NTT(NTTYY) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Operating revenue for the nine months ended December 31, 2019, was JPY 8.862 trillion, an increase of JPY 67.5 billion year-on-year, marking record third-quarter levels for three consecutive years [4] - Operating income declined to JPY 1.450 trillion, representing a year-on-year decrease of JPY 76.7 billion [4] - Net profit increased to JPY 796.9 billion, reflecting a year-on-year increase of JPY 4.8 billion [5] - Overseas sales reached $14.7 billion, an increase of $0.7 billion year-on-year, with an overseas operating income margin of 2.5%, down 0.6 points year-on-year [6] Business Line Data and Key Metrics Changes - Mobile communications segment saw a decline in operating income due to restructuring and cost reduction efforts [9] - Regional communication business achieved an increase in operating income year-on-year, aligning with initial targets [10] - Long-distance and international communication business experienced a drop in operating income due to reorganization costs [11] - Telecommunication business saw robust growth in size, but operating income remained flat due to increased investment and restructuring expenses [12] Market Data and Key Metrics Changes - The company reported a positive trend in the regional communication business, particularly for NTT East and West, with expectations for continued growth [42][45] - The global business, particularly NTT Ltd., is undergoing rationalization, with a focus on improving profitability and efficiency [39][40] Company Strategy and Development Direction - The company is focusing on transitioning to high-profit, higher-margin businesses, including enhancing its data center operations and SD-WAN services [22][26] - A joint venture with Tokyo Century Corporation was announced, involving JPY 1.2 trillion in assets, which will help reduce liabilities on the balance sheet [13] - The company aims to streamline operations and reduce overhead costs as part of its integration strategy [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving the annual targets despite challenges, with a focus on improving integration and rationalization efforts [18][40] - The company anticipates a reduction in burdens for the next fiscal year as it accelerates rationalization efforts [40] - Management acknowledged the need for talent acquisition to support growth in managed services and data centers [48][50] Other Important Information - The company incurred JPY 11 billion in reorganization costs up to the third quarter, with similar costs expected in the fourth quarter [24][32] - The company is exploring options to securitize assets, including data centers and real estate, to improve capital efficiency [66][70] Q&A Session Summary Question: Status of NTT Ltd. and outlook for achieving full-year targets - Management indicated that NTT Ltd. is showing improvement, with a cumulative deficit of JPY 1.3 billion but positive trends in the third quarter [18] Question: Progress against internal plans and overall company performance - Management confirmed satisfactory progress across divisions, with DOCOMO's new rate shift contributing positively [36] Question: Future growth drivers for NTT East and West - Management expects continued cost reduction and efficiency improvements, despite a decline in fixed-line communications [58] Question: Competitiveness in managed services and data centers - Management believes the company is competitive in network-related services and is focusing on talent acquisition for growth [48][50] Question: Impact of equal work, equal pay on costs - Management has been proactive in addressing potential cost increases and aims to absorb any relevant costs through personnel reductions [82]