepting new subscriptions to PHS services, and we terminated PHS services on January 7, 2008.

Number of PHS Subscriptions

At the end of the year ended March 31, 1996, the NTT Personal Group had approximately 0.38 million subscriptions. Initially, with the rapid expansion of service areas and the introduction of inexpensive handsets and billing rates, the number of NTT Personal Group PHS subscriptions reached approximately 2.12 million in September 1997. From September 1997 to March 31, 2000, PHS subscriptions declined to approximately 1.35 million. PHS subscriptions increased to approximately 1.92 million as of March 31, 2002, but fell to approximately 1.69 million as of March 31, 2003, 1.59 million as of March 31, 2004, 1.31 million as of March 31, 2005, 0.77 million as of March 31, 2006 and 0.45 million as of March 31, 2007. As of December 2007, the number of PHS subscriptions was 0.155 million.

Other Mobile Multimedia Services

We have focused extensively on our initiative to develop the mobile multimedia and data communications markets. As part of these efforts, we have been offering a wide variety of data services such as packet transmission at speeds up to 28.8 Kbps for i-mode and DoPa services, 64K data service on the PHS platform and data communications at speeds up to 384 Kbps on FOMA and 7.2 Mbps on FOMA HIGH-SPEED. Our client authentication service ensures a highly secure individual authentication to suit a variety of users of the mobile Internet.

As part of our endeavor to promote mobile multimedia services, we began sales of the DoPa Ubiquitous Module in July 2004 and the FOMA Ubiquitous Module in December 2005 to address the increase in machine-to-machine services. We expect that incorporation of these modules will lead to a broad range of uses such as automobile fleet management, wireless credit card transaction systems, and systems enabling automatic inventory check between vending machines and service centers. These modules make contributions to our strategy of broadening the scope of mobile communications. Ubiquitous Modules are used mainly in person-to-machine and machine-to-machine communications. We offer a Ubiquitous Plan for FOMA service and DoPa Service for PDC, and we offer low-rate services for users with low-traffic needs. As of the end of March 2008, the number of DoPa service subscriptions was 0.73 million and the number of Ubiquitous Plan subscriptions was 0.7 million. For the second generation communication services, DoPa Single Packet Service, we decided to stop accepting new subscriptions in September 2008, to concentrate our managerial resources on FOMA services (third generation communication services).

We provide Business mopera Access Series services to corporate customers, to enable them to link office information systems outside the workplace. “Business mopera Access Pro” provides extremely high-security access to corporate LANs from remote terminals such as notebook PCs and PDAs via closed networks. This service makes it possible under a contract for a single dedicated line to provide access to office information systems through wireless networks such as FOMA, mova, DoPa, i-mode and Wide Star (satellite packet communication only).

In June 2005, we started “mopera U” service, which enables FOMA customers to access the Internet from public wireless LAN service areas, from overseas (using international roaming connections) and from fixed-line broadband circuits at home. “mopera U” service provides users with diversified access options as well as enhanced security features such as web compression, packet filtering, and transmission domain authentication to prevent spam mails. Furthermore, the FOMA M1000, a PDA type of FOMA terminal introduced in July 2005, enables users to exchange e-mails for PC when they are away from home or office and provide unique features suited for mobile environments, such as the ability to automatically receive emails with attachments, in order to respond to users’ diversified needs for the Internet and other data communications services and seamless network access.

In August 2006, we introduced the “Business mopera ANSHIN Manager,” which enables cellular phone settings and control to be carried out remotely, and we expanded the lineup for “Business mopera”, the network service for corporate customers. In January 2007, we added the “Browser Restriction Function” and “Global Broadcast Function”. In September 2007, we expanded the number of URLs that can be subject to the Browser Restriction Function, and in March 2008 we added functions that enable sub-group settings and settings for a common administrator.

In October 2006, we launched the “OFFICEED,” an internal communications service for corporate customers that uses an In-building Mobile Communications System (IMCS) to provide free voice communications among registered FOMA handsets within the IMCS service area. With this service, by installing an IMCS and additional dedicated equipment, customers can use their existing FOMA handsets for free voice communications among registered members within the IMCS service area. The service makes use of an IMCS and existing FOMA handsets to reduce communications expenses. In May 2007, as part of the “OFFICEED” service menu, we launched the “OFFICEED-PBX Connection Service”, which achieves communications between FOMA handsets and internal telephones lines by connecting “OFFICEED” and the PBX, enabling FOMA handsets to serve as cordless internal telephones.

We also launched the Business mopera IP Centrex service in November 2006. This service for corporate customers enables users to make internal or outbound IP telephony calls via IP Centrex devices on DOCOMO networks without the need for an in-house IP-PBX. The N900iL and N902i FOMA and wireless LAN compatible handsets can be used as an extension phone for internal calls, as an IP phone (with a 050 number) for external calls, and as a FOMA-compatible mobile phone (with a 090 number) when outside the office, allowing users to access a number of different communications services from a single handset. Business customers that introduce this service will not incur expenses for installation, operation, and maintenance of PBX and other equipment and can lower their communications expenses by using low-cost IP telephony voice networks and eliminating fees for internal calls, including calls made between different offices. In April 2007, we began providing new plans and expanded functions, including soft phone and fixed IP phone compatibility.

In addition, in June 2008, we launched “IP Centrex One Number”, a Fixed Mobile Convergence (“FMC”) service which enables users to make and receive calls with a single number (090/080) in both FOMA area and Office area (IP Centrex area).

We offer a public wireless LAN service called “Mzone”, and started “U ‘Public Wireless LAN’ Course” as an optional service of “mopera U”. Customers in Mzone areas (DOCOMO Public Wireless areas) such as airports, train stations are able to send and receive data at high speeds of up to 54Mbps using notebook PCs with wi-fi, Smart Phones, PDAs, or cellular game devices. In October 2007, the monthly fee for the “U ‘Public Wireless LAN’ Course” was lowered to ¥315 yen. There were approximately 6,200 access points as of the end of March 2008, and we plan to further expand the coverage in the future according to the needs of our customers. Furthermore, we currently offer roaming service domestically through “BB Mobile Point” and “Airport Net” (Narita Airport), and internationally through arrangements with iPass, TeliaSonera, SingTel and Deutsche Telecom. Through these endeavors, we are aiming to provide enhanced convenience to customers by enabling public wireless LAN service over a broad area both in Japan and overseas.

Other Business Activities

Efforts towards expansion of the credit business

On April 27, 2005, DOCOMO, Sumitomo Mitsui Financial Group, Inc. (SMFG), Sumitomo Mitsui Card Co., Ltd. and Sumitomo Mitsui Banking Corporation (SMBC) jointly announced that we agreed to form a strategic, business and capital alliance for the launch of a credit-payment service using DOCOMO Osaifu-Keitai phones equipped with smart-card functions for cashless payments. As part of the tie-up, we acquired 34% of Sumitomo Mitsui Card’s common shares for approximately ¥98.7 billion, including shares newly issued by Sumitomo Mitsui Card, the pioneer in the issuance of the Visa Card in Japan and a leader in the domestic credit card industry.

On December 1, 2005, we launched our new iD credit card brand that enables users to make credit card payments using the Osaifu-Keitai service.

The credit brand “iD” is a settlement platform that enables a user, simply by waving the Osaifu-Keitai in front of a specialized terminal installed in stores (“reader/writer”), to make a speedy credit transaction without the need for signing a credit card slip. It can be used for both small and large purchases, and comes with a number of security features to prevent unauthorized use, so that it can be used with peace of mind and safety.

We are providing the iD brand as an open model to credit card issuers, who can offer card members credit services combining conventional plastic cards and use of iD with the Osaifu-Keitai.

On March 6, 2006, we announced an alliance with the credit card companies Credit Saison Co., Ltd. (“Credit Saison”) and UC Card Co., Ltd. (“UC Card”), and with Mizuho Bank, Ltd. (“Mizuho Bank”), whose client base is centered on individual retail customers. Following the announcement of this alliance, in March 2006 we acquired Mizuho Bank’s stake in UC Card, which was approximately 18% of UC Card’s outstanding shares. UC Card began handling transactions with iD member merchants in October 2006, and in November 2006 Mizuho Bank launched services that enable iD services to be used with credit cards it issues. Starting in November 2006, Aeon Credit Service began issuing iD and in February 2007, cash registers in Aeon stores in the Kanto region and Niigata began handling iD transactions. In March 2007, LAWSON, Inc. (“LAWSON”) began accepting iD transactions at all its stores and also began issuing the Lawson Pass for iD. In April 2007, iD became available for use for Internet transactions. In July 2007, FamilyMart, Co., Ltd. (“FamilyMart”) began accepting iD at all its locations; in August 2007 Orient Corporation began issuing iD; in October 2007, McDonald’s Holdings Company (Japan), Ltd. (“McDonald’s”) began accepting iD at some stores; in February 2008, Life began issuing iD; and in March 2008, efforts to render registers at Aeon stores nationwide iD-compatible were completed. Going forward, we intend to continue providing iD to credit card issuers as an open model.

Our aim for iD is to expand the range of situations in which the Osaifu-Keitai is used, and our goal is for mobile handsets to become “Seikatsu Keitai”, that is, even more fully integrated into the daily lives of our subscribers. In April 2006, as the issuer of credit using iD, we launched “DCMX mini” and “DCMX” as credit services for small purchases. In April 2007, we further expanded our menu of credit services tailored to customers’ spending styles, with the launch of “DCMX GOLD”, which allows for purchases in higher amounts and provides a higher level of customer benefits and rewards. In addition, in June 2007, in addition to the DCMX Visa card that we had offered from the commencement of services, we commenced issue of the DCMX MasterCard, allowing customers, when they sign up for service, to choose between a card from Visa and MasterCard.

As of the end of March 2008, the number of contracts had exceeded 5.64 million.

By developing these credit card businesses, we aim to expand demand for credit services in Japan, and, as we do so, to capture a portion of this market, leading to growth in our corporate value.

Investments and Affiliations in Japan

Tower Records

In November 2005, we formed a business tie-up with Tower Records Japan Inc. (“Tower Records”) by acquiring approximately 42% of Tower Records’ common stock through subscription to new shares and other means at a total cost of approximately ¥12.8 billion. Tower Records offers ”iD” credit payment service using Osaifu-Keitai. In November 2007, Internet purchases using the electronic money “iD” with our Osaifu-Keitai became possible at Tower Records’ mobile site “TOWER MOBILE”.

Rakuten Auction

In October 2005, we entered into an agreement with Rakuten, Inc. (“Rakuten”), a leading Japanese e-commerce company, to form a business and capital alliance to provide Internet auction services over mobile phones and PCs, enabling Rakuten to expand its auction business through mobile Internet phones while enabling us to diversify our revenue streams through a service not tied to communications traffic.

Under the agreement, Rakuten spun off a part of its Internet auction business and established a new company, Rakuten Auction, Inc. (“Rakuten Auction”), in December 2005. We acquired a total of 40% of the common stock of Rakuten Auction for approximately ¥4.2 billion through a third-party allotment of Rakuten Auction’s shares and a transfer of Rakuten Auction’s shares from Rakuten.

Fuji Television

In January 2006, we acquired 77,000 shares of Fuji Television Network, Inc. (“Fuji Television”), or approximately 2.6% of the total issued shares of Fuji Television, for approximately ¥20.7 billion. The distance between communications and broadcasting has been rapidly shrinking, as evidenced by the April 1, 2006 launch of “One Seg”, one-segment terrestrial digital broadcasting. By linking communications and broadcasting through this tie-up with Fuji Television, the two companies will be able to share their know-how in their respective businesses, and build a more powerful partnership.

Nippon Television

In February 2006, we entered into an agreement with Nippon Television Network Corporation (“NTV”) on a business tie-up for contents development. Pursuant to the agreement, we formed a seven-year limited liability partnership, D.N. dream partners LLP, on April 3, 2006, with each party bringing ¥5 billion in capital. This LLP is investing in and developing content such as TV programs with a view to making such content available to mobile phones.

We are also jointly studying new business opportunities, including one-segment terrestrial digital broadcasting and i-mode service as well as content developed by NTV for our conventional services such as V-Live video streaming and i-motion video clip distribution services. We plan to hold NTV entertainment events with special activities for users of “Osaifu-Keitai” phones equipped with IC chips.

In January 2007, we acquired 760,500 shares of NTV, representing 3.0% of total issued shares. We are collaborating with NTV on a number of projects with the goal of creating new markets through collaboration between communications and broadcasting entities and providing attractive services to customers. In addition, sales of handsets compatible with One Seg, a service providing terrestrial digital broadcast and mobile communications services, are strong, and as the market expands, the gap between communications and broadcasting will continue to narrow. Under these circumstances, we will further strengthen the partnership with Nippon Television by this share acquisition.

Multimedia Broadcasting Planning LLC

In November 2006, we reached an agreement with Fuji Television Network, Inc., ITOCHU Corporation, SKY Perfect Communications, Inc., and Nippon Broadcasting System, Inc. to establish a limited liability company named Multimedia Broadcasting Planning LLC (MMBP). The purpose of the new company is to research new multimedia services applying the Integrated Services Digital Broadcasting—Terrestrial (ISDB-T) protocol developed in Japan and to publicize its usefulness and thereby encourage the allocation of bandwidth for mobile multimedia broadcasting employing ISDB-T following the termination of terrestrial analog broadcasting. The five companies, each of which has an established track record and know-how in its areas of expertise, plan to combine their knowledge through MMBP and provide diverse programming through the effective use of this bandwidth to create new multimedia services that can contribute to the enhanced use of information by the public. ISDB-T, recognized around the world as a high-quality protocol, has already been commercialized for use for terrestrial digital broadcasting in Japan and will be adopted in Brazil and other countries.

Sumitomo Mitsui Card

On April 27, 2005, we entered into an agreement with Sumitomo Mitsui Financial Group, Inc., Sumitomo Mitsui Card Co., Ltd. (“Sumitomo Mitsui Card”) and Sumitomo Mitsui Banking Corporation (“SMBC”) to form a strategic business and capital alliance for the launch of a credit-payment service using our Osaifu-Keitai phones equipped with smart-card functions for cashless payments. As part of the tie-up, we acquired 34% of the common stock of Sumitomo Mitsui Card for approximately ¥98.7 billion, including shares newly issued by Sumitomo Mitsui Card. Starting in December 2005, Sumitomo Mitsui Card began issuing the Sumitomo Mitsui Card for iD.

UC Card

In March 2006, we entered into a comprehensive agreement with UC Card Co., Ltd. (“UC Card”) and Mizuho Bank, Ltd. (“Mizuho Bank”), to promote our iD brand card business. Under the agreement, Mizuho Bank transferred its 18% stake in UC Card to us for approximately ¥1 billion. While UC Card is to expand acceptance of our iD brand at its networked participating stores, Mizuho Bank, in cooperation with Credit Saison, is to provide iD services to members of its Mizuho Mileage Club (“MMC”) Card, enabling MMC members to make credit card payments by using our iD service through their mobile phones.

LAWSON

In March 2006, we reached an agreement with LAWSON, Inc. (“LAWSON”) to form a business tie-up through capital participation in LAWSON by DOCOMO, with the intention of providing greater convenience to customers. Through the tie-up, DOCOMO and LAWSON will make use of their respective customer bases and expertise in the mobile communications and convenience store businesses to contribute to enriching the lives of customers by providing new value-added services. Under the tie-up, LAWSON introduced iD credit card payment services and ToruCa information provisions services at all LAWSON stores.

Pursuant to this capital alliance, in April 2006 we acquired 2,092,000 shares of LAWSON, which corresponds to 2% of total issued shares, for approximately ¥9 billion.

FamilyMart

In May 2007, we reached an agreement with FamilyMart, Co., Ltd. (“FamilyMart”) to form a business tie-up and for capital participation in FamilyMart, with the intention of providing greater convenience to customers. In June 2007, pursuant to this tie-up, we purchased 2,930,500 shares of FamilyMart common shares (treasury stock), constituting 3% of its outstanding shares, for roughly ¥9 billion. Through the tie-up, DOCOMO and FamilyMart will make use of their respective customer bases, brands, business know-how and infrastructure to provide new services having greater added value and convenience that are closely tied to the daily lives of customers.

CA MOBILE

In March 2006, we concluded an agreement with CA MOBILE, Ltd. (“CA MOBILE”) for collaboration in the mobile advertising market, a rapidly expanding field, and for DOCOMO to acquire approximately 10% of CA MOBILE’s shares for ¥1.8 billion. CA MOBILE is a leading player in the mobile advertising industry and boasts considerable expertise as well as extensive contacts with advertisers. Under the tie-up, the two companies will investigate a wide range of cooperative business structures using their respective expertise and resources with the objective of creating synergistic effects and further developing the mobile advertising market as a whole.

ACCESS

In December 2005, we completed an acquisition of 6,356 newly allocated shares of ACCESS CO., LTD. (“ACCESS”), a developer of software for mobile phones, for approximately ¥15 billion, raising our share of ACCESS from 7.12% to 11.63%. ACCESS’s browser is widely used in our 3G FOMA handsets and we aim to further strengthen our relationship through this investment to support the development of browser technology.

Aplix

In December 2005, we completed an acquisition of 15,000 newly allocated shares, or 14.98%, of Aplix Corporation (“Aplix”), a software company which develops middleware for mobile phones and PCs, for approximately ¥13 billion, raising our group’s total stake in Aplix to 17.91%. Our relationship with Aplix was established in connection with the development of DoJa/Java platforms, which have made a number of Java products adaptable to our 3G FOMA handsets, and we aim to form further technical tie-ups in handset middleware centered on Java technology.

FueTrek

In May 2006, we formed a business and capital tie-up with FueTrek Co., Ltd. (“FueTrek”). FueTrek develops, designs, manufactures, and sells large-scale integrated circuits and semiconductors and develops and licenses sound source and acoustic technologies. Under the capital tie-up, we acquired 1,420 shares of FueTrek (representing 6.19% of total issued shares. FueTrek’s sound source and acoustic products are used in many FOMA terminals, and with this tie-up, the partnership between us and FueTrek has been strengthened and we can look forward to improved acoustic functions in our handsets and higher development efficiency as well as greater collaboration with respect to acoustic technologies overall.

Kadokawa Group Holdings

In November 2006, we concluded an agreement for a comprehensive business alliance with Kadokawa Group Holdings, Inc. (“Kadokawa GHD”) and other Kadokawa Group companies (Kadokawa Shoten Publishing Co., Ltd., Kadokawa Herald Pictures, Inc., Kadokawa Mobile, Inc., Herald Enterprise, Inc., and Kadokawa Media House Inc.) to develop and expand the market for video programming for mobile phones. In conjunction with this agreement, we also agreed to invest in Kadokawa GHD, and in December 2006 acquired 1,031,000 ordinary shares of Kadokawa GHD, representing 3.78% of total issued shares, through a third-party allocation of new shares at a cost of approximately ¥4 billion. With the expansion of high-speed communications networks such as HSDPA, the market for video programming for mobile phones is expected to grow, and an alliance between DOCOMO, which has business expertise and a solid customer base developed through the i-mode service business, and the Kadokawa Group, which engages in comprehensive programming development as a mega-content provider for various media ranging from publishing to film, can be used to distribute high-quality video programming and nurture and expand the market for mobile phone video programming. In addition, the capital tie-up will also serve to strengthen cooperation between the companies, and a variety of collaborative measures will be implemented.

McDonald’s

In February 2007, we agreed to establish a new company with McDonald’s Holdings Company (Japan), Ltd. (“McDonald’s”) to jointly promote e-marketing with a focus on Osaifu-Keitai. In conjunction with this tie-up, we jointly formed a new company, The JV, Ltd. (“JV”), in July 2007 to plan and implement promotional activities targeting members of McDonald’s new membership club. This new company, which merges the two companies’ respective customer bases, brands, and business know-how in the restaurant and mobile phone businesses, will provide customers with “Value”, “Convenience”, and “Fun”, by proposing new lifestyles to be achieved through e-marketing focusing on the Osaifu-Keitai.

ZENRIN DataCom

In June 2007, we reached an agreement with ZENRIN DataCom Co., Ltd. (“ZENRIN DataCom”), a subsidiary of ZENRIN Co., Ltd., and acquired 1,700 shares of common stock of ZENRIN DataCom, representing 10.27% of total issued shares, through a third-party allocation of new shares. Through this tie-up, DOCOMO, which has business expertise and technology developed through the i-mode service business, and ZENRIN DataCom, which has a high-quality cartographic database of ZENRIN and a technology to distribute advanced map data, will work together to promote and expand map services such as the distribution of map information applications for mobile phones and services linked with the location information of the mobile phone, customizing to the diversifying needs of each customer.

CXD NEXT

In July 2007, NTT DOCOMO and Casio Computer Co., Ltd. (“Casio”) established a joint venture called CXD NEXT Co., Ltd., to provide electronic settlement-related services for credit services (primarily “iD”) and to provide store support services to enable proprietors to manage and analyze sale information. Making use of Casio’s know-how in store support services, which Casio, as a leading manufacturer of electronic registers, has cultivated through the development and sale of a variety of models, and DOCOMO’s know-how in electronic settlement, which it cultivated through development of the mobile credit service “iD”, CXD NEXT will develop new businesses using Internet-based cash registers that focus on small-to-mid-sized companies with multiple retail outlets, and will seek to improve Casio’s sales of electronic registers and expand the environments for use of “iD” and the Osaifu-Keitai.

ACCA Wireless

In August 2007, NTT DOCOMO and ACCA Networks Co., Ltd. (“ACCA”) reached agreement on investment in ACCA Wireless Co., Ltd. (“ACCA Wireless”), and a strategic alliance. ACCA Wireless, which was established as a planning company for the purpose of obtaining a license for ACCA as an operator of a 2.5GHz broadband wireless access system (“BWA”) using mobile WiMAX (“WiMAX”), made application to the Ministry of Internal Affairs and Communications in October 2007 for a 2.5GHz BWA license using WiMAX, but because it was not able to obtain this license, the partnership was dissolved in December 2007.

Google

In January 2008, NTT DOCOMO and Google Inc. (“Google”) reached agreement on forming a partnership that includes providing search services, search-related advertisements, and applications for use by i-mode users. By bringing together the services of Google, the world’s largest search engine, and DOCOMO’s mobile Internet service “i-mode”, used by roughly 48 million customers, the two companies aim to provide greater convenience to customers using their services, and to stimulate the Japanese mobile Internet market by developing innovative services. Going forward, we will make Google’s map service a standard feature on i-mode compatible handsets, or otherwise enable Google services to be used on i-mode handsets, and we will work together with Google to provide our customers with even greater convenience across a wide range of mobile Internet services.

ACRODEA

In February 2008, we reached agreement with Acrodea, Inc. (“Acrodea”), which develops and sells middleware for mobile phones, to subscribe to Acrodea shares through a third party allotment. In addition, DOCOMO requested that JAIC Advanced-Tech No. 1 Venture Capital Investment, L. P. of which DOCOMO is a limited partner, transfer its shares in Acrodea to DOCOMO. Prior to this, DOCOMO and Acrodea had built an amicable cooperative relationship, and with this investment, the relationship with Acrodea will be further strengthened, and going forward, we will promote greater efficiency and stability in DOCOMO handsets loaded with Acrodea products.

Quickcast Services (Paging Services)

We used to offer paging services under the service name Quickcast, but on June 30, 2004, we stopped accepting applications for new subscriptions, and on March 31, 2007, we terminated the service.

Satellite Telephone Services

We provide satellite telephone services for communications in case of emergencies in mountainous areas and aboard ships. The service area covers the territory of Japan and its surrounding waters of roughly up to 200 nautical miles from the mainland. Currently the satellite mobile communications network uses two communications satellites, N-STARc and N-STARd. Satellite telephone services can be used for voice, fax, and packet transmission. We had approximately 41,000 subscriptions to this service as of March 31, 2008. The service can be used for packet transmission (maximum 64 Kbps downlink and 4.8 Kbps uplink) and high-speed data communications, and a variety of communications services are offered including Internet connectivity and telemetering.

In February 2008, we lowered some of the basic charges for satellite packet transmission and charges for dual contracts (packet, circuit switching). In conjunction with the packet fee decrease, expanded use for low-volume data and use for data transmission at low costs for uses other than voice communications at time of disaster became possible. In addition, as a tool for expanding use of packet communications, we developed, and provided at no cost, image transmission software that enables easy transmission of conditions at time of disaster.

Global Businesses

International Dialing Services and International Roaming Services

In October 2003, we enabled 3G FOMA videophones to make international videophone calls and 64Kbps transmissions to the UK using “WORLD CALL”, our international dialing service. As of March 31, 2008, FOMA subscribers were able to make international videophone calls via our 3G network to 3G subscribers in 45 countries and regions, including the UK, Hong Kong, Singapore, and Australia.

With regard to our international roaming services, in May 2003 we added services called WORLD WALKER-PLUS and WORLD WALKER G-CARD, which have geographical coverage similar to that of WORLD WING, to supplement WORLD WALKER, the international roaming service for mova subscribers. In the following month, we launched WORLD WING as an international roaming service for FOMA subscribers. With this service, FOMA subscribers, when traveling overseas, by inserting a FOMA UIM chip in a GSM handset, can make and receive calls using their regular FOMA telephone number. In December 2004, we launched an integrated handset that is compatible with both 3G and GSM. In June 2006, WORLD WALKER-PLUS and WORLD WALKER G-CARD were combined into a single brand called WORLD WING. As of March 31, 2008, WORLD WING subscribers can make and receive calls using their regular FOMA mobile number in 157 countries and regions across the world.

We launched international packet roaming services in December 2004, enabling WORLD WING subscribers to access i-mode packet transmission in 114 countries and regions as of March 31, 2008. In addition, in February 2005, we launched international SMS for FOMA subscribers, and in July 2005 we started international MMS (multimedia messaging service). In June 2006, we introduced 3G roaming compatible handsets which are compatible with overseas 3G networks. Through the addition of these handsets, WORLD WING users are able to make and receive phone calls, and access i-mode packet transmission with the same FOMA phone number by using 3G roaming compatible handsets in 3G networks of 56 countries and regions as of March 31, 2008.

International Investments and Alliances and Licensing Agreements

We make investments in and/or enter into agreements with overseas mobile network operators and businesses providing mobile phone related services with the long-term aim of securing growth and revenue opportunities and strengthening our global competitiveness. We plan to leverage our expertise and experience in the Japanese mobile telecommunications market by assisting mobile network operators who are our partners abroad to develop and promote their 3G platform based on the W- CDMA technology and promote the widespread and rapid deployment of mobile multimedia services, thereby achieving our goal of establishing a world of seamless communications.

Whereas mobile network operators in other parts of the world have achieved success in offering wireless Internet access only in certain segments, such as services directed towards enterprises/businesses, our i-mode services achieved immediate success among a broad range of segments in Japan, including the consumer segment. We believe that our experience with the development and deployment of our i-mode services is a great strength that provides us with the ability and skills necessary to replicate our success in overseas markets in cooperation with our strategic partners. We believe that this will increase the value of our business by generating returns on investments, enhancing service quality and strengthening our competitiveness in the domestic market. International roaming services have also grown in recent years, and we believe that these services will become an important revenue source in the future, and we forecast further business growth in this field going forward.

We intend to continue to look outside of Japan for attractive investment and partnership opportunities, such as foreign mobile telecommunication companies and other companies providing mobile telecommunications related services. If we find such investment opportunities, we will look for the optimal investment method according to the circumstances, acquiring either majority or minority stakes, or entering into licensing agreements or collaboration agreements in certain fields, such as W-CDMA-based 3G services.

Our invested affiliates operate in key markets and regions around the world, particularly in the Asia-Pacific region. We do not believe, however, that the regulatory environments in which our partners operate will have any adverse effect on our investments or on our financial results.

Far EasTone Telecommunications Co., Ltd.

In February 2001, we invested approximately NT$17.1 billion (approximately ¥61.3 billion at the date of investment) for a 20% equity stake in KG Telecommunications Co., Ltd. (“KG Telecom”). KG Telecom was a mobile network operator which operated in Taiwan. Through this business alliance with KG Telecom, we aimed to provide sophisticated wireless broadband services to the Taiwanese market using W-CDMA technology and to provide mobile Internet services in Taiwan based on our i-mode technology and business model. In June 2001, we signed an i-mode license agreement with KG Telecom to license our intellectual property and technology know-how regarding i-mode services. KG Telecom launched i-mode services in June 2002.

In July 2001, we increased our equity stake in KG Telecom by purchasing new shares, thereby increasing our equity stake to 21.4%. The amount of our additional investment was NT$1.87 billion (approximately ¥6.7 billion at the date of investment).

In October, 2003, we agreed to a plan by KG Telecom to enter into a Share Purchase Agreement with Far EasTone Telecommunications Co., Ltd. (“FET”), the third-ranked mobile network operator in Taiwan. Under the agreement, each KG Telecom share was converted into 0.46332 FET shares plus NT$6.72. As a result, KG Telecom became a 100% subsidiary of FET. Upon completion of the transaction, we became an approximately 5.0% shareholder in FET, and received NT$2.5 billion (approximately ¥8.0 billion at the date of payment) in cash.

At that time, we also concluded a memorandum of understanding with FET to collaborate on the W-CDMA 3G and i-mode businesses in Taiwan. This merger enabled us to secure a more solid base in Taiwan and has continued to increase economic value via further development of i-mode services and the 3G business. FET began its i-mode service on the Global Packet Radio Service (GPRS) network in April 2004 and on a W-CDMA network in July 2005.

In March 2004, we signed a consulting agreement with FET. Under the agreement, we provided technical assistance including assistance for network field testing and coverage optimization for the introduction of FET’s W-CDMA 3G service. FET launched 3G services based on W-CDMA technology in July 2005.

We currently hold a 4.7% equity interest in FET.

Hutchison Telephone Company Limited/Hutchison 3G HK Holdings Limited

In December 1999, we acquired a 19% equity interest in Hutchison Telephone Company Limited (“HTCL”) in Hong Kong for approximately US$410 million (approximately ¥42 billion at the date of investment) as part of our business alliance with Hutchison Whampoa Limited (“HWL”) with respect to the development of their mobile Internet services and 3G businesses in Hong Kong. In May 2001, we invested an additional US$30.44 million (approximately ¥3.7 billion at the date of investment) for a 6.4 point increase in our equity stake in HTCL.

In July 2001, we agreed with HWL to separate the 3G entity from HTCL, and acquired a 25.4% equity interest in Hutchison 3G HK Holdings Limited (“H3G HK”), for approximately HK$303,190 (approximately ¥5 million at the date of investment).

In November 2002, NEC Corporation (“NEC”), acquired a 5% equity interest in both HTCL and H3G HK. As part of this transaction, our interest in both HTCL and H3G HK decreased from 25.4% to 24.1%. We currently hold a 24.1% equity interest in both HTCL and H3G HK.

HTCL launched its mobile Internet services in May 2000. In addition, H3G HK acquired a 3G license in September 2001 and launched 3G services in January 2004. H3G HK’s 3G license was transferred to HTCL in June 2005 and 3G services are provided by HTCL at present. In June 2006, we signed an i-mode license agreement with HTCL. Under this agreement, we provided the know-how, related technologies, and patent rights to HTCL for it to develop i-mode services, and HTCL’s i-mode services were launched in Hong Kong in May 2007.

Telstra Corporation Limited

We signed an exclusive strategic partnership agreement with Telstra Corporation Limited, the leading telecommunications operator in Australia in June 2004. Telstra launched its i-mode service in November 2004, and launched 3G i-mode service on the W-CDMA network in September 2005; however, due to a change in strategy regarding Internet data services, i-mode service was terminated in December 2007.

StarHub Ltd.

In January 2005, DOCOMO and StarHub Ltd. (“StarHub”), an integrated info-communications provider based in Singapore, jointly announced a strategic partnership and StarHub launched i-mode service over its W-CDMA and GPRS networks in Singapore in November 2005.

Hutchison Essar Ltd.

In December 2006, we signed an agreement to license i-mode to Hutchison Essar Ltd. (“Hutchison Essar”) which was scheduled to become effective upon receipt of certain permits from administrative authorities in India. However, due to a change in the business environment for Hutchison Essar, we concluded that it would be difficult to provide i-mode services, and thus we and Hutchison Essar agreed to cancel the agreement in May 2007.

Mobile Innovation Co., Ltd.

In April 2004, we signed a joint venture and share subscription agreement with Loxley Public Company Limited (“Loxley”), a Thai IT-related trading company, under which we acquired a 40% equity stake in Mobile Innovation Co., Ltd. (“MI”), a location-based service provider, wholly owned by Loxley, for a cash consideration of 21.6 million baht (approximately ¥60 million at the date of investment). In February 2005, we agreed to increase the capital of MI, and invested 12 million baht (approximately ¥30 million at the date of investment). Loxley concurrently invested 18 million baht (approximately ¥50 million at the date of our investment) in MI.

In October 2007, we invested an additional 49.80 million baht (approximately ¥180 million on the date of our investment), giving us a 49.9% equity stake in MI. By September 2008, we will invest an additional 50.2 million baht (approximately ¥165 million), giving us a 72.6% equity stake in MI.

DoCoMo interTouch Pte. Ltd.

In December 2004, we invested US $70 million (approximately ¥7.3 billion as of the date of investment) to fully acquire inter-touch (BVI) Limited, a Singapore-based holding company of Internet providers which supply high-speed broadband connections and applications for travelers at hotels across the Asia-Pacific region, Europe, the Americas and other regions.

In February 2007, we decided to reorganize the structure of the subsidiary group and make INTER-TOUCH PTE LTD (currently DoCoMo interTouch Pte. Ltd.) (“interTouch”), one of the inter-touch group’s operational companies in Singapore, a wholly owned subsidiary. The reorganization resulted in interTouch becoming a wholly-owned subsidiary of DOCOMO and the dissolution of three companies, inter-touch (BVI) Limited, INTER-TOUCH (MIDDLE EAST) LIMITED and inter-touch Holdings (Singapore) Pte. Ltd. The plan, made in response to the inter-touch group’s rapid business growth, is intended to streamline the inter-touch group’s organizational structure and enhance operational efficiency. inter-touch (BVI) Limited was dissolved in February 2008, and inter-touch Holdings (Singapore) Pte. Ltd. was dissolved in March 2008.

In December 2007, interTouch reached agreement with the primary shareholder of MagiNet Pte. Ltd. (“MagiNet”), a high-speed Internet service and video distribution service provider for hotels, to fully acquire the company for approximately US $150 million (approximately ¥16.5 billion). The acquisition was completed in January 2008. In conjunction with this acquisition, we carried out a capital increase in interTouch of US $191 million (approximately ¥21 billion). With this acquisition, interTouch became one of the largest providers of high-speed Internet service in the Asia-Pacific region, with an annual total of 25 million users in 1,000 hotels in 63 countries across the world. In April 2008, we announced that the name of the company had been changed to DoCoMo interTouch Pte. Ltd. Going forward, under the DOCOMO brand, the company will endeavor to further expand its business, and by providing a full range of services, enhance convenience for overseas travelers.

ADVANCED MPAY COMPANY LIMITED

We acquired a 30% stake in ADVANCED MPAY COMPANY LIMITED (“mPAY”) for 315 million baht (approximately ¥850 million at the date of investment) in August 2005. mPAY was established with Advanced Info Service Public Company Limited (“AIS”), a Thai mobile network operator, which owned a 70% stake of mPAY.

mPAY provides mobile payment services in Thailand, and provides services enabling customers to use their mobile phones to settle shopping transactions, including online shopping via PCs or mobile phones, and make payments for the use of prepaid phone services.

In January 2008, we sold all our shares in mPAY to AIS, and currently have no stake in mPAY.

Telargo Inc.

In June 2005, we signed a joint venture and share subscription agreement with ULTRA d.o.o. (“ULTRA”), a Slovenia-based European technology company. Under the agreement, we acquired a 49% equity stake in Telargo Inc. (“Telargo”), ULTRA’s wholly-owned US mobile assets management service provider, for US $28.6 million (approximately ¥3.1 billion at the date of investment).

Thereafter, Telargo provided fleet management services to a variety of companies, but in February 2008 we reached agreement with ULTRA on the sale of all our shares in Telargo (49% of outstanding shares), and decided to dissolve our capital alliance with Telargo.

KT Freetel Co., Ltd.

In December 2005, we entered into an agreement with Korean mobile network operator KT Freetel Co., Ltd. (“KTF”) on a comprehensive strategic alliance including equity participation, under which we invested approximately KRW 564.9 billion (approximately ¥65.1 billion at the date of investment) to acquire a 10% stake in KTF through a third-party allotment of new shares and purchase of KTF treasury stock.

Through the tie-up, we provided technical support to KTF to deploy a nationwide W-CDMA network successfully. Also, the alliance aimed to improve convenience for the increasing number of travelers in both countries through the joint development and offering of roaming services, to seek new business opportunities by fusing together the technical and marketing expertise of the worlds leading providers of cellular phone services and to examine cost-saving opportunities, such as the joint handset procurements through the combination of our expertise in W-CDMA network operation and KTF’s service development capabilities. In July 2007, as part of the companies’ joint handset procurement project, an announcement was made of the joint procurement of HSDPA compatible USB type terminals. In October 2007, as part of the joint business in the Business & Technology Cooperation Committee established by the two companies, the companies agreed to investment in the KTF-DoCoMo Mobile Investment Limited Partnership, a fund having KTBnetwork Co., Ltd. (“KTB”) as the asset manager that invests in South Korean venture companies in mobile and IT related fields. In conjunction with this alliance, we have agreed to invest KRW 13.5 billion (roughly ¥1.7 billion at time of investment decision, a 45% equity stake) in the fund.

We currently hold a 10.5% equity interest in KTF.

Philippine Long Distance Telephone Company

In January 2006, we entered into an agreement with NTT Communications Corporation (“NTT Com”), Philippine Long Distance Telephone Company (“PLDT”) and First Pacific Company Limited (“FPC”), PLDT’s largest shareholder, on a share acquisition and business tie-up. Under the agreement, we purchased approximately 7.0% of its total common shares from NTT Com, for approximately ¥52.2 billion and established a comprehensive business tie-up with PLDT.

As part of the tie-up, we have designated one director to PLDT and its mobile network operator subsidiary SMART Communications, Inc. (“SMART”) respectively. In addition, with the goal of developing W-CDMA services by PLDT and SMART and the commencement of i-mode services in the Philippines as well as promoting international roaming services between Japan and the Philippines, we concluded an i-mode license agreement with SMART in February 2006. In March 2008, i-mode services in the Philippines commenced.

Since March 2007, we have acquired PLDT shares in stages through the open markets, acquiring a total of roughly ¥98.9 billion, shares equivalent to 7.5% of PLDT’s outstanding shares as of March 31, 2008; as a result, combined with NTT Com’s PLDT shares, the NTT Group achieved a 20.9% stake in PLDT. With the recent acquisition of further shares, PLDT became an equity method affiliate of DOCOMO. Going forward, we will further strengthen our tie-up with PLDT and SMART and make efforts directed toward joint consideration of services and technologies, and will move ahead with activities directed towards even greater convenience in international roaming services.

Guam Cellular and Paging

In March 2006, we agreed to fully acquire both Guam Cellular & Paging (“Guam Cellular”) and Guam Wireless Telephone Company, LLC (“Guam Wireless”), mobile network operators operating in Guam and the Northern Mariana Islands (including the island of Saipan), for a total amount of US$71.8 million (at the time of investment, approximately ¥8.4 billion). We received approval for the acquisitions from the U.S. Federal Communications Commission (“FCC”) in November 2006. In December 2006, we transferred operations to Guam Cellular from Guam Wireless through a holding company and we integrated operations of the two companies. Through this acquisition, Guam Cellular became our wholly-owned subsidiary. We have endeavored to improve convenience of international roaming services for the large number of Japanese travelers who visit Guam and the Northern Mariana Islands, by enhancing Guam Cellular’s GSM network and introducing packet roaming services by developing its GPRS network. Going forward, we also aim to introduce 3G services, based on W-CDMA technology, utilizing Guam Cellular’s frequency band.

Fidatone Mobile Technology and Service

In January 2007, we decided to make a joint investment with UFIDA Software Co., Ltd., the leading Chinese supplier of enterprise resource planning (ERP) software, which is listed on the Shanghai Stock Exchange, in Fidatone Mobile Technology and Service Co., Ltd (“Fidatone”). Although the timing has not yet been decided, we intend to invest US$5 million to acquire an approximately 33.3% equity stake. Through this investment, we seek to enter the corporate mobile solutions services market in China jointly with UFIDA Software. Fidatone will establish a local subsidiary to use UFIDA Software’s ERP software and corporate customer base and our expertise to develop a corporate mobile solution services business in China.

Gobi Fund II

In May 2007, we signed an investment participation agreement under which we are to invest US $10 million (approximately ¥1.2 billion at time of investment decision) in Gobi Fund II. L.P., a venture capital fund targeting venture firms in China’s digital media related fields. The fund was established by the asset management company Gobi Partners, Inc., which invests in venture firms in China. Through this investment in the fund, we aim to build relationships with a broad range of Chinese venture firms in fields involving cellular phones.

AT&T Mobility

In July 2007, with the goal of promoting international roaming services, we concluded a business cooperation agreement with AT&T Mobility LLC (formerly Cingular Wireless LLC; “AT&T Mobility”) related to the building of a 3G network in Hawaii. Pursuant to this agreement, we provided technical support relating to AT&T Mobility’s construction of a 3G network in Hawaii, and contributed US $24 million (roughly ¥3 billion) in funds.

U Mobile Sdn. Bhd.

In December 2007, we agreed with KTF on the joint acquisition of common shares representing 33% of the outstanding shares in U Mobile Sdn. Bhd. (“U Mobile”), a Malaysian mobile network operator, through a third party allocation of shares, at a cost of US $200 million (approximately ¥22 billion at the time of investment). In March 2008, after receiving approval from the Malaysian government, DOCOMO completed acquisition of a 16.5% equity stake for US $100 million (approximately ¥11 billion). Jointly with KTF, DOCOMO will participate in U Mobile’s management and draw on its 3G expertise to enhance U Mobile’s competitiveness. We also intend in the future to promote international roaming services through U Mobile’s 3G network, thereby providing greater convenience to both South Korean and Japanese customers traveling in Malaysia.

TM International (Bangladesh) Limited

In June 2008, we agreed to acquire a 30% stake in TM International (Bangladesh) Limited (“TMIB”), a mobile network operator based in Dhaka, Bangladesh, by directly acquiring all of the stock in TMIB held by A.K. Khan Co. Ltd. and its four group companies. The deal, worth US$350 million (approximately ¥37 billion), is expected to be completed by the end of 2008.

We intend to participate in TMIB’s management and actively draw on our expertise to enhance the company’s business in the fast-growing Bangladeshi mobile telecommunications market.

Sales and Marketing

We benefit from the strong positive perception in Japan of both the DOCOMO brand name and the NTT brand name. We market cellular and other services to subscribers through our extensive distribution network throughout Japan, which includes numerous primary retailers operating 2,233 DOCOMO Shops. DOCOMO Shops are specialty shops that we have licensed and allowed to use the DOCOMO logo and other DOCOMO trade and service marks, as well as facades and displays that easily identify the shops as DOCOMO Shops. DOCOMO Shops have agreed to market the full line of our products and services and no other competitor’s products or services on the premises. Primary retailers also resell handsets to secondary and tertiary retailers who have no direct contractual relationship with DOCOMO. Such secondary and tertiary retailers also market our cellular and other services and must be approved as a DOCOMO retailer prior to selling our products and services. There were 9,768 secondary and tertiary retailers throughout Japan as of March 31, 2008.

One of the primary advantages of our extensive distribution network is to make it easier for potential subscribers to sign up for services and purchase mova, FOMA and other equipment. As competition for subscribers increases, the ability to attract and retain subscribers is becoming even more important. In order to continue to attract and retain subscribers, our current sales and marketing strategy is to (i) continue to improve our network coverage and quality, (ii) increase traffic by enhancing i-mode and other services, (iii) increase the quality of after-sales service, (iv) promote our brand name through our “customer-oriented” approach, (v) provide competitive tariff and service pricing, (vi) enrich our handset lineup, (vii) develop our “liaison between the real and cyber worlds”, and (viii) enrich our customer retention program.

In August 2007 we established the Corporate Branding Division, an organization that reports directly to the President, in order to enhance business activities that directly address customer needs. External marketing experts were invited to participate in the division, which directed its efforts towards brand marketing that is not bound by conventional values.

We engaged in deliberations directed toward further enhancement of marketing functions, and the review of the corporate brand in light of the changing market environment. In April 2008, the DOCOMO brand was updated, and we issued the “New DOCOMO Commitments,” which sets forth the vision for reforming DOCOMO. Going forward, based on this platform, we will carry out business so that customers are provided with high-quality, high value-added services and products that match their individual needs.

The New DOCOMO Commitments

	(1)		We will re-build our brand and strengthen our ties with our customers.
	(2)		We will seek and value the voices of our customers and become a company that exceeds their expectations.
	(3)		We will continue to drive innovations, and aspire to become a corporation that is admired by the world.
	(4)		We will enrich our organization with diverse and active talents who seek a common goal and dream.

In addition, with the new brand statements and the new brand slogan “Unlimited Potential, in Your Hand”, we will aim to improve each customer’s satisfaction level, to deepen bonds and facilitate long-term use of our products and services, and in July 2008, we will commence use of a new corporate logo and corporate color “DOCOMO Red”.

In November 2007, we began offering new methods for purchasing handsets. In this new purchase system, customers choose, depending on their needs, between a “Value Course” and a “Basic Course”. With the Value Course plans, by bearing initial handset costs, customers can select billing plans with cheaper basic monthly charges. Basic course plans are similar to the plans that had been in effect, where initial handset costs are reduced because we subsidize resellers for a portion of the sales promotion costs; with Basic Course plans, the monthly basic use charges remain as they have been, and in exchange for the customer committing to a two-year subscription, initial handset costs are kept low (discounted) because we pay a portion of the handset purchase costs. For customers who have purchased a handset with a Value Course plan, the billing plans with cheaper basic monthly charges continue even after the handset purchase cost is paid, so the longer a customer stays with this plan, the greater the value provided. Also, those customers who choose the Value Course can select either twelve-month or twenty-four-month installment payment plans upon purchasing a handset.

Previously, we handled handset sales in Japan by assigning handsets with a sales commission that we paid, thereby holding down initial costs and facilitating customer purchase. While we believe this sales model has contributed greatly to the growth of the cellular phone market, as the market has now matured, problems such as a sense of unfairness and lack of transparency have arisen. Therefore, we believed that it was necessary to introduce a new sales model that would be suitable for the current conditions in Japan’s matured cellular phone market.

We believe that the combination of our distribution network, extensive advertising activities, the strength of our brand name, the quality of our digital network, our competitive pricing and extensive after-sales service will allow us to continue to attract and retain subscribers.

Customer Service

As customer retention is increasingly becoming important in the Japanese telecommunications market, we have focused on ensuring high degrees of customer satisfaction. We realize that customer service, including the service we provide when customers sign up and after-sales service, is critical to retaining subscribers and maintaining the high reputation and recognition of the DOCOMO brand name. We provide extensive customer service at the point of sale through DOCOMO Shops and other retailers. Our customer service efforts are also supported by fully integrated information systems. In addition, customers can use their cell phones or personal computers to access our 24-hour Internet e-site, where they can change their services, plans and addresses.

We also provide extensive after-sales service primarily through the DOCOMO Shops, which have service counters that deal with handset problems and repairs. In fiscal year 2007, to provide customers with even greater convenience, we expanded service counters that handle repairs. We also have various toll free numbers that provide customer service including basic service and billing information provided during business hours as well as support and assistance 24 hours a day for network and handset problems, including lost and stolen handsets.

In order to promote quality of after-sales service for existing customers, we pay various fees to agents for certain after-sales services, including handset upgrades, calling plan changes, and diagnostic and repair work on handsets and other equipment.

In an effort to expand the number of users in segments where the penetration rate has been low, we have periodically held educational seminars at DOCOMO Shops and created a customer desk to respond to inquiries relating to the use of cellular phones.

We have also started a membership-based loyalty program called “DOCOMO Premier Club” for all subscribers in order to offer enhanced customer service. This program consists of a “Point Incentive Program”, a “Staging System” and offers “courtesy treatment”. Customers earn points based on the amount they spend every month. They can use accumulated points to get discounts when they purchase new handsets, or exchange them for items such as travel coupons, dining coupons and entertainment tickets. Customers are classified into four levels according to the previous year’s usage and length of continuous subscription, and higher-level customers receive more points for the same amount of spending. For three years from the purchase of any handset, all DOCOMO Premier Club members can receive free repair services. Members are also entitled to a complimentary battery-pack for handsets they have used for two years or longer, repairs of handsets with expired warranties at ¥5,000 or less, and support for problems such as water damage, theft and loss that occur within a year of purchase. In addition, starting in July 2006, we began offering a “Handset Replacement and Delivery Service” to FOMA customers, which for ¥300 per month (which was changed from ¥500 per month in November 2007) protects subscribers from all damage to handsets, including water damage, loss and breakage, by providing subscribers with replacement handsets. Furthermore, starting in December 2007, we began offering a “500 Point Battery-pack Replacement Service” to FOMA customers, which allows those customers who have used the same FOMA handsets for between one and two years to replace their battery-packs for 500 points. Members are also entitled to preferential treatment including discounts at hotels, shops and restaurants given by our alliance partners in this program. In addition, starting in October 2007, we began offering preferential treatments in a number of popular areas abroad (Guam, Saipan, South Korea, Hawaii, Beijing, and Shanghai).

Handsets

We offer a variety of different handsets to subscribers. Because we offer a number of different network protocols, subscribers purchase handsets compatible with different protocols, such as 2G or 3G. We have strict quality standards that manufacturers of our handsets must meet. We also provide one-year warranties on all our handsets during which we provide repairs free of charge except in cases where customers are responsible for the damages. In addition, for increased user convenience and operation efficiency, users use DOCOMO networks to download software for upgrades.

Cellular (FOMA) Handsets

We have prepared a handset lineup that includes the 9 series, which comes equipped with the latest features, the 7 series, which focuses on primary functions, and concept models, which emphasize the individuality of each handset. The 9 series handsets come equipped with the latest features, including GPS, 3G/GSM roaming, Mega i-appli, a more powerful Osaifu-Keitai, Deco-mail (Decoration mail) and an upgraded e-mail capable of attaching large files. The 7 series is equipped with the primary functions, is easy-to-use and attractively designed. The concept models offer individuality, in the form, for example, of “Kids’ PHONE” — thin and simple designs, and two-screen handsets, while also being equipped with cutting-edge technologies.

In February 2005, we revealed the FOMA 700i series, which targets the mid-range user. The new 700i series emphasizes style and ease of use while possessing all the basic FOMA services, including videophone, “ChakuUta” ring songs, “ChakuMotion” ring videos, “Deco-mail” decorative e-mails, music player functions, i-appli JAVA and Macromedia Flash applications, QVGA LCD screen resolution and megapixel cameras.

In September 2005, we introduced the FOMA 701i series. This series is compatible with the i-channel service, allowing users to automatically receive updated news and other information, which is displayed on a handset’s standby screen. FOMA 701i handsets have superior performance and users can select functions and designs to match a wide variety of usage patterns.

In November 2005, we introduced the FOMA 902i series handsets. These handsets are compatible with the “Push Talk” service which enables simultaneous group conversations by as many as five people. They are also compatible with the “ToruCa” information capture service that enables a user to download promotional coupons, store information and other such information simply by waving an Osaifu-Keitai enabled handset in front of a dedicated reader/writer machine at merchants, and they are compatible with i-channel and multi number, which enables users to assign up to two additional phone numbers to their handsets.

In December 2005, we introduced the “FOMA Raku Raku Phone Simple”, with functions stripped down to voice communication only.

In February 2006, we introduced the FOMA702i series handsets. With these handsets, users can use such functions as i-channel, G-Guide EPG Remote Control and Security Scan. Of the five models in this series, three were the result of collaborations among a noted designer, manufacturer and us, each model having its own unique design and style.

In March 2006, we introduced the FOMA P901iTV, which is designed to receive one-segment terrestrial digital broadcasting, known as “One Seg”, that began on April 1, 2006.

Also in March 2006, we introduced a child-friendly mobile phone, the FOMA SA800i. Developed both to be easy for children to use and to help keep children safe, this handset has a number of functions, including an alarm and GPS positioning, to give families peace of mind. It is compatible with “Kids’ i-mode menu”, which only has content suitable for children, as well as with the “imadoco search” service that enables parents to confirm the physical location of the handset.

Also in March 2006, we introduced the FOMA NM850iG, a global handset useable both in Japan and overseas. The handset is both compatible with Bluetooth and capable of wireless connection.

In April 2006, we introduced the simple and compact “SIMPURE” series, which is geared toward no-frills-oriented customers who want only these basic functions. These handsets are compatible with overseas i-mode and i-mode mail, SMS, and “World Wing”, an international roaming service that also allows use of a videophone function.

In August 2006, we introduced the HSDPA-compatible FOMA N902iX HIGH-SPEED handset. This handset is compatible with “Music Channel (currently “Music&Video Channel”),” a service that automatically distributes a customer’s favorite music and “Chaku-Uta Full”.

In September 2006, we introduced the BlackBerry^® 8707h handset. This handset responds to the mobile solution needs of corporate users. By subscribing to BlackBerry Network Services, users gain access to RIM Inc.’s BlackBerry^® Enterprise Server which may be integrated with Microsoft^® Exchange, IBM Lotus/Notes, Domino, Novell^® and GroupWise^®, enabling utilization of system solutions including e-mail and business support tools in a secure environment. Also, in July 2007, in response to the need for corporate users to use their BlackBerrys in a Japanese environment, we introduced the Japanese compatible versions of the BlackBerry^® 8707h and the BlackBerry^® Enterprise Solution. To make them available to even more people, in December 2007, we reduced the monthly charge for “BlackBerry Network Services” from ¥5,700 to ¥3,400.

In October 2006, we introduced the FOMA 903i series. These handsets support “Chaku-Uta Full” and “Mega i-appli”, which supports a maximum program size of 1 MB, ten times the conventional 100 KB of i-appli. Of the total lineup of twelve models, five models support the Napster music service, which offers access to unlimited music for a fixed rate, four models support “One Seg”, two models support HSDPA, and six models are compatible with GPS navigation.

In December 2006, we introduced the simple and compact SIMPURE N1, which is geared toward customers seeking only basic functions. These compact size handsets do not take up much bag or pocket space and are equipped with basic functions such as i-mode, e-mail, camera, and videophone.

In January 2007, we introduced the FOMA 703i series. Of the eight models in this series, two are the thinnest W-CDMA clamshell handsets in the world (as of January 16, 2007). One model was developed through collaboration with a noted designer, the manufacturer and DOCOMO, and each model has its own unique design and style.

In February 2007, we introduced the FOMA D800iDS, a dual-screen handset with a touch-screen panel that is operated using Direct&Smooth.

In April 2007, we introduced the Raku Raku Phone Basic. This model seeks to provide ease of use of basic mobile phone functions—voice calls, e-mail, and i-mode—as well as beauty in its design. The design of this handset was created through collaboration with a noted designer, the manufacturer and DOCOMO.

In May 2007, we introduced the FOMA 904i. This series features the new functions of “2in1”, which allows the functions of two mobile phones to be divided on a single mobile phone, “Chokkan-Game”, games played using intuitive movements such as shaking or inclining the handset, and “Uta-Hodai”, a new music service offering users unlimited music downloads for a fixed rate. This series includes models supporting One Seg and FOMA HIGH-SPEED (HSDPA), and all models support Video Clip, Napster and Full Browser. By improving existing services, we sought to enhance functionality.

In June 2007, we introduced the simple and compact SIMPURE L2, the latest model of the SIMPURE series, which is geared toward no-frills-oriented customers who want only basic functions. This model was developed through collaboration with a noted designer and features a Curve & Square design.

In July 2007, we introduced the FOMA 704i series. In addition to the Slim & Compact feature that the 70X series has traditionally sought, the lineup has added functions that have been popular on the 90X series such as One Seg, FOMA HIGH-SPEED (HSDPA), Music Channel ^® and Uta-Hodai ^TM, as well as global roaming services and waterproof functionality.

In August 2007, we developed the FOMA Raku Raku Phone IV. In addition to having improved basic Raku Raku Phone functions, this handset is the first Raku Raku series handset equipped with GPS. We improved voice functions, focusing on ease of listening and ease of speaking.

In November 2007, we introduced the FOMA 905i series, which comprises the latest models of our flagship 90X series. This series comes fully-equipped with the latest features, including World Wing^® (3G+GSM), FOMA HIGH-SPEED (HSDPA), One Seg, GPS, 2in1, and DCMX.

In December 2007, we introduced a child-friendly mobile phone, the FOMA F801i, with enhanced safety functions, including waterproof functionality and a function that prevents children from losing their phones.

In January 2008, we introduced the FOMA 705i series. This series offers a rich lineup of slim handsets, and by having a brand and interface collaboration with home appliances makers, we made new approaches in the field of design. In March 2008, in the same series, we launched the “PROSOLID ^®μ (P705iCL)”, a camera-less extreme slim mobile handset, and in April 2008, we launched the FOMA “SH705iII”, a handset with clear audio quality offering easy-to-hear conversation and easy-to-see text and screens and loaded with One Seg and a 3.2 megapixel digital camera.

In April 2008, we launched “Raku Raku Phone Premium”, which inherits the characteristic features of universal design which has evolved through the Raku Raku Phone series, but is also functionally advanced, as it comes pre-installed with sophisticated applications that are easy enough for a first time user, such as Osaifu-Keitai, One Seg, which is started simply by swinging the screen to the right, and “WORLD WING^® (3G + GSM)”. The Raku Raku Phone Premium was designed under the supervision of the same graphic designer in charge of the Raku Raku Phone Basic, and has the same ease of use and quality of design. We also launched “Raku Raku Phone IVS” which can be applied to the Value Course.

As a FOMA data transmission device, in addition to the FOMA P2402, which has a packet transmission capability of up to 384 Kbps downlink and 64 Kbps uplink, we introduced the FOMA P2403, which supports the FOMA Plus Area, in March 2006. We also offered the FOMA F2402, which has a packet transmission capability with a maximum throughput of 384Kbps for both downlink and uplink. In September 2006, we launched the HSDPA-compatible FOMA M2501 HIGH-SPEED data transmission handsets. In March 2008, we introduced FOMA N2502 HIGH-SPEED, CompactFlash card-type handsets for data transmission that are compatible with HIGH-SPEED 7.2 Mbps.

As USB-type data transmission devices compatible with HSDPA, in October 2007, we introduced the HSDPA-compatible FOMA A2502 HIGH-SPEED. This device was developed as part of the joint handset procurement project between DOCOMO and KT Freetel Co., Ltd (“KTF”), a South Korea based mobile telecommunications service provider.

In July 2005, as a PDA-type FOMA handset for businesspersons, we introduced the FOMA M1000, which enables users to browse the Internet like a PC, to exchange e-mails with PCs (POP mail and IMAP mail) when they are away from home or the office, and to handle e-mail file attachments. In July 2006, we launched the hTc Z handset equipped with the Microsoft Windows Mobile operating system (OS).

In March 2008, we introduced the Windows^®Mobile F1100, which is equipped with Windows Mobile^® 6, and features ease of use and portability with enhanced business functions.

In addition to FOMA data communication handsets, as part of our collaboration with PC manufacturers, HIGH SPEED compatible PCs (PCs with a built-in module that can connect with the DOCOMO HSDPA), were launched by Fujitsu Ltd. and Sony Corp. in October 2007 and by NEC Corp. in February 2008. Matsushita Electric Industrial Co., Ltd issued a press release about HIGH SPEED compatible PCs in April and began marketing these PCs in May 2008.

With respect to procurement cost for handsets, we expect that the price of FOMA handsets will continue to decrease through our cost reduction efforts.

One factor for procurement cost reduction is the expansion of our product mix. In addition to the ever-evolving 9 series, which is continuously updated with new features, in February 2005, we introduced the 7 series, handsets with sophisticated designs and well-balanced between function and cost. And in April 2006, we introduced the SIMPURE series with which we simplified functions and reduced costs even more so than with the 7 series.

We have invested in chipset development, standardization of the OS platform and greater efficiency in software development. During the years ended March 31, 2003 and March 31, 2004, we invested approximately ¥41 billion in the development of FOMA handsets, and succeeded in developing FOMA handsets featuring advanced applications and longer battery life. In order to accelerate the evolution of state-of-the-art 3G technologies, we invested a total of approximately ¥37 billion during the years ended March 31, 2005 and March 31, 2006 in the areas of handset application software which runs on advanced OS platforms (Linux and Symbian) and High Speed Downlink Packet Access, or HSDPA technology. Particularly with respect to the OS platforms, standardization among manufacturers has progressed well, resulting in a shortened development period and cost reductions. With respect to the Linux platform, in order to further advance global alliances, in January 2007, we announced the establishment of LiMo Foundation, comprising six companies including Vodafone and Motorola, as part of our efforts to further reduce handset procurement costs.

Furthermore, by investing a total of approximately ¥12.5 billion from the year ended March 31, 2005 to the year ended March 31, 2007, in the development of LSI technology in relation to FOMA handset chipsets, having manufacturers incorporate our requirements at the LSI specification review stage and striving for one-chip LSI, we have shortened the time required for and reduced the cost of development. In addition, in the second half of the year ended March 31, 2008, we co-developed a cellular phone platform that integrates the baseband LSI, the application processor one-chip LSI, and core software including the OS platform. Even following the year ended March 31, 2008, we will make efforts in the joint development of a mobile phone platform compatible with HSDPA cat.8 and having an even faster processor, achieving greater functionality and cost efficiency.

Further, we will participate in the Open Handset Alliance, which includes Google Inc., and in cooperation with Google, will consider the development of Android, a software platform for mobile phones, including commercialization for our use. By having a standardized platform for mobile phones, we can anticipate reductions in development costs and lead time for development, and this in turn leads to the promotion and spread of W-CDMA services across the world, and for this reason we have been actively involved in this process.

In April 2008, to achieve greater efficiency in the development of FOMA handsets, encourage cellular phone handsets manufacturers to participate in FOMA handset development, and improve the international competitiveness of domestic handset manufacturers, we commenced development of an operator pack to be used in the development of FOMA handsets.

The operator pack is an application software set for the Linux^Ò operating system that meets LiMoÔ specifications for DOCOMO’s proprietary services, including i-mode and i-appli. The operator pack will make use of such properties as the middleware (MOAP^Ò*: Mobilephone Oriented Application Platform) and application software we have developed. We are jointly developing the operator pack with ACCESS Co., Ltd.

The operator pack, combined with a global software platform containing a suite of basic functions such as calling, will enable us to provide a variety of services.

We are planning to install the operator pack on FOMA handsets starting in the second half of 2009, and will recommend that handset manufacturers use the operator pack.

We will continue engaging in platform standardization and development of improved functions.

We and the handset manufacturers co-own the rights for FOMA handset patented technologies and know-how, and we will receive royalties if these manufacturers supply similar 3G handsets to other 3G operators. In December 2005, in order to promote cooperation in technological development focusing on browser technology, we invested an additional ¥15 billion in ACCESS Co. Ltd. Also in December 2005, in an effort to strengthen our cooperation in handset middleware centered on Java technology, we invested ¥13 billion in Aplix Corporation. In March 2008, with a view towards greater technical cooperation in the field of user interfaces and other terminal middleware, we invested a total of ¥1.8 billion in Acrodea, Inc., and received a distribution in kind of Acrodea shares held by JAIC Advanced-Tech No. 1 Venture Capital Investment, LP of which DOCOMO is a limited partner. Advanced handset capabilities and a wide variety of model choices play an important role in the success of 3G services. By investing in FOMA handset expansion, we expect to motivate manufacturers to produce advanced value-added 3G handsets, promoting the development of 3G services and mobile multimedia as we have already seen with the popularity of our 9 series.

Cellular (mova) Handsets

We have offered three types of handsets for our 2G service: our 5 series handsets which are our high-end models with advanced technology, our 2 series handsets which are our basic function models and our 6 series handsets which are targeted for particular user segments. We plan and develop these handsets jointly with manufacturers and offer several different models for each series of handsets. While our customers continue to migrate from our mova service to our FOMA service, we continue to offer mova handsets, principally as various niche models, in order to enrich our total line-up of cellular handsets.

In March and April of 2006, in response to user demand for the long-popular mova handsets, we introduced new members of the 506i series, the low-priced N506iS II and P506iC II.

DOCOMO Networks

We currently provide our services on several different networks, including our 2G network and our 3G network. Each of these networks is composed of four basic components: base stations, antennas, switching centers and transmission lines. When a person uses a phone (or other mobile device), an antenna on top of a base station receives the signal. The signal then travels via fixed transmission lines to a switching center which routes the signal to another base station in the vicinity of the intended recipient of the signal. In general, our 2G network and our 3G network use separate base stations, antennas and switchboards, but we are moving ahead with providing common antennas and transmission lines for the 2G and 3G networks in our efforts to reduce network costs.

In order to establish and maintain our high quality network economically and efficiently, we purchase high quality network equipment at low cost from approximately 100 suppliers inside and outside Japan in accordance with our procurement policies which stress openness and fairness.

At new procurement opportunities, we obtain quality equipment at competitive prices by receiving proposals widely from domestic and international suppliers through our website.

2G Network

Our 2G network is an integrated network of base stations, switching centers, signal transfer points, mobile-service control points and a mobile communication information storage system that routes calls from the calling party to the called party. The various components of the network are connected primarily by microwave transmission, our own trunk and other fixed lines and fixed lines leased from NTT.

The Government issues licenses to carriers for the use of radio spectrum bandwidth, so the capacity of our cellular network is limited to the amounts of bandwidth that the Government has made available to us. The Government has currently allocated 69 MHz x2 (uplink and downlink) for the use of 2G Network nationwide. We have been allocated frequency spectrum of 22 MHz x2 for our 2G system, of which 18 MHz x2 is in the 800 MHz band nationwide and 4 MHz x2 is in the 1.5 GHz band in cities such as Tokyo, Nagoya and Osaka. Therefore, our 2G network is separated into two bandwidths, an 800 MHz system and a 1.5 GHz system. We offer nationwide coverage on our 800 MHz digital cellular service, and coverage in cities such as Tokyo, Nagoya and Osaka on our 1.5GHz digital cellular service.

3G Network

We developed our 3G network based on the IMT-2000 standards of the International Telecommunications Union, or ITU, and launched commercial service of our 3G network in October 2001. IMT-2000 indicates a third generation mobile phone system (3G) which offers data transmission at speeds higher than the conventional second-generation system (2G) as well as global roaming services. In May 2000, ITU recommended five technologies as the IMT-2000 standard. The technology adopted in our 3G network, Wideband Code Division Multiple Access, or W-CDMA, is a type of DS-CDMA, one of the five technologies recommended by ITU. We believe that, given the number of industry participants which have already signed on to W-CDMA, this platform may become an industry standard. Enough overseas operators have adopted a W-CDMA system compatible with our W-CDMA technology and commercialized the services, and we believe that we will be able to offer our services globally and benefit from economies of scale.

Our 3G network is an integrated network of base stations, various switching centers, transfer and control points and information storage systems. We are actively encouraging the migration of our customers from our 2G to our 3G network. We are adding equipment and infrastructure for our 3G network to our existing 2G network. We began installing an IP router network based on an optical fiber relay network to reduce costs and supplement our backbone switching station and transmission line network. The Government is currently allocating a total bandwidth of 285MHz as radio frequencies available for use in the nationwide 3G network. Of this, we are using 20MHz x2 (for uplink and downlink) in the 2GHz band across the entire country. Of the 800MHz band that is in the process of reallocation, we currently use 5MHz x2 in regions where interference with existing systems can be avoided. Further, on the 1.7GHz spectrum, we use 10MHz x2, and will commence usage of 10MHz x2 in the Tokai and Kansai regions. Therefore, our 3G network operates on the three bands of 2GHz, 800Hz and 1.7GHz.

In July 2007, in order to improve reception quality in certain areas, we developed an ultra compact base station device that can cover limited areas in residences and stores where FOMA signals have difficulty penetrating. This device covers an area with a radius of several dozen meters, and is smaller, lighter, and uses less energy than conventional indoor base stations. By adding this device to “IMCS”, our indoor base station, reception areas can be constructed at low cost. The device was introduced in November 2007.

3G Standardization Efforts

In 2000, the International Telecommunications Union, or ITU, recommended standard specifications for 3G, mobile phone systems. ITU collectively refers to 3G systems as IMT-2000 (International Mobile Telecommunications for the year 2000). In the recommendations setting forth the IMT-2000 standard specifications, five technological characteristics are listed.

Out of five characteristics, we expect that the following two are the most likely to achieve commercial success:

	•		IMT-MC, known as cdma2000; and
	•		IMT-DS, known as Wideband Code Division Multiple Access, or W-CDMA.

Super 3G (also known as LTE, Long Term Evolution, in the standardization) has recently been discussed in 3GPP (3rd Generation Partnership Project), a standardization association of W-CDMA, and we are playing a key role in the discussion. In accordance with the completion of fundamental discussion on LTE during the meeting of 3GPP held in June 2006, we launched the development of Super 3G for its commercialization. In tandem with these developments, we will continue to vigorously participate in the 3GPP standardization activities in order to finalize detailed LTE specifications.

We were the first company in the world to launch 3G services based on W-CDMA technology. Many foreign businesses in which we have invested, including HTCL, FET, KTF and PLDT, and our international strategic allies, including Conexus Mobile Alliance operators, have already launched 3G services based on W-CDMA. One of our competitors in Japan, Softbank (formerly Vodafone), launched their 3G service based on W-CDMA in December 2002.

Cdma2000 1x was first commercialized in South Korea in 2000. Our competitor, KDDI, launched its 3G commercial service based on cdma2000 1x in April 2002 in major cities in Japan.

While there can be no assurances, we believe that W-CDMA will become the dominant 3G technology. In an effort to promote and encourage the worldwide implementation of W-CDMA, in April 2002, we announced that we would begin licensing patents at reasonable and non-exclusive terms for our proprietary W-CDMA technology on which our FOMA system is based. Patents will be licensed to manufacturers which supply 3G products to mobile communications operators. We believe that widespread adoption of W-CDMA technology will reduce procurement and production costs and contribute to lowering fees for 3G services and products.

Research and Development

Research and development is performed primarily at our facilities with input from our various eight regional subsidiaries as well as our various divisions. We spent ¥100.0 billion on research and development in the year ended March 31, 2008. Previously, research and development expenses were apportioned between us and our eight regional subsidiaries. However, this expense apportionment was replaced by a new arrangement effective the year ended March 31, 2001. Currently, each of our regional subsidiaries bears research and development expenses in the form of usage fees equal to 3.1% of its operating revenues. Each regional subsidiary is allowed to use the results of our research and development freely, although we retain patents and other intellectual property rights and we control all intellectual property licensing and sublicensing.

We organize our research and development efforts through our R&D division. Our R&D division includes:

	•		a research laboratory;
	•		four development departments, including core network development, radio access network development, service & solution development, and communication device development departments;
	•		an R&D general affairs department; and
	•		an R&D strategy department.

Furthermore, as part of our ongoing research and development and in order to continue to improve our products, networks and services, our various research and development departments collaborate with product development staff at each of our operating divisions. We are also working with major manufacturers of our handsets and network equipment.

In addition, outside the R&D division we have other development-related divisions, such as our Network Division and Products & Services Division.

We have established DoCoMo Communications Laboratories USA, Inc., a U.S. subsidiary which carries out research and development of network technology, handset software and media encoding. In July 2005, we established DoCoMo Capital, Inc., whose purpose is to invest in venture businesses that have innovative, leading-edge technology applicable to mobile communications. We have also set up DoCoMo Communications Laboratories Europe GmbH, whose primary research areas are network technology, wireless technology, next-generation IC/USIM card technology, security technology and standardization activities. In November 2003, we established DoCoMo Beijing Communications Laboratories Co., Ltd. to research and promote the advancement of mobile communication technologies for fourth-generation (4G) and beyond. Finally, we established DoCoMo Technology, Inc., which primarily carries out research and development to enhance our PDC system, IMT-2000 system and other existing systems and supplements our fundamental research and development activities.

Furthermore, we have also conducted research with various universities inside and outside of Japan. These groups are involved in technological exchange in connection with not only 3G research and development but also 4G cellular communications systems and other advanced technology research.

In April 2003, we and Japan’s other mobile phone operators agreed to conduct a joint study on the possible biological effects of exposure to radio waves from mobile phone systems. In April 2005 and January 2007, interim reports were issued, and at present research is still ongoing.

We are continuing research and development of our 3G system through our IMT-2000 related research. This includes further research and development of the W-CDMA technology as well as research and development of new products, services and applications for the 3G system. Currently, we are focusing on increasing transmission capacity and capabilities, reducing network costs, downsizing base station equipment, improving functionality of switches, reducing handset size and weight, adding advanced functions to handsets, extending battery life, improving mobile multimedia services and developing video mail and international roaming services.

Another research and development theme is an IP-based network. The rapid increase of IP-based applications and the traffic they generate require communications methods for mobile networks that are both efficient and highly compatible with IP traffic. To meet these requirements, we have initiated research aimed at implementing an IP-based network that can be constructed at a low cost with generalized network routers, concerning development of IP-based routing and Quality of Service (QoS) technologies for multimedia traffic, as well as the development of new IP-based mobility control technology. Furthermore, we continually research ways to improve the efficiency, design and quality of our Personal Digital Cellular network.

We are conducting research regarding other advanced technology, including fundamental research on a 4G wireless communications system aiming at further enhancement of cellular services. ITU has set forth as a requirement for fourth generation services the ability to support transmission speeds of up to 100 Mbps for downlinks when a user is traveling at high speeds, and 1 Gbps when traveling at low speeds. If such a system is realized, fourth generation services will also feature high quality video equivalent to high definition television and will allow high-speed transmission of large-capacity data on a bandwidth of approximately 100 MHz. We are actively participating in the international standardization movement for a 4G system. We also support the development of the Super 3G system. In July 2006, we started to accept proposals from suppliers and launched the development of Super 3G equipment to commercialize Super 3G. In September 2007, using our proprietary technology, we succeeded in the trial manufacture of a low-energy LSI chip that carries out high-performance signal separation of MIMO multiplexed signals. With this trial manufacture, we achieved the loading of 3G high-speed signal transmission technology onto handsets at an energy-consumption level acceptable for handsets. The trial product is capable of highly accurate processing of signal separation at transmission speeds of 200Mbps with energy consumption of below 0.1 watts. In July 2007, we commenced indoor tests, seeking a basic performance confirmation system and system optimization. In February 2008, with a goal of testing performance in an actual wireless environment and achieving further system optimization, we commenced outdoor Super 3G system field tests, and succeeded in packet signal transmission with a maximum downlink speed of 250Mbps.

In the summer of 2002, we began practical evaluations of key technologies for our 4G mobile communications system, as well as implementing an experimental system to demonstrate their benefits. In October 2002, we successfully completed a 100 Mbps downlink and a 20 Mbps uplink transmission experiment in an indoor environment using an experimental 4G mobile communications system. In May 2003, the Kanto Bureau of Telecommunications granted us a preliminary license to conduct field trials of 4G mobile communications systems. In August 2004, we successfully completed experiments on real-time 1-Gbps packet transmission in downlink. In May 2005, following the experiments in an indoor environment, we successfully realized outdoor experiments on real-time 1-Gbps packet transmission in downlink, followed by 2.5 Gbps packet transmission in downlink in December 2005. In February 2007, we successfully tested packet transmissions with a maximum downlink speed of 5 Gbps outdoors. Currently, we are continuing to evaluate and improve these high-speed transmission technologies through field trials.

R&D Center

In order to respond to swiftly growing demand for wireless telecommunications and to diversifying customer needs, we have upgraded our research and development capabilities and streamlined our research and development operations. To this end, the NTT DOCOMO R&D Center in Yokosuka Research Park was completed in March 1998. We added three R&D facilities in March 2002, October 2003 and December 2004. The NTT DOCOMO R&D Center is a highly advanced R&D center near Tokyo specializing in mobile telecommunications technology. With state-of-the-art testing facilities, the NTT DOCOMO R&D Center is the base for research and development of basic technologies, 3G, 4G and other mobile telecommunications systems and a variety of new products and services.

Information Technology

We employ various computerized, fully integrated information systems to support key functions, including network operation management, procurement, billing, financial accounting, customer service and marketing.

One of the most important of these systems is ALADIN, which is a proprietary nationwide operating system we share with our eight regional subsidiaries. ALADIN has five primary functions: customer management, phone number management, information processing and storage, sales information management, and credit investigation. ALADIN manages information and data concerning our nationwide mova and FOMA subscribers and provides authorized customer service personnel in DOCOMO Shops and our telemarketing center with online access to network data so that they can properly address customer inquiries.

ALADIN enhances the efficiency of our operations by simplifying the process of registering customer information, automating phone number registration, enabling automatic credit reference checks and other functions. For example, ALADIN controls telephone number allocation which makes it possible for handsets to be assigned telephone numbers and activated immediately upon signing up for cellular service and also provides an opportunity to conduct reference checks in order to prevent the assignment of a telephone number to a subscriber who does not meet our payment history and other requirements. ALADIN maintains and continually updates a list of previous subscribers that had credit problems.

ALADIN and related systems are also used to collect customer data so that management and marketing personnel can monitor and analyze the usage of services, market segments and subscriber satisfaction, and utilize those data to develop a plan for network expansion and appropriate marketing strategies.

We have implemented various measures to ensure thorough and adequate control of customer information during the use of the ALADIN customer information system by our staff members. Such measures include system login and fingerprint authentication for each search of customer information, regular inspections of locations where ALADIN terminals are installed to check how the system is used and managed, examination of access logs and regular information management training for employees who manage this system.

Billing System

The billing system handles the processing and printing of certain bills sent on a monthly basis to our subscribers. We bill each of our subscribers on a monthly basis and subscribers may pay their bills by bank or other financial institution account transfer, by credit card, or in person at any number of locations, including our shops, banks or other financial institutions or convenience stores. Our e-billing service allows us to provide customers with an electronic bill instead of sending them a paper bill and therefore helps the environment and allows us to provide rebates of ¥100 per bill to subscribers who use this service. A very high percentage of our subscribers, approximately 75% as of March 31, 2008, pay their monthly bill by automatic payment or with their credit card, bank or other financial institution account.

In May 2002, we introduced a paperless billing system that enables i-mode users to pay monthly mobile phone bills at convenience stores using a QR code on the screens of their mobile phones. Our “comvien” service is offered at approximately 1,400 convenience stores nationwide as of March 31, 2008. We are also negotiating similar arrangements with other convenience stores. There is no fee for this service and users only pay a small transmission charge to download the bar code.

We also offer a “Mobiler’s Check” that allows payment in advance for the monthly phone bill. By registering the 14-digit number that appears on the back or other part of the card from a mobile phone, the prepaid amount will be deducted from the next month’s mobile phone bill. Subscribers can use this payment method for all mobile phones and Widestar services. Mobiler’s Check is available at DOCOMO Shops and other locations.

As of March 31, 2008, our collection rate on outstanding bills within 60 days from the payment due date was 99%. In order to keep our ratio of bad debts low, we carefully monitor subscribers with large outstanding amounts and delinquent customers, send frequent notices and accelerate billing in cases where usage amounts may have accumulated above certain threshold amounts during a billing cycle. In addition, we terminate services to subscribers who have not paid after 20 to 30 days from the initial payment due date and cancel subscribers’ subscriptions if they have not paid after 60 days from the initial payment due date.

Enterprise Information System (DREAMS)

In April 2002, we and our 34 consolidated subsidiaries introduced an enterprise information system which we call “DREAMS”, and as of June 2008, our 36 subsidiaries had implemented this system. This system enables us to consolidate the flow of operations, cash, goods and information throughout our company and our consolidated subsidiaries. This system allows us to realize real-time and effective management of our company. Specifically, this system gives us the ability to understand real-time information and thereby make timely decisions, allows us to perform electronic approval to reduce indirect operations, and allows us to effectively manage capital among the DOCOMO group companies.

Competition

With the rapid growth of the wireless telecommunications industry in Japan, the increasing numbers of subscribers and the deregulation of the industry, we are facing increased competition. We have responded to the gains made in recent years by KDDI’s au service with a comprehensive approach, including revisions in our billing plans, releases of attractive handsets, and improvement in network quality. In addition to existing mobile phone operators, other companies have also expressed their intention to enter the mobile phone market. Of these companies, SoftBank Corp. acquired Vodafone’s Japanese unit in April 2006 and began providing services under the SoftBank Mobile brand in October of that year, and EMOBILE Ltd. began offering mobile data services using the HSDPA protocol on March 31, 2007, and voice communication services on March 28, 2008. Also, new businesses using MVNO began full-scale market entry, and Disney Mobile started offering these services on March 1, 2008.

Mobile Number Portability (MNP) took effect among domestic mobile phone operators in October 2006. MNP allows mobile phone users to keep their current phone numbers even if they switch mobile phone operators.

Furthermore, in addition to direct competition from other cellular operators, we believe that the telecommunications industry in Japan is organizing itself into integrated groups of telecommunications service providers that will offer local, long-distance and international phone services as well as mobile and other services. While we believe that we have certain competitive advantages over these groups, including our current market leadership position, our research and development capability and our affiliation with NTT, the effect of industry consolidation is difficult to predict and no assurance can be given that we will be able to continue to protect our current market position.

Cellular Competition

There are presently four cellular operators in Japan: DOCOMO, the KDDI group, SoftBank, and EMOBILE. As of March 31, 2008, we had a market share of 52.0%, the KDDI group (including the TU-KA Group) had a market share of 29.5%, Softbank had a market share of 18.1% and EMOBILE had a market share of 0.4%. These cellular operators have all received permission and licenses from the Government for the establishment of 3G services in Japan.

The KDDI group is the second largest cellular operator in Japan with approximately 30.3 million subscriptions as of March 31, 2008. The KDDI group is a product of the merger of the telecommunications carriers KDD, DDI and IDO in Japan that occurred on October 1, 2000. Its cellular operations are a result of an alliance between three formerly independent cellular operators, DDI cellular and its related subsidiaries and IDO. They offer nationwide services using cdmaOne technology as well as PDC technology. The KDDI group launched its 3G services through cdma2000 1x in major cities in Japan in April 2002. On October 1, 2005, KDDI merged three companies of TU-KA group and began to accept contract changes from TU-KA cellular services to au cellular services, enabling TU-KA subscriptions to carry over the same mobile phone number they were using in TU-KA cellular services. Furthermore, on February 20, 2006, KDDI added another privilege which enables TU-KA subscriptions to carry over the same e-mail address, and promote the migration of the users to au cellular services. As of March 31, 2008, they had approximately 29.7 million 3G subscriptions. The network construction costs for the KDDI group have been lower than ours because of their ability to use most of their existing cdmaOne networks.

SoftBank operates nationwide and is the third largest cellular operator with approximately 18.6 million subscriptions as of March 31, 2008. SoftBank acquired the Japanese subsidiary of the worldwide Vodafone group in April 2006 and began providing mobile phone services in October of that year. The Japanese Vodafone subsidiary began offering 3G services in December 2002, based on the same standard W-CDMA (DS-CDMA) technology as ours. SoftBank had approximately 14.0 million W-CDMA 3G subscriptions as of March 31, 2008. SoftBank also offers international roaming service with GSM networks overseas.

Competition in the industry has led the three cellular operators (excluding EMOBILE) to enact similar rate plans and promotions. For example, KDDI and SoftBank both offer plans that are similar to our “Family Discount”, “Nikagetsu Kurikoshi” and “Pake-hodai” plans. Softbank introduced the “White Plan” service that allows unlimited free calls among SoftBank subscribers between 1:00 a.m. and 9:00 p.m.

Regarding potential competition from fixed-line telecommunications services companies, our management believes that fixed-line telecommunications services and cellular communications services are not necessarily competitive with, but rather are primarily complementary to, each other—customers typically use fixed-line networks when they are at their homes or offices and cellular networks when they are outside. However, with the expansion of services offered by both fixed-line and cellular operators, improvements in fixed-line and cellular technology, rate reductions in cellular services, deregulation, competition within the telecommunications industry and other developments (including technological developments that may enable us to lower the cost and further improve the capacity of cellular transmission), there may be direct or indirect competition or conflicts of interest between us and other NTT subsidiaries.

i-mode Competition

The competitors of i-mode are “EZweb” provided by the KDDI group and “Yahoo! Keitai” provided by SoftBank. As with i-mode, KDDI’s “EZweb” and SoftBank’s “Yahoo! Keitai” services allow their users to connect to the Internet, send and receive e-mails, download games, music and video content, and also utilize navigation programs. We expect increasing competition in the areas of content offering and e-commerce services.

PHS Competition

Our competitor in the PHS (Personal Handy-phone System) market was WILLCOM. In October 2004, the Carlyle Group and Kyocera Corporation acquired the business of DDI Pocket, Inc., a subsidiary of KDDI. In February 2005, DDI Pocket changed its name to WILLCOM. We stopped accepting new applications for PHS services as of the end of April 2005, and terminated the service on January 7, 2008. As of the end of December 2007, WILLCOM had a PHS market share of 96.7% and we had a PHS market share of 3.3%.

Regulation of the Mobile Telecommunications Industry in Japan

MIC is the primary regulatory body with responsibility for the telecommunications industry in Japan. We are regulated by MIC primarily under the Telecommunications Business Law. We and other mobile telecommunications service providers are also subject to the Radio Law. We, however, are not subject to regulation under the Law Concerning Nippon Telegraph and Telephone Corporation, Etc., or NTT Law.

The Telecommunications Business Law

Under the Telecommunications Business Law, we and our eight regional subsidiaries are subject to a registration requirement as telecommunications operators. Depending on the scale of telecommunications circuit facilities operated and the scope of the areas where the telecommunications circuit facilities are located, telecommunications carriers are subject to either a registration requirement or a notification requirement.

The following table summarizes some of the major current regulatory requirements applicable to telecommunications carriers under the Telecommunications Business Law:

				Regulation:
a.		Business entry		Registration with the Minister of MIC required for carriers that install large-size telecommunications circuit facilities. Notification to the Minister of MIC required for carriers other than the above.
b.		Suspension and Discontinuation of business		Notification to the Minister of MIC and, in general, announcement to users are required.
c.		Tariff settings, service offerings, etc.		Unregulated in principle (1) Accountability to users concerning outline of terms and conditions of telecommunications service and proper and swift processing of complaints and inquiries from the users are required.

				Regulation:
d.		Business improvement order		The Minister of MIC may order a telecommunications carrier to improve business activities to protect the interests of the public and users with regard to the secrecy of communications, unreasonably discriminatory treatment, ensuring important communications, tariff and other service conditions, sound development of telecommunications, national convenience, etc.
e.		Interconnection		Obligation for interconnection with other telecommunications carriers in principle, which propose interconnection. In the event a telecommunications carrier does not accept entering into a consultation despite other carrier’s proposal to enter into an agreement to interconnect telecommunications facilities or if said consultation fails to come to an agreement, except for certain cases, the Minister of MIC may order such telecommunications carrier to start or resume consultation.
f.		Privilege of public utilities		Based on a request by a telecommunications carrier, except for certain cases, the Minister of MIC may designate the telecommunications carrier as an approved carrier who has the privilege to act as a public utility.
g.		Ensuring important communications		Telecommunications carriers are required to prioritize important communications when natural disaster, accident or any other emergency occurs or is on the verge of occurring.
h.		Permission of agreement with foreign governments, etc.		The Minister of MIC’s permission is required for conclusion, amendment or abolition of agreements/contracts on important matters relating to telecommunications business with foreign governments, nationals, or judicial persons/entities.
i.		Maintenance and Self-declaration of conformity		Telecommunications carriers that install telecommunications circuit facilities are obligated to maintain their facilities in compliance with technical standards and to confirm conformity of such facilities to technical standards by themselves, and notify the outcome to the Minister of MIC.

The asymmetric regulation

Furthermore, our Group is subject to the asymmetric regulation provided in the Telecommunications Business Law. This regulation is based on the distinction of (i) Category I-designated telecommunications facilities (e.g., local fixed-line systems) and (ii) Category II-designated telecommunication facilities (e.g., mobile communications systems), each designated by the Minister of MIC. The Minister of MIC may designate as Category II-designated facilities the transmission lines and other telecommunication facilities of a telecommunication carrier if its market share of the number of mobile terminal facilities within the same service area exceeds 25%. Our telecommunications facilities were designated as Category II-designated facilities in February 2002. The Minister of MIC may designate a telecommunications carrier installing Category II-designated facilities as a telecommunications carrier to whom the prohibition of anti-competitive behaviors by designation shall apply, if the percentage of such carrier’s revenue from telecommunications service using the Category II-designated facilities to the total revenue from all business activities of the provision of the same type of telecommunications service within the same area exceeds 25% and it is deemed necessary to ensure fair competition with other telecommunications carriers. Our and our eight subsidiaries’ revenue percentage in all service areas exceeds the 25% threshold and we were so designated in May 2002.

Under the asymmetric regulation described above, we and other telecommunications carriers that have installed Category II-designated telecommunications facilities are subject to the prohibition of anti-competitive behaviors, such as abuse or provision of proprietary information obtained from competitors through interconnection for other purposes, unduly favorable treatment of specific carriers and undue compulsion or intervention upon other carriers, manufacturers or suppliers of telecommunication equipment, and are obligated to compile and disclose financial statements pertaining to telecommunications and other businesses. In addition, telecommunications carriers that have installed Category II-designated telecommunications facilities are obligated to establish and notify to the Minister of MIC the Article of Agreement Concerning Interconnection prior to implementation and to make them available for public inspection. The Minister of MIC may order changes be made to the Article of Agreement Concerning Interconnection. Agreements pertaining to the interconnection between Category II-designated facilities and other telecommunications carriers cannot be entered into or amended without complying with the Article of Agreement Concerning Interconnection.

For other recent discussions concerning the Telecommunications Business Law, please see “Recent Discussions on the Telecommunications Business Law and the Radio Law” below.

The Radio Law

Outline

The Radio Law was established to promote public welfare by ensuring the equitable and efficient utilization of radio waves. There are certain important provisions of the Radio Law applicable to us and other mobile phone service providers.

Article 4 requires that any person who intends to establish a radio station shall obtain a license from the Minister of MIC. This requires cellular operators to obtain a license in connection with individual base stations and handsets. However, with respect to increases in the number of base stations and sales of handsets within the already allocated spectrum, a technical standards verification system and other systems have been introduced to expedite the process by MIC. Under Article 6 of the Radio Law, persons wishing to obtain a license for a radio station must submit an application to the Minister of MIC together with documents setting forth matters such as purpose and the reason for requiring the establishment of a base station, communication counterparties, communication matters, locations where radio equipment are to be installed, and frequencies to be used. Under Article 7 of the Radio Law, the Minister of MIC, upon receiving an application for a license, shall examine it to determine whether it satisfies, among others, the following criteria: conformity of the construction design to technical standards, the availability of the frequencies requested, and conformity with the fundamental standards for radio station establishment such as the applicant’s business need for the license. Generally, however, the Minister of MIC submits such important matters as spectrum allocation to new operators and new systems to the Radio Regulatory Council for consultation and will grant the license only after obtaining the Council’s reply thereto.

Article 17 of the Radio Law requires a licensee to obtain prior permission from the Minister of MIC for changes in the operations, including changes of the person with whom radio communications is conducted and location of radio equipment, and for the initiation of construction to modify any radio equipment. As with licensing, regulatory requirements with respect to the location of radio equipment and construction to change radio equipment for use within the allocated spectrum has been simplified by implementing a certification procedure.

Article 26 of the Radio Law also provides that a list setting out current frequency assignments and frequencies available for future assignment shall be made public for the convenience of any person that would like to establish a radio station. The frequency or spectrum allocated for a certain use, such as cellular, PHS or paging services is stipulated by a ministerial ordinance of MIC. From within the assigned frequency or spectrum for a certain service, MIC by issuing a circular allocates a spectrum to the wireless telecommunications operators providing such services. In accordance with Article 4 of the Radio Law as noted above, the operators then apply for a license for radio stations (i.e. base stations and handsets) that use frequency from within their allocated spectrum.

Spectrum Allocation

Spectrum allocation is awarded based on an application to MIC, which regulates the use of radio frequencies and the allocation of spectrum in Japan under the Radio Law. MIC currently allocates 69 MHz x2 for 2G network. As spectrum capacity is limited, spectrum is a highly valuable resource. We have been allocated a frequency spectrum of 22MHz x2. Within our allocated spectrum, we use 18 MHz x2 for our 800 MHz PDC network and 4 MHz x2 for our 1.5 GHz PDC network in cities such as Tokyo, Nagoya and Osaka. Currently, two other mobile phone operators have been allocated spectrum for their cellular services in Japan. The KDDI group has collectively been allocated 13 MHz x2 in the 800 MHz and 1.5 GHz bands for 2G network. SoftBank Mobile has been allocated 11.5 MHz x2 in the 1.5 GHz band.

Radio frequencies for 3G networks have been allocated as stated below.

On June 30, 2000, we, KDDI and Vodafone (currently Softbank Mobile) respectively obtained approvals from the Ministry of Posts and Telecommunications (which was consolidated into the Ministry of Public Management, Home Affairs, Posts and Telecommunications with other governmental organizations and is currently called the Ministry of Internal Affairs and Communications, or MIC) which allow each company to use the 2 GHz band. All three companies have each been allocated 15 MHz x2 of spectrum.

In May 2004, MIC announced its allocation policy allowing us and Vodafone each to use an additional 5MHz x2 of spectrum in the 2GHz band. KDDI is expected to be allowed to use an additional 5MHz x2 of spectrum after the interference problem with PHS systems is technically resolved.

In February 2005, MIC announced its policy to allocate spectrum in the 800MHz band to us and KDDI respectively, which allows each company to use 15MHz x2 of spectrum after completing the migration of existing systems operated in the 800MHz band to other frequency bands.

In August 2005, MIC announced its policy for new allocation of 35MHz x2 in the 1.7GHz band (of which, 15 MHz x2 is nationwide, only for new businesses, and 20MHz x2 is for Tokyo, Nagoya and Osaka, for both new and existing businesses) and 15 MHz x2 in the 2GHz band (nationwide, for new businesses only). As of April 2006, in the 1.7GHz band, BB Mobile (a subsidiary of Softbank, currently Softbank Mobile) and EMOBILE (subsidiary of eAccess), as new business, have each been allocated 5MHz x2 nationwide, and we, as an existing business, have been allocated 5MHz x2, and IP Mobile has been allocated 15MHz in the 2GHz band. However, because through the acquisition of Vodafone by BB Mobile, the assumptions that were in effect at the time of attestation of the establishment plan were no longer operative, BB Mobile, on April 28, 2006, reported to MIC that it wanted to return the attestation, and in May 2006, MIC referred the matter of revocation of attestation of the establishment plan to the Radio Regulatory Council and canceled the attestation. Moreover, IP mobile also offered the return of attestation on October 30, 2007, and MIC canceled the attestation according to the report of the Radio Regulatory Council.

Recent Amendments

Under amendments to the Radio Law that took effect in November 2005, a review was undertaken of charges for radio spectrum use, with a view towards correcting what was perceived as unfairness based on type of radio station. In addition, new bandwidth charges are to be imposed depending on the frequency bandwidth used by mobile phones and other devices, and radio spectrum use charges for mobile phones have been lowered. Under this system, which is designed to facilitate migration from 2G to 3G, increases or decreases in use fees for mobile phones may be offset among blanket licenses held by the same licensee. The radio spectrum use fees are to be used to provide subsidies to support transmission line costs to base stations meeting certain requirements and qualifying as a wireless system dissemination support business.

For other recent discussions concerning the Radio Law, please see “Recent Discussions on the Telecommunications Business Law and the Radio Law” below.

Recent Discussions on the Telecommunications Business Law and the Radio Law

Besides the points already covered in the amendments or the proposed amendments to the Telecommunications Business Law and the Radio Law, several other changes have been recommended by various governmental bodies.

Three-Year Program for Promoting Regulatory Reform

The Regulatory Reform Committee recommended in its report dated December 12, 2000 that, among other things, the introduction of a spectrum auction system be considered and discussed. The Government on March 30, 2001, launched the Three-Year Program for Promoting Regulatory Reform. The Regulatory Reform Committee was terminated on March 31, 2001. The General Regulatory Reform Council, a body established under the Cabinet Office, has since then been in charge of promoting regulatory reform. On March 28, 2003, it published the Three-Year Program for Promoting Regulatory Reform. In relation to the mobile telecommunications area, most of the issues in the Three-Year Program have already been reflected in the amended Telecommunications Business Law while an optimum spectrum reallocation system is still under consideration.

New IT Revolution Strategy

As part of the “New IT Revolution Strategy” determined on January 19, 2006 by the Government’s IT Strategy Headquarters the following proposals were made in connection with mobile communications:

	•		realization of a mobile communications system with data transmission speeds that are 100 times faster than the current level by fiscal year 2010, and
	•		formulation of guidelines for standardization by 2010 of displays and methods of operations for handsets and equipment that take into consideration user-friendliness for all people, including seniors and the handicapped, and promotion of product labeling that facilitates selection by consumers of easy-to-use products.

Emergency Calling Functions

As part of the “technical requirements for caller location notification functions for emergency calls from cellular phones” announced by MIC’s committee on advancement of emergency calling functions on June 30, 2004, the following provision was proposed:

•

cellular handsets for 3G mobile communication systems introduced by network operators in April 2007 and after must in principle be equipped with GPS location and notification functionality.

Regarding the provision of a location information notification feature for emergency situations, we are working with relevant ministries in order to successfully implement the proposal in consideration of user convenience and the demands of society with due consideration to the protection of privacy and communication confidentiality.

NTT Group

Both the Three-Year Program and the New IT Revolution Strategy stated that the Government expects that NTT will establish a voluntary action plan for promoting competition, including:

	•		further opening of the NTT group’s local network, and
	•		realization of competition within the NTT group by decreasing NTT’s ownership percentage in our company and NTT Com.

In response, on October 25, 2001, NTT together with NTT East and NTT West announced “NTT’s Strategy concerning Current Management Issues”. In relation to its group operations, in that release NTT stated that:

	•		maintaining the present group operation under a holding company will be necessary in order to proceed with the structural reform that would revise NTT East and NTT West cost structures by reallocating personnel within the NTT group and making use of outsourcing companies,
	•		from the standpoint of maximizing corporate value (shareholders’ profits), the NTT group management apportions each group company’s business areas such that (i) in fields where new markets need to be developed, such as Internet-related business, each company is free to decide its own business strategy while taking advantage of its own strengths, even if this involves competition among NTT group companies; and (ii) in the remaining fields, group operations are carried out on the principle of avoiding duplication of resources,
	•		the simultaneous holding of executive positions between local companies (NTT East and NTT West) and NTT Com or our company is not implemented currently and will remain unimplemented, from the viewpoint of fair competition, and
	•		decisions on NTT’s investment ratio of NTT Com and our company and the simultaneous holding of executive positions will continue to be considered from the standpoint of maximizing shareholders’ profits, while fully respecting the autonomy in actual business operations of each NTT group company and taking into account operational necessities and stock market trends, as the market and other environmental factors surrounding the NTT group are rapidly changing.

In the report released on June 6, 2006, an MIC panel on the future of telecommunications and broadcasting services proposed conducting a thorough review of the legal system for telecommunications by 2010 for promotion of fair competition among telecommunications carriers. It also called for discussions of measures aimed at eliminating regulations restricting the operations of NTT East and NTT West, as well as abolishing the holding company and separating the capital ties within the group in an integrated manner. Further, it proposed a swift start to discussions necessary for the above proposals.

In response to the report released from the MIC panel, NTT released a statement on June 6, 2006, saying that it planned to exert its utmost efforts to achieve the goals stated in its medium-term business strategy and that it would not be able to accept the proposals in the report because they would interfere with the smooth implementation of such strategy.

On June 20, 2006, the consensus between Government and ruling parties on the future of telecommunications and broadcasting services was released. In the statement, they concluded that, in the telecommunications industry, they would promote such fair competition rules as those on opening of networks that are necessary for realizing advanced yet inexpensive information communication services and would discuss the organizational issue of NTT in 2010 after assessing the status of the diffusion of broadband and the trend of medium-term business strategy of NTT.

Fair Competition

One of the purposes of the Telecommunications Business Law is promoting fair competition in the telecommunications business, and accordingly MIC implements various measures. MIC and the Fair Trade Commission jointly published in November 2001 the Guidelines for Promotion of Competition in the Telecommunications Business Field for the purpose of the Antimonopoly Law and the Telecommunications Business Law in order, principally, to enhance the transparency of telecommunications carriers, to clarify actual practices for which telecommunications carriers having market power are prohibited and to clarify practices leading to orders to change charges or orders to improve business activities under the Telecommunications Business Law.

On June 6, 2002, MIC’s study group on new business models and grand design of the competitive environments for the new information and communications era compiled and released its final report regarding how competitive environments in the telecommunications business fields should be established in the broadband age. The report indicates the necessity of introducing new regulations in order to facilitate participation of content providers, portal site providers and Internet service providers to the i-mode service market. In addition, equal treatment among content providers has been required by the aforementioned joint guidelines published by MIC and the Fair Trade Commission. In November 2002, we started providing Internet service providers with open access to the interface with our PDC-P packet network used for i-mode-compatible PDC handsets. Open access to the interface with our IMT-2000 packet network used for FOMA i-mode handsets has also been allowed since March 2003.

The Right to Set Charge for Calls

In November 2002, in connection with an application by Heisei Denden to MIC concerning terms and conditions of interconnection between Heisei Denden’s telecommunications facilities and our telecommunications facilities, MIC decided, following a recommendation by the Telecommunications Dispute Settlement Commission, that it is appropriate for Heisei Denden to set user charges for calls generated from Heisei Denden’s facilities to our facilities. This principle will be applied to interconnections among other local operators, except NTT East and NTT West, and mobile operators. This is a case of a fixed-line operator being given the right to set charges for calls made from fixed-line phones to cellular phones. In addition, in December 2002, MIC set up a study group regarding the setting of charges with respect to intermediate interconnection services and calls made from IP telephones to cellular phones.

As a consequence, in June 2003, it was announced in the study group report and the administrative policies of MIC that the charges for inter-exchange calls (outbound calls from the fixed-line telephones of NTT East and NTT West to cellular phones connected via the facilities of inter-exchange operators) will be set by inter-exchange operators if the caller selects the inter-exchange operator for each call, and the charges for calls made from IP phones to cellular phones will be set by the IP phone operator. Following this announcement, intermediate interconnection services were introduced in April 2004. While, as a transitional measure, mobile phone operators were allowed to set user charges for the portion of an inter-exchange call serviced by mobile phone operators during the year ended March 31, 2005, effective April 2005, interconnection fees have been applied instead for the said portion of an inter-exchange call.

Radio Spectrum Use

The study group on policies concerning the effective radio spectrum use of MIC that was established in January 2002, published its first report in December 2002. Its proposals included the introduction of a compensation scheme for licensees who shoulder losses resulting from a short-term reallocation of spectrum or a shift to fiber-optic cables instead of an alternative spectrum. That proposal was reflected in the Amendments to the Radio Law that passed the Diet in May 2003. The report also proposed that a comparative examination system based on market principles and licensing procedures is desirable instead of an auction system which could seriously hinder effective use of radio spectrums as shown by the extremely high bidding that occurred in various European countries. The report also proposed deregulation on experimental radio stations. In September 2003 and December 2003, the study group published its second and third reports, including discussion of such topics as an after-the-fact registration system (including exemption from prior licensing) primarily for public wireless LAN services, and discussions about cost burdens. They released a final report October 2004 proposing basic policy regarding amendment of the scheme for spectrum user fee. In this report, in order to secure the fairness of the burden for spectrum user fee imposed to every licensee, reexamination of the fee scheme for each type of radio station and imposition of spectrum user fee charged depending on areas and ranges of spectrum used as a radio spectrum exclusive for wide-range areas (a frequency mainly used in radio stations which are built considerably in wide-range area by same licensee) were incorporated. Also, in order to bridge the digital divide, a system to financially assist, with a certain criteria, the expense of the cable transmission line to the mobile base station in rural areas and allocation of funds for the research and development of effective use of spectrum are incorporated. The proposed measure was approved and materialized in the Diet in October 2005, and it was reflected in the amended Radio Law proclaimed and enforced in November of the same year (reexamination of the charging scheme was enforced in December of the same year).

Evaluation of Competition in the Telecommunications Field

MIC announced its “basic approach of competition review in the telecommunications field” and “details of the implementation for the year ended March 31, 2004 of the evaluation of the state of competition in the telecommunications field” in November 2003. MIC has performed analyses of four areas including the areas of fixed-line phone, Internet access services, mobile communications, and corporate network services annually from the year ended March 31, 2004. Analysis and evaluation on the state of competition will first be made based on an analysis using quantitative indices, and in the event it is judged that progress of competition cannot be sufficiently achieved with quantitative analysis only, qualitative analysis, including factors affected by circumstances that are indicated by qualitative indices, will also be employed.

In October 2006, MIC designated the three years from fiscal year 2006 to fiscal year 2008 as the second phase for competition review, and formulated the “basic policy for competition review in the telecommunications field for fiscal years 2006-2008,” based upon which it announced in November 2006 “particulars for competition review in the telecommunications field for fiscal year 2006.” The stipulated implementation particulars included matters ranging from the domains subject to analysis in the fiscal 2006 competition review to the analysis and review of competition conditions.

In July 2007, MIC announced its “competition review in the telecommunications field for fiscal 2006”. In this report, MIC’s evaluation of the mobile communications field was as follows:

	•		in the cellular phone and PHS markets, the migration from 2G to 3G would advance, and competition would remain brisk;
	•		while the NTT DOCOMO Group had a market share, as of December 31, 2006, of 52.8% and has been in a position to control the market, due to the regulations on Category II-designated telecommunication facilities and the intense competition among carriers for market share, the possibility of its actually exercising market control in the future is low; and
	•		regarding concerns that multiple carriers could collude to exercise market control, the entry of new competitors to the market, including Softbank and EMOBILE, and the introduction of Mobile Number Portability, have resulted in the provision of a variety of rate discounts and a diverse range of services. As a result, the competition seems even greater than ever, and the possibility of the exercise of market control in the future is low.

New Competition Promotion Program 2010

In October 2005, MIC established a “Panel on Competition Rules corresponding to the development of IP” for the purpose of clarifying basic policy regarding competition rules in light of developments in IP and the direction in which review of connection and rate policies is to proceed. A final report was released in September 2006.

In light of this report, MIC announced in September 2006 the New Competition Promotion Program 2010, which concerns measures to be implemented by the early 2010s from the viewpoint of ensuring fair competition. Further, in October 2007, MIC revised the program in order to more accurately address the rapid changes in market environment. The outline of the program is as follows:

	•		promotion of facility competition;
	•		review of the designated telecommunications facilities system (dominant regulations);
	•		review of the calculation rules for NTT East and NTT West interconnection charges;
	•		promotion of competition in the mobile telecommunications market;
	•		environmental improvements for realizing communication handsets compatible with IP technology;
	•		review of rate policy;
	•		review of the Universal Service Fund system;
	•		environmental improvements for ensuring network neutrality;
	•		strengthening of dispute resolution functions;
	•		review of market exit rules; and
	•		enhancement of consumer protection measures.

Based on the New Competition Promotion Program 2010, MIC plans to implement the required system changes by the early part of the decade starting in 2010. The status of the main changes affecting our Group is described below.

Review of the designated telecommunications facilities system (dominant regulations)

On April 18, 2007, MIC formulated the “guidelines for operation of the competition safeguard system” with the purpose of verifying the scope of designated telecommunications facilities and the validity of NTT Group’s successive fair competition requirements on a regular basis (once per year). The validation results for the fiscal year 2007, released on February 18, 2008, revealed that, among the matters relating to NTT DOCOMO that had been pointed out, there were no matters requiring measures, and that monitoring would continue.

Further, MIC is planning to undertake a comprehensive review of the currently designated telecommunications facility system, from the viewpoint of the fair operation of the dominant regulations in light of market integration associated with developments in IP related trends. Specifically, under the auspices of the “panel for network neutrality,” established in November 2006, a working group on “new competition rules” was established, with the purpose of examining the direction in which review of dominant regulations should proceed. In the report of the panel released in September 2007, a new regulatory framework was proposed for the Next Generation Network (NGN) of NTT East and NTT West, for platforms as vertical market control, and for FMC as horizontal market control. Going forward, in response to this report, specific conclusions will be released regarding the review of the designated telecommunications facilities system, and operation thereof is to begin by fiscal 2010.

Promotion of competition in the mobile telecommunications market

On February 13, 2007, with a view toward a more dynamic mobile telecommunications market achieved by promoting new entry by MVNO operators, MIC issued its revised “guidelines regarding the application of the Telecommunications Business Law and the Radio Law to MVNO.” Under the revised guidelines, whether wholesale telecommunications services are to be provided by a Mobile Network Operator (“MNO”) to an MVNO, or whether there will be an interconnection between an MNO and MVNO are matters, in principle, to be decided by consultations between the parties, and when an MNO has had a request for connection from an MVNO, unless it has grounds to refuse, it must comply with such request.

Further, in order to carry out an examination with a view towards improving economic vitality and user interests through the growth of new mobile businesses, a “mobile business study group” has been meeting since January 2007. In light of the final report of the study group, on September 21, 2007, MIC released the “Mobile Business Vitality Plan”. The following are the main points of the “Mobile Business Vitality Plan”:

	•		review of marketing models for mobile businesses;
	•		partial introduction of the new sales price plans (plans separating communication charges and handset fees) for fiscal 2008;
	•		clarification of the accounting arrangements for sales promotion funds;
	•		removal of SIM locks (final conclusion in 2010 regarding mandatory removal of SIM locks);
	•		promotion of handset platform standardization;
	•		examination of measures for enhancing consumer protection; and
	•		consideration of greater platform collaboration.

Further, since March 2008, the “Mobile Business Vitality Plan Assessment Meeting” has been held and the progress of the vitality plan has been evaluated on a regular basis.

Review of the Universal Service System

In November 2005, MIC announced its response with respect to the report on the universal service system, and it was decided that in order to maintain subscriber telephones of NTT East and NTT West, carriers connecting with NTT East and NTT West would share cost burdens in accordance with their ratio of telecommunication numbers handled. The universal service system was introduced in June 2003, but in the three years following its introduction, through 2005, no funds were actually utilized. An amended ministerial order was promulgated on April 1, 2006, and starting in January 2007, in order to ensure provision of universal service by NTT East and NTT West, a portion of such costs would be borne by all telecommunications companies, including our group, that provide services through connections to universal service, with such costs to be apportioned according to number of telephone numbers owned by each telecommunications company. In light of the intent of the system, our group is requiring its customers to assume an equitable portion of the costs in proportion to the number of telephone numbers they use, and starting with February 2007 bills (for usage in January 2007), its customers have been billed universal service fees.

The March 2007 report of the Telecommunications Deliberation Council stated that it would be appropriate to carry out a review of the rules for computing subsidies under the universal service system for the fiscal year 2007 and beyond. In response, the Universal Service Subcommittee commenced deliberation of these rules. In September 2007, the rules for computing subsidies and costs for the provision of the universal service system were revised, and the subsidy computing method was changed from the conventional method of using the national average cost as a benchmark, to a method where the benchmark is the total of the national average cost and twice the standard deviation.

Further, in regards to the universal service system, starting in January 2007, a “study group regarding the future image of the universal service system” began meeting, with a view towards the building of a new system in line with future environmental changes. In December 2007, the study group released its report on the universal service system of the future, in light of advances in IP technology. This report stated that, as an approach to reviewing the range of services encompassed by universal services from the beginning of 2010 and onwards, it would be appropriate to use as the standard a situation where, without regard to type of services, services that are provided through an access network and meet certain requirements are available (universal services).

Examination regarding network neutrality

On February 26, 2008, the Panel on Internet Policy began meeting, with the purpose of selecting and organizing policy for ensuring network neutrality and promoting sound development of the Internet, as seen from the diverse viewpoints of a range of stakeholders and in the midst of dramatic changes in network structure and market environment. The panel is expected to issue its conclusions by the end of December 2008.

On February 27, 2008, the Communication Platform Study Group began meeting, with the purpose of (1) encouraging further collaboration among platform functions for authentication, billing and other functions essential for the smooth distribution of content and applications over broadband network as broadband and IP technologies develop, and (2) organizing the goals necessary for promotion of a market environment conducive to the creation of new businesses and considering the direction government policy should take going forward. The report is scheduled to be concluded by the end of November, 2008.

The Other Recent Discussions

MIC established the Study Group for Telecommunication Numbers in the IP Age in order to deliberate how telecommunication numbers should be handled in light of the development of IP networks; the study group issued its first report in August 2005. The Study Group continued deliberations regarding such matters as telecommunication numbers available for FMC and other new services, and in its second report, released in June 2006, the Study Group accepted, for telecommunications numbers used for FMC services, 060 as a new telephone prefix and 050, 070, 080, and 090 as existing prefixes. In October 2006, MIC’s Telecommunication Numbers Subcommittee began deliberations, issuing a report on a “system for telecommunication numbers directed toward introduction of FMC services”. In November 2007, MIC amended the regulations on telecommunication numbers in light of this report.

In August 2006, MIC established the Study Group for Comprehensive Legal System for Communications and Broadcasting. With studies conducted from the viewpoint of experts, the Study Group aims to embody a studied framework of the law system in anticipation of the integration and alliance of communications and broadcasting. In December 2007, the Study Group released a report advising a fundamental review of the current legal framework, with the goal of a layered legal system. Starting in February 2008, the Committee Considering a Comprehensive Legal System for Telecommunications and Broadcasting has continued making specific policy considerations, with the goal of submitting a bill to the ordinary Diet session of 2010.

Information Security Management

In order to protect customer information, in conjunction with the full implementation of the Law on the Protection of Personal Information, we established the position of Chief Privacy Officer (CPO) and strengthened the system for protection of personal information, and we are making efforts to construct a company-wide information security system.

In addition, we agreed to take efforts to prevent personal information leaks by handling and managing all terminals and external storage devices containing personal information, training our employees, confirming matters for compliance in information management with all entities to which we outsource services, instructing and supervising such entities, strengthening the security technology in all our systems, establishing system security standards and developing, operating and managing systems in compliance with such standards.

Law to Prevent Unauthorized Use of Mobile Phones

In April 2006, with the enforcement of the Law to Prevent Unauthorized Use of Mobile Phones, we coped with imposition of identification and recording the documents verifying the customer’s proof of identity at the time of new contracts and reviewed an operative manual in order to comply with the law as a mobile telephone operator. In addition, we carry out the training for all the members performing duties such as identification and make an effort to ensure proper operation of such duties.

Relationship with NTT

NTT is our parent company and owned 64.8% of our voting rights as of March 31, 2008. The Government, in the name of the Minister of Finance, owned 39.0% of the voting rights of NTT as of the same date. The Government, acting through MIC, also regulates the activities of NTT.

The NTT group is the largest provider of fixed-line and wireless voice, data, Internet and related telecommunications services in Japan and operates one of the largest telecommunications networks in the world. The NTT group’s main business is providing nationwide telecommunications services including voice transmission services, data transmission services, leased circuit services, system integration services and other services. As a holding company, NTT is directly responsible for the overall strategy of the NTT group. NTT is also responsible for basic research and development for its group companies.

On July 1, 1999, NTT was reorganized into a holding company structure. The former NTT parent company transferred its local and long-distance businesses to three new wholly-owned subsidiaries: Nippon Telegraph and Telephone East Corporation, Nippon Telegraph and Telephone West Corporation, and NTT Communications Corporation (“NTT Com”). NTT East and NTT West operate regional telecommunications services in eastern Japan and western Japan, respectively, and NTT Com operates long distance telecommunications and other network services throughout Japan. NTT Com also offers international telecommunications services. We continue to be a direct subsidiary of NTT after the reorganization.

Although NTT owned 64.8% of our voting rights as of March 31, 2008, we conduct our day-to-day business operations independently of NTT and its other subsidiaries. All transactions between us and each of NTT and its subsidiaries and affiliates are conducted on an arm’s length basis. In the fiscal year ended March 31, 2008, we had sales of ¥65,126 million to NTT and its subsidiaries and had cost of services, selling, general and administrative expenses and capital expenditures of ¥247,016 million, ¥138,709 million and ¥78,112 million, respectively, to NTT and its other subsidiaries, compared to sales of ¥61,796 million and cost of services, selling, general and administrative expenses and capital expenditures of ¥267,329 million, ¥161,041 million and ¥103,728 million, respectively, in the year ended March 31, 2007. We also had receivables of ¥15,197 million from NTT and its subsidiaries and payables of ¥75,516 million to NTT and its subsidiaries at March 31, 2008, compared to ¥28,018 million and ¥93,208 million at March 31, 2007. In conjunction with the reorganization of NTT into a holding company, we now pay NTT at fair market rates for the fundamental research and development conducted by NTT on our behalf as well as fees and charges for any other services or benefits that are provided to us by NTT. In the fiscal year ended March 31, 2008, total payments by us to NTT amounted to ¥16.5 billion.

In order to ensure fair competition in the mobile telecommunications business, the MPT in April 1992 established the following conditions of separation on NTT (which was then in operation of the fixed line telephone services) and us (which remain applicable):

	•		To the extent possible, we must establish transmission lines for our network independent of NTT. In the event that we use NTT transmission lines, the terms and conditions for such use shall be the same as those for our competitors.
	•		NTT must not favor us in any transactions between NTT and us. The terms and conditions for our use of NTT utility poles, access to NTT’s network, access to NTT research and development and similar matters should be the same as for our competitors.
	•		All former NTT employees transferred to us were required to be permanent employees, rather than being seconded from NTT.
	•		We were to plan to have our shares listed and NTT’s ownership in us reduced approximately five years after incorporation.
	•		We must not engage in joint procurement with NTT so as not to use NTT’s purchasing power with the objective of obtaining favorable treatment or pricing from its suppliers and manufacturers.

At the time of separation from NTT, all trademarks and service marks for our products developed by NTT, other than the “NTT DOCOMO” trademark, the “DOCOMO” trademark and the “NTT DOCOMO” service mark, were assigned to us. If NTT’s ownership of our shares is substantially reduced, we may not be able to continue to use the trademarks and service marks that include “NTT”. Patents, utility model rights and design rights are shared equally with NTT. While certain rights to programs concerning wireless telecommunications systems were assigned by NTT to us, NTT owns the rights to other programs concerning wireless telecommunications systems and grants us licenses to use such rights. Since the separation, NTT and we have each retained rights resulting from our own research and development. When we desire to use NTT’s technology, we are required to pay royalties equal to those other wireless telecommunications companies would pay for the use of such technology, and such technology is available equally to us and our competitors. We are also required to pay NTT certain basic research and development fees.

Although we operate independently of NTT, the following matters, among other things, relating to us are discussed directly with or reported to NTT: matters that are required to be voted on at shareholders’ meetings, including amendments to the Articles of Incorporation, mergers and consolidations, assignments and transfers of business, election and removal of directors and corporate auditors, and appropriation of profits; increases in share capital; investments, including international investments; loans and guarantees; and establishment of businesses plans. In addition, Hiroshi Tsujigami, a full-time employee of NTT, serves part-time on our Board of Directors.

The Deregulation Committee (succeeded to by the Regulatory Reform Committee), an advisory committee set up by the decision of the Japanese Cabinet dated December 20, 1997, issued a report on December 15, 1998, with respect to government deregulation in a number of sectors of the Japanese economy. This report recommended the complete privatization of NTT at some point in the future, together with the elimination of monopolies in the regional telecommunications markets, and recommended that effective action should be taken to promote substantive competition between NTT East and NTT West. This report also included a recommendation that in the future the reorganized NTT be required to reduce its ownership of our shares to the level where competition between us and NTT East and NTT West is facilitated. On March 30, 1999, the Government revised its Three-year Program for Promoting Deregulation stating, among other things, that, based on the Deregulation Committee’s report and in connection with NTT’s ownership of our shares, it would carefully watch competition between us and NTT East and NTT West. On March 31, 2000, in its decision to further revise the Three-year Program, the Government stated that it would continue to consider NTT’s ownership of our shares taking into account the competition among cellular phone companies and the competition between us and NTT East and NTT West. Furthermore, on December 12, 2000, the Regulatory Reform Committee issued a written opinion stating that NTT’s ownership of our shares should be reduced to the level at which fair competition among us and other NTT companies is ensured, and that the “firewall” regulation that restricts the sharing of management and other personnel among us and other NTT companies should be strengthened.

On December 21, 2000, the Telecommunications Council, then an advisory committee of the MPT, issued its first formal report concerning initiatives to promote competition in the telecommunications industry and to promote information technology generally. In this report, the Telecommunications Council stated its view that NTT’s ownership of our shares should be reduced as much as possible through the listing of us on foreign stock exchanges, among other means, and that there should not be common directors of NTT and DOCOMO.

The Government, on March 30, 2001, launched its Three-year Program for Promoting Regulatory Reform. In that program the Government expected NTT as well as NTT East and NTT West would prepare and publish a voluntary action program for promoting competition, including a realization of competition within the NTT group by decreasing NTT’s ownership of our shares. In response, on October 25, 2001, NTT together with NTT East and NTT West announced “NTT’s Strategy concerning Current Management Issues” and stated in that release that simultaneous holding of executive positions between NTT East or NTT West and our company would remain unimplemented and that NTT’s investment ratio in our company and the simultaneous holding of executive positions would continue to be considered from the standpoint of maximizing its shareholders’ profits, taking into account operational necessities and stock market trends. On October 29, 2002, NTT made a report to MIC on the current status of implementation of the voluntary action plan released in October 2001. In the report, NTT stated that it sold 551,000 shares of our company in July 2002, in conjunction with our planned share reacquisition and that the system of concurrent appointment of directors for NTT and our company was discontinued at the general meeting of shareholders in June 2001.

In June 2006, an advisory panel on the future of telecommunications and broadcasting made a final report. In the report, it says that, in order to promote fair competition in the telecommunications industry, the study group proposed that MIC make a drastic review of legislation related to telecommunication by 2010. The study group also proposed that, keeping issues such as abolishment of the regulations on the scope of the business of NTT East and NTT West, abolishment of a holding company, and separation of equity links, etc. in mind as a whole mission, MIC take necessary measures to realize issues and start necessary investigation immediately. In June 2006, corresponding to this report, NTT made a statement that, with the aim to establish a safe and secure next-generation network under current structure and provide optimal services to approximately 30 million customers by 2010, NTT will make its utmost effort to realize medium-term management strategies, and that NTT cannot accept the proposal as it may disturb smooth promotion of their medium-term management strategies.

The Government has not decided what action, if any, it will take with respect to NTT’s ownership of our shares. NTT has declared its view that its ownership of our shares does not have any adverse effects on fair competition and that it intends to maintain its ownership percentage in us at 51% or above.

NTT has entered into agreements with each of DOCOMO, NTT East and NTT West and certain other subsidiaries that provide for NTT to receive compensation for performing basic research and development and for providing management and administrative services. NTT also receives dividends when dividends are declared by its subsidiaries, including DOCOMO.

Property

Our property includes buildings which contain wireless telecommunications equipment. As of March 31, 2008, we and our regional subsidiaries owned 3,286,185 square meters of land and 1,562,434 square meters of office space, buildings containing switching centers, company dormitories and warehouses throughout Japan. In addition, as of March 31, 2008, we leased approximately 7,871,226 square meters of land mainly for base stations and transmission facilities.

Additional information can be found in “Capital Expenditures” of Item 5.B.

Employees

As of March 31, 2008, NTT DOCOMO and its subsidiaries had 22,100 employees representing an increase of 509 employees since March 31, 2007. As of March 31, 2007, 2006 and 2005 we had 21,591, 21,646, and 21,527 employees, respectively. The average number of temporary employees for the year ended March 31, 2008 was 6,229.

Of our 22,100 employees on March 31, 2008, roughly 1,380 were staff in departments such as human resources, general affairs, management planning, accounting and finance, while the rest were engaged in business operations, such as sales, research and development and related matters. Also, as of March 31, 2008, approximately 1,500 employees were working at overseas consolidated subsidiaries.

We consider our level of remuneration, non-wage benefits, including our employee share ownership program, working conditions and other allowances, including lump-sum payments and annuities to employees upon retirement, to be generally competitive with those offered in Japan by other large enterprises. We have an extensive training program for new employees. To increase incentives, the NTT group has implemented a bonus plan based on overall business performance and personal results. The general retirement age has been 60.

Most of our non-management employees are members of ALL NTT WORKERS UNION OF JAPAN. We consider our relationship with such unions to be excellent. We have never had a strike.

Legal Proceedings

We have initiated normal actions relating to the collection of telecommunications charges and other legal proceedings in the ordinary course of business and are not involved in any litigation and have not been involved in other legal proceedings in the preceding twelve months from the date of this document that, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our financial position or profitability.

C. Organizational Structure

As of March 31, 2008, NTT, our parent company, was our largest shareholder and owned 64.8% of our outstanding voting shares. We conduct our business with our 121 subsidiaries and 16 affiliates which together constitute the largest wireless telecommunications services provider in Japan based on the number of subscriptions. Our most significant subsidiaries are our eight regional subsidiaries, each of which operates in a region of Japan.

The following table sets forth certain information on our significant subsidiaries as of March 31, 2008:

		Country of				Voting rights owned by the
Name		Incorporation				Company, directly or indirectly
NTT DoCoMo Hokkaido, Inc. (1)		Japan					100.0	%
NTT DoCoMo Tohoku, Inc. (1)		Japan					100.0	%
NTT DoCoMo Tokai, Inc. (1)		Japan					100.0	%
NTT DoCoMo Hokuriku, Inc. (1)		Japan					100.0	%
NTT DoCoMo Kansai, Inc. (1)		Japan					100.0	%
NTT DoCoMo Chugoku, Inc. (1)		Japan					100.0	%
NTT DoCoMo Shikoku, Inc. (1)		Japan					100.0	%
NTT DoCoMo Kyushu, Inc. (1)		Japan					100.0	%
DoCoMo Service Inc.		Japan					100.0	%
DoCoMo Engineering Inc.		Japan					100.0	%
DoCoMo Mobile Inc.		Japan					100.0	%
DoCoMo Support Inc.		Japan					100.0	%
DoCoMo Systems, Inc.		Japan					100.0	%
DoCoMo Sentsu, Inc.		Japan					100.0	%
DoCoMo Business Net, inc.		Japan					100.0	%
DoCoMo Technology, Inc.		Japan					100.0	%

Other than our eight regional subsidiaries listed above, which are discussed elsewhere in this annual report, the eight main consolidated subsidiaries and their lines of business are: DoCoMo Service Inc., a company that collects charges on our behalf; DoCoMo Engineering Inc., which is engaged in the construction and maintenance of facilities; DoCoMo Mobile Inc., which repairs handsets and related cellular equipment used by subscribers; DoCoMo Support Inc., which renders office services such as call center services; DoCoMo Systems, Inc., which develops, maintains and operates our fundamental systems; DoCoMo Sentsu, Inc., which renders ancillary services for our satellite phone business; DoCoMo Business Net, inc., which operates and provides support for agency sales; and DoCoMo Technology, Inc., which develops software and provides support services regarding field tests.

Relationship Between Us and Our Eight Regional Subsidiaries

Each of our eight regional subsidiaries operates largely independently of us and each other and each is directly responsible for the operations in its specific region. However, we are responsible for coordinating, establishing guidelines for and centralizing control over certain matters to ensure that nationwide services are available to our subscribers and to enhance the synergies achieved as a group.

Matters coordinated as a group include (i) our medium- and long-term management strategies and business plans as a group, (ii) tariffs, (iii) basic customer service standards, (iv) basic working terms and conditions for employees, (v) management personnel related matters, and (vi) consolidated accounting matters. We also establish guidelines for matters such as nationwide network development strategies and network maintenance and service standards, nationwide sales and marketing and designs for facilities.

We retain central control over matters such as the use of intellectual property and operations systems. With respect to service marks, the usage rights we control which grant licenses to each of our eight regional subsidiaries allow them unlimited use of the service marks. Similarly, we basically control all of our patents, know-how and other intellectual property. Each of us may use the results of research and development as well as the patents, know-how and other intellectual property rights we own without royalties, since the research and development costs are shared among ourselves. However, our eight regional subsidiaries may not sublicense such use to any third parties, and all licensing and sublicensing are basically controlled by us directly.

Other areas of our operations over which we retain central control include, for example: (i) basic arrangements with NTT and NCCs (e.g., development and use of infrastructure facilities and agreements relating to interconnection); (ii) the coordination of matters to be reported to NTT and those legally required to be notified to MIC; (iii) spectrum matters; (iv) procurement, price negotiations and other business with handset and network equipment manufacturers; (v) traffic estimates, investment plans and network control; (vi) product and system related development; (vii) information systems management; and (viii) technical training of our personnel.

With respect to operating systems such as ALADIN, the procurement system and the accounting system, we and our eight regional subsidiaries share the use and expenses of such systems but we control their development and administration.

In order to increase the strength of the NTT DOCOMO brand name and identity, our services, pricing, handsets and customer services are fairly uniform throughout Japan.

In October 2007, in order to further enrich and enhance our customer service, and to carry out rapid decision-making and effective management, we decided to revamp our existing operational structure, in which operations are carried out by DOCOMO and our eight regional subsidiaries, to a single nationwide operational structure, by consolidating operations at DOCOMO on July 1, 2008.

D. Property, Plant and Equipment

The information required by this item is set forth in Item 4.B. of this annual report.

Item 4A. Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements and the notes thereto included in this annual report.

This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this annual report.

We will discuss the following matters in this Item 5:

	•		Our Business
	•		Trends in the Mobile Communications Industry in Japan
	•		Operating Strategies
	•		Operating Trends
	•		Operating Results for the years ended March 31, 2008 and 2007
	•		Segment Information
	•		Recent Accounting Pronouncements and Critical Accounting Policies
	•		Liquidity and Capital Resources
	•		Research and Development
	•		Trend Information
	•		Others

A. Operating Results

Our Business

We are the largest cellular network operator in Japan in terms of both revenues and number of subscriptions. As of March 31, 2008, we had approximately 53.39 million subscriptions, which represented 52.0% of all cellular subscriptions in Japan. We earn revenues and generate cash primarily by offering a variety of wireless voice and data communications services and products. In cellular services, which account for the majority of our revenues, we provide voice communication services as well as “i-mode” services, which enable our subscribers to exchange e-mails and to access various sources of information including the Internet via our nationwide packet communications network. In addition to cellular services, we presently provide wireless LAN services nationwide, a mobile credit payment platform and mobile credit payment services.

We have been the market leader in the Japanese mobile communications industry as the demand for mobile communications has grown very rapidly. Now that a cellular phone has already become a part of daily life in Japan, it is difficult to duplicate the speedy growth we experienced in the first decade of our operations. However, in order to achieve sustainable growth and establish new sources of revenues, we are committed to upgrading our cellular communications services from a telecommunication infrastructure to a life-style infrastructure so that cellular services will be rooted even more deeply in the daily lives of our subscribers and further enrich their lives and businesses.

Trends in the Mobile Communications Industry in Japan

According to a release from the Telecommunications Carriers Association, the mobile communications market in Japan saw a 5.64 million net increase in cellular and PHS subscriptions for the year ended March 31, 2008. As of March 31, 2008, the total number of wireless subscriptions including cellular and PHS reached 107.34 million and the market penetration rate reached 84.0%. The annual growth rate of cellular subscriptions rebounded to 6.2% for the year ended March 31, 2008 after a continued decline from 5.5% to 5.4% for the years ended March 31, 2006 and 2007, respectively. However, given the maturity of the market and the declining population trend, we expect that the growth rate of cellular subscriptions in Japan will be limited in the future.

As of March 31, 2008, cellular services were provided by four network operators including us and their subsidiaries in Japan. In addition to providing cellular services, the network operators also collaborate with handset manufacturers to develop handsets compatible with the specifications of their wireless services and then sell them primarily to agent resellers, who in turn sell such handsets to the subscribers. As for cellular services, since the year 2001, when we first launched “FOMA” services, our third generation (“3G”) cellular services based on W-CDMA technology, our competitors have followed us in the launch of their 3G services. The network operators have been in an intense competition in pursuit of the acquisition of new subscribers and the migration of their current subscribers to 3G services. As of March 31, 2008, the number of 3G service subscriptions in Japan reached 88.06 million, which represented 85.7% of the total number of cellular subscriptions.

Competition among the network operators in Japan has become more intense under present market conditions as the needs of subscribers diversify and growth in new subscriptions slows. The network operators in Japan have been eager to differentiate themselves as they pursue the acquisition of new subscriptions and encourage the migration of their current subscribers to 3G services. The differentiation efforts include:

	•		Offering of free voice calls among family members under the same discount account with the same operators, free voice calls among subscribers under the same corporate subscription account with the same operators, introduction of new discount programs to cut basic monthly charges by half upon commitment of long-term subscriptions;
	•		Introduction of new sales methods such as installment sales for handsets;
	•		Launching of new services such as providing mobile credit payment services, music downloading, video downloading, news casting, web-browsing filtering, location information services and high-speed data transmission;
	•		Equipping new handsets with various new functions including a TV tuner, radio tuner, music player, video player, contact-less IC (Integrated Circuit) chip capability, GPS (Global Positioning System), enlarged memory capability, compatibility with GSM network or security function; and
	•		Partnering with entities of different industries including retail, manufacturing and financial institutions.

Recently, domestic deregulation of the industry has accelerated competition among cellular network operators, who have already implemented discounts in their service charges. Mobile Number Portability, which enables subscribers to switch subscriptions from one operator to another without changing their telephone number, was introduced in October 2006. In September 2007, the Mobile Business Study Group, which was appointed by the Ministry of Internal Affairs and Communications, concluded a report in which it proposed certain actions to be taken by regulatory authorities including (1) reformation on methods of cellular handset sales, (2) promotion of new MVNO entrants to the market and (3) development of the market environment to invigorate the mobile business. The implementation of these proposals by the regulatory authorities is expected to change revenue structures and business models of incumbent cellular network operators including us.

It is possible that innovations in Internet technology will have a material impact on the mobile communications industry as well. IP (Internet Protocol) phone, voice communications based on IP technology, is becoming a popular means of fixed line communications as a result of the penetration of local broadband access. If IP phone technology is applied to the mobile communications field, we expect that it will have a material impact on the current revenue structure of the mobile communications industry. The penetration of local broadband access and cellular phones has produced an expectation for new services in the future, converging fixed and mobile communications. A “Fixed-Mobile Convergence” concept has already been partially realized when some network operators issued a single bill for both fixed and mobile subscriptions or others enable their subscribers to access common contents or e-mail accounts via both a PC and a cellular phone. The demand for a seamless service between the fixed and mobile network and a common handset compatible with both fixed and mobile network service will possibly increase in the future. Digital terrestrial TV broadcasting dedicated to mobile terminals, which was launched in April 2006, has already been included in many cellular handsets and is expected to be the first step in the future convergence of broadcasting and mobile communications. In the field of high-speed wireless networks, WiMAX has been standardized by the Institute of Electrical and Electronic Engineers in the United States. In Japan, two network operators were licensed to operate a 2.5GHz wide-band wireless broadband system in December 2007 and have started preparing for future commercial service launches.

Thus, we expect that the competitive environment for the mobile communications market will become increasingly severe in the future due to market, regulatory and technology changes.

Operating Strategies

We recognize that the cellular market in Japan has already entered into a phase of saturation as total cellular subscription exceeded 100 million in December 2007. In a phase of saturation, it is necessary to attract subscribers of competitors as it is difficult to rely on those who have not owned a cellular phone as a driving force of acquisition of new subscriptions. It is also indispensable to minimize the loss of subscriptions to competitors subsequent to intensified competition. As a market leader, we have put a top priority on the retention of our current subscriptions.

During a phase of market growth, it was a common practice for network operators including us to pay sales commissions, including handset sales incentives, to agent resellers and later recover such initial expenditures through future service charges collected from their subscribers. It was a business model where sales of handsets and of network services were vertically integrated. As the agent resellers applied the handset sales incentive to discount for handset sales, inexpensive discounted handsets contributed to the penetration of cellular subscription and growth of the market. Now that the market has entered into a phase of saturation, however, it has been often pointed out that such business model lacked transparency on the cost allocation of handset and network services, brought about unfairness on cost allocation among subscribers dependent on the duration of subscriptions and put downward pressure on the operating income of network operators.

In order to respond to such changes in the market environment, we abolished handset sales incentives and introduced new handset sales methods and discounted billing plans in November 2007. “Value Course” is a new handset sales method, where purchase of a handset not discounted by the handset sales incentive awards the subscriber with a subscription to a billing plan with discounted basic monthly charges called “Value Plan”. Payment in installments is available for purchase of a handset in this “Value Course”. If a subscriber chooses to make installment payments, under agreements entered into among the subscriber, the agent reseller and us, we provide financing by paying for the purchased handset to the agent resellers and include the installment charge for the purchased handset in the monthly bill for network usage for the installment payment term. Because equipment sales are recognized upon delivery of handsets to agent resellers, the advance payment for the purchased handset to agent resellers and the subsequent cash collection of the installment receivable for the purchased handset from subscribers do not have an impact on our equipment sales. While we introduced another handset sale method called “Basic Course”, where a subscriber purchases a handset discounted by our direct subsidy and undiscounted billing plans are applied, we intend to put more emphasis on the promotion of “Value Course”. “Value Course” and “Basic Course” are applied to handsets released after November 2007. In August and September 2007, we also introduced new discount programs called “Fami-wari MAX 50”, “Hitoridemo Discount 50” and “Office Discount MAX 50”, all of which discount basic monthly charges by half upon the commitment of a two-year subscription. We expect to realize the extension of subscriptions of current subscribers and a continued decline in our churn rate through these new handset sale methods and new discount programs. Please refer to “B. Liquidity and Capital Resources” for the impact of the introduction of “Value Course” on our financial position.

Operating Trends

This section describes our operating trends from the perspectives of revenues and expenses.

Revenues

Wireless Services

We earn our wireless services revenues primarily from basic monthly charges, calling charges for outgoing calls, revenues from incoming calls including interconnection charges and charges for optional value-added services and features. Cellular services, which earn the majority of our overall revenues, consist of the third generation FOMA services, the second generation “mova” services and other services. FOMA’s packet transmission technology allows our subscribers to transmit more packets per minute and the per-packet charges for data communications of FOMA services are set lower than those of mova services. Because we believe that FOMA’s advanced technological capability enables us to provide our subscribers with more convenient and competitive services, we aim to induce our mova subscribers to migrate to FOMA services as well as to acquire new FOMA subscriptions. As of March 31, 2008, the number of FOMA subscriptions reached 43.95 million or 82.3% of our total number of cellular subscriptions, the largest number of 3G subscriptions among cellular operators in Japan. Cellular services revenues include voice revenues and packet communications revenues. Voice revenues are derived from a combination of basic monthly charges for service and additional calling charges depending on connection time. Our packet communications revenues, which are currently dominated by i-mode revenues, accounted for a greater portion of our wireless services revenues for the year ended March 31, 2008, representing 33.0% of wireless services revenues, as compared to 28.8% and 26.1% for the years ended March 31, 2007 and 2006, respectively. As a result of the continued migration of mova subscribers to FOMA services, the portion of FOMA packet communications revenues increased to 91.3% of the total packet communications revenues for the year ended March 31, 2008 from 78.2% and 54.8% for the years ended March 31, 2007 and 2006, respectively.

Our top operational priorities include maintaining our current subscribers and the level of our average monthly revenue per unit (“ARPU”) despite the increasingly competitive market environment in which we are operating, including the introduction of Mobile Number Portability. Our cellular services revenues are essentially a function of our number of active subscriptions multiplied by ARPU.

Our number of subscriptions continues to grow while the growth rate of subscriptions has declined. Our subscription churn rate, or contract termination rate, is an important performance indicator for us to achieve retention of our current subscriptions. The churn rate has an impact on our number of subscriptions and in particular affects our number of net additional subscriptions for a given period. Efforts to reduce our churn rate through discount programs and other customer incentive programs can increase our revenues by increasing our number of net additional subscriptions, but they can also have an adverse impact on our revenues by decreasing the amount of revenues we are able to collect from each subscriber on average. In order to keep our churn rate low, we have focused on subscriber retention by implementing certain measures including offering discounts for long-term subscribers. During the year ended March 31, 2008, we introduced the previously mentioned “Value Course”, new discount programs such as “Fami-wari MAX 50”, “Hitoridemo Discount 50” and “Office Discount MAX 50”, expanded HSDPA (High-Speed Downlink Packet Access) data transmission service areas, released attractive FOMA handsets and expanded FOMA service area coverage. For the year ended March 31, 2008, we continued to release handsets such as “Kids’ PHONE” designed specifically for children and “Raku Raku PHONE” universally designed for elderly users in an effort to pioneer such new market segments.

ARPU is calculated by dividing various revenue items included in operating revenues from our wireless services, such as basic monthly charges, calling charges and packet communications charges, from designated services by the number of active subscriptions to the relevant services. ARPU is another important performance indicator for us to measure average monthly revenues per subscription. Accordingly, the calculation of ARPU excludes revenues that are not representative of monthly average usage such as subscription activation fees. We believe that our ARPU figures calculated in this way provide useful information to analyze the trend of monthly average usage of our subscribers over time and the impact 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. The ARPU calculation is described in “Item 4. Information on the Company—B. Business Overview—Cellular System Usage”. ARPU (FOMA+mova) has fallen over the past few years, due to a gradual increase in the discount rate of basic monthly charges according to an increase in the number of years of subscriptions under long-term subscription discount and a decrease in MOU (Minutes of usage, which is the average communication time per month per subscription). The shrinking trend of ARPU also resulted from an increase in the number of subscribers who subscribe to discount programs newly introduced for the retention of subscriptions. In order to boost ARPU, we have been actively involved in the promotion of “Pake-hodai”, our optional packet flat-rate service for unlimited i-mode usage and “i-channel”, a convenient and easy-to-use information push-delivery optional service. We also introduced more handsets compatible with international roaming service in order to increase roaming revenues. Furthermore, we are promoting cellular usage other than voice calls such as downloading of music or video-clip. We achieved a slight increase in the cellular services revenues from the prior fiscal year owing to a slower decline in ARPU for the year ended March 31, 2006. For the year ended March 31, 2007, although the decline in ARPU continued, growth in the number of subscriptions, combined with our recognition as revenue of the portion of “Nikagetsu Kurikoshi” (2 month carry-over) allowance that is projected to expire, resulted in an increase in cellular services revenues. Cellular services revenues declined again during the year ended March 31, 2008 due to the penetration of discount programs newly introduced for subscriber retention purposes. We expect that the positive effects of the moderate growth in the number of subscriptions will be more than offset by the negative effects from the continued penetration of new discount programs, and thus cellular services revenues will consequently decline for the year ending March 31, 2009. We intend to achieve sustainable growth by increasing revenues from non-traffic business while we maintain the current level of revenues through marketing activities with more focus on brand loyalty in the cellular business.

Equipment Sales

We collaborate with handset manufacturers to develop handsets compatible with our cellular services, purchase the handsets from those handset manufacturers and then sell those handsets to our subscribers through agent resellers. We provide a wide variety of handsets to the market to answer diverse needs of our current and potential subscribers. The handset offering includes “FOMA 9 series”, which are equipped with most advanced functions, and “FOMA 7 series” which feature a sophisticated balance between unique designs and functionalities.

Revenues from equipment sales, primarily sales of handsets and other telecommunications equipment to agent resellers, accounted for 11.6% of total operating revenues for the year ended March 31, 2008. We adopted Emerging Issues Task Force (“EITF”) Issue No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products),” and therefore account for a portion of the sales commissions that we pay to agent resellers, the main component of which is handset sales incentives, as a reduction in equipment sales revenues and selling, general and administrative expenses. As a result, structurally, the cost of equipment sold has exceeded equipment sales revenues, and thus the sale of an extra handset has had a negative impact on our operating income. During the year ended March 31, 2008, as both the number of handsets sold to agent resellers and revenues per handset declined, equipment sales before the deduction of sales commissions to agent resellers decreased. However, due to a decrease in handset sales incentives to be deducted from gross equipment sales subsequent to the introduction of “Value Course”, equipment sales after the deduction of sales commissions to agent resellers increased. We expect that, for the year ending March 31, 2009, a combination of an increase in the number of handsets sold to agent resellers and a continued decrease in handset sales incentives subsequent to the introduction of “Value Course” will result in a significant increase in the equipment sales. The number of handsets sold to agent resellers is expected to increase in response to diversified demand from subscribers. Because the trend of handset sales is closely interrelated with the cost of handsets sold, you should also refer hereafter to the “Cost of Equipment Sold” section below.

Expansion of Our Business Domain

In addition to the further buildup of our competitiveness in the cellular business, we are actively involved in the diversification of revenue sources. The most significant is our credit services business. We seek to reposition our cellular phones as tools more deeply rooted in the daily life of our subscribers by enabling transactional settlements through the use of cellular phones equipped with contact-less IC chips. We launched a credit card brand called “iD” for card issuers in December 2005 and “DCMX” credit issuing services via the “iD” platform in April 2006. For the year ended March 31, 2008, we were actively involved in the acquisition of DCMX subscriptions, promotion of credit usage and expansion of stores equipped with iD readers/writers. We are confident that our mobile credit service is steadily penetrating the market as the number of DCMX subscriptions reached 5.64 million while the number of “iD” compatible reader/writers installed reached 300,000 as of March 31, 2008.

We also collaborated with Google, Inc. to upgrade portal functions of i-mode so that a cellular phone will become a powerful advertisement medium.

Although contribution from the credit service business and advertisement business to our results of operations have not yet become material, we will continue to be engaged in accelerating the development of these businesses.

Expenses

Cost of Services

Cost of services represents the expenses we incur directly in connection with providing our subscribers with wireless communication services and includes the cost for usage of other operators’ networks, maintenance of equipment or facilities and payroll for employees dedicated to the operations and maintenance of our wireless services. Cost of services accounted for 20.8% of our total operating expenses for the year ended March 31, 2008. Communication network charges, which we pay for the usage of other operators’ networks or for access charges, occupy the largest part of cost of services, accounting for 42.5% of the total. The amount of our communication network charges is dependent on the number of our base stations installed and rates set by the other operators. In recent years, our communication network charges have steadily declined as a result of our buildup of our own back-bone network to replace circuits leased from NTT. Communication network charges decreased for the year ended March 31, 2008 as well due mainly to the discount in charges of NTT’s leased circuits. We expect that the downward trend will continue and the communication network charges will decrease slightly for the year ending March 31, 2009.

Cost of Equipment Sold

Cost of equipment sold arises mainly from our procurement of handsets for sale to our new or current subscribers, which is basically dependent on the number of handsets sold to agent resellers and the purchase price per handset. Cost of equipment sold represented 29.5% of our operating expenses for the year ended March 31, 2008. Although the purchase price per handset has increased in recent years due to the increase in sales of more sophisticated FOMA handsets in the migration of mova subscribers to FOMA services, the purchase price per handset decreased for the year ended March 31, 2008. The decline in the purchase price per handset was due to a decrease in the number of “FOMA 9 series” handsets sold, which are equipped with most advanced functions, and an increase in the number of less expensive “FOMA 7 series” handsets sold, which feature a sophisticated balance between unique designs and functionalities. The total number of handsets sold decreased slightly because an increase in the number of FOMA handsets sold was more than offset by a decrease in the number of mova handsets sold as a result of the continued migration of subscribers from mova services to FOMA services. As a result, cost of equipment sold decreased from the prior fiscal year. For the year ending March 31, 2009, we expect that the level of the purchase price per handset will be the same while a decrease in the number of mova handsets sold will be more than offset by an increase in the number of FOMA handsets sold. As a result, we expect that cost of equipment sold will increase for the year ending March 31, 2009.

We have taken some measures to control the cost of equipment sold. We have saved on FOMA handset development cost by introducing a single-chip LSI and common platforms for the handset operating system. We will provide packaged software dedicated to our handsets to handset manufacturers to facilitate development of FOMA handsets as well. We also aim to procure at lower costs FOMA models such as the “FOMA 7 series”, which would match the purpose and usage volume of various subscribers, and to increase sales of such FOMA models. We are also engaged in a campaign to slow down the handset upgrading cycle by introducing “Value Course” or providing members of “DOCOMO Premier Club” with free-of-charge battery packs and the extension of free warranty periods in order to slash the cost of equipment sold. Finally, we are planning to centralize our inventory management to optimize the level of equipment inventories subsequent to our merger with our regional subsidiaries.

Depreciation and Amortization

We expense the acquisition cost of a fixed asset such as telecommunications equipment, a network facility and software during its estimated useful life as depreciation and amortization. Depreciation and amortization accounted for 19.9% of our operating expenses for the year ended March 31, 2008. In order to respond attentively to demand from our subscribers, we actively invested in the FOMA services network during the year ended March 31, 2008. Our investments in the FOMA network included:

	•		further enhancement of FOMA network quality;
	•		buildup of FOMA network capacity in response to an increase in data traffic following the penetration of our packet flat-rate service for unlimited i-mode usage; and
	•		further expansion of HSDPA service coverage.

Active capital expenditures in the FOMA network in recent years are followed by an upward trend in depreciation and amortization expenses. Depreciation and amortization expenses for the year ended March 31, 2008 increased from the prior fiscal year. As we have been involved with cost saving efforts such as economized procurement, design and installment of low-cost devices and improvements in construction processes, depreciation and amortization are expected to decrease for the year ending March 31, 2009. As for our capital expenditures, please refer to “Capital Expenditures” in this Item 5.B.

Selling, General and Administrative Expenses

Selling, general and administrative expenses represented 29.9% of our total operating expenses for the year ended March 31, 2008. The primary components included in our selling, general and administrative expenses are expenses related to acquisition of new subscribers and retention of current subscribers, the most significant of which was sales commissions paid to agent resellers. The main components of the sales commissions that we pay to agents who sign up new subscribers are a closing commission for each new subscription and volume incentives that vary depending on the number of new subscriptions per agent per month. In addition, we provide subsidies directly to our subscribers in the form of a discount to the handset price to be purchased subject to competition in the market. As already discussed in the “Operating Strategies” section, we abolished handset sales incentives, which were paid to agent resellers depending on the type of handset a subscriber purchased. Sales commissions differ from region to region due to such factors as the competitive and economic environments in the various regions.

We applied EITF 01-9 and therefore a portion of the sales commissions paid to agent resellers, including handset sales incentives, is recognized as a deduction from equipment sales revenues and selling, general and administrative expenses. Due to the introduction of “Value Course”, sales commissions, both before and after the deduction of certain sales commissions to agent resellers, decreased for the year ended March 31, 2008 compared with the prior fiscal year. For the year ending March 31, 2009, we expect that the gross and net amount of sales commissions will continue to decrease due to the further penetration of “Value Course”.

Operating Income

For the year ended March 31, 2008, a decrease in wireless services revenues, due mainly to penetration of newly introduced discount programs, exceeded an increase in equipment sales, which resulted in a decrease in operating revenues. On the other hand, a decrease in operating expenses due to a decrease in sales commissions subsequent to the introduction of “Value Course” exceeded the decrease in operating revenues. As a result, operating income increased. The factors contributing to the increase in operating income are summarized as follows:

•

cellular services revenues decreased due to a gradual increase in the discount rate of basic monthly charges according to an increase in the number of years of subscriptions under long-term subscription discount, penetration of discount programs newly introduced for subscriber retention purposes and a decrease in MOU in addition to the adverse impact of changes in estimates during the prior year regarding initially recognizing as revenues the portion of “Nikagetsu Kurikoshi (2 month carry-over)” allowances that are estimated to expire;

•

a decrease in both the number of handsets sold to agent resellers and revenues per handset was more than offset by a decrease in sales commissions to be deducted from gross equipment sales. As a result, net equipment sales increased from the prior fiscal year. However, operating revenues still decreased as the increase in net equipment sales was not sufficient to cover the decrease in cellular services revenues; and

•

a combination of a decrease in sales commissions subsequent to the introduction of “Value Course” and a decrease in cost of equipment sold due to a decline in the purchase price per handset and in the number of handsets sold contributed to a decrease in operating expenses, which more than offset the decrease in operating revenues and resulted in an increase in operating income.

The market environment has become increasingly competitive after the introduction of Mobile Number Portability. Under our renewed corporate brand, we will be engaged in the promotion of new business models such as “Value Course” and the provision of various services as a life-style infrastructure through marketing activities with a focus on brand loyalty. We expect both operating revenues and operating income to increase for the year ending March 31, 2009 for the following reasons:

•

we expect cellular services revenues to decrease because a decline in ARPU caused by penetration of “Value Plan”, for which the basic monthly charge is discounted, penetration of discount programs newly introduced for subscriber retention purposes and negative impact of the provision of free domestic voice calls among subscribers registered in the same “Fami-wari MAX 50” account will more than offset the positive effect of our acquisition of new subscriptions;

•

we expect that an increase in the number of handsets sold to agent resellers and a continued decrease in sales commissions subsequent to the introduction of “Value Course” will contribute to an increase in equipment sales, which will more than offset the decrease in cellular services revenues and result in an increase in operating revenues; and

•

we expect that a continued decrease in sales commissions will be offset by an increase in expenses related to retention of current subscribers, resulting in a slight increase in operating expenses. We expect the net of the increases in operating revenues and operating expenses to be an increase in operating income.

As a life-style infrastructure, we seek to diversify revenue sources in three business domains as follows:

•

promotion of optional flat rate-billing plans or flat-rate value added services including “Pake-hodai”, an optional packet flat-rate service for unlimited i-mode usage, “i-channel”, a convenient and easy-to-use information push-delivery service and “Music & Video Channel”, a music and video downloading service;

•

accelerated development of non-traffic businesses including the acquisition of DCMX subscriptions and promotion of credit usage; and

•

promotion of usage of international calls and international roaming services, and growth through investment and partnership in Asia-Pacific regions.

We seek to reduce costs by:

•

reduction of sales commissions through further penetration of “Value Course”;

•

saving on the development cost of FOMA handsets through provision of packaged software dedicated to our handsets to handset manufacturers; and

•

administrative optimization and efficient inventory management through the merger with our regional subsidiaries.

Other income and expenses

As part of our corporate strategy, we have made investments in foreign and domestic companies in businesses that complement our mobile communications business. See “Item 4. Information on the Company—B. Business Overview—Other Business Activities—Investments and Affiliations in Japan” and "—B. Business Overview—Global Businesses—International Investments and Licensing Agreements”. In accordance with U.S. GAAP, the investment is accounted for under the equity method and recognized under “Investments in affiliates” in our consolidated balance sheets when our equity in the investee’s issued and outstanding capital is between 20% and 50% or we are able to exercise significant influence over the investee. In accordance with equity method accounting, we include equity in net income or losses of affiliates in our consolidated income. Where our equity in the investee’s issued and outstanding capital is less than 20%, we include the investment as “Marketable securities and other investments” in our consolidated balance sheets. Our results of operations can be affected by impairments of such investments and losses and gains on the sale of such investments. In the past, we experienced material impairments in the value of our investments in equity method affiliates that were included in “Equity in net losses of affiliates” in our consolidated statements of income and comprehensive income for relevant years. It is possible that we could experience similar impairments with respect to our investments in affiliates and marketable securities and other investments again in the future. Please refer to “- Critical Accounting Policies—Impairment of investments”. We may also experience material gains or losses on the sale of our investments. As of March 31, 2008, the total carrying value of our investments in affiliates was ¥349.5 billion, while the total carrying value for investments in marketable equity securities and equity securities accounted for under the cost method was ¥187.3 billion.

Operating Results for the year ended March 31, 2008

The following discussion includes analysis of our operating results for the year ended March 31, 2008. The tables below describe selected operating data and income statement data:

Key Performance Indicators

		Years ended March 31
										Increase
		2007				2008				(Decrease)				Change (%)
Cellular
Subscriptions (thousands)			52,621				53,388				767				1.5	%
FOMA services (thousands)			35,529				43,949				8,420				23.7	%
mova services (thousands)			17,092				9,438				(7,653	)			(44.8	)%
i-mode services (thousands)			47,574				47,993				419				0.9	%
Market Share (%) (1)(2)			54.4				52.0				(2.4	)			—
Aggregate ARPU (FOMA+mova) (yen/month/contract) (3)			6,700				6,360				(340	)			(5.1	)%
Voice ARPU (yen/month/contract) (4)			4,690				4,160				(530	)			(11.3	)%
Packet ARPU(yen/month/contract)			2,010				2,200				190				9.5	%
MOU (FOMA+mova) (minutes/month/contract) (3)(5)			144				138				(6	)			(4.2	)%
Churn Rate (%) (2)			0.78				0.80				0.02				—

Breakdown of Financial Information

		Millions of yen
		Years ended March 31
										Increase
		2007				2008				(Decrease)				Change (%)
Operating revenues :
Wireless services		¥	4,314,140			¥	4,165,234			¥	(148,906	)			(3.5	)%
Cellular services revenues			4,182,609				4,018,988				(163,621	)			(3.9	)%
- Voice revenues (6)			2,940,364				2,645,096				(295,268	)			(10.0	)%
Including: FOMA services			1,793,037				2,084,263				291,226				16.2	%
- Packet communications revenues			1,242,245				1,373,892				131,647				10.6	%
Including: FOMA services			971,946				1,254,648				282,702				29.1	%
PHS services revenues			23,002				9,472				(13,530	)			(58.8	)%
Other revenues			108,529				136,774				28,245				26.0	%
Equipment sales			473,953				546,593				72,640				15.3	%
Total operating revenues			4,788,093				4,711,827				(76,266	)			(1.6	)%
Operating expenses
Cost of services			766,960				811,133				44,173				5.8	%
Cost of equipment sold			1,218,694				1,150,261				(68,433	)			(5.6	)%
Depreciation and amortization			745,338				776,425				31,087				4.2	%
Selling, general and administrative			1,283,577				1,165,696				(117,881	)			(9.2	)%
Total operating expense			4,014,569				3,903,515				(111,054	)			(2.8	)%
Operating income			773,524				808,312				34,788				4.5	%
Other income (expense)			(581	)			(7,624	)			(7,043	)			—
Income before income taxes, equity in net income (losses) of affiliates and minority interests:			772,943				800,688				27,745				3.6	%
Income taxes			313,679				322,955				9,276				3.0	%
Income before equity in net income (losses) of affiliates and minority interests:			459,264				477,733				18,469				4.0	%
Equity in net income (losses) of affiliates (net of applicable taxes)			(1,941	)			13,553				15,494				—
Minority interests			(45	)			(84	)			(39	)			(86.7	)%
Net income		¥	457,278			¥	491,202			¥	33,924				7.4	%

Analysis of operating results for the year ended March 31, 2008 and comparison with the prior fiscal year

As of March 31, 2008, the number of our cellular (FOMA+mova) subscriptions reached 53.39 million and increased by 0.77 million (1.5%) from 52.62 million at the end of the prior fiscal year. We expect that the growth rate of our cellular subscriptions will decelerate in the future as the growth rate of cellular subscriptions declines due to the maturity of the market in Japan. The number of FOMA subscriptions increased by 8.42 million (23.7%) to 43.95 million as of March 31, 2008 from 35.53 million at the end of the prior fiscal year. The ratio of FOMA subscriptions to the total cellular subscriptions reached 82.3% as of March 31, 2008. On the other hand, the number of mova subscriptions, which has decreased since the year ended March 31, 2004, decreased by 7.65 million (44.8%) to 9.44 million as of March 31, 2008 from 17.09 million as of the end of the prior fiscal year. We expect that the migration of mova subscribers to FOMA services will continue hereafter. Our market share decreased by 2.4 point to 52.0% as of March 31, 2008 from 54.4% as of the end of the prior fiscal year. The number of i-mode subscriptions increased by 0.42 million (0.9%) to 47.99 million as of March 31, 2008 from 47.57 million at the end of the prior fiscal year.

Aggregate ARPU of cellular (FOMA+mova) service decreased by ¥340 (5.1%) to ¥6,360 for the year ended March 31, 2008 from ¥6,700 in the prior fiscal year. Voice ARPU decreased by ¥530 (11.3%) to ¥ 4,160 for the year ended March 31, 2008 from ¥4,690 in the prior fiscal year. This decrease in voice ARPU was due to a gradual increase in the discount rate of basic monthly charges according to an increase in the number of years of subscriptions under long-term subscription discount, a decrease in MOU and an increase in the number of subscribers who subscribe to discount programs newly introduced for the retention of subscriptions. Packet ARPU increased by ¥190 (9.5%) to ¥2,200 for the year ended March 31, 2008 from ¥2,010 in the prior fiscal year. This increase in packet ARPU was due to penetration of services such as “i-channel”, which promote i-mode usage and of an optional packet flat-rate service for unlimited i-mode usage. The MOU (FOMA+mova) decreased by 6 minutes (4.2%) to 138 minutes from 144 minutes in the prior fiscal year.

Our churn rate for cellular subscriptions was 0.80% and 0.78% for the years ended March 31, 2008 and 2007, respectively. The churn rate increased by 0.02 point due to Mobile Number Portability. Although the churn rate for the six months ended September 30, 2007 rose to 0.90%, the introduction of new discount programs including “Fami-wari MAX 50”, “Hitoridemo Discount 50” and “Office Discount MAX 50” in August and September 2007 and of “Value Course” in November 2007 helped lower the churn rate to 0.71% for the six months ended March 31, 2008. We believe that, due to various factors, such as the implementation of competitive billing arrangements, customer confidence in our network and services and the introduction of new services, our churn rate was lower than that of other operators. However, no assurance can be given that our churn rate will decline or remain low.

During the year ended March 31, 2008, we implemented various measures with focus on benefit for our subscribers, such as the introduction of “Value Course” and “Value Plan”, new discount programs such as “Fami-wari MAX 50”, “Hitoridemo Discount 50” and “Office Discount MAX 50”, expansion of HSDPA services areas, releases of attractive FOMA handsets and the expansion of FOMA coverage areas, both indoors and outdoors.

Operating revenues decreased by ¥76.3 billion (1.6%) to ¥4,711.8 billion for the year ended March 31, 2008 from ¥4,788.1 billion in the prior fiscal year. Wireless services revenues decreased by ¥148.9 billion (3.5%) to ¥4,165.2 billion from ¥4,314.1 billion in the prior fiscal year. As a result, wireless services accounted for 88.4% of operating revenues for the year ended March 31, 2008, decreasing from 90.1% in the prior fiscal year. The decrease in wireless services revenues resulted from a decrease in cellular services revenues, especially voice revenues, and in PHS services revenues due to our termination of PHS services in January 2008. The decrease in cellular services revenues was a net of a decrease in voice revenues by ¥295.3 billion (10.0%) to ¥2,645.1 billion from ¥2,940.4 billion in the prior fiscal year, and an increase in packet communications revenues by ¥131.6 billion (10.6%) to ¥1,373.9 billion from ¥1,242.2 billion in the prior fiscal year. The factors for the decrease in cellular services revenues and the increase in packet communications revenues were already discussed in the analysis of changes in ARPU.

The decrease in cellular services revenues was due partially to the adverse impact of changes in estimates during the prior fiscal year regarding initially recognizing as revenues the portion of “Nikagetsu Kurikoshi (2 month carry-over)” allowances that are estimated to expire. Voice revenues from FOMA services increased by ¥291.2 billion (16.2%) to ¥2,084.3 billion from ¥1,793.0 billion in the prior fiscal year and packet communications revenues also increased by ¥282.7 billion (29.1%) to ¥1,254.6 billion from ¥971.9 billion in the prior fiscal year. The revenues from PHS services decreased by ¥13.5 billion (58.8 %) to ¥9.5 billion from ¥23.0 billion in the prior fiscal year and represented 0.2% of total wireless services revenues. Equipment sales increased by ¥72.6 billion (15.3%) to ¥546.6 billion for the year ended March 31, 2008 from ¥474.0 billion in the prior fiscal year because of a decrease in sales commissions to be deducted from gross equipment sales due to the introduction of “Value Course”.

Operating expenses decreased by ¥111.1 billion (2.8%) to ¥3,903.5 billion for the year ended March 31, 2008 from ¥4,014.6 billion in the prior fiscal year. This decrease resulted mainly from a decrease in selling, general and administrative expenses, by ¥117.9 billion (9.2%) to ¥1,165.7 billion for the year ended March 31, 2008 from ¥1,283.6 billion for the prior fiscal year, due to the decrease in sales commissions subsequent to the introduction of “Value Course”. As the NTT Corporate Defined Benefit Pension Plan (“NTT CDBP”) transferred its substitutional obligation and related plan assets of the National Welfare Pension Plan to the government in February 2008, the aggregate amount of ¥24.7 billion was recognized as a decrease in operating expenses. Cost of services increased by ¥44.2 billion (5.8%) to ¥811.1 billion for the year ended March 31, 2008 from ¥767.0 billion in the prior fiscal year due to an increased number of FOMA base stations installed. Depreciation and amortization increased by ¥31.1 billion (4.2%) to ¥776.4 billion for the year ended March 31, 2008 from ¥745.3 billion in the prior fiscal year, reflecting intensive capital expenditures on the FOMA network in prior fiscal years.

The operating income margin improved to 17.2% for the year ended March 31, 2008 from 16.2% for the prior fiscal year. The decrease in cost of equipment sold due to the decrease in the number of handsets sold and the decrease in selling, general and administrative expenses contributed to this improvement.

As a result of the foregoing, our operating income increased by ¥34.8 billion (4.5%) to ¥808.3 billion for the year ended March 31, 2008 from ¥773.5 billion for the prior fiscal year.

Other income (or expense) includes items such as interest income, interest expense, gains and losses on sale of marketable securities and other investments and foreign exchange gains and losses. We accounted for ¥7.6 billion as other expenses for the year ended March 31, 2008. Other expenses increased by ¥7.0 billion from ¥0.6 billion for the year ended March 31, 2007.

Income before income taxes, equity in net income of affiliates and minority interests increased by ¥27.7 billion (3.6%) to ¥800.7 billion for the year ended March 31, 2008 from ¥772.9 billion for the prior fiscal year.

Income taxes were ¥323.0 billion for the year ended March 31, 2008 and ¥313.7 billion in the prior fiscal year, representing effective tax rates of approximately 40.3% and 40.6%, respectively. We are subject to income taxes imposed by various taxing authorities in Japan, including corporate income tax, corporate enterprise tax and corporate inhabitant income taxes, which in the aggregate amounted to a statutory tax rate of approximately 40.9% for the years ended March 31, 2008 and 2007. The Japanese government introduced various special tax benefits, one of which enabled us to deduct from our taxable income a portion of investments in research and development (“R&D investment tax incentive”). The government also introduced an arrangement where we could deduct a certain amount of investments in IT systems for two years effective April 1, 2006 (“IT infrastructure tax incentive”). The difference between our effective tax rate and statutory tax rate for the year ended March 31, 2008 and 2007 arose primarily from such special tax allowances.

Equity in net income of affiliates (net of applicable taxes) was ¥13.6 billion for the year ended March 31, 2008 compared to net losses of ¥1.9 billion for the prior fiscal year, due to the application of the equity method to our investment in Philippine Long Distance Telephone Company, a telecommunications operator in the Philippines.

As a result of the foregoing, we recorded net income of ¥491.2 billion for the year ended March 31, 2008, an increase of ¥33.9 billion (7.4%) from ¥457.3 billion for the prior fiscal year.

Operating Results for the year ended March 31, 2007

The following discussion includes analysis of our operating results for the year ended March 31, 2007. The tables below describe selected operating data and income statement data:

Key Performance Indicators

		Years ended March 31
										Increase
		2006				2007				(Decrease)				Change (%)
Cellular
Subscriptions (thousands)			51,144				52,621				1,477				2.9	%
FOMA services (thousands)			23,463				35,529				12,066				51.4	%
mova services (thousands)			27,680				17,092				(10,589	)			(38.3	)%
i-mode services (thousands)			46,360				47,574				1,214				2.6	%
Market Share (%) (1)(2)			55.7				54.4				(1.3	)			—
Aggregate ARPU (FOMA+mova) (yen/month/contract) (3)			6,910				6,700				(210	)			(3.0	)%
Voice ARPU (yen/month/contract) (4)			5,030				4,690				(340	)			(6.8	)%
Packet ARPU(yen/month/contract)			1,880				2,010				130				6.9	%
MOU (FOMA+mova) (minutes/month/contract) (3)(5)			149				144				(5	)			(3.4	)%
Churn Rate (%) (2)			0.77				0.78				0.01				—