NTT(US:NTTYY)2019-08-10 19:00Financial Data and Key Metrics Changes - Operating revenue reached a record first quarter level of ¥2.9 trillion, an increase of ¥62.7 billion year-on-year [6] - Operating income declined by ¥32.0 billion year-on-year, totaling ¥505.2 billion, primarily due to a decrease in operating income margin from customer returns at DOCOMO [6] - Profit was ¥280.5 billion, a decline of ¥9.2 billion year-on-year [7] - Overseas sales increased by ¥0.1 billion, reaching $4.8 billion, while the overseas operating income margin decreased by 1.0 point to 1.6% [7][8] Business Line Data and Key Metrics Changes - Long distance and international communication business saw an increase in revenue, while the mobile communication segment experienced a decline in operating revenue [8] - The data communication segment and other segments increased due to the integration of NTT's consolidated subsidiary and expansion of Urban Sales [8] - The Regional Communication segment also saw a decline [8] Market Data and Key Metrics Changes - The share buyback program was announced with a maximum amount of ¥300 billion and a maximum of 53 million shares to be bought back [8] - The EPS target was revised upward from ¥456 to ¥462 due to the share buyback [8] Company Strategy and Development Direction - The company is focusing on integrating its global operations over the next two years, with anticipatory investments expected to increase [11][12] - Digital transformation initiatives are being promoted to reduce costs over time, although immediate cost reductions are not anticipated [20][22] - The company aims to expand its urban solutions business, targeting ¥600 billion in annual sales by 2025 through various redevelopment projects [44][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the performance of NTT DOCOMO, despite potential challenges from new rate plans affecting customer migration [17][18] - The integration expenses are expected to continue impacting operating income in the short term, but management anticipates a recovery in profitability starting from the third quarter [49] - The company is considering partnerships for large-scale investments to mitigate financial burdens [67][69] Other Important Information - The integration of ENNET as a consolidated subsidiary contributed ¥61.5 billion to revenue, with a slight positive impact on operating income [50] - The company is planning to centralize management of civil engineering-related facilities to enhance operational efficiency [25] Q&A Session Summary Question: Integration expenses in the long-distance international communication segment - Management confirmed that integration expenses for this fiscal year are expected to be above ¥10 billion, primarily impacting Dimension Data's operating income [12][15] Question: Drivers of performance exceeding internal plans - The operating income at NTT East and West exceeded expectations, but potential expenses in the second half of the year were noted [17] Question: Digital transformation impact on cost reduction - Management indicated that while immediate cost reductions are not expected, gradual reductions in personnel expenses are anticipated as digital systems are implemented [20][22] Question: Revenue growth in applications and content - The growth in applications and content was attributed to the integration of Plala with DOCOMO, although a decline is expected in the second quarter [34] Question: Future business strategies post-NTT Limited establishment - The company plans to integrate cost-related matters and enhance engagement with customers to improve profitability [55] Question: Medium-term investment areas - Key areas for potential investment expansion include data centers and urban solutions, with a focus on partnerships to manage financial risks [67][69]