UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of July, 2014
Commission File Number: 001-31221
Total number of pages: 78
NTT DOCOMO, INC.
(Translation of registrants name into English)
Sanno Park Tower 11-1, Nagata-cho 2-chome
Chiyoda-ku, Tokyo 100-6150
Japan
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NTT DOCOMO, INC. | ||||||
Date: July 25, 2014 | By: | /s/ KATSUYUKI TAKAGI | ||||
Katsuyuki Takagi Head of Investor Relations |
Information furnished in this form:
1. |
2. | Results presentation for the first three months of the fiscal year ending March 31, 2015 |
Earnings Release | July 25, 2014 | |||
For the Three Months Ended June 30, 2014 | [U.S. GAAP] |
Name of registrant: | NTT DOCOMO, INC. (URL https://www.nttdocomo.co.jp/) | |
Code No.: | 9437 | |
Stock exchange on which the Companys shares are listed: | Tokyo Stock Exchange-First Section | |
Representative: | Kaoru Kato, Representative Director, President and Chief Executive Officer | |
Contact: | Koji Otsuki, Senior Manager, General Affairs Department / TEL +81-3-5156-1111 | |
Scheduled date for filing of quarterly report: | July 31, 2014 | |
Scheduled date for dividend payment: | | |
Supplemental material on quarterly results: | Yes | |
Presentation on quarterly results: | Yes (for institutional investors and analysts) | |
(Amounts are rounded off to the nearest 1 million yen.) |
1. Consolidated Financial Results for the Three Months Ended June 30, 2014 (April 1, 2014 - June 30, 2014)
(1) Consolidated Results of Operations
(Millions of yen, except per share amounts)
Operating Revenues | Operating Income | Income Before Income Taxes and Equity in Net Income (Losses) of Affiliates |
Net Income Attributable to NTT DOCOMO, INC. |
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Three months ended June 30, 2014 |
1,075,302 | (3.4) | % | 209,640 | (15.3) | % | 212,474 | (15.8) | % | 136,381 | (13.7) | % | ||||||||||||||||||||
Three months ended June 30, 2013 |
1,113,573 | 3.9 | % | 247,470 | (5.8) | % | 252,484 | (4.7) | % | 158,009 | (3.8) | % |
(Percentages above represent changes compared to the corresponding previous quarterly period)
(Note) | Comprehensive income attributable to | For the three months ended June 30, 2014: | 133,714 million yen | (27.8) | % | |||||
NTT DOCOMO, INC.: | For the three months ended June 30, 2013: | 185,232 million yen | 0.5 | % |
Basic Earnings per Share Attributable to NTT DOCOMO, INC. |
Diluted Earnings per Share Attributable to NTT DOCOMO, INC. |
|||||||
Three months ended June 30, 2014 |
32.89 (yen) | | ||||||
Three months ended June 30, 2013 |
38.10 (yen) | |
(Note) | As we conducted a 1:100 stock split with an effective date of October 1, 2013, Basic Earnings per Share Attributable to NTT DOCOMO, INC. are calculated on the assumption that the stock split was conducted at the beginning of the fiscal period of 2013. |
(2) Consolidated Financial Position
(Millions of yen, except per share amounts)
Total Assets | Total Equity (Net Assets) |
NTT DOCOMO, INC. Shareholders Equity |
Shareholders Equity Ratio |
NTT DOCOMO, INC. Shareholders Equity per Share |
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June 30, 2014 |
7,261,331 | 5,685,736 | 5,652,677 | 77.8% | 1,363.16 (yen) | |||||||||||
March 31, 2014 |
7,508,030 | 5,678,644 | 5,643,366 | 75.2% | 1,360.91 (yen) |
2. Dividends
Cash Dividends per Share (yen) | ||||||||||||||||||||
End of the First Quarter |
End of the Second Quarter |
End of the Third Quarter |
Year End | Total | ||||||||||||||||
Year ended March 31, 2014 |
| 3,000.00 | | 30.00 | | |||||||||||||||
Year ending March 31, 2015 |
| |||||||||||||||||||
Year ending March 31, 2015 (Forecasts) |
30.00 | | 30.00 | 60.00 |
(Note 1) | Revisions to the forecasts of dividends: None | |
(Note 2) | As we conducted a 1:100 stock split with an effective date of October 1, 2013, Cash Dividends per Share as of the end of the second quarter of the year ended March 31, 2014, calculated before the stock split. |
3. Forecasts of Consolidated Financial Results for the Fiscal Year Ending March 31, 2015 (April 1, 2014 - March 31, 2015)
(Millions of yen, except per share amounts)
Operating Revenues | Operating Income | Income Before Income Taxes and Equity in Net Income (Losses) of Affiliates |
Net Income Attributable to NTT DOCOMO, INC. |
Basic Earnings per Share Attributable to NTT DOCOMO, INC. |
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Six months ending September 30, 2014 |
| | | | | | | | | |||||||||||||||||||||||||||
Year ending March 31, 2015 |
4,590,000 | 2.9 | % | 750,000 | (8.4 | )% | 758,000 | (9.0 | )% | 480,000 | 3.3 | % | 120.40 (yen) |
(Percentages above represent changes compared to the corresponding previous year)
(Note) Revisions to the forecasts of consolidated financial results: None
* Notes:
(1) Changes in significant subsidiaries |
None | |||
(Changes in significant subsidiaries for the three months ended June 30, 2014 which resulted in changes in scope of consolidation) |
||||
(2) Application of simplified or exceptional accounting |
None | |||
(3) Changes in accounting policies |
i. Changes due to revision of accounting standards and other regulations: |
None | |||
ii. Others: |
None | |||
(4) Number of issued shares (common stock) |
i. Number of issued shares (inclusive of treasury stock): |
As of June 30, 2014: | 4,365,000,000 shares | ||||
As of March 31, 2014: | 4,365,000,000 shares | |||||
ii. Number of treasury stock: |
As of June 30, 2014: | 218,239,900 shares | ||||
As of March 31, 2014: | 218,239,900 shares | |||||
iii. Number of weighted average common shares outstanding: |
For the three months ended June 30, 2014: | 4,146,760,100 shares | ||||
For the three months ended June 30, 2013: | 4,146,760,100 shares |
As we conducted a 1:100 stock split with an effective date of October 1, 2013, Number of issued shares (common stock) are disclosed on the assumption that the stock split was conducted at the beginning of the fiscal period of 2013.
* Presentation on the status of quarterly review procedure:
This earnings release is not subject to the quarterly review procedure as required by the Financial Instruments and Exchange Act of Japan. As of the date when this earnings release was issued, the quarterly review procedure on financial statements as required by the Financial Instruments and Exchange Act had not been finalized.
* Explanation for forecasts of operations and other notes:
1. Forecast of results
Forward-looking statements in this earnings release, such as forecasts of results of operations, are based on the information currently available and certain assumptions that we regard as reasonable, and therefore actual results may differ materially from those contained in, or suggested by, any forward-looking statements. With regard to the assumptions and other related matters concerning forecasts for the fiscal year ending March 31, 2015, refer to 1. (3) Prospects for the Fiscal Year Ending March 31, 2015 on page 12 and 5. Special Note Regarding Forward-Looking Statements on page 22, contained in the attachment.
2. Resolution of share repurchase up to prescribed maximum limit
The forecasts of Basic Earnings per Share Attributable to NTT DOCOMO, INC. for the fiscal year ending March 31, 2015 are based on the assumption that DOCOMO will repurchase up to 320 million shares for up to ¥500,000 million, as resolved at the board of directors meeting held on April 25, 2014.
CONTENTS OF THE ATTACHMENT
page | ||||
Contents of the Attachment |
1 | |||
2-12 | ||||
2-10 | ||||
11 | ||||
12 | ||||
13 | ||||
13 | ||||
13 | ||||
13 | ||||
14-18 | ||||
14 | ||||
(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income |
15 | |||
16 | ||||
17-18 | ||||
19-21 | ||||
(1) Operating Data for 1st Quarter of the Fiscal Year Ending March 31, 2015 |
19 | |||
20 | ||||
21 | ||||
22 |
1
Earnings Release for the Three Months Ended June 30, 2014
1. Information on Consolidated Results
i. Business Overview
In the mobile telecommunications market, besides the intense competition that we engage in with other Japanese telecommunications carriers due to active movement of subscribers using the Mobile Number Portability (MNP) system, we are also facing competition with new players offering a wide variety of Internet-based services that transcend the scope of traditional telecommunications businesses.
In this new competitive landscape, we have laid out our medium-term growth plan: Medium-Term Vision 2015: Shaping a Smart Life.
For the fiscal year ending March 31, 2015, we are addressing the challenge of establishing a new path to growth by reinforcing our comprehensive strengths in the four key areas of devices (handsets), network, services and billing plans/sales channel, with the goal of being chosen by a greater number of customers.
During the three months ended June 30, 2014, we launched a new billing scheme, Kake-hodai & Pake-aeru, which allows customers to utilize our services at affordable rates for a long period of time by selecting a plan suitable for their individual needs in different stages of life. In addition, leveraging our Xi LTE*1 network, we launched the commercial service of VoLTE*2, a new voice communication service that realizes high-quality and stable calls.
To solidify our managerial foundation, we reorganized our group structure effective July 1, 2014, aiming to achieve even higher customer satisfaction through a group of specialists and community-based organization, and have accelerated the shift of resources to priority areas (our smart life business and corporate marketing).
We will implement measures that will bring greater happiness to the lives of our customers, their family and society, so we can be chosen by customers as a Partner for a Smart Life, and maintain long-term customer relationships.
Operating revenues for the three months ended June 30, 2014 decreased by ¥38.3 billion from the same period of the previous fiscal year to ¥1,075.3 billion due mainly to a decrease in mobile communications services revenues by ¥49.2 billion as a result of a decrease in voice revenues and an impact of penetration of the Monthly Support discount program, whereas other operating revenues increased by ¥16.4 billion from the same period of the previous fiscal year as a result of growing revenues from various services including dmarket.
Operating expenses were ¥865.7 billion which was relatively consistent with the same period of the previous fiscal year as a result of cost reduction implemented to further strengthen our management structure and a decrease in selling expenses due to a decrease in the number of handsets sold which was offset by an increase in expenses linked with other operating revenues.
As a result, operating income decreased by ¥37.8 billion from the same period of the previous fiscal year to ¥209.6 billion for the three months ended June 30, 2014.
Income before income taxes and equity in net income (losses) of affiliates was ¥212.5 billion, and net income attributable to NTT DOCOMO, INC. decreased by ¥21.6 billion from the same period of the previous fiscal year to ¥136.4 billion for the three months ended June 30, 2014.
*1: | Abbreviation for Long Term Evolution. A mobile communications system specified by the international standard development organization, 3GPP (3rd Generation Partnership Project). |
*2: | Abbreviation for Voice over LTE. A technology that carries voice calls over LTEs high-speed data communications network. |
2
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
Consolidated results of operations for the three months ended June 30, 2013 and 2014 were as follows:
<Results of operations>
Billions of yen | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
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Operating revenues |
¥ | 1,113.6 | ¥ | 1,075.3 | ¥ | (38.3 | ) | (3.4 | )% | |||||||
Operating expenses |
866.1 | 865.7 | (0.4 | ) | (0.1 | ) | ||||||||||
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Operating income |
247.5 | 209.6 | (37.8 | ) | (15.3 | ) | ||||||||||
Other income (expense) |
5.0 | 2.8 | (2.2 | ) | (43.5 | ) | ||||||||||
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Income before income taxes and equity in net income (losses) of affiliates |
252.5 | 212.5 | (40.0 | ) | (15.8 | ) | ||||||||||
Income taxes |
96.1 | 73.5 | (22.6 | ) | (23.5 | ) | ||||||||||
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Income before equity in net income (losses) of affiliates |
156.3 | 139.0 | (17.4 | ) | (11.1 | ) | ||||||||||
Equity in net income (losses) of affiliates |
0.3 | (3.6 | ) | (3.9 | ) | | ||||||||||
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Net income |
156.6 | 135.4 | (21.2 | ) | (13.6 | ) | ||||||||||
Less: Net (income) loss attributable to noncontrolling interests |
1.4 | 1.0 | (0.4 | ) | (28.2 | ) | ||||||||||
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Net income attributable to NTT DOCOMO, INC. |
¥ | 158.0 | ¥ | 136.4 | ¥ | (21.6 | ) | (13.7 | ) | |||||||
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EBITDA margin* |
37.8 | % | 36.0 | % | (1.8) point | | ||||||||||
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ROCE before tax effect* |
4.4 | % | 3.6 | % | (0.8) point | | ||||||||||
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ROCE after tax effect* |
2.7 | % | 2.3 | % | (0.4) point | | ||||||||||
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* | EBITDA and EBITDA margin, as we use them in this earnings release, are different from EBITDA as used in Item 10(e) of Regulation S-K and may not be comparable to similarly titled measures used by other companies. For an explanation of our definitions of EBITDA, EBITDA margin, ROCE before tax effect and ROCE after tax effect, see 4. (3) Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures on page 21. |
<Operating revenues>
Billions of yen | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
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Mobile communications services |
¥ | 749.9 | ¥ | 700.7 | ¥ | (49.2 | ) | (6.6 | )% | |||||||
Voice revenues |
274.9 | 229.3 | (45.6 | ) | (16.6 | ) | ||||||||||
Packet communications revenues |
474.9 | 471.3 | (3.6 | ) | (0.8 | ) | ||||||||||
Equipment sales |
212.5 | 207.0 | (5.5 | ) | (2.6 | ) | ||||||||||
Other operating revenues |
151.2 | 167.7 | 16.4 | 10.9 | ||||||||||||
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Total operating revenues |
¥ | 1,113.6 | ¥ | 1,075.3 | ¥ | (38.3 | ) | (3.4 | )% | |||||||
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Notes: Voice revenues include data communications revenues through circuit switching systems.
3
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
<Operating expenses>
Billions of yen | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
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Personnel expenses |
¥ | 72.0 | ¥ | 71.2 | ¥ | (0.7 | ) | (1.0 | )% | |||||||
Non-personnel expenses |
550.3 | 546.4 | (3.9 | ) | (0.7 | ) | ||||||||||
Depreciation and amortization |
166.6 | 167.2 | 0.5 | 0.3 | ||||||||||||
Loss on disposal of property, plant and equipment and intangible assets |
14.1 | 16.2 | 2.1 | 14.8 | ||||||||||||
Communication network charges |
53.1 | 54.3 | 1.2 | 2.2 | ||||||||||||
Taxes and public dues |
10.0 | 10.4 | 0.4 | 3.7 | ||||||||||||
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Total operating expenses |
¥ | 866.1 | ¥ | 865.7 | ¥ | (0.4 | ) | (0.1 | )% | |||||||
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<Trend of ARPU and MOU>
Yen | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
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Aggregate ARPU* |
¥ | 4,610 | ¥ | 4,300 | ¥ | (310 | ) | (6.7 | )% | |||||||
Voice ARPU |
1,470 | 1,210 | (260 | ) | (17.7 | ) | ||||||||||
Packet ARPU |
2,680 | 2,580 | (100 | ) | (3.7 | ) | ||||||||||
Smart ARPU |
460 | 510 | 50 | 10.9 | ||||||||||||
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MOU* (minutes) |
109 | 99 | (10 | ) | (9.2 | )% |
* | See 4. (2) Definition and Calculation Methods of ARPU and MOU on page 20 for definition and calculation methods. |
4
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
ii. Segment Results
We realigned the reportable segments from the three months ended June 30, 2014, in order to clearly define our business management of our mobile communications fields (where we are taking steps to reinforce our competitiveness) and new business fields (where we are striving for further expansion of revenue sources by making Smart Life a reality), toward the establishment of a new path to growth.
For details, please see 3. (4) Notes to Consolidated Financial Statements.
Mobile Communications Business
<Results of operations>
Billions of yen | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
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Operating revenues from mobile communications business |
¥ | 961.4 | ¥ | 905.2 | ¥ | (56.2 | ) | (5.8 | )% | |||||||
Operating income (loss) from mobile communications business |
243.4 | 203.1 | (40.3 | ) | (16.6 | ) |
Our total number of mobile phone subscriptions as of June 30, 2014 was 63.57 million, an increase of 1.94 million subscriptions compared to the number as of June 30, 2013, and the churn rate for the three months ended June 30, 2014 was 0.67%.
Operating revenues from our mobile communications business decreased by ¥56.2 billion from the same period of the previous fiscal year to ¥905.2 billion for the three months ended June 30, 2014 due mainly to a decrease in mobile communications services revenues as a result of the impacts of increasing penetration of the Monthly Support discount program.
Operating expenses from mobile communications business decreased by ¥15.9 billion from the same period of the previous fiscal year to ¥702.0 billion for the three months ended June 30, 2014 due mainly to a decrease in selling expenses as a result of a decrease in the number of handsets sold and consequently operating income from our mobile communications business decreased by ¥40.3 billion from the same period of the previous fiscal year to ¥203.1 billion for the three months ended June 30, 2014.
<<Highlights>>
<Devices>
As part of our effort to expand our product lineup, we released new smartphone models equipped with new functions, docomo keitai feature phones and docomo tablets, aiming to expand our smartphone user base and to facilitate the adoption of multiple mobile devices by a single user.
| We unveiled our 2014 summer handset collection comprising 12 different models including DOCOMO-unique Android smartphones equipped with VoLTE compatibility, emergency power-saving mode and various other features, docomo keitai feature phones and docomo tablets. |
| In June 2014, we started marketing iPad Air* and iPad mini with Retina Display. * |
| We launched a new mobile phone accessories brand, docomo select, which offers a wide variety of recommended peripherals, such as smartphone cases and audio-visual tools. |
5
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
<Network>
We continued our efforts to take advantage of DOCOMOs technical strengths to build a robust network pursuing breadth, speed and convenience, and launched a brand new LTE-based voice communications service.
| To further expand the coverage of our Xi LTE service, we increased the total number of LTE base stations to 66,300 stations across Japan as of June 30, 2014 (vis-à-vis our target of 95,300 LTE base stations as of March 31, 2015.) |
| Toward the goal of further enhancement of the transmission speeds of our Xi LTE service, we increased the number of base stations compatible with a maximum download speed of 100Mps or higher to 10,900 stations as of June 30, 2014 (vis-à-vis our target of 40,000 base stations as of March 31, 2015.) |
| We commenced the commercial VoLTE service that enables users to enjoy stable and high-quality voice calls over the Xi LTE network. |
<Billing Plan/Sales Channel>
We introduced a new billing plan, Kake-hodai & Pake-aeru, to allow customers to utilize smartphones, docomo keitai feature phones and other mobile devices at affordable rates for a long period of time by selecting plans appropriate for their needs in different stages of life.
The total subscriptions to the new billing plan, Kake-hodai & Pake-aeru, reached approximately 4.7 million as of June 30, 2014.
<Overview of New Billing Plan>
Zutto DOCOMO Discount | A service that offers weighted discounts based on the length of subscription
Offers discounts on data communication charges based on the subscription length of the longest user | |
U25 Ouen Discount | A service that offers helpful discounts not only to students but to all customers of age 25 or younger
Provides a discount of ¥500/month on phone bill
Also offers free bonus packets of 1GB | |
Kake-hodai | Unlimited domestic voice calling at a flat monthly rate for any destination, including other DOCOMO phones or users of other mobile/fixed-line networks, with no restrictions on the number of calls or their duration | |
Pake-aeru | Allows packet data-quota sharing among family members or among multiple devices owned by a single user
Allows waste-free data usage through the sharing of a data quota among family members by selecting a plan suitable for the familys total packet consumption
Additional packets can be purchased on an as-needed basis in months of heavy usage |
The total number of smartphones sold for the three months ended June 30, 2014 was 3.06 million units, and the total number of subscriptions to Xi services as of June 30, 2014 was 24.04 million.
*: | TM and (c) 2014 Apple Inc. All rights reserved. iPad and Retina are trademarks of Apple Inc., registered in the U.S. and other countries. |
6
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
Number of subscriptions by services and other operating data are as follows:
<Number of subscriptions by services>
Thousand subscriptions | ||||||||||||||||
June 30, 2013 | June 30, 2014 | Increase (Decrease) |
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Cellular services |
61,623 | 63,566 | 1,943 | 3.2 | % | |||||||||||
Cellular (Xi) services |
14,198 | 24,043 | 9,845 | 69.3 | ||||||||||||
Cellular (FOMA) services |
47,425 | 39,523 | (7,902 | ) | (16.7 | ) | ||||||||||
packet flat-rate services |
39,057 | 40,164 | 1,107 | 2.8 | ||||||||||||
sp-mode services |
19,921 | 24,685 | 4,764 | 23.9 | ||||||||||||
i-mode services |
30,689 | 25,362 | (5,328 | ) | (17.4 | ) |
Notes: | ||
1. |
Number of subscriptions to Cellular services and Cellular (FOMA) services includes Communication Module services subscriptions. | |
2. |
Effective March 3, 2008, FOMA subscription became mandatory for subscription to 2in1 services, and those FOMA subscriptions are included in the number of FOMA subscriptions. | |
3. | Number of subscriptions to packet flat-rate services includes Share Option subscriptions under the Kake-hodai & Pake-aeru plan. |
<Number of handsets sold and churn rate>
Thousand units | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
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Number of handsets sold |
5,393 | 5,156 | (237 | ) | (4.4 | )% | ||||||||||
Cellular (Xi) services |
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New Xi subscription |
860 | 1,160 | 300 | 34.9 | ||||||||||||
Change of subscription from FOMA |
2,021 | 1,388 | (634 | ) | (31.3 | ) | ||||||||||
Xi handset upgrade by Xi subscribers |
396 | 1,026 | 630 | 159.1 | ||||||||||||
Cellular (FOMA) services |
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New FOMA subscription |
815 | 577 | (238 | ) | (29.2 | ) | ||||||||||
Change of subscription from Xi |
16 | 31 | 16 | 99.8 | ||||||||||||
FOMA handset upgrade by FOMA subscribers |
1,284 | 973 | (311 | ) | (24.2 | ) | ||||||||||
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Churn Rate |
0.86 | % | 0.67 | % | (0.19) point | |
7
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
Smart Life Business
The services provided as part of our smart life business include video and music distribution, electronic books and other services offered through our dmarket portal, as well as finance/payment services, shopping services and various other life-related services.
<Results of operations>
Billions of yen | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
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Operating revenues from smart life business |
¥ | 85.2 | ¥ | 99.6 | ¥ | 14.4 | 16.9 | % | ||||||||
Operating income (loss) from smart life business |
5.3 | 6.6 | 1.3 | 25.0 |
Operating revenues from smart life business increased by ¥14.4 billion from the same period of the prior fiscal year to ¥99.6 billion for the three months ended June 30, 2014 owing to an increase in the number of users of dmarket services by expanding new stores on dmarket and enriching stores services, an increase in the total subscriptions to Osusume Pack and other factors. Operating expenses from smart life business were ¥93.1 billion for the three months ended June 30, 2014, an increase of ¥13.1 billion from the same period of the previous fiscal year. As a consequence, the operating income from our smart life business amounted to ¥6.6 billion for the three months ended June 30, 2014.
<<Highlights>>
<Devices>
To deliver greater Smart Life experience, we launched wearable devices equipped with new features and capabilities.
| Through docomo Healthcare, Inc., we launched a new wristband-type health-monitoring device, move band 2, after making improvements to the preceding model in pursuit of more comfortable use, e.g., reducing its weight and adding new features such as an alarm function that vibrates to wake up the wearer from the sleep at the optimal timing. |
<Services>
We have worked to enrich the content portfolio of existing dmarket stores, while launching new stores that will provide users with useful solutions in various scenes of everyday life, and made further progress toward realizing carrier-independent access to services through the use of docomo ID.
| We launched a new home food delivery service, ddelivery. With this service, users can search restaurants/menus and place orders using voice command via our Shabette Concier voice agent service, and also make payments using docomo Points. |
| We launched dmagazine electronic magazine service, which provides users with unlimited access to wide-ranging genres of magazines and/or individual articles from smartphone/tablets for a flat monthly fee. |
As a result of these efforts, the combined dmarket store subscriptions* reached 7.46 million as of June 30, 2014, and we are making favorable progress toward our goal of acquiring 10 million subscriptions as quickly as possible.
*: | Total number of users using dvideo, dhits, danime store, dkids and dmagazine services under a monthly subscription arrangement. |
8
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
Other Businesses
<Results of operations>
Billions of yen | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
||||||||||||||
Operating revenues from other businesses |
¥ | 72.8 | ¥ | 77.2 | ¥ | 4.4 | 6.1 | % | ||||||||
Operating income (loss) from other businesses |
(1.2 | ) | (0.1 | ) | 1.2 | 93.4 |
Operating revenues from other businesses increased by ¥4.4 billion from the same period of the prior fiscal year to ¥77.2 billion for the three months ended June 30, 2014, mainly driven by the growth of revenues from our Mobile Phone Protection & Delivery service. Operating expenses from other businesses were ¥77.3 billion for the three months ended June 30, 2014, an increase of ¥3.2 billion from the same period of the prior fiscal year. Consequently, we recorded an operating loss of ¥0.1 billion from other businesses for the three months ended June 30, 2014.
<<Highlights>>
| We reached an agreement with Tesla Motors, Inc. (Tesla) to implement our M2M* connectivity management system for corporate users, docomo M2M Platform, in all Model S, Teslas electrical vehicles and to provide mobile data communications services to be sold in Japan. |
| We entered into a basic agreement for business alliance with Vodafone Group Plc to address the delivery of M2M services with the aim of strengthening corporate marketing to global accounts. |
*: | Abbreviation for Machine-to-Machine. A system that provides automatic communication between machines with built-in communications capability, e.g., vehicles, vending machines or information appliances, and the server or other network equipment. |
9
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
iii. CSR Activities
In accordance with our medium-term business plan, Medium-Term Vision 2015, we are working to provide a stable, high quality network and services and to engage in the persistent creation of new value as a Partner for a Smart Life for our customers.
We believe it is the corporate social responsibility CSR of DOCOMO to contribute to the realization of a society that enables people to lead abundant lives with comfort, safety, and security by resolving various social issues and surpassing the confines of countries, regions, and generations. Accordingly, we have positioned CSR as the core of our corporate management.
The principal actions undertaken during the three months ended June 30, 2014 are summarized below:
| We set forth the NTT DOCOMO Group Environmental Targets for FY2016, which will serve as a medium-term guideline for our environmentally-conscious business management, and also defined concrete numerical targets to reduce the environmental burdens from our network operations or sales activities (e.g., cut power consumption per each unit of data transmission by 1/4; over 40% savings in the paper volume used for producing sales promotion tools.) |
| We held approximately 1,900 sessions of our Mobile Phone Safety Class to enlighten audiences on the rules and manners of using mobile phones and how to respond to criminal activities and other troubles if encountered when using a mobile phone, and garnered attendance of approximately 390,000 people in total for the three months ended June 30, 2014. |
iv. Trend of Capital Expenditures
<Capital expenditures>
Billions of yen | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
||||||||||||||
Total capital expenditures |
¥ | 145.4 | ¥ | 148.5 | ¥ | 3.1 | 2.1 | % | ||||||||
Mobile communications business |
139.4 | 145.0 | 5.6 | 4.0 | ||||||||||||
Smart life business |
3.3 | 1.9 | (1.4 | ) | (42.0 | ) | ||||||||||
Other businesses |
2.7 | 1.6 | (1.1 | ) | (39.6 | ) |
We continued our efforts for Xi LTE coverage expansion and facility buildup to accommodate the growth of data traffic, while working on the improvement of the efficiency of construction and the reduction of equipment procurement costs. As a result, the total amount of capital expenditures increased by 2.1% from the same period of the prior fiscal year to ¥148.5 billion for the three months ended June 30, 2014.
10
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
i. Financial Position
Billions of yen | ||||||||||||||||||||
June 30, 2013 | June 30, 2014 | Increase (Decrease) |
(Reference) March 31, 2014 |
|||||||||||||||||
Total assets |
¥ | 7,094.7 | ¥ | 7,261.3 | ¥ | 166.7 | 2.3 | % | ¥ | 7,508.0 | ||||||||||
NTT DOCOMO, INC. shareholders equity |
5,429.3 | 5,652.7 | 223.4 | 4.1 | 5,643.4 | |||||||||||||||
Liabilities |
1,624.9 | 1,560.6 | (64.2 | ) | (4.0 | ) | 1,814.5 | |||||||||||||
Including: Interest bearing liabilities |
246.4 | 230.5 | (15.9 | ) | (6.4 | ) | 230.3 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Shareholders equity ratio (1) (%) |
76.5 | % | 77.8 | % | 1.3 point | | 75.2 | % | ||||||||||||
Debt to Equity ratio (2) (multiple) |
0.045 | 0.041 | (0.004 | ) | | 0.041 |
Notes: | (1) | Shareholders equity ratio = NTT DOCOMO, INC. shareholders equity / Total assets | ||
(2) | Debt to Equity ratio = Interest bearing liabilities / NTT DOCOMO, INC. shareholders equity |
ii. Cash Flow Conditions
Billions of yen | ||||||||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
Increase (Decrease) |
||||||||||||||
Net cash provided by operating activities |
¥ | 241.6 | ¥ | 196.5 | ¥ | (45.1 | ) | (18.7 | )% | |||||||
Net cash used in investing activities |
(207.4 | ) | (235.8 | ) | (28.4 | ) | (13.7 | ) | ||||||||
Net cash used in financing activities |
(135.7 | ) | (128.0 | ) | 7.7 | 5.7 | ||||||||||
Free cash flows (1) |
34.2 | (39.4 | ) | (73.5 | ) | | ||||||||||
Free cash flows excluding changes in investments for cash management purposes (2)* |
16.8 | (24.1 | ) | (40.8 | ) | | ||||||||||
|
|
|
|
|
|
|
|
Notes: | (1) | Free cash flows = Net cash provided by operating activities + Net cash used in investing activities | ||
(2) | Changes in investments for cash management purposes = Changes by purchases, redemption at maturity and disposals of financial instruments held for cash management purposes with original maturities of longer than three months |
* | See 4. (3) Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures on page 21. |
For the three months ended June 30, 2014, net cash provided by operating activities was ¥196.5 billion, a decrease of ¥45.1 billion (18.7%) from the same period of the previous fiscal year. This was due mainly to an increase in the amount of income taxes paid and an increase in cash outflows resulting from advance payments to agent resellers in relation to collections of installment receivables for customers handset purchases, in addition to a decrease in mobile communications services revenues from the same period of the previous fiscal year.
Net cash used in investing activities was ¥235.8 billion, an increase of ¥28.4 billion (13.7%) from the same period of the previous fiscal year. This was due mainly to a decrease in cash inflows resulting from the redemption of short-term investments for cash management purpose, in addition to an increase in cash outflows resulting from purchases of short-term investments.
Net cash used in financing activities was ¥128.0 billion, a decrease of ¥7.7 billion (5.7%) from the same period of the previous fiscal year, due mainly to an increase in cash inflows resulting from proceed from short-term borrowings, in addition to a decrease in cash outflows resulting from repayments of short and long-term debt.
As a result, the balance of cash and cash equivalents was ¥358.7 billion as of June 30, 2014, a decrease of ¥168.3 billion (31.9%) from the previous fiscal year end.
11
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
(3) Prospects for the Fiscal Year Ending March 31, 2015
While competition in Japans mobile telecommunications market is expected to remain intense in such areas as acquisition of subscribers and further improvement of service offerings, we have undertaken various initiatives to strengthen our competitive edge, most importantly with the introduction of a new billing plan. Under this competitive market, we expect to post an increase in operating revenues due mainly to an increase in packet communications revenues resulting from the expansion of the smartphone user base and an increase in revenues from new business fields, whereas we expect to decrease operating income due mainly to a decrease in voice revenues and an increase in cost for quality enhancements of Xi LTE services for the fiscal year ending March 31, 2015.
Our operating revenues for the fiscal year ending March 31, 2015 are expected to be ¥4,590.0 billion, an increase of ¥128.8 billion from the previous fiscal year, reflecting growth in packet revenues driven by accelerating the migration to Xi smartphones, equipment sales revenues by promoting smartphones sales, and other operating revenues from sources such as dmarket, offsetting a decrease in mobile communications services revenues, which was due mainly to a decrease in voice revenues and the growing impact of the Monthly Support discount program. Our operating expenses are expected to be ¥3,840.0 billion, an increase of ¥198.0 billion from the previous fiscal year. Although we continue efforts aimed at further cost efficiency, operating expenses are expected to increase primarily caused by the growth in the number of Xi LTE base stations for quality enhancements, actions aimed for expanding future revenues, and an increase in cost of equipment sold driven by the growth in handset sales. Accordingly, operating income is estimated to be ¥750.0 billion, a decrease of ¥69.2 billion from the previous fiscal year.
As we are not currently aware of any factor that may have a material impact on our projected results of operations, we have not revised our forecasts announced on April 25, 2014.
12
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
(1) Changes in Significant Subsidiaries
None
(2) Application of Simplified or Exceptional Accounting
None
(3) Changes in Accounting Policies
None
13
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
3. Consolidated Financial Statements
(1) Consolidated Balance Sheets
Millions of yen | ||||||||
March 31, 2014 | June 30, 2014 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
¥ | 526,920 | ¥ | 358,662 | ||||
Short-term investments |
19,561 | 34,765 | ||||||
Accounts receivable |
281,509 | 200,863 | ||||||
Receivables held for sale |
787,459 | 789,078 | ||||||
Credit card receivables |
220,979 | 223,375 | ||||||
Other receivables |
315,962 | 317,687 | ||||||
Allowance for doubtful accounts |
(15,078 | ) | (11,934 | ) | ||||
Inventories |
232,126 | 239,241 | ||||||
Deferred tax assets |
61,592 | 53,337 | ||||||
Prepaid expenses and other current assets |
95,732 | 110,103 | ||||||
|
|
|
|
|||||
Total current assets |
2,526,762 | 2,315,177 | ||||||
|
|
|
|
|||||
Property, plant and equipment: |
||||||||
Wireless telecommunications equipment |
4,975,826 | 4,991,289 | ||||||
Buildings and structures |
897,759 | 898,841 | ||||||
Tools, furniture and fixtures |
553,497 | 548,111 | ||||||
Land |
201,121 | 200,945 | ||||||
Construction in progress |
158,173 | 161,487 | ||||||
Accumulated depreciation and amortization |
(4,228,610 | ) | (4,255,938 | ) | ||||
|
|
|
|
|||||
Total property, plant and equipment, net |
2,557,766 | 2,544,735 | ||||||
|
|
|
|
|||||
Non-current investments and other assets: |
||||||||
Investments in affiliates |
424,531 | 409,941 | ||||||
Marketable securities and other investments |
171,875 | 178,252 | ||||||
Intangible assets, net |
665,960 | 645,414 | ||||||
Goodwill |
262,462 | 261,021 | ||||||
Other assets |
629,174 | 636,203 | ||||||
Deferred tax assets |
269,500 | 270,588 | ||||||
|
|
|
|
|||||
Total non-current investments and other assets |
2,423,502 | 2,401,419 | ||||||
|
|
|
|
|||||
Total assets |
¥ | 7,508,030 | ¥ | 7,261,331 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt |
¥ | 248 | ¥ | 228 | ||||
Short-term borrowings |
9,495 | 9,688 | ||||||
Accounts payable, trade |
798,315 | 661,153 | ||||||
Accrued payroll |
54,294 | 41,770 | ||||||
Accrued income taxes |
175,683 | 61,730 | ||||||
Other current liabilities |
167,951 | 177,746 | ||||||
|
|
|
|
|||||
Total current liabilities |
1,205,986 | 952,315 | ||||||
|
|
|
|
|||||
Long-term liabilities: |
||||||||
Long-term debt (exclusive of current portion) |
220,603 | 220,570 | ||||||
Accrued liabilities for point programs |
113,001 | 99,650 | ||||||
Liability for employees retirement benefits |
160,666 | 161,842 | ||||||
Other long-term liabilities |
114,261 | 126,258 | ||||||
|
|
|
|
|||||
Total long-term liabilities |
608,531 | 608,320 | ||||||
|
|
|
|
|||||
Total liabilities |
1,814,517 | 1,560,635 | ||||||
|
|
|
|
|||||
Redeemable noncontrolling interests |
14,869 | 14,960 | ||||||
|
|
|
|
|||||
Equity: |
||||||||
NTT DOCOMO, INC. shareholders equity |
||||||||
Common stock |
949,680 | 949,680 | ||||||
Additional paid-in capital |
732,875 | 732,875 | ||||||
Retained earnings |
4,328,389 | 4,340,367 | ||||||
Accumulated other comprehensive income (loss) |
9,590 | 6,923 | ||||||
Treasury stock |
(377,168 | ) | (377,168 | ) | ||||
Total NTT DOCOMO, INC. shareholders equity |
5,643,366 | 5,652,677 | ||||||
Noncontrolling interests |
35,278 | 33,059 | ||||||
|
|
|
|
|||||
Total equity |
5,678,644 | 5,685,736 | ||||||
|
|
|
|
|||||
Total liabilities and equity |
¥ | 7,508,030 | ¥ | 7,261,331 | ||||
|
|
|
|
14
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Consolidated Statements of Income
Millions of yen | ||||||||
Three Months Ended June 30, 2013 |
Three Months Ended June 30, 2014 |
|||||||
Operating revenues: |
||||||||
Mobile communications services |
¥ | 749,856 | ¥ | 700,661 | ||||
Equipment sales |
212,481 | 206,987 | ||||||
Other operating revenues |
151,236 | 167,654 | ||||||
|
|
|
|
|||||
Total operating revenues |
1,113,573 | 1,075,302 | ||||||
|
|
|
|
|||||
Operating expenses: |
||||||||
Cost of services (exclusive of items shown separately below) |
251,041 | 265,587 | ||||||
Cost of equipment sold (exclusive of items shown separately below) |
177,253 | 177,255 | ||||||
Depreciation and amortization |
166,640 | 167,183 | ||||||
Selling, general and administrative |
271,169 | 255,637 | ||||||
|
|
|
|
|||||
Total operating expenses |
866,103 | 865,662 | ||||||
|
|
|
|
|||||
Operating income |
247,470 | 209,640 | ||||||
|
|
|
|
|||||
Other income (expense): |
||||||||
Interest expense |
(479 | ) | (280 | ) | ||||
Interest income |
428 | 404 | ||||||
Other, net |
5,065 | 2,710 | ||||||
|
|
|
|
|||||
Total other income (expense) |
5,014 | 2,834 | ||||||
|
|
|
|
|||||
Income before income taxes and equity in net income (losses) of affiliates |
252,484 | 212,474 | ||||||
|
|
|
|
|||||
Income taxes: |
||||||||
Current |
79,267 | 63,801 | ||||||
Deferred |
16,881 | 9,722 | ||||||
|
|
|
|
|||||
Total income taxes |
96,148 | 73,523 | ||||||
|
|
|
|
|||||
Income before equity in net income (losses) of affiliates |
156,336 | 138,951 | ||||||
|
|
|
|
|||||
Equity in net income (losses) of affiliates |
298 | (3,557 | ) | |||||
|
|
|
|
|||||
Net income |
156,634 | 135,394 | ||||||
|
|
|
|
|||||
Less: Net (income) loss attributable to noncontrolling interests |
1,375 | 987 | ||||||
|
|
|
|
|||||
Net income attributable to NTT DOCOMO, INC. |
¥ | 158,009 | ¥ | 136,381 | ||||
|
|
|
|
|||||
Per share data |
||||||||
Weighted average common shares outstanding Basic and Diluted |
4,146,760,100 | 4,146,760,100 | ||||||
|
|
|
|
|||||
Basic and Diluted earnings per share attributable to NTT DOCOMO, INC. |
¥ | 38.10 | ¥ | 32.89 | ||||
|
|
|
|
|||||
Consolidated Statements of Comprehensive Income |
||||||||
Millions of yen | ||||||||
Three Months Ended June 30, 2013 |
Three Months Ended June 30, 2014 |
|||||||
Net income |
¥ | 156,634 | ¥ | 135,394 | ||||
Other comprehensive income (loss): |
||||||||
Unrealized holding gains (losses) on available-for-sale securities, net of applicable taxes |
11,264 | 3,900 | ||||||
Unrealized gains (losses) on cash flow hedges, net of applicable taxes |
(32 | ) | 27 | |||||
Foreign currency translation adjustment, net of applicable taxes |
15,902 | (6,678 | ) | |||||
Pension liability adjustment, net of applicable taxes |
146 | 22 | ||||||
|
|
|
|
|||||
Total other comprehensive income (loss) |
27,280 | (2,729 | ) | |||||
|
|
|
|
|||||
Comprehensive income |
183,914 | 132,665 | ||||||
|
|
|
|
|||||
Less: Comprehensive (income) loss attributable to noncontrolling interests |
1,318 | 1,049 | ||||||
|
|
|
|
|||||
Comprehensive income attributable to NTT DOCOMO, INC. |
¥ | 185,232 | ¥ | 133,714 | ||||
|
|
|
|
15
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
(3) Consolidated Statements of Cash Flows
Millions of yen | ||||||||
Three Months Ended June 30, 2013 |
Three Months Ended June 30, 2014 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
¥ | 156,634 | ¥ | 135,394 | ||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
Depreciation and amortization |
166,640 | 167,183 | ||||||
Deferred taxes |
16,881 | 9,722 | ||||||
Loss on sale or disposal of property, plant and equipment |
6,276 | 9,849 | ||||||
Equity in net (income) losses of affiliates |
(298 | ) | 3,557 | |||||
Changes in assets and liabilities: |
||||||||
(Increase) / decrease in accounts receivable |
20,165 | 80,189 | ||||||
(Increase) / decrease in receivables held for sale |
(23,921 | ) | (1,619 | ) | ||||
(Increase) / decrease in credit card receivables |
(4,184 | ) | (1,392 | ) | ||||
(Increase) / decrease in other receivables |
4,753 | (3,968 | ) | |||||
Increase / (decrease) in allowance for doubtful accounts |
(2,293 | ) | (2,992 | ) | ||||
(Increase) / decrease in inventories |
(2,821 | ) | (7,938 | ) | ||||
(Increase) / decrease in prepaid expenses and other current assets |
(16,530 | ) | (12,087 | ) | ||||
(Increase) / decrease in non-current receivables held for sale |
(5,323 | ) | (4,334 | ) | ||||
Increase / (decrease) in accounts payable, trade |
(5,880 | ) | (67,295 | ) | ||||
Increase / (decrease) in accrued income taxes |
(60,633 | ) | (113,900 | ) | ||||
Increase / (decrease) in other current liabilities |
21,311 | 15,533 | ||||||
Increase / (decrease) in accrued liabilities for point programs |
(19,265 | ) | (13,351 | ) | ||||
Increase / (decrease) in liability for employees retirement benefits |
2,433 | 1,184 | ||||||
Increase / (decrease) in other long-term liabilities |
(544 | ) | 10,156 | |||||
Other, net |
(11,824 | ) | (7,426 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities |
241,577 | 196,465 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchases of property, plant and equipment |
(140,377 | ) | (150,785 | ) | ||||
Purchases of intangible and other assets |
(66,462 | ) | (60,336 | ) | ||||
Purchases of non-current investments |
(6,072 | ) | (491 | ) | ||||
Proceeds from sale of non-current investments |
9 | 340 | ||||||
Acquisitions of subsidiaries, net of cash acquired |
(8,611 | ) | | |||||
Purchases of short-term investments |
(13,754 | ) | (26,982 | ) | ||||
Redemption of short-term investments |
31,182 | 11,699 | ||||||
Other, net |
(3,309 | ) | (9,264 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(207,394 | ) | (235,819 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Repayment of long-term debt |
(4,390 | ) | (53 | ) | ||||
Proceeds from short-term borrowings |
4,934 | 10,478 | ||||||
Repayment of short-term borrowings |
(12,984 | ) | (10,245 | ) | ||||
Principal payments under capital lease obligations |
(560 | ) | (465 | ) | ||||
Dividends paid |
(121,665 | ) | (122,434 | ) | ||||
Other, net |
(1,032 | ) | (5,248 | ) | ||||
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
(135,697 | ) | (127,967 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
1,144 | (937 | ) | |||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
(100,370 | ) | (168,258 | ) | ||||
Cash and cash equivalents as of beginning of period |
493,674 | 526,920 | ||||||
|
|
|
|
|||||
Cash and cash equivalents as of end of period |
¥ | 393,304 | ¥ | 358,662 | ||||
|
|
|
|
|||||
Supplemental disclosures of cash flow information: |
||||||||
Cash received during the period for: |
||||||||
Income tax refunds |
¥ | 10 | ¥ | 4 | ||||
Cash paid during the period for: |
||||||||
Interest, net of amount capitalized |
933 | 266 | ||||||
Income taxes |
136,692 | 175,655 | ||||||
|
|
|
|
16
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
(4) Notes to Consolidated Financial Statements
i. Note to Going Concern Assumption
There is no corresponding item.
ii. Significant Changes in NTT DOCOMO, INC. Shareholders Equity
None
iii. Segment Information
DOCOMOs chief operating decision maker (CODM) is its board of directors. The CODM evaluates the performance and makes resource allocations of its segments based on the information provided by DOCOMOs internal management reports.
DOCOMO realigned its conventional five operating segments, which consist of mobile phone business, credit services business, home shopping services business, internet connection services business for hotel facilities, and miscellaneous businesses into three operating segments, which consist of mobile communications business, smart life business and other businesses from the three months ended June 30, 2014 in order to clearly define its business management of the mobile communications fields where DOCOMO is taking steps to reinforce its competitiveness, and the new business fields where DOCOMO is striving for its further expansion of revenue sources by making Smart Life a reality toward the establishment of a new path to grow.
The mobile communications business includes mobile phone services (Xi services and FOMA services), satellite mobile communications services, international services and the equipment sales related to these services. The smart life business includes video and music distribution, electronic books and other services offered through DOOMOs dmarket portal, as well as finance/payment services, shopping services and various other life-related services. The other businesses primarily includes Mobile Phone protection and delivery services, as well as development, sales and maintenance of IT systems.
In connection with this realignment, segment information for the three months ended June 30, 2013 has been restated to conform to the presentation for the three months ended June 30, 2014.
Accounting policies used to determine segment operating revenues and operating profit or loss are consistent with those used to prepare the consolidated financial statements in accordance with U.S. GAAP.
17
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
Segment operating revenues:
Millions of yen | ||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
|||||||
Mobile communications business- |
||||||||
External customers |
¥ | 961,048 | ¥ | 904,968 | ||||
Intersegment |
336 | 192 | ||||||
|
|
|
|
|||||
Subtotal |
961,384 | 905,160 | ||||||
Smart life business- |
||||||||
External customers |
82,410 | 96,104 | ||||||
Intersegment |
2,839 | 3,542 | ||||||
|
|
|
|
|||||
Subtotal |
85,249 | 99,646 | ||||||
Other businesses- |
||||||||
External customers |
70,115 | 74,230 | ||||||
Intersegment |
2,652 | 2,940 | ||||||
|
|
|
|
|||||
Subtotal |
72,767 | 77,170 | ||||||
|
|
|
|
|||||
Total |
1,119,400 | 1,081,976 | ||||||
Elimination |
(5,827 | ) | (6,674 | ) | ||||
|
|
|
|
|||||
Consolidated |
¥ | 1,113,573 | ¥ | 1,075,302 | ||||
|
|
|
|
Segment operating income (loss):
Millions of yen | ||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
|||||||
Mobile communications business |
¥ | 243,442 | ¥ | 203,134 | ||||
Smart life business |
5,270 | 6,588 | ||||||
Other businesses |
(1,242 | ) | (82 | ) | ||||
|
|
|
|
|||||
Total |
247,470 | 209,640 | ||||||
Elimination |
| | ||||||
|
|
|
|
|||||
Consolidated |
¥ | 247,470 | ¥ | 209,640 | ||||
|
|
|
|
Operating income is operating revenues less operating expenses.
DOCOMO does not disclose geographical information since the amounts of operating revenues generated outside Japan are immaterial.
18
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
(1) Operating Data for 1st Quarter of the Fiscal Year Ending March 31, 2015
Full-year Forecasts: as announced on April 25, 2014
First Quarter (Apr. - Jun. 2013) Results |
First Quarter (Apr. - Jun. 2014) Results |
[Ref.] Fiscal Year Ended Mar. 31, 2014 Full-year Results |
[Ref.] Fiscal Year Ending Mar. 31, 2015 Full-year Forecasts |
|||||||||||||||
Number of Subscriptions and Other Operating Data |
||||||||||||||||||
Cellular Subscriptions |
thousands | 61,623 | 63,566 | 63,105 | 66,800 | |||||||||||||
Xi |
thousands | 14,198 | 24,043 | 21,965 | 29,800 | |||||||||||||
FOMA (1) |
thousands | 47,425 | 39,523 | 41,140 | 37,000 | |||||||||||||
Communication Module Service |
thousands | 3,204 | 3,286 | 3,338 | | |||||||||||||
Packet Flat-rate Services Subscriptions (2) |
thousands | 39,057 | 40,164 | 40,148 | | |||||||||||||
Net Increase from Previous Period (3) |
thousands | 87 | 461 | 1,569 | 3,700 | |||||||||||||
Xi |
thousands | 2,632 | 2,078 | 10,399 | 7,900 | |||||||||||||
FOMA (1) |
thousands | (2,545 | ) | (1,617 | ) | (8,830 | ) | (4,200 | ) | |||||||||
sp-mode Subscriptions |
thousands | 19,921 | 24,685 | 23,781 | 28,700 | |||||||||||||
i-mode Subscriptions |
thousands | 30,689 | 25,362 | 26,415 | 22,700 | |||||||||||||
Churn Rate (3) |
% | 0.86 | 0.67 | 0.87 | | |||||||||||||
Number of Handsets Sold (4) |
thousands | 5,393 | 5,156 | 22,514 | | |||||||||||||
ARPU and MOU |
||||||||||||||||||
Aggregate ARPU (5) |
yen/month/subscription | 4,610 | 4,300 | 4,500 | 4,390 | |||||||||||||
Voice ARPU (6) |
yen/month/subscription | 1,470 | 1,210 | 1,370 | 1,240 | |||||||||||||
Packet ARPU |
yen/month/subscription | 2,680 | 2,580 | 2,640 | 2,620 | |||||||||||||
Smart ARPU |
yen/month/subscription | 460 | 510 | 490 | 530 | |||||||||||||
MOU (7) |
minute/month/subscription | 109 | 99 | 106 | |
* | Please refer to 4. (2) Definition and Calculation Methods of ARPU and MOU for the definition of ARPU and MOU on page 20, and an explanation of the methods used to calculate ARPU and the number of active subscriptions. |
(1) | Effective March 3, 2008, FOMA subscription became mandatory for subscription to 2in1 services, and those FOMA subscriptions include in the number of FOMA subscribers. |
(2) | Number of subscriptions to packet flat-rate services includes Share Option subscriptions under the Kake-hodai & Pake-aeru plan. |
(3) | Data are calculated including communication module services subscriptions. |
(4) | Sum of new subscriptions, change of subscription from FOMA to Xi, Xi to FOMA, Xi handset upgrade by Xi subscribers, FOMA handset upgrade by FOMA subscribers. |
(5) | Data are calculated excluding revenues and subscriptions to communication module services, Phone Number Storage, Mail Address Storage and docomo Business Transceiver. |
(6) | Inclusive of circuit-switched data communication |
(7) | Data are calculated excluding subscriptions to communication module services, Phone Number Storage, Mail Address Storage and docomo Business Transceiver. |
19
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
(2) Definition and Calculation Methods of ARPU and MOU
i. | Definition of ARPU and MOU |
a. | ARPU (Average monthly Revenue Per Unit): |
Average monthly revenue per unit, or ARPU, is used to measure average monthly operating revenues attributable to designated services on a per subscription basis. ARPU is calculated by dividing various revenue items included in operating revenues from our mobile communications services and a part of other operating revenues by the number of active subscriptions to our wireless services in the relevant periods. We believe that our ARPU figures provide useful information to analyze the average usage per subscription and the impacts of changes in our billing arrangements. The revenue items included in the numerators of our ARPU figures are based on our U.S. GAAP results of operations.
b. | MOU (Minutes of Use): Average monthly communication time per subscription. |
ii. | ARPU Calculation Methods |
Aggregate ARPU = Voice ARPU + Packet ARPU + Smart ARPU
- Voice ARPU : | Voice ARPU Related Revenues (basic monthly charges, voice communication charges) / No. of active subscriptions | |
- Packet ARPU : | Packet ARPU Related Revenues (basic monthly charges, packet communication charges) / No. of active subscriptions | |
- Smart ARPU : | A part of other operating revenues (revenues from content, collection of charges, mobile phone insurance service, advertising and others) / No. of active subscriptions |
iii. | Active Subscriptions Calculation Methods |
Sum of No. of active subscriptions for each month ((No. of subscriptions at the end of previous month + No. of subscriptions at the end of current month) / 2) during the relevant period
Note: | Subscriptions and revenues for communication module services, Phone Number Storage, Mail Address Storage and docomo Business Transceiver are not included in the ARPU and MOU calculations. |
20
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
(3) Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
i. EBITDA and EBITDA margin
Billions of yen | ||||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
|||||||||
a. EBITDA |
¥ | 420.4 | ¥ | 386.7 | ||||||
|
|
|
|
|||||||
Depreciation and amortization |
(166.6 | ) | (167.2 | ) | ||||||
Loss on sale or disposal of property, plant and equipment |
(6.3 | ) | (9.8 | ) | ||||||
|
|
|
|
|||||||
Operating income |
247.5 | 209.6 | ||||||||
|
|
|
|
|||||||
Other income (expense) |
5.0 | 2.8 | ||||||||
Income taxes |
(96.1 | ) | (73.5 | ) | ||||||
Equity in net income (losses) of affiliates |
0.3 | (3.6 | ) | |||||||
Less: Net (income) loss attributable to noncontrolling interests |
1.4 | 1.0 | ||||||||
|
|
|
|
|||||||
b. Net income attributable to NTT DOCOMO, INC. |
158.0 | 136.4 | ||||||||
|
|
|
|
|||||||
c. Operating revenues |
1,113.6 | 1,075.3 | ||||||||
|
|
|
|
|||||||
EBITDA margin (=a/c) |
37.8 | % | 36.0 | % | ||||||
Net income margin (=b/c) |
14.2 | % | 12.7 | % | ||||||
|
|
|
|
Note: | EBITDA and EBITDA margin, as we use them, are different from EBITDA as used in Item 10(e) of regulation S-K and may not be comparable to similarly titled measures used by other companies. |
ii. ROCE after tax effect
Billions of yen | ||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
|||||||
a. Operating income |
¥ | 247.5 | ¥ | 209.6 | ||||
b. Operating income after tax effect {=a*(1-effective tax rate)} |
153.2 | 134.6 | ||||||
c. Capital employed |
5,648.9 | 5,878.4 | ||||||
|
|
|
|
|||||
ROCE before tax effect (=a/c) |
4.4 | % | 3.6 | % | ||||
ROCE after tax effect (=b/c) |
2.7 | % | 2.3 | % | ||||
|
|
|
|
Notes: | Capital employed = Two period ends average of (NTT DOCOMO, INC. shareholders equity + Interest bearing liabilities) Interest bearing liabilities = Current portion of long-term debt + Short-term borrowings + Long-term debt The effective tax rate for the year ended June 30, 2013 was 38.1%. The effective tax rate for the year ending June 30, 2014 was 35.8%. |
iii. Free cash flows excluding changes in investments for cash management purposes
Billions of yen | ||||||||
Three months ended June 30, 2013 |
Three months ended June 30, 2014 |
|||||||
Net cash provided by operating activities |
¥ | 241.6 | ¥ | 196.5 | ||||
Net cash used in investing activities |
(207.4 | ) | (235.8 | ) | ||||
|
|
|
|
|||||
Free cash flows |
34.2 | (39.4 | ) | |||||
|
|
|
|
|||||
Changes in investments for cash management purposes |
17.4 | (15.3 | ) | |||||
|
|
|
|
|||||
Free cash flows excluding changes in investments for cash management purposes |
16.8 | (24.1 | ) | |||||
|
|
|
|
Note: | Changes in investments for cash management purposes were derived from purchases, redemption at maturity and disposals of financial instruments held for cash management purposes with original maturities of longer than three months. |
21
DOCOMO Earnings Release | Three Months Ended June 30, 2014 |
5. Special Note Regarding Forward-Looking Statements
This earning release contains forward-looking statements such as forecasts of results of operations, management strategies, objectives and plans, forecasts of operational data such as the expected number of subscriptions, and the expected dividend payments. All forward-looking statements that are not historical facts are based on managements current plans, expectations, assumptions and estimates based on the information currently available. Some of the projected numbers in this report were derived using certain assumptions that were indispensable for making such projections in addition to historical facts. These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those contained in or suggested by any forward-looking statement. Potential risks and uncertainties include, without limitation, the following:
(1) | Changes in the market environment in the telecommunications industry, such as intensifying competition from other businesses or other technologies caused by Mobile Number Portability, development of appealing new handsets, new market entrants, mergers among other service providers and other factors, or the expansion of the areas of competition could limit the acquisition of new subscriptions and retention of existing subscriptions by our corporate group, or it may lead to ARPU diminishing at a greater than expected rate, an increase in our costs, or an inability to reduce expenses as expected. |
(2) | If current and new services, usage patterns, and sales schemes proposed and introduced by our corporate group cannot be developed as planned, or if unanticipated expenses arise the financial condition of our corporate group could be affected and our growth could be limited. |
(3) | The introduction or change of various laws or regulations inside and outside of Japan, or the application of such laws and regulations to our corporate group, could restrict our business operations, which may adversely affect our financial condition and results of operations. |
(4) | Limitations in the amount of frequency spectrum or facilities made available to us could negatively affect our ability to maintain and improve our service quality and level of customer satisfaction and could increase our costs. |
(5) | Other mobile service providers in the world may not adopt the technologies and the frequency bands that are compatible with those used by our corporate groups mobile communications system on a continuing basis, which could affect our ability to sufficiently offer international services. |
(6) | Our domestic and international investments, alliances and collaborations, as well as investments in new business fields, may not produce the returns or provide the opportunities we expect. |
(7) | Malfunctions, defects or imperfections in our products and services or those of other parties may give rise to problems. |
(8) | Social problems that could be caused by misuse or misunderstanding of our products and services may adversely affect our credibility or corporate image. |
(9) | Inadequate handling of confidential business information including personal information by our corporate group, contractors and others may adversely affect our credibility or corporate image. |
(10) | Owners of intellectual property rights that are essential for our business execution may not grant us a license or other use of such intellectual property rights, which may result in our inability to offer certain technologies, products and/or services, and our corporate group may also be held liable for damage compensation if we infringe the intellectual property rights of others. In addition, the illicit use by a third party of the intellectual property rights owned by our corporate group could reduce our license revenues actually obtained and may inhibit our competitive superiority. |
(11) | Events and incidents caused by natural disasters, social infrastructure paralysis such as power shortages, the proliferation of harmful substances, terror or other destructive acts, the malfunctioning of equipment, software bugs, deliberate incidents induced by computer viruses, cyber-attacks, equipment misconfiguration, hacking, unauthorized access and other problems could cause failure in our networks, distribution channels, and/or other factors necessary for the provision of service, disrupting our ability to offer services to our subscribers and such incidents may adversely affect our credibility or corporate image, or lead to a reduction of revenues and/or increase of costs. |
(12) | Concerns about adverse health effects arising from wireless telecommunications may spread and consequently adversely affect our financial condition and results of operations. |
(13) | Our parent company, NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT), could exercise influence that may not be in the interests of our other shareholders. |
* | Names of companies, products, etc., contained in this release are the trademarks or registered trademarks of their respective organizations. |
22
Results Presentation
for the First Three Months of the Fiscal Year Ending March 31, 2015
July 25, 2014
|
1. Results Highlights
Principal Financial Results
Operational data: Progress vs. Target
2. FY14/1Q Actions
New Billing Plan: Uptake and Effects Reinforcement of LTE Network/Sales Channel Expansion of services
3. Future Action Plans
Business Structure Reform; Change of Reportable Segments; Reinforcement of Management Foundation FY14/1Q Results & Planned Actions
1
|
FY2014/1Q Results Summary
Off to a good start toward
establishing a growth track
GAAP U.S.
Favorable progress vis-à-vis YOY Progress to
full-year guidance changes target
Operating revenues: ¥ 1,075.3 billion
(-3.4%) (23.4%)
Operating income: ¥ 209.6 billion
(-15.3%) (28.0%)
New billing plan and operational data also showing
favorable trends
New billing plan subs: 4.67 million
Net additions: 460,000
(Up 5.3-fold YOY)
Smartphone users: 25.34 million
(Up 1.2-fold YOY)
Consolidated financial statements in this document are unaudited
2
|
Selected Financial Data
GAAP U.S.
FY2013/1Q FY2014/1Q Changes
(Billions of yen)(1)(2)(2) (1)
Operating revenues 1,113.6 1,075.3 -38.3
Operating expenses 866.1 865.7 -0.4
Operating income 247.5 209.6 -37.8
Net income attributable to 158.0 136.4 -21.6
NTT DOCOMO, INC.
EBITDA Margin (%)*1 37.8 36.0 -1.8
Capital expenditures 145.4 148.5 +3.1
Adjusted free cash flow*1*2 16.8 -24.1 -40.8
*1: For an explanation of the calculation processes of these numbers, please see the reconciliations to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in this document and the IR page of our website, www.nttdocomo.co.jp
*2: Adjusted free cash flow excludes the effects of changes in investment derived from purchases, redemption at maturity and disposals of financial instruments held for cash management purposes with original maturities of longer than three months.
3
|
Key Factors Behind YOY Changes in Operating Income
GAAP U.S.
¥ 247.5 billion yen
Decrease in voice revenues*1: Down ¥26.8 billion
Increase packet revenues*1: Up ¥23.4 billion
Impact of Monthly Support discount program: Down ¥ 45.8 billion
Increase in other operating revenues: Up ¥16.4 billion
Decrease in equipment sales revenues: Down ¥5.5 billion
Decrease in equipment sales expenses*2: Down ¥11.6 billion
Increase depreciation, in loss amortization, on disposal property, of plant, equipment intangible assets: & Up ¥2.6 billion
Increase other expenses: in Up ¥8.5 billion
¥ 209.6 billion yen
Operating - ¥38.3 revenues: billion
Operating - ¥0.4 expenses: billion
FY13/1Q
FY14/1Q
*1: Excluding impact of Monthly Support discounts *2: Sum of cost of equipment sold and commissions to agent resellers
4
|
Net Additions
(1,000 subs)
Over 5-fold 460
YOY
increase
90
FY13/1Q FY14/1Q
Up significantly compared to same period of previous fiscal year
5
|
Net Additions (Monthly)
Apr May Jun
FY13 FY14
Monthly numbers also show remarkable increase
6
|
New Sales
(Million subs)
1.74
1.68
FY13/1Q FY14/1Q
Recorded YOY increase
7
|
Churn Rate
1.00%
0.86% 0.86%
0.76%
0.67%
FY13/1Q 2Q 3Q 4Q FY14/1Q
Trend of improvement driven by young users
8
|
MNP Performance
(1,000 subs)
1Q 2Q 3Q 4Q 1Q
-90
-200
-210 -220 -260
-390
-410 -420 -410
-530
FY12 FY13 FY14
Improving significantly
9
|
MNP Performance (Monthly)
Apr May Jun
FY13 FY14
Showing further improvement after announcement of new billing plan
10
|
Total Handset/Smartphone Sales
(Million units)
Total handsets sold:
Total handsets sold:
5.39
5.16
Smartphones Smartphones sold: sold:
3.35 3.06
FY13/1Q FY14/1Q
Total handsets sales almost on par with FY13/1Q
Smartphones account for approx. 60% of total handsets sold
11
|
Tablet Sales
Up approx. 30% YOY
(1,000 units) 290
220
FY13/1Q FY14/1Q
FY13 FY14
Adoption of a
second mobile device expanding
12
|
Smartphone Users
(Million subs) % of LTE-enabled 83% smartphone users
25.34
60%
20.39
FY13/1Q 2Q 3Q 4Q FY14/1Q
Smartphone users: Topped 25 million
% of LTE smartphones:
Over 80% of total
13
|
LTE Subscriptions
(Million subs)
Increased by
approx.10 million
from FY13/1Q 24.04 14.20 FY13/1Q 2Q 3Q 4Q FY14/1Q
Grew to over 24 million
14
|
ARPU (Exclusive of Monthly Support Impact)
(Yen)
5,190
+50 5,120
+40 -160
Smart Voice Packet ARPU ARPU ARPU
FY13/1Q FY14/1Q
Aim to boost packet & smart ARPU even further
*For an explanation on ARPU, please see slide Definition and Calculation Methods of ARPU and MOU in this document
15
|
1. Results Highlights
Principal Financial Results
Operational data: Progress vs. Target
2. FY14/1Q Actions
New Billing Plan: Uptake and Effects Reinforcement of LTE Network/Sales Channel Expansion of services
3. Future Action Plans
Business Structure Reform; Change of Reportable Segments; Reinforcement of Management Foundation FY14/1Q Results & Planned Actions
16
|
New Billing Plan Subscriptions No. of subs: To exceed 6 million
Kake-hodai & Pake-aeru
At service launch:
2.08 mil
As of Jun. 30:
4.67 mil
As of Jul. 5:
Over 5 mil
No. of Number of pre-orders subscriptions
May 15 Jun. 1 Jun. 30
17
|
Effects of New Billing Plan
High rate of subscription among long-term users Successfully raised awareness about the benefits and attractiveness of voice flat-rate plan Significantly increased the number of net additions
(Up 5.3 times YOY)
Improved churn rate, particularly among U25 users
(Down to 0.6%-level for the first time in 2.5 years)
Optimized handset sales expenses
(Commissions to agent resellers*: Down approx. 24% YOY)
* Commissions to agent resellers before deduction of equipment sales related expenses.
18
|
VoLTE
Japans first premium-quality voice service
Launched June 24, 2014
Combined sales of
4 VoLTE-enabled models:
Approx. 600,000 units
GALAXY S5 SC-04F
Xperia TM Z2 SO-03F
AQUOS ZETA SH-04F
AQUOS PAD SH-06F
ARROWS NX F-05F
Xperia TM Z2 Tablet SO-05F
Compatibility to be introduced late July
Compatibility to be introduced late Sept
19
|
iPad
Stimulating demand for a second mobile device
New billing plan applicable
Kake-hodai & Pake-aeru
Launched Jun. 10, 2014
1GB free bonus packets to iPad subs
20
|
LTE Network
LTE base station rollout progressing favorably
225Mbps service (LTE-Advanced) to start within FY14
Added 95,300 stations
10,000+
stations
66,300 stations
55,300 stations
BSs compatible with
max. download speed of
100Mbps or higher
40,000
3,500 10,900
Mar. 31, 2014 Jun. 30, 2014 Mar. 31, 2015 target
*The transmission speeds described above are theoretical maximum downlink rates as specified in the technical standard. The actual rate may vary depending on the propagation conditions, etc.
21
|
Network Quality Evaluations
DOCOMO ranked No. 1 in both network satisfaction and download speed
Source: Nationwide surveys on mobile networks by Nikkei BP Consulting
Network LTE download
satisfaction speed
Coverage Voice Data In all prefectures of Japan
quality quality
No.1 No. 1
* No.1 network satisfaction: Smartphone user satisfaction survey based on actual network usage experience by Nikkei BP Consulting (Survey period: April 11-22, 2014)
* No.1 LTE data download speed: 3rd nationwide LTE/4G area coverage survey by Nikkei BP Consulting (Survey period: April 10-May 7, 2014)
22
|
docomo Shop Evaluation
Ranked No.1 in Hospitality Level
2014
* Received No.1 ranking in Hospitality (customer service) award of Japans Best Retail Stores 2014 Grand Prix (based on shop attractiveness) sponsored by Nikkei Research Inc.
23
|
Total dmarket Transactions
Growing steadily
(Billions of yen) Up approx. 16.8
30% YOY
12.7
FY13/1Q FY14/1Q
For entire FY14 Target:
\90 billion
24
|
dmarket Subscriptions
Aim for further increase
(Million subs) dmarket
7.69 7.46
7.02 7.07
6.53
FY13/1Q 2Q 3Q 4Q FY14/1Q
No. of subs (As of Jun. 30, 2014)
dvideo d anime store
4.13 million subs 1.14 million subs
New dhits
\500/month \300/month
service: service:
460,000 subs 1.54 million subs
New
dmagazine dkids
90,000 subs 90,000 subs
* No. of dmarket subscriptions above accounts for only monthly subscriptions and one-time transactions are not included
25
|
Service Enrichment
Steadily expanded dmarket stores
dhits Launched dmagazine Launched
Apr. 1, 2014 Jun. 20, 2014
\500/month service:
Acquired 460,000 subs*1 in 3 months 400/month all-you-can-eat electronic magazine service: Acquired 210,000 subs*2 in 1 month
Unlimited access to 300
music programs containing Unlimited access to 80
many hit songs popular magazine titles
Allows users enjoy favorite Allows users to search & read
tunes anytime and as many articles on the same theme
times as they like by storing from multiple magazines
them on My Hits
*1: dhits \500/month service: No. of subscriptions as of Jun. 30, 2014
*2: dmagazine: No. of subscriptions as of Jul. 19, 2014
26
|
Historical Growth Per Subscriber of dmarket Usage
Subscribers usage growing steadily
(Yen)
Up approx. 950
30% YOY
840
750 760
720
2013/Jun Sept Dec 2014/Mar Jun
Key Factors driving growth
dtravel
Transaction volume rising rapidly in line with expansion of user base
dhits
Transaction volume showing an increase after launch of \500/month service
* dmarket usage per subscriber herein is calculated excluding consumption tax (dmarket usage per subscriber in the presentation materials for FY2013/1-3Q results dated Jan. 31, 2014 and FY2013 full-year results dated Apr. 25, 2014 was calculated inclusive of consumption tax)
27
|
1. Results Highlights
Principal Financial Results
Operational Data: Progress vs. Target
2. FY14/1Q Actions
New Billing Plan: Uptake and Effects Reinforcement of LTE Network/Sales Channel Expansion of services
3. Future Action Plans
Business Structure Reform; Change of Reportable Segments; Reinforcement of Management Foundation FY14/1Q Results & Planned Actions
28
|
Business Structure Reform/Reconstruction
Launched new organization toward business transformation
Improved customer Enhanced
satisfaction competitiveness
Optimize group formation Shift resources to focus
Organization closely tied
with community areas
DOCOMO CS, Inc. Shift 600 people
(Comprising 9 regional companies, to new business areas/
established July 1, 2014) corporate marketing
29
|
Change of Reportable Segments
Clear presentation of earnings/expenses of new businesses
Former
segments New segments
Mobile
Mobile Communications Core
phone Business business
business
Smart
All Life Businesses Other businesses New
other Business
businesses
30
|
Segment Results
GAAP U.S.
(Billions of yen) FY2013/1Q FY2014/1Q Changes
(1)(2)(2) (1)
Mobile Operating revenues 961.4 905.2 -56.2
Communications
Business Operating income 243.4 203.1 -40.3
Operating
Smart revenues 85.2 99.6 +14.4
Life
Operating
Business income 5.3 6.6 +1.3
Operating
Other revenues 72.8 77.2 +4.4
Businesses Operating
income -1.2 -0.1 +1.2
31
|
New Business Revenues: Progress
Achieving favorable growth toward full-year guidance
(Billions of yen)
158 177
Other Businesses
Other Businesses 77
73 Full-year
guidance:
Smart Life ¥770 billion
Smart Life Business
Business
85 100
FY13/1Q FY14/1Q
* Revenues include transactions between different segments as defined in the new reportable segments.
32
|
Reinforcement of Management Foundation
Cost efficiency improvement making steady progress
(Billions of yen) FY14/1Q FY14 full-year target
-¥32
(Cumulative* -¥257)
-¥55
(Cumulative* -¥280)
FY14/1Q cost reduction: breakdown
(Total cost reduction: Ą32 billion,
Progress to forecast: 58%)
Equipment sales :¥13 billion
expenses
Depreciation/amortization, :¥3 billion
Loss on disposal of property,
plant, equipment & intangible
assts
Others :¥16 billion
* Cumulative Amounts of cost reduction in parentheses are all in comparison with the level of FY2011.
33
|
FY14/1Q Results Snapshot
Off to a good start toward establishing a growth track
Migration of subscribers to new billing plan progressing at a favorable pace
Achieved significant improvements in acquisition of net adds, MNP performance and churn rate
Making good progress with LTE network buildup
Launched Japans first VoLTE service
Expanded dmarket stores by adding new service e.g., dmagazine, etc.
Reorganized group structure to create an organization closely tied to community and shift resources to priority areas
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Planned Actions
Further proliferation of new billing plan
Grow smartphone user base even further
Further promote the adoption of a second mobile
device, e.g., tablets
Boost packet usage
Expansion and profitability improvement of
new businesses
Continuous control of equipment sales
expenses
Studies on introducing Hikari Collaboration
Model
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NTT docomo
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Appendices
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Growth of New Business Revenues
(based on former business area classification)
177
(Billions of yen)
158 Others:
46
Others:
35
Finance/Payment:
Finance/Payment: 61
58
Commerce:
Commerce: 35
35
Media/Content: Media/Content:
30 35
FY13/1Q FY14/1Q
* Revenues include transactions between different segments as defined in the new reportable segments.
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Services, etc., Included in New Reportable Segments
Mobile Communications Business
Mobile communications services
Xi services (LTE) Satellite mobile communications services
FOMA services (3G) International services
Sales of handset/equipment for each service etc.
Smart Life Business
dmarket (Media/Content, Commerce) Finance/Payment services Life-Related services
Video distribution service Credit service Cooking studio
Music distribution service Proxy bill collection etc. Health management
Electronic book service Medical database etc.
Online shopping service etc. Shopping services (Commerce)
Home shopping service
Music software sales
Food delivery etc.
Other Businesses
Mobile Phone protection and delivery services
System development/sales/maintenance services etc.
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Operating Revenues
GAAP U.S.
(Billions of yen)
4,590.0
1,113.6 1,075.3
FY2013/1Q FY2014/1Q FY2014
(full-year forecast)
Mobile communications services revenues 749.9 700.7 2,881.0
Equipment sales revenues 212.5 207.0 935.0
Other operating revenues 151.2 167.7 774.0
International services revenues are included in Mobile communications services revenues
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Operating Expenses
GAAP U.S.
(Billions of yen)
3,840.0
866.1 865.7
FY2013/1Q FY2014/1Q FY2014
(full-year forecast)
Personnel expenses 72.0 71.2 288.0
Non-personnel expenses 550.3 546.4 2,504.0
Depreciation & amortization 166.6 167.2 715.0
Loss on disposal of property, plant
and equipment and intangible assets 14.1 16.2 71.0
Communication network charges 53.1 54.3 223.0
Taxed and public duties 10.0 10.4 39.0
(Incl) Revenue-linked expenses * 292.8 273.2 1,286.0
(Incl) Other non-personnel expenses 257.5 273.2 1,218.0
* Revenue-linked expenses: Cost of equipment sold + commissions to agent resellers + loyalty program expenses
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Capital Expenditures
U.S. GAAP
(Billions of yen)
145.4 148.5
690.0
FY2013/1Q FY2014/1Q FY2014
(full-year forecast)
Mobile communications business (LTE) 2.7 1.6 17.0
Mobile communications business (FOMA) 3.3 1.9 27.0
Mobile communications business (other) 66.5 49.1 236.0
Smart life business 13.7 0.3 4.0
Other 59.3 95.6 406.0
To conform to the change in reportable segments, items contained in the capital expenditures for FY2013/1Q (actual) and FY2014 (full-year forecast) have been reclassified from the former segment presentation.
* Research and development investments, which had previously been included in Mobile phone business (LTE) and Mobile phone business (FOMA) are recorded in Mobile Communications Business (other)under the new segment reporting structure.
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Operational Results and Forecasts
FY2013/1Q FY2014/1Q Changes FY2014
(1) (2) (2) (1) (full-year forecast)
No. of subscriptions (thousands) 61,623 63,566 +1,943 66,800
FOMA 47,425 39,523 -7,902 37,000
Xi 14,198 24,043 +9,845 29,800
i-mode 30,689 25,362 -5,328 22,700
sp-mode 19,921 24,685 +4,764 28,700
Communication module service 3,204 3,286 +82 -
Net additional subscriptions (thousands) 87 461 +374 3,700
Total handsets sold 5,393 5,156 -237 -
Handsets sold New Xi subscription 860 1,160 +300 -
(thousands)
Cellular Xi from Change FOMA of subscription 2,021 1,388 -634 -
(Including Xi handset upgrade by Xi 396 1,026 +630 -
handsets sold subscribers
Phone without involving New FOMA subscription 815 577 -238 -
sales by FOMA Change of subscription 16 31 +16 -
DOCOMO) from Xi
FOMA handset upgrade 1,284 973 -311 -
by FOMA subscribers
Churn rate (%) 0.86 0.67 -0.19 -
Aggregate ARPU (yen) 4,610 4,300 -310 4,390
Voice ARPU (yen) 1,470 1,210 -260 1,240
Packet ARPU (yen) 2,680 2,580 -100 2,620
Smart ARPU (yen) 460 510 +50 530
MOU (minutes) 109 99 -10 -
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Principal Services: Miscellaneous Data
FY2013/4Q FY2014/1Q Changes
(1)
[Previous quarter] (2) (2)(1)
dmarket
dvideo subscriptions (Millions) 4.41 4.13 -0.28
dhits subscriptions (Millions) 2.08 2.00 -0.08
danime store subscriptions (Millions) 1.15 1.14 -0.01
dkids subscriptions (Millions) 0.05 0.09 +0.04
dmagazine subscriptions (Millions) 0.09 -
docomo Service Pack
Osusume Pack subscriptions (Millions) 2.92 3.15 +0.23
Anshin Pack subscriptions (Millions) 4.46 5.40 +0.94
Other new businesses
Karada-no-kimochi subs (Millions) 0.41 0.44 +0.03
NOTTV subs (Millions) 1.61 1.64 +0.03
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Aggregate ARPU
(Exclusive of Monthly Support Impact)
Voice ARPU Packet ARPU Smart ARPU
(Yen)
5,190 5,240 5,250 5,140 5,120 5,240
(580) (650) (740) (820) (820) (850)
460 490 500 500 510 530
2,890 2,910 2,930 2,950 2,930 3,010
1,840 1,840 1,820 1,690 1,680 1,700
FY13/1Q 2Q 3Q 4Q FY14/1Q FY14 (full-year
forecast)
* Numbers in parentheses indicate impact of Monthly Support discounts
Smart ARPU is not impacted by Monthly Support discounts
ARPU data contained in this document are calculated based on the new ARPU definition
For an explanation on ARPU, please see slide Definition and Calculation Methods of ARPU and MOU in this document
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Aggregate ARPU/MOU
Voice ARPU Packet ARPU Smart ARPU (Yen)
4,610 4,590 4,510 4,320 4,300 4,390
460 490 500 500 510 530
2,680 2,670 2,640 2,600 2,580 2,620
1,470 1,430 1,370 1,220 1,210 1,240
FY13/1Q 2Q 3Q 4Q FY14/1Q FY14 (full year
forecast)
MOU 109 108 107 102 99
minutes
ARPU data contained in this document are calculated based on the new ARPU definition
For an explanation on ARPU, please see slide Definition and Calculation Methods of ARPU and MOU in this document
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Key Indicators
FY13/1Q FY14/1Q FY13/End FY14/End
(forecast)
Profitability/efficiency indicators
EBITDA (billions of yen) 420.4 386.7 1,572.2 1,499.0
EBITDA margin (%) 37.8 36.0 35.2 32.7
Adjusted free cash flow (billions of yen) 16.8 -24.1 257.2 280.0
ROE (%) 2.9 2.4 8.4 8.7
*Net income attributable to NTT DOCOMO,INC/shareholders equity
ROCE (%) 4.4 3.6 14.3 13.1
Operating income before tax/(shareholders equity+ interest bearing liabilities) *1
Safety indicators
Shareholders equity ratio (%) 76.5 77.8 75.2 75.0
*Shareholders equity/ Total assets
Debt ratio (%) 0.045 0.041 0.041 0.041
*Interest bearing liabilities / shareholders equity
Interest bearing liabilities/EBITDA multiples -- 0.15 0.15
Equity value indicators
EPS (Yen) *Net income attributable to NTT DOCOMO, INC per share -- 112.07 120.4
PER *Market capitalization/net income -- 14.53 -
PBR *Market capitalization / shareholders equity 1.2 1.3 1.2 -
Dividend payout ratio (%) -- 53.5 49.8
Dividend yield (%) -- 3.7 -
*Annual cash dividend per share/Closing share price at end of period
Market capitalization (billions of yen)
Closing share price x number of outstanding shares (excluding treasury stocks) 6,390.2 7,182.2 6,750.9 -
as of the end of the fiscal period
* ROE and ROCE are calculated using the average end-of-period shareholders equity and interest bearing liabilities for the current and previous fiscal periods.
* The number of Mar. 31, 2015 forecast is calculated based on the assumption of conducting share repurchase of 320 million shares (upper limit) for 500 billion yen (upper limit) as resolved by the Board of Directors of the Company on April 25, 2014.
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NTT docomo
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Definition and Calculation Methods of ARPU and MOU
i. Definition of ARPU and MOU a. ARPU (Average monthly Revenue Per Unit):
Average monthly revenue per unit, or ARPU, is used to measure average monthly operating revenues attributable to designated services on a per subscription basis. ARPU is calculated by dividing various revenue items included in operating revenues from our mobile communications services and a part of other operating revenues by the number of active subscriptions to our wireless services in the relevant periods. We believe that our ARPU figures provide useful information to analyze the average usage per subscription and the impacts of changes in our billing arrangements. The revenue items included in the numerators of our ARPU figures are based on our U.S. GAAP results of operations. b. MOU (Minutes of Use): Average monthly communication time per subscription.
ii. ARPU Calculation Methods
Aggregate ARPU = Voice ARPU + Packet ARPU + Smart ARPU
-Voice ARPU : Voice ARPU Related Revenues (basic monthly charges, voice communication charges) / No. of active subscriptions -Packet ARPU : Packet ARPU Related Revenues (basic monthly charges, packet communication charges) / No. of active subscriptions
-Smart ARPU : A part of other operating revenues (revenues from content services, proxy bill collection commissions, mobile phone insurance service, advertising and others) / No. of active subscriptions
iii. Active Subscriptions Calculation Methods
Sum of No. of active subscriptions for each month ((No. of subscriptions at the end of previous month + No. of subscriptions at the end of current month) / 2) during the relevant period
Note: Subscriptions and revenues for communication module services, Phone Number Storage and Mail Address Storage services are not included in the ARPU and MOU calculations.
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Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
i. EBITDA and EBITDA margin (Billions of yen)
Year ended Three months ended Three months ended
March 31,2014 June 30, 2013 June 30, 2014
a. EBITDA ¥ 1,572.2 ¥ 420.4 ¥ 386.7
Depreciation and amortization (718.7) (166.6) (167.2)
Loss on sale or disposal of property, plant and equipment (34.3) (6.3) (9.8)
Operating income 819.2 247.5 209.6
Other income (expense) 13.9 5.0 2.8
Income taxes (308.0) (96.1) (73.5)
Equity in net income (losses) of affiliates (69.1) 0.3 (3.6)
Less: Net (income) loss attributable to noncontrolling interests 8.8 1.4 1.0
b. Net income attributable to NTT DOCOMO, INC. 464.7 158.0 136.4
c. Operating revenues 4,461.2 1,113.6 1,075.3
EBITDA margin (=a/c) 35.2% 37.8% 36.0%
Net income margin (=b/c) 10.4% 14.2% 12.7%
Note : EBITDA and EBITDA margin, as we use them, are different from EBITDA as used in Item 10(e) of regulation S-K and may not be comparable to similarly titled
measures used by other companies.
ii. ROCE before tax effect (Billions of yen)
Year ended Three months ended Three months ended
March 31,2014 June 30, 2013 June 30, 2014
a. Operating income ¥ 819.2 ¥ 247.5 ¥ 209.6
b. Capital employed 5,748.0 5,648.9 5,878.4
ROCE before tax effect (=a/b) 14.3% 4.4% 3.6%
Notes : Capital employed = Two period ends average of (NTT DOCOMO, INC. shareholders equity + Interest bearing liabilities) Interest bearing liabilities = Current portion of long-term debt + Short-term borrowings + Long-term debt The effective tax rate for the year ended June 30, 2013 was 38.1%. The effective tax rate for the year ending June 30, 2014 was 35.8%.
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Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
iii. Free cash flows excluding changes in investments for cash management purposes
(Billions of yen)
Year ended Three months ended Three months ended
March 31,2014 June 30, 2013 June 30, 2014
Net cash provided by operating activities ¥ 1,000.6 ¥ 241.6 ¥ 196.5
Net cash used in investing activities (703.6) (207.4) (235.8)
Free cash flows 297.1 34.2 (39.4)
Changes in investments for cash management purposes 39.9 17.4 (15.3)
Free cash flows excluding changes in investments for cash 257.2 16.8 (24.1)
management purposes
Notes : Changes in investments for cash management purposes were derived from purchases, redemption at maturity and disposals of financial instruments held for cash management purposes with original maturities of longer than three months.
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Special Note Regarding Forward-Looking Statements
This presentation contains forward-looking statements such as forecasts of results of operations, management strategies, objectives and plans, forecasts of operational data such as the expected number of subscriptions, and the expected dividend payments. All forward-looking statements that are not historical facts are based on managements current plans, expectations, assumptions and estimates based on the information currently available. Some of the projected numbers in this report were derived using certain assumptions that were indispensable for making such projections in addition to historical facts. These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those contained in or suggested by any forward-looking statement. Potential risks and uncertainties include, without limitation, the following:
(1) Changes in the market environment in the telecommunications industry, such as intensifying competition from other businesses or other technologies caused by Mobile Number Portability, development of appealing new handsets, new market entrants, mergers among other service providers and other factors, or the expansion of the areas of competition could limit the acquisition of new subscriptions and retention of existing subscriptions by our corporate group, or it may lead to ARPU diminishing at a greater than expected rate, an increase in our costs, or an inability to reduce expenses as expected.
(2) If current and new services, usage patterns, and sales schemes proposed and introduced by our corporate group cannot be developed as planned, or if unanticipated expenses arise the financial condition of our corporate group could be affected and our growth could be limited.
(3) The introduction or change of various laws or regulations inside and outside of Japan, or the application of such laws and regulations to our corporate group, could restrict our business operations, which may adversely affect our financial condition and results of operations.
(4) Limitations in the amount of frequency spectrum or facilities made available to us could negatively affect our ability to maintain and improve our service quality and level of customer satisfaction and could increase our costs.
(5) Other mobile service providers in the world may not adopt the technologies and the frequency bands that are compatible with those used by our corporate groups mobile communications system on a continuing basis, which could affect our ability to sufficiently offer international services.
(6) Our domestic and international investments, alliances and collaborations, as well as investments in new business fields, may not produce the returns or provide the opportunities we expect.
(7) Malfunctions, defects or imperfections in our products and services or those of other parties may give rise to problems.
(8) Social problems that could be caused by misuse or misunderstanding of our products and services may adversely affect our credibility or corporate image.
(9) Inadequate handling of confidential business information including personal information by our corporate group, contractors and others may adversely affect our credibility or corporate image.
(10)Owners of intellectual property rights that are essential for our business execution may not grant us a license or other use of such intellectual property rights, which may result in our inability to offer certain technologies, products and/or services, and our corporate group may also be held liable for damage compensation if we infringe the intellectual property rights of others. In addition, the illicit use by a third party of the intellectual property rights owned by our corporate group could reduce our license revenues actually obtained and may inhibit our competitive superiority.
(11)Events and incidents caused by natural disasters, social infrastructure paralysis such as power shortages, the proliferation of harmful substances, terror or other destructive acts, the malfunctioning of equipment, software bugs, deliberate incidents induced by computer viruses, cyber-attacks, equipment misconfiguration, hacking, unauthorized access and other problems could cause failure in our networks, distribution channels, and/or other factors necessary for the provision of service, disrupting our ability to offer services to our subscribers and such incidents may adversely affect our credibility or corporate image, or lead to a reduction of revenues and/or increase of costs.
(12)Concerns about adverse health effects arising from wireless telecommunications may spread and consequently adversely affect our financial condition and results of operations.
(13)Our parent company, NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT), could exercise influence that may not be in the interests of our other shareholders.
Company names, product names, service names, logos and brands included in this document are the trademarks or registered trademarks of NTT DOCOMO, INC. or their is respective a trademark organizations.
iPad is a trademark of Apple Inc.
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