NTT, Inc. (9432) Earnings Call Transcript & Summary

Thank you very much for taking time out of your busy schedule to attend NTT IR Day today. I am Fujiki from NTT IR, and I will serve as the moderator till the end of the meeting. Today, we will have presentation on 3 themes: technological strategy, global strategy and governance. And then move on to the Q&A session by President Sawada at the end. If you have questions or NTT DOCOMO subsidiary questions that we announced on September 29 will be entertained at the end. We plan to end at 5:30 p.m. Today, we have the live streaming by the Internet, and this will be distributed on demand at a later date. I hope you could understand. Without further ado, the first theme, technical strategy, will be explained by Senior Executive Vice President, Shibutani, who will talk about NTT's growth strategy from the viewpoint of the CTO. Mr. Shibutani, please.

Good afternoon, ladies and gentlemen. Thank you for the kind introduction. My name is Shibutani, the Senior Executive Vice President of NTT. I was appointed in the current position back in June this year. Allow me to briefly introduce myself. I was involved in network reliability, building a design -- for network reliability building back in Fukushima at 3.11. I was involved in the reconstruction and the rebuilding of the network after the earthquake and tsunami. Since then, I was involved in business development and also as the President of East Port, I was involved in exploration of new strategic business. Now from June this year, I was appointed as the CTO, CIO and responsible for -- CTO responsible for digital transformation. So I'm responsible for technology matters overall at NTT Holding company. I look forward to your kind support and understanding. Now on the 19th -- on the 29th of this (sic) [ last ] month, we announced JPY 4 trillion worth of tender offer for NTT DOCOMO. I'm sure you're highly interested in this particular topic. Back then, we had the largest market cap at NTT in the past. And also in the heyday of the IMO technology, DOCOMO's market cap was around JPY 43 trillion. But then subsequently, the likes of GAFA and also BAT of China, these players have grown, and there is now a major gap. Can NTT once again be -- reemerge as an innovative company? That I am sure is the topic that you're most interested in. With regard to the short-term growth plan, DOCOMO and other group operating companies will come up with rate plans and also will come up with new services. And that is how we'll be responding to the requirements of the market. But in terms of the medium-term and beyond -- the strategy for medium-term and beyond, it's important that R&D capacity of NTT Group and the technology capacity of NTT Group as a whole -- how can we build this together so that we can drive innovation and contribute to the society? This is very important, and this is another matter of great interest to the public. So that being the case today, I would like to talk about NTT's growth strategy from the perspective of CTO. That is why I decided to choose this topic. I would very much appreciate your kind attention until the very end. So let me start with the substance of my presentation. On the 29th when we announced the tender offer, President and CEO Mr. Sawada mentioned that -- because of this tender offer, this is the direction of business, which we're going to seek growth, and he identified 4 directions of growth. And the 2 boxes that are not covered in black, that's the smart life and digital transformation. In the case of digital transformation, JPY 800 billion cost reduction until 2023. And also with regard to smart life and B2B2X model business, by 2023, again, we are aiming for JPY 600 billion. These are the targets we have set for these 2 boxes. And we have made concrete progress to date. But with the consolidation of the group December end, we'll be able to further expand these sites, and we'll be able to accelerate this growth. Now in terms of the medium-term growth, the boxes that are covered in red, #1 and #3. Development and provision of new services space on a remote world will be very critical. How can we provide that to the society at large? And the other box is #3. We want to make sure that we're able to promote global scale R&D and drive innovation. So for these 2 topics, I would like to primarily focus on during the presentation today. So in order to deliver these targets, and by the way, on the 29th, Mr. Sawada used these materials at the press conference, and we are going to pursue 4 pillars, and we are going to contribute to the society at large. In particular, I want to highlight the most relevant topics, the yellow one on the top, strengthening global industrial competitiveness. We want to develop new services because the world becomes more virtual in nature. And it's important that we have the ability to deliver various services on our own volition, so we want to bring about that change. And the second, right now, 5G is being introduced, and we want to expand the area of coverage so that we'll be able to see the dawn of the new IoT era. We really are in the new development stage. We're in the new era. Mr. Sawada talked about 6G inclusive of space and outer space and underwater, it's important that the scope covered by wireless further expand going forward. So inclusive of the deal of DOCOMO that we announced, it's important that we further accelerate the expansion of wireless. And the third topic, this is in the blue part. We want to promote B2B2X. We want to support the society and enrich the society. So digitalization and smartification and also revitalizing local communities and economies. These are the things that we need to promote. So these would be the 3 targets, which I'll be covering today. And one further point that I wish to address. There's a common platform, the common theme that runs across these 3 aforementioned targets, which is to -- increasing resilience and increasing cybersecurity. So increasing resilience of information -- ICT system against disasters and strengthen the cybersecurity is the key as there's decoupling involving U.S. and China, it's important that we offer trusted services. There is a -- how do we deliver that in Japan because there's an increase in this topic on a global scale. So at the basis -- this is a common basis. So inclusive of R&D, it's important that we address this very common theme that RAN core software is target. So let me talk about the 2 mention -- the 2 targets. How do we intend to pursue the growth? I want to focus on these 2 growth strategies and focus on how we intend to deliver them. First is to develop and provide new services based on so-called remote world. Let me try to explain the backdrop of what I mean. There's reference to local area network. This is the access network and the core is the upper network, a 4-layer network. So RAN is the bottom layer. As you see, specific vendors provide vertical model, covering all the way from application, hardware to software. And they're not providing that to carriers and end users. This is a very efficient model, by the way, and it is very integrated. So therefore, it is efficient. However, having said that, if you want to be innovative with regard to software, you have to -- you were reliant on vendors, so therefore this did not drive very healthy innovation. What we want to pursue is a model on the right-hand side, which is the open model. This is what we would like to pursue. There are 2 approaches. First is the so-called multi-vendor approach, where various equipments could be selected, where you have a variety of available options. This is the DUs -- CU, DU world. The other is where the upper layer equipment would be translated into the software, which means that we, ourselves and our customers, will be able to expeditiously create their functions in a desired manner in an open environment. This is what we would like to achieve as soon as possible. If this could be delivered, then, on the right-hand side, this actually is the fixed line network, the telephone network offered by NTT, so it's an -- NTT FLET'S, which is the broadband fiber network. So NTT Comware and other operating companies are trying to create a virtual situation. If this is delivered, then full fledged fixed mobile convergence could be realized through software. Then to be more specific, so let me try to summarize. So a dedicate -- so we want to make sure that we have a general-purpose open system so that we will be able to create a situation, we'll be able to further advance the given environment. So let me share with you some of the specific examples. On June 25, we announced that we'll be investing in NEC, and that initiative involves the following: We are having a very heated discussion right now. And in 3 major phases, we're trying to consider the development going forward. In order to pursue multi-vendor situation, it's important that RN -- RU and implements be connected through open network, open connection and expand globally. And the control units, the DU and CU, these control units, they should be driven by this virtual software and develop this new system, the new -- and then on top of that, what we would have is our strength, which is operation. And also flexibility and advance and reliability, these functions or these features will be offered on top. And we -- what we want to do is to deliver this to other vendors and to other carriers as well. So on the right-hand side, you'll find preference to software and NEC with software technology, production technology, and also the ability to use them at DOCOMO and also NTT that has LSI and both coming together can offer installation support and maintenance and operational services. We believe that we'll be able to expand our business in this fashion. Then that being the case, when this model is achieved, what type of universe are we going to welcome? This is the integration of mobile and fixed line technologies for core networks. The left-hand side shows mobile network and fixed line network. These are 2 independent networks right now. But with softwarization, based on virtual platform, we'll be able to integrate them. So what are some of the challenges in the connected world? For example, in the case of Zoom, the telecommunication with your friends and also when you have connection for mission-critical functions and also when you want connection with -- for government agencies, if you use SNS and other meeting systems, the authentication and reliability issues are really going to be critical. So by using the softwarization and platform, the authentication, security -- authentication and billing, security, XR, device management and contents, we believe we'll be able to offer them because we have the advantage and know-how in these functions. And on top of that then, we'll be able to offer trusted service. That is the platform, which we want to deliver. In addition, it's important that on our own, we also have the ability to deliver new services. And also it's important that with other partners, we provide trusted remote services through collaboration with those partners. So we believe that, that is the services that we are offering in the context of remote world strategy, which is the first topic. And the third pillar, which is the worldwide promotion of R&D. Let me explain about this particular topic. From -- about 2 years ago, our President, Mr. Sawada, when he was appointed as the President, he talked about the Road to IOWN. The major pillars are as follows, but the primary pillars are all-photonics network, #2; and also digital-twin computing, which is #3; and the cognitive foundation. These are the major elements. Now this time around with DOCOMO becoming a wholly-owned subsidiary, then the wireless component, this was not connected up until now, but this will not be connected with very strong connection. So therefore -- so wireless, all-photonics network, digital-twin computing, all these functions will come together. Then, that being the case, how can we leverage our strength in these different facets? I would like to talk about this one by one. So let me talk about our strength in wireless. Right now, the 5G universe is expanded. But these are simply area coverage for smartphones on a landline -- on land basis; 270,000 kilometers -- square kilometers in area. In Japan, we have the exclusive economic zone. We have 2.45 million square kilometers, if you include the waters, such as the exclusive economic zone. So we need IoT world that can cover not only land but also massive water space. And in order to achieve this, it means that we need to further advance the current 5G technology or also pursue development in outer space and sky. It's important that we expand the coverage rather into outer space and sky. In the case of space, we have the pace of communication with satellite, needs to be further expanded by 10 unfold. And NTT has already verified that. And also, we have partnered with JAXA and right now, we have various satellites, in 10s numbers, from space and creating constellation. And we have initiatives where we will be able to offer communication to -- in this constellation fashion at 294 megahertz, which is the platinum bandwidth. We've used this platinum bandwidth and with very inexpensive terminals, we'll be able to have communication with space. We're trying to promote that technology. So therefore, space level coverage, we hope that we'll be able to further promote going forward. And also in terms of undersea, be it culture and also wind farm, it's important that we'll be able to monitor what is going on undersea as well as above the sea. And so if you cannot reach the deep area, there is still many unknowns, but we have 300-meter class or mega class, the high-speed sea acceleration technology. And therefore, we will combine this technology to have the true IoT wireless network that connects the land, ocean and lead the world. Now DOCOMO, the other day, announced 6G beyond 5G, and so extremely high data rate, capacity, extremely wide coverage, extremely low energy and cost and low latency, high safety, reliability and this extremely massive connectivity. It will be covered from the outer space, and therefore, multiple devices need to be connected at the same time to make this work. So the speed and the simultaneous connectivity will be 10x more than 5G. And furthermore, we have to support the smart society. So the reliability has to be 2 orders of magnitude higher. So TOB -- backed by DOB, the wireless DOCOMO and research institute can lead this technology. So we can once again take on the challenge to lead the world. We have the core technology to do that. Second point is all-photonics network, APN. It is a bit complex. So let me explain. Currently, in this diagram, the IP network at the bottom and PSTN are the mainstream. IP network. Why this was so innovative was the DoD, Department of Defense -- even if one communication network is damaged, it can still function. So put in IP packet network, send to the recipient and look at the pop and deliver to counter the attack. All the communication data was integrated under this network. And in the center -- plus it -- this is priority. This is highest priority, can be flagged. So voice, which was the biggest profit maker, was put into the IP and send it real-time because it's high priority. So right now, IP network integration is now underway. And so this was very innovative. But going forward, many traffic will be -- come on play. So IP weakness is emerging. First of all, to do packeting, there is a delay. And you have to look at the routing. So there's routing delay latency. So this has to be resolved. Otherwise, this red to blue, the smart mobility, smart city, health care, as the integrated network, it is still not enough. So end-to-end optical network has to be established. Then in mobility, multiple video need to be reflected to the transportation at low latency. And in health care, many people's health information, even with smart delay, has to be archived. So this is a completely different requirement and we, in our network, have to provide that, to provide digitalization and smartification. So that's the kind of communication that we have to realize. So with this optical network, what is our strength? LSI. In the optical communication, we have led the world. Fiber is not dependent on coding. And with Internet, global crossing, when the white -- broadband increased, we led the world to increase the wavelength. This time, we have to go beyond the limit of more and go into the miniaturized world of the opticals to reduce the power consumption and have enough capacity. NTT is leading the world there. More specifically, it is the integration of photonics and electronics. This strategy is our technological development that we lead the world. And the component level chip 400 gigahertz transmission equipment is already in the commercialized stage, and we can offer this by next year. Next is chips and inside chips, we will incorporate optics to chips. The latency that converts to electricity or the power consumption converting to electricity can be reduced. And Intel and NVIDIA are now coming on board. Processor, we are starting from the communication device. The computer processor or GPU server, these can be integrated in photonics and electronics for higher efficiency. So the top -- we are leading this research among the top players in the world. And the third component, this is the digital-twin computing. This is the world of computer. This shows digital-twin computing. The real-world is created in the virtual world and conduct simulation to forecast the future or manage the health or enhance efficiency to digitalize society. So left side is the personal level and the right side is the national level or town, city level and globe. And the AI, data science efforts, for example, in the smart city, we are doing this in Las Vegas or Uber City with Toyota and smart agri and smart chain with Mitsubishi Corporation. We are taking on many challenges. So we are honing these use cases. And this is a world of competition now. And other than that, we have other strengths, too. And that's what I want to touch upon today. Two points. One is for the digital platform. In the digital era, this is a must. Digital map is a must, and we are running at the forefront. And another is health care. Digital data, when we collect medical digital data, it is precise -- you need a precise dedicated sensor. So the optical and audio technology is something we have. So the device technology is what we are trying to promote. So the first digital twin for the digital platform. For example, Zenrin or HIA, the overseas player, we formed alliance -- capital alliance. Google Maps and others, there are many semantic information, where houses are, where are stores and what transportation network exists where? But that alone is not enough in the digital era because the precision is low. Zenrin Map is by meter -- it's deviating by meter. But if the person is walking, if using for a walk, it's okay. But for autonomous driving or for the infrastructure development to dig underground, then it has to be -- the error can only be 10 centimeters at most. Otherwise, it's not functional in 4D, the vertical and horizontal and depth. The vertical and height, you have to have the map of the height and depth. Otherwise -- Kubota and the heavy machinery manufacturers, you need to have digital instruction to show the height and the depth underground. That's 3D. In addition, time line. With time line, you can see the deterioration, comparing with past data, the health or the geographic data or how environment is changing, you can see all that. So 4D data digital platform is now used -- advanced geographic space information database. And the right side is the business use case. So the navigation, high-precision location navigation and the smartification in industry and the city design, we are trying to apply in these areas. Next is digital-twin device. Various cases here and some are commercialized. Wearable electrocardiogram with Toray, our sensor is embedded in fiber to always take the electrocardiogram vital data. And other than that, the temperature inside the body and with AI stethoscope, we can have -- even if you're not an expert, you can take the pulse very accurately or implant -- sensors embedded in implant and on digital twin it can be reproduced. So by combining with your heart, we can use this technology. So this optical technology, we are leading the world. Terumo and other manufacturers will be making the products, but we have the core technology. So that is what we are thinking and pursuing our core technology that we excel at. One more new area. So wireless and fixed line and computer are integrated in this world, but we think this will be disaggregated. What I mean by that is the computer power, the left side, the red one, currently, the network, Amazon and Microsoft Cloud, it's accumulated there and processed there. But in terms of collection, it is efficient, but it uses much power and the collected data needs to be converted to electricity again to analyze. So the process speed and -- it is not efficient. So network and computing need to be modularized. Some will be down permits, some will be in users, some will be core network, or Amazon Cloud. So it will be distributed. As you see at the top, the computing that can support the society will be required. It says OS. So we want to optimize this in totality. The operational scheme in software innovation research lab is now addressing this challenge. And this discussion is now just starting in the world. So we want to lead this endeavor. So my time is almost up. I talked about NTT's medium-term strategy, promoting with technology, and I talked about many new developments, the use cases or the progress. November 17 to November 20, we will have an R&D forum online. So President Sawada and Research Lab Center Head Kawazoe-san will do a presentation like we did today in more detail or show you some actual examples so that you can directly experience. So I hope you could enter and attend. That concludes my presentation. This -- including the large-scale deal, we want to support the society and help realize the digital society from technology. We want to lead the technology. So I ask you for your continuous expectation. Thank you very much.

The first question is from SMBC Nikko Securities, Mr. Kikuchi.

My name is Kikuchi. I was able to identify very interesting topics. And I would like to very much study about these topics going forward. If I may ask a question, sir, about R&D organization? Within the group, the operating companies have different research and development organizations. Now there's been a major shift in the transformation through this deal. I would image that, that is going to be the case, possibly. I know that the specifics of what you're going to do are not determined yet, but with regard to how -- if you could share with us the policy with regard to the structure of your R&D going forward?

Thank you for that question. As explained in the course of my presentation earlier, as, Mr. Kikuchi, you mentioned, the role of R&D will become even more important down the road. At the same time, we're going to have a tender offer for DOCOMO. We want to make sure that we're fully connected to the IOWN because we had a part which was not yet connected. So -- because wireless is going to be so critical, it's important that this component to be part of the IOWN concept. So this is the top priority for us. So with regard to reorganization, of course, it's a matter of what type of organization we're going to create. But this wireless part, the holding companies, R&D will talk about outer space and also undersea, Wi-Fi, they're very strong. But in the case of DOCOMO, they have strength in 5G and also strength in the 6G, which will follow, so -- whether we converge these 2 so that in the wireless area, we'll be able to accelerate R&D. So without a doubt, that will be the top priority for us. And one other point with regard to R&D itself, with open innovation, we need to involve various global parties. So therefore, it's important that we accelerate our global activities. And for that purpose, we need to create such a team. So we're going to focus on this global oriented team even more as we go down -- as we go further ahead. So it's important that the emphasis of R&D before we strengthen in the management. That is all. Thank you very much. That is all.

I know that there are a lot of study groups and tours that you're carrying out in various parts of your group, and you are very highly motivated. So I'm not sure whether or not if this is included, but I hope that with NTT data as well, I hope that you'll be able to do something that -- which can translate into concrete output. It's important that you provide some economic analysis so that we will be able to have a dialogue with you. I would appreciate some sort of explanation about how you intent to advance your organization going forward?

Yes. Thank you. Thank you for your encouragement. We will certainly do our best. Thank you for all those comments.

Next question is Nomura Securities, Masuno-san. Mr. Masuno, please.

I have 2 questions. First, as you mentioned at the outset, network virtualization, CU and DU virtualization. vRAN, Altiostar is already realizing this. So what is the difference and the future progress? How do you see the future progress? And you will do this in parallel with O-RAN? So that's my first question.

Thank you. As you correctly mentioned Rakuten and [indiscernible], they are already -- vRAN with Altiostar is already being commercialized. But difference with Rakuten is the ones that can build with zero base are introducing vRAN and other global carriers, including Rakuten have the existing network and migrating to virtualization. So that's the challenge they have to overcome. So we want to build the virtualization that can meet those needs. Altiostar, we will consult with them initially to move forward. However, as I mentioned in this material, what we are trying to pursue is NEC, the O-RAN, CU, DU, not just the virtualization there, but furthermore, core network, white box and software. We are trying to go that far. And our R&D team will be involved and with Intel -- working with Intel and other players.

My second question is about the semiconductor, optical semiconductor. In terms of IR, this is ESG, social contribution and the power consumption may be reduced by 100th. After this spring, Intel, Microsoft were invited and a few dozen companies came up with the standard and moving towards the commercialization -- taking steps towards commercialization. From R&D, this is an aggressive short-term target, but the commercialization is targeted in 5 years' time. So the current progress, the current status and the outlook, if you could update us once again?

Thank you. So what is mentioned here, 400-giga transceiver on the silicon, the optical will be included and power consumption version can be launched next year. And the next one, interposer in chips -- electrical circuit in chip will be done optically. So chip-to-chip connection will be optical. And then package will be made to optical. And in the end, we will build chips optically. But in the meantime, in the next 2 to 3 years, optical interposer device can be realized. So we will go in phases. And in the end, the optical and electric will be integrated. So this photonic-electric convergence will be released as soon as possible. So the global standard is already underway. IOWN Global Forum, NVIDIA is now involved, Intel, NVIDIA are now part of us. So open innovation, standardization will be pursued. And co-innovation, collaboration will also be established. So various strategies will be utilized as we move forward.

Thank you, very much. Masuno-san, I am afraid because of the time constraint, this will be the final question. So this will be the last question of the session. Next question is from Citigroup Securities, Mr. Tsuruo.

I hope you can hear my voice. Two questions. My first question relates to Masuno-san's previous question about O-RAN. You mentioned that some would start from pure, some will start from brownfield. So very briefly, what are the advantages and disadvantages of these 2 approaches, starting the pure approach and the brownfield approach? And that being the case, how does NTT intend to offset any negatives that could be suffered by the companies who follow the brownfield approach?

Well, in terms of virtualization, the packet core -- the core -- the packet core virtualization is something that DOCOMO has already begun to launch significantly. So as a replacement, virtualization can be introduced in certain parts. So EOL timing. In other words, once the equipment needs to be replaced, then we can -- we will be able to replace that. So already, in some parts, this is being done. On the other hand, in the case of CDR with RDU, as I mentioned earlier, there's interoperability between these components need to be considered. They have to be insured. So this is the area where, regardless of any combination, you have to connect to vRAN, virtual RAN -- oh, sorry, it's not yet done. This is one that we have a position where everything can be connected to vRAN. So making sure that we ensure connectivity of existing systems with vRAN and then pursue replacement. That type of approach needs to be pursued. Also, right now, 5G is expanding. In the case of growth communities, we can use the greenfield approach. So in those approaches, we can actually deliver and introduce a launch of virtual from the beginning. So it's important that we have a good combination between the existing system, reduce the CapEx and at the same time make sure that we leverage the strength of the virtual platform.

If I could ask a follow-up question? When you make this coordination, do you believe that you'll be able to overcome the gap with companies that are able to follow the greenfield approach?

Well, as you point out, what is the pricing? What can we deliver? That's something that we need to scrutinize further.

Thank you. My second question. I'd like to go back to the partnership. I know that -- what is the competing technology vis-à-vis IOWN in relation to 6G? And so that being the case, in order to have a de facto victory, what are some of the focus -- emphasis that you need to focus on? Of course, partnership is important. But what is the emphasis that you're bearing in mind when -- as you try to grade 6G de facto standard?

You're talking about competition between 6G and IOWN? Is that what you asked?

No, no, no. That's not the case. I think in the case of optical semiconductor, this is very important to drive 6G technologies. Is my understanding correct? If that is the case, then is there a standard technology that can compete with -- in the context of 6G? And also, if you want to compete with such technology, what must be done? I guess, that is gist of my question.

Well, yes. Perhaps my explanation was not sufficient. In the case of 6G, we are trying to expand the wireless technology, wireless universe. In the case -- the main target for the photonic-electronic convergence is to create all-photonics network. We want to apply the all-photonics technology. So it is not a direct competition between the two. But the wireless world, it also need to incorporate digital signaling processor, they need more advanced signaling processor. So that being the case, so photonics and electronics convergence could be applied in that particular area as well. Now in terms of any competing technology, well, how far can the nonphotonic-electronic convergence world advance? I guess that is a going to be the dictating factor. Well, we can't say about collaboration, but Intel and NVIDIA might decide to further brush up their executive technology. So the cost competition is going to be the key how advantageous can photonics and electronic convergence be? But these 2 companies are now part of the IOWN partnership. That is because we believe that they want a new perspective. They want to be involved in this new LSI development. Unless they're involved in this development, then they will not be able to overcome whatever boundaries or obstacles that may exist. So that being the case, I do hope that they will further be involved as partners in this initiative.

Thank you very much, Mr. Tsuruo. So with that, we will close the Q&A session. Thank you very much, Mr. Shibutani.

Next, second theme. Global strategy. Global Business Promotion Office, Mr. Ozaki, and Mr. Nakayama, Senior Vice President and Head of Finance and Accounting, will do a presentation. Mr. Ozaki has been involved in the global business all along, and 3 years from 2016 was in Hong Kong, NTT Com Asia President, a local subsidiary. The overseas data center launch and enhancement had been its business. He has been -- led the global business of NTT. And in July this year, he became global business promotion office head. Today, he will talk about the overseas company NTT Limited that was launched last year, the progress of the business reform and the future business strategy. Nakayama, Senior Vice President of Head of Finance and Accounting, will ask questions, and Mr. Ozaki will respond to that. It will be a Q&A session. So Mr. Ozaki and Mr. Nakayama, please.

Thank you very much. My name is Nakayama. I'm the Head of Finance and Accounting. As was introduced by the moderator, I would like to pose questions that are heard from investors on a day-to-day basis. And based on that interest of the investors, I would like to ask questions to Mr. Ozaki, who is the Senior Vice President and Head of Global Business in this dialogue. And also we have set aside our time to answer questions directly from the investors, so we hope that you will take part in the Q&A session as well. So without further ado, let's start the session. So Mr. Ozaki, first of all, NTT's global business reorganization was carried out in July last year, starting in July, and NTT Limited was established anew in July of 2019. So can you talk about the activities of the past year at NTT Limited, if you could share that with us? Thank you.

Yes, thank you very much. Thank you very much. I was appointed as the Head of Global Business since July this year. My name is Ozaki. I really appreciate this opportunity. So as you are aware, in July of last year, NTT Limited was established. NTT Limited combines NTT Communications, Dimension Data and NTT Security. 150 companies have gone together to create NTT Limited. And in each of these 3 companies, they were -- we had presidents, we also had employees for Dimension Data, NTT Communications and NTT Security. So it's an aggregation of very large number of people and companies. So that being the case, it's important that our line of vision are totally aligned among the total employee base. So we wanted to prioritize the expansion of profit, not scale. And the second is that we shift to value-added services that are more profitable in nature and deliver value to our customers. So focus on value-added services and shifting to value-added services. And the final point was that we implement structural reform by the end of the year. That's what we try to keep in mind. Now last fiscal year, we launched the structural reform, and we were able to implement structural reform. So in terms of the most recent financial situation, because of the -- those structural reform, last fiscal year, we had very large deficit. But now the structural reform benefits are now beginning to be seen. So therefore, I believe the company is back on track to drive profit. Now this fiscal year, we believe that -- correction, we have a target of JPY 5 billion as a profit, and we're making efforts as a team to achieve this. The progress up until August has been very robust so far. But then because of COVID-19, the greatest risk is that our sense of urgency become lax. So therefore, it's important that we do not -- that we become -- it's important that we not become lax and that we further accelerate reform. Next, let me talk about the percentage of the value-added services. This -- if the company is to become further profitable and if the company is to drive profit in a stable fashion, it's important that we increase the percentage of profit of business. And we have a situation where we have a structure where we can continuously drive value -- profits from value-added services. Let's just go through. 32% of sales was the percentage, but this was in the COVID-19 universe, value-added services are actually increasing. 36% of sales will be achieved. And by 2023, we hope that the 50% of our sales could be driven by value-added services. So that is the reform and improvements, which we're trying to drive as we speak. Now in terms of examples of value-added services, let me try to explain what they are. This is an example from North America. In North America, usage of cloud is by far most expeditious compared to other regions. And these customers -- their mission-critical services are shifting from their customer premise to cloud in a safe environment. There is a demand that customers be able to migrate their mission-critical servers from on-premise to cloud, which means that they have high-performance environment. And that's just North America. So as far as Europe and Asia included, they want to pursue IT reform. And that type of demand is quite prevalent. So that being the case, in the case of North America, we have private cloud services being used. In case of Europe, we have data centers. In Asia, Microsoft public cloud, that was being utilized by customers. So we are accommodating multi-cloud environment and offering managed services. So that is the type of proposal, which we provided to this particular case. And the customers ended up choosing our service at the end of the day. So by reflecting value-added services, we were able to resolve customers' issues. And we came up -- we were able to come up with an IT plan together with our customers, bearing in mind those elements. Next, from March through July this year, we had spread of COVID-19 on global scale. At NTT Ltd., we offered NTT a safe remote work environment. And more than 500,000 remote office environments were developed and also -- we also offered security environment for the customers. So we've made -- so we were involved in this reset work also. As is the case with the program today, it's very difficult to have face-to-face event. So digital event services is now being proposed to many of the customers. Now from this point onwards, if NTT Ltd. is to further drive profitability, what is required? There are 2 elements. First is sales transformation. And the other is improved productivity -- business productivity. So let me talk about improving global operation efficiency. This activity has already been launched. In the case of shared service center, this is a consolidation center for various operations. In April this year, we decided to establish 2 such centers. One is in Romania. The other is in Malaysia. And here, operational support services and also personnel and accounting services were consolidated. And we innovated the IT system and improved cost efficiency. And we are expecting JPY 50 million cost reduction from fiscal 2020 to fiscal '23, that is our expectation. And what about sales transformation? But -- this is something that reviews go-to-market service and go-to-market strategy. So the customers will be more incentivized to use our system. Already 1,700 customers are there. And we decided to categorize, resegment these customers. And digital transformation and the modernization of all these companies will be coupled with our value-added services. And we wanted to put proposals to these companies. So that being the case, we decided to recreate the sales system based on this new categorization. So based on One NTT concept, from October this year, we'll be further accelerating our sales effort based on One NTT strategy. So sales transformation and go-to-market reflecting such services and shifting to value-added services. And also cost efficiency improvements by using shared service center and improving our cost efficiency. With this, we believe that this fiscal year, as things stand right now, our operating margin is 2.6%, approximately $300 million. That's our profit. But we want to improve this to $1 million (sic) [$1 billion] and operating margin of 7%. That is our goal. That is all. Thank you very much.

Thank you. So allow me now to ask a few questions to Mr. Ozaki. So Ozaki, rather. My first question the impact of COVID-19, that is what I would like to ask. Fiscal year 2020, the guidance for fiscal 2020 for overseas sales is JPY 120 billion impact. And also in terms of operating income, JPY 25 billion negative impact is being foreseen. That number has been disclosed. What is the current situation with regard to such negative impact? And also, I would assume that this might be a difficult question for you to respond to depending on decision -- on how the situation evolves, but after next fiscal year, what is going to be the likely situation? Can you try to envision what is going to be the situation over the next fiscal year?

So the impact of COVID-19 for this fiscal year, in the first quarter, the impact in terms of sales at NTT Ltd. was JPY 16 billion impact. On a full year basis, we believe that close to JPY 80 billion impact is likely to be there for sales on a full year basis. That is the current plan that we have on a monthly basis, we cautiously monitor the situation. At NTT Ltd., we've established this plan, and we believe that the situation is very much in line with the plan, which we have established. So the impact on sales right now up until the month of August is roughly very much in line with our projection. So 8% in terms of the percentage -- in terms of the impact on sales is seen, especially in Asia. We are beginning to see significant impact in sales in Asia. Now turning to NTT DATA. Right now, the financial impact of COVID-19 is not yet prevalent. But primarily based on North America, the order taking is beginning to slow down. So going forward, there could be potential impact. So we are cautiously monitoring the situation.

So second question, the investors' biggest interest is the international global business. So the medium-term strategy, what is your financial target in fiscal year 2023, USD 25 million, USD 1 billion and 7% operating profit margin? On the last page, you talked about limited activities, the image of the activities. So if you could quantify this 2.6% in 3 years' time will go up to 7%. If you could quantify this a little more, please?

This year, JPY 300 million is the profit target and fiscal year '23 is USD 1 billion. So it's a challenging goal, but we will take measures 1 by 1 and accumulate lock 1 by 1. And with that, we think we can achieve this target. As I mentioned earlier, sales transformation will be driven from October around the world. And this activity, from my experience from the frontline, will take a little time because the customers' IT challenges needs to be heard carefully, understood and planned and budget need to be secured and have our services used. It takes time for our service to be installed. So the activities that we've taken so far will become orders in 1 year time. And in fiscal year 2022 or '23, it will have a positive impact on our financial results. I think that's the kind of time line. So the key here is, in the meantime, from now to fiscal year '21, we need to take measures of the business process optimization expeditiously. And by reducing cost, we can have competitive price and if the customers can choose us, then it will lead to profit. So this is something we have to do. By having 2 wheels of a car, 7% can be achieved in fiscal year 2023.

Thank you. So in your explanation, you talked about the sales on the offense side, how the high value-added service can be grown. This is important. I understand. So in your presentation, you talked about the high added value service, ratio of total sales. The graph, if you could first project that slide. So in IR Day last year, NTT Ltd., Jason Goodall, CEO, talked about 50% in fiscal year 2023. We are frequently asked by the investors that so the 50% high added value services, data center, managed service ratio or the breakdown. So we are asked to give the breakdown -- rough breakdown. So could you enlighten us on that?

Data center 30%, managed service 30%, network 20% and cloud communications business voice service is the remainder.

Understood. So data center 30%, managed services 30%. So those 2 account for a large portion. So 1 additional question. Data center, managed services, market size, how do you think the market will evolve? Will this grow strongly? And as the player in the market, what do you think is NTT's competitive edge differentiation that allows us to capture market share vis-à-vis the competitors? What do you think our strength?

Yes, the market size, the global market size is JPY 40 trillion. And especially the cloud type managed services is now growing strongly. The growth is around 20%, JPY 8.5 trillion, 20%. Data center market size is around JPY 13 trillion. Growth is 10%. Now our current status is, in managed services, North America is strong. On a year-on-year basis, 30% growth, although the sales is still small. Data center is now also growing at 15%. So this is where we stand at. And our strength, as mentioned here, we have global network and data center and cloud service platform that can allow us to offer managed service. So the global capability and another strength is our relationship with our customers. Customer intimacy we can provide good service, backed by good technology and automation. And that allows us to generate profit. So that model is our strength.

The first question is from Nomura Securities, Masuno-san.

Two questions. My first question is about the data center. You talked about the strength. You mentioned the strength for the NTT group overall. But with regard to data centers, if the migration to the cloud is accelerating and in the post COVID-19 universe, I believe that this will continue to project very strong growth. But in terms of comparison with your competition, what is your strength? I know that there are variances and differences from region to region. But in terms of Digital Reality, Equinix, what is the difference between your competition? That's my first question.

Yes. Thank you. Well, DRT, Equinix competition. First a comparison between our competition such as DRT and Equinix. As I mentioned earlier, network cloud, data center included, NTT has the capacity to provide total comprehensive services. So in the facilities that we deliver, we're able to provide very robust management and deliver that to our customers. We believe that represents our strength. And the customers' demands and requirements are changing. For example, back in 2016, when I was in Hong Kong, until [ 2009 ]. This was at a time when customers were beginning to explore the possibility of cloud in Asia. And at that time, we had data centers and cloud and migration, and we're trying to drive migration to cloud. And we provide a very meticulous technical support to our customers, and we're able to support customers' migration to cloud. We actually offered the implementation of cloud as well. So this is something that we really cared about, and we emphasized.

Well, in the case of North America, I think you have -- you'll begin to see increasing capacity for hyperscalers. You talked about JPY 100 billion data center CapEx. You mentioned that you're going to continue this caliber of CapEx for data centers outside Japan. How sustainable is this investment? And also, as NTT and DOCOMO work together. I know that there are possible talks about selling some of the assets and incorporating REITs. What about the possibility of taking off-balance some of those assets going forward?

Well, first of all, with regard to the investment, the requirements of the hyperscalers continue to be very robust. So up until 2023, we believe that this will continue to a certain degree. At the same time, though, it's important that we become an asset-light operation that we have that very strong mission. So taking assets off-balance, that is something that we're pursuing in parallel as well.

Next question is from SMBC Nikko Securities, Mr. Kikuchi.

Kikuchi speaking here. My question overlapped with Masuno-san. It was about the expansion of the scale of the data center, but it was answered, so I'm fine.

Next question is from SBI Securities, Mr. Moriyuki, please.

Can you hear me?

Yes.

So earlier, you talked about your strength, managed services. What do you think your weaknesses are vis-à-vis your competitors? And in what time frame -- how do you plan to resolve those weaknesses?

Yes. Private cloud service is our core to deal with the cloud, migration to cloud. Our customers some have needs to migrate to public cloud. So in case of migration to public cloud, our customer support and the various automated, performance monitoring and patch for security problems. These are routine tasks, but customers, as managed service, we do these businesses for them. And our cloud service is making profit automating this at high efficiency. But once there's a migration to public cloud, we cannot do all these services for them. But it's a market trend. So public cloud, cloud security strengths will be explained. We will explain our strength in private cloud and support the public cloud, too. We can support to a certain extent. So that is what we will do in the sales activities.

So any initiatives on the public cloud side? You will continue what you are doing now after migrating to public cloud? Or are you going to take any particular actions in public side?

We announced a strategic alliance with Microsoft the other day, our strategic partner, Microsoft Azure service will be offered to those who watch public cloud. That's our policy. And managed service can be provided in that opportunity.

And you will expand that going forward?

Yes. This strategic alliance, go-to-market service development, it covers wide range of areas. So we will drive this forward.

I'm afraid in the interest of time, this will be the final question of this session. Next question is from Daiwa Securities, Mr. Ando.

I wanted to ask a qualitative question. I would like to ask about your feeling as of actual management of NTT Ltd. Let me first ask a question about the organization. I know -- are you going to revisit your reporting line going forward? Have you already completed the restructuring of our reporting line? That's my first question.

Well, last fiscal year, this organization was established. And the head office was located in London, and the management team has been active since July of 2019. In principle, based on that management team, we are pursuing our business and operations. For example, depending on regions, starting from yesterday, actually, in the case of Asia -- APAC and Australia was integrated into 1 region, very close as a region. And the requirements of the customers are very close. So depending on the situation, the organization will be revisited. But the basic policy will follow this situation with separate set of languages, which is having head office in London and having hub offices in other regions. That principal structure remains unchanged.

It seems -- is it correct to understand that the reporting line follows a well -- very well entrenched top-down system?

Well, let's say that with regard to integration policy and the intentions of the management team from the head office to be projected to the various regional sites, that needs to be important. But yes, it has to be directional and support that we get, we'll be able to get feedback from the people on the ground. So that is very important in terms of the governance structure. And compared with the time that we launched the system last year, I think that situation has really significantly improved.

My second question. Especially in North America, we see a market that is very dynamic and very rapidly changing. If you could just share with us your impression. You mentioned that value-added services accounted for 50% of the sales going forward. But I guess my question is, as you try to migrate to this platform, if there is -- if you are making progress, do you believe that you are in a position where you're able to reach your targets ahead of your competition? Or do you believe that the targets you offset is simply in line with the prevailing situation?

In the case of North America, we have companies that operate data centers. We have managed service operating company. We also have a network company as well. And we have the head office, and we have very robust sales team there. Up until now, in the contest of NTT Ltd., we would provide proposals to the customers. And we are now beginning to receive orders for value-added service projects, inclusive of value-added services and data centers. So we believe that going forward, together with our sales force at NTT DATA, NTT Ltd. will be able to propose value-added services to NTT DATA's customers. So we want to accelerate One NTT team activities going forward. So I hope that you look forward to the results. It might take a bit of time. But if we start now, we believe that by next fiscal year, we will be in a situation where we're able to provide proposals, very positive proposals that also reflects value-added services. And that will lead to new orders taking, and we hope that this will further bring positive results in '22 and 2023. That is my expectation. And that, I believe, is the expectation on the part of NTT Holding Company, and we want to make sure that we drive this.

With that, we will end the Q&A session. After this, we will have a Q&A session, so please ask more questions there. Mr. Ozaki, Mr. Nakayama, thank you very much. Thank you very much for your attention.

Next topic will be at NTT's governance reform. Senior Executive Vice President, Mr. Shimada; and Independent Director, Mr. Sakakibara, will be joining us on stage, and we will have a dialogue style presentation format. Mr. Sakakibara, served as the President and Chairman of Toray Industries. And for 4 years after 2014, he served as the Chairman of Keidanren, Japan Business Federation, and he was relied -- he was involved in the delivery of Japan Society 5.0. He developed to -- he contributed the development of Japanese economy. Ever since he was appointed as the Independent Outside Director of our company in 2012, over the past 8 years, he has provided very constructive and very candid valuable advice from a very objective position. Today, he will talk about -- he will share with us his thoughts about the situation of NTT's efforts to reform governance. And also he will share with us what his thoughts are. So we're looking forward to a very wide-ranging dialogue. I'd now like to invite Mr. Shimada, Senior Executive Vice President; and Outside Director, Mr. Sakakibara to the stage.

Thank you very much. In this session, we would like to focus on NTT's governance reform. When we take a look at the history of Japanese corporate sectors governance, how has NTT addressed corporate governance along the way. As it was mentioned earlier, Mr. Sakakibara has been our Independent Outside Director for Keidanren, and we have invited him to the stage as our guest. So without further ado, shall we start our session. So how was the corporate governance code introduced in Japan? In 2012, our administration was formed, and it's one of the third arrow of Abenomics. The government was trying to drive private sector investment. And therefore, in 2013, Japan revitalization strategy was formed. And 1 year later, in order to further fortify this policy, strengthening of corporate governance was actually positioned as per the Japan's growth strategy, and this was incorporated into Japan's -- Japan revitalization strategy. And at around at the same time, at a study group under the Ministry of Economy, Trade and Industry, or METI, the investors and companies -- it was pointed out that corporate -- enterprise value being incorporated and enhanced through further dialogue with the investors in the private sector. The so-called Ito report, Ito Review was announced. And this report recommended that ROE target should be set at 8%. I know that the Investors community had positive view of Ito Review. Many investors at that time pointed out that they very much like to see the Japanese companies deliver 8% ROE. Now in 2015, in a very speedy fashion, the corporate governance code was introduced. And this -- the task was under the Financial Service Agency and TSE, Tokyo Stock Exchange, together created this corporate governance. So that's how corporate governance code was established in Japan. Now this was at a time when Mr. Sakakibara was leading Keidanren as the Chairman. So can you talk about how the business sector addressed the corporate governance question.

As you pointed out, under the second session -- question, in December of 2012, the second Abe government was formed. And revival of the Japanese economy was the top foremost priority for this administration. And at the same time, under the cabinet office, industrial competitiveness task force was also established. And Prime Minister Abe himself chaired this session, and relevant ministers and also several representatives from the private sector took part. I also took part in the Industrial Competitiveness Council as the representative of the private sector, and we discussed this growth strategy. And the issue presented by the industrial community -- by business community back in 2013 was that the competitiveness of Japan was being undermined by 6 factors. There are 6 factors that are actually undermined the growth of the Japanese economy, and that needs to be resolved. First was the strong yen. It was JPY 80 to the dollar, so we need to resolve the strong yen. And also, the corporate tax was already at 35%, the highest in the world at the background. And also, EPA, Economic Partnership Agreement, compared to neighboring countries such as Republic of Korea, we have very few installed energy cost and environmental regulation issues and also labor code issue. So we outlined 6 challenges that need to be resolved in order for the Japanese competitiveness to be enhanced. That was the view from the business community in Japan. At the same time, we wanted to ensure growth by securing competitiveness. At the same time, it was important that we need to be more profitable as business community. And members of the academia pointed out that in the case of companies in Europe and the United States, ROE was around 10% to 15%. But the Japanese company's average ROE back then was 5%. Why there is wider gap? The analyst reasoned, the corporate governance was the key. In the case of companies in U.S. and Europe, their perspective was based on interest of the investors. And outside directors were very much involved in this decision related to management strategy of the companies, in particular, growth strategy, portfolio review and productivity improvement. They had very lovely debate among the management and the investors. And that led to the company's ability to drive profitability. In order to realize revitalization to Japanese economy, corporate governance was indispensable. So therefore, one of the outputs of this industrial competitiveness task force was indeed this corporate governance-related recommendation. As a result, in 2016, the Japan revitalization strategy came out with this new policy. And as the head -- I was the Chairman of Keidanren at the time, corporate governance code literally came into being. So it's not how much the government showed the way. The government and the private sector together created this code. So therefore, the industrial community was very much involved. Unless they pursue this code, they cannot secure the growth of the industry. So that's how this code was established.

At the time of the corporate governance code, I was responsible for this issue within my company. And within a very relatively short period of time, it was spring that TSE announced this and already in summer of this year, it was implemented. So this was unprecedentedly very high-speed implementation in Japan. So the members of the Keidanren, how did they react to this?

Well, I was the President of Keidanren and to the member companies, I try to play to the importance of the corporate governance reform. As you pointed out, it was very speedy. Within a very short period of time, we had to come up with a concrete plan. So there was a sense of -- of course, many in the business community in Japan were perplexed. And also, back in 2014, there are a lot of different forms of corporate governance, Japanese, European, American way. And many Japanese companies felt that there was a Japanese way. And one other point was that because of independent outside director and the significance of having outside independent director, how could independent outside director who was someone first in the management of the company will be -- contribute to the decision related to management policy? Many Japanese executives questioned the ability of such independent outside directors, that's along with the case. So therefore, introduction of outside directors initially was not done in a very smooth fashion. However, via the corporate governance code and concrete numerical targets were set. So as a result, in a short period of time, introduction of outside directors were implemented. So we have a bump of -- in 2015, back then, companies with more than 2 outside directors was only 20% among the companies listed on the Tokyo Stock Exchange. Now in 2020, 96% of the companies already have more than 2 outside directors on board. And also, 60% or more of the companies have more than 1/3 outside directors on board. So that's the current situation. So that being the case, I think we now have a very good situation. And that's because the corporate governance code was delivered as a concrete model by the governance -- by the government and to help create the situation. So that, I believe, is one of the outputs and result of the administration. Actually, we'll come to this later on. We have form, but what is the substance? Is there -- in terms of substance, do we have a situation first around corporate governance management, like that we have in U.S. and Europe, that I believe is the challenge.

Okay. So moving on to the next point. So corporate governance code has various principles, especially regarding the Board of Directors of the responsibilities and the transparency are important themes. From your view, Mr. Sakakibara, which point do you think is particularly important?

The top one, evaluation -- the effectiveness of the Board. Board is the most important, highest decision-making body of the company. So the corporate strategy needs to be deliberated sufficiently there. Outside directors need to take part from the shareholder and society view. Leading the discussion from the societal view, shareholder view is important. So in pursuing corporate governance code, the company's growth strategy, profit generation will be pursued. So from outside directors, the shareholders, you need to be included to pursue the growth strategy. In compliance, I need to be overseeing, supervised. So that is the most important role of the Board. And another point is the nomination and compensation committee. The growth strategy is an important component of the company, but nomination or denial, rejection of the executives from the shareholders' view, rejection of the CEO may be necessary in some cases. And that takes time frequently in U.S. and Europe. So the outside directors need to play a role there. And at the same time, as you see here, for remuneration, transparency and the objectivity and the strategy viewpoint is required. Outside directors need to supervise from shareholder and social view. So these principles listed here, to realize them, the outside directors have a big role to play.

Understood. So now let us review what NTT has done so far. So Sakakibara-san, you talked about this as the most important thing, the effectiveness of the Board, evaluation of the effectiveness of the Board. From around 2015, NTT has had the involvement of Mr. Sakakibara. The independent outside directors and the independent auditors had discussions. NTT DATA, NTT DOCOMO's outside directors and holding companies' outside directors had discussions. So in various forms, and of course, discussion with the executive side, too, we've had many realms of discussions. And in addition, from 2018, directors and auditors survey, questionnaire started. In the 2018 questionnaire, governance, organizational design, whether we should study organizational design more or not? For this question, 80% to 90% replied, yes. So we've been discussing this topic for 1 or 2 years now. How did you see this as you were involved in the discussion?

Yes. As you mentioned, from around 2015, the governance had been discussed in many fora. In the past 2 years, after Mr. Sawada became the President, governance reform has progressed significantly, I think. Outside directors have been involved in many areas to be involved in the discussion on strategy. And for governance reform from around 2 years ago, we started the discussion. So in the course of this discussion, a company of NTT size and a company that will pursue global expansion going forward, NTT's governance structure, organizational design, eventually need to have companies with nomination committee. So needless to say, the executive side and the supervision side is clearly divided. In the 3 companies, nomination, remuneration and audit committee will have the independent authority and the majority members will be outside directors. And the overall directors -- outside director will account for major in the overall directorship. So the supervision, that is the ultimate form of well-supervised format. So that is what we suggested. And you've conducted the organizational design this time. As you mentioned here, the company corporate with corporate auditors is maintained, but you have a big reform. So you have the executives outside, you had 15 members before the change and 2 outside directors. But after the change, the total is 8 directors, of which 4 are outside, 4 is internal. One is nonexecutive. So executive is 3, nonexecutive is 5. So this is a well-governed director structure, we think. And 1 female in the outside director and 2 in the audit. So in terms of gender diversity, we are making good progress. And another important point is this nomination and remuneration committee's role is enhanced. The transparency objectiveness are insured in the discussion. It was established in June. So we just got started. But starting June, NTT's governance structure has stepped up, I think.

Yes, as you just correctly mentioned, starting this summer, strategic discussions have become deeper because we optimized the size of the board. And another important point is diversity. So among the directors and auditors, of the 13, 3 are female. Under NTT law, you have to have the Japanese nationality to be a director. So unfortunately, those with foreign nationality cannot become the director of NTT Holding Company. But instead, we established global intermediate holding company. And we -- 4 foreign nationals are appointed to capture our global insight and knowledge. What do you think about that?

Yes. In this NTT's organizational reform, the directors and auditors, total 3 females are appointed, and I think this is highly significant. Gender diversity is very important in the decision-making. In the U.S. statistics, female directors, companies with 2 or more female directors and the ones who don't, if you draw a line and compare the ROE between the 2 groups, there's a gap of 2%. So companies with 2 or more female directors, ROE is 2% higher. So if the female are involved in the executive, the discussion becomes more active. And the management's decision-making quality is enhanced, and this is proving it. So in the June organizational reform, 3 female executives are coming on board. And I think it's an important step. Originally, foreign nationals should be part of the structure, it will be the best. But as you mentioned, in the case of NTT foreign nationals cannot take part. But it's an issue for the future. As we're going to purse global operations further, then it's important that foreign nationals be on the board as an outside independent director. I think that's the structure you should aspire to achieve. So it's an issue for the future. We have 2 officers as executives as well. So we are trying to enhance that.

So let's go on to the next topic then. Mr. Sakakibara, earlier you talked about the Appointment and Compensation Committee. And they have a very critical role to play. In the case of NTT, we have already -- in 2005, we already had voluntary appointment and compensation committee, especially over 5 times we had discussions for this committee over personal management, and also with regard to compensation, remuneration question as well. So what are your impressions about the discussions taking place in those committees?

So in 2012, when I was appointed as the Outside Independent Director of NTT System, I've been a member of the Appointment and Compensation Committee along the way. In the initial couple of years, we had the form. But the -- what would happen is that committees would present a personal plan. That was the nature of the meeting. But as I mentioned earlier, under Mr. Sawada, we began to have discussions, more substantive discussions at the Appointment and Compensation Committee. Appointment and Compensation Committee plays a very critical role, especially when it comes to appointment, they play a very critical role. And that is the expectation, in particular for the company. Appointment and the CEO -- appointment of CEO and President, this is extremely critical. So that has to be determined with the viewpoint of investors in mind. So decision of CEO that should be fully deliberated at the Appointment and Compensation Committee. So it's not just a matter of presenting proposal. It's important that you have a long list, bearing in mind the candidate for the future. You should explain the long list of candidates. And on the 1, you should -- along the way, through discussions, you should narrow down and then appoint the candidate -- decide on the candidate, that's the CEO. That's the process which we proposed in order to get with the process, which you actually took into consideration.

So I think I was able to play a role as a member of this committee. With regards to executive officers, in the case of selection of executive officers, as is pointed out here, clarification of expected missions and specifications needs to be done. It's important that we have a selection of diverse candidates. It's important that we select members from diverse candidates. And as Mr. Sakakibara pointed the fact that the Appointment and Compensation Committee, I believe, the nature of the discussion in this committee really evolved. So let me go on. So procedures to determine the remuneration of executives. As you pointed out earlier, it's important that the corporate performance will be determined by the remuneration of the executives, right now the monthly remuneration and the bonus. We have 70% monthly remuneration and 30% performance-linked remuneration, that is the breakdown. In the midterm target, we appointed adverse KPIs in the medium-term financial management strategy and we may -- we delivered on these KPIs.

In terms of the KPIs, which were said, what are your thoughts? If you could share that with us Mr. Sawada.

Well, monthly -- so fixed remuneration, monthly remuneration and performance-linked remuneration bonus categories into 2. That represents a major progress. And also when setting performance remuneration, you clarified KPI. That was very important. In the case of NTT and holding company, you have a very wide-ranging business operations all the way from IT to real estate and also to global. So setting of KPI requires a lot of creativity. It has to be fair, clear and transparent. Also the KPI should be very productive. And that's how you should determine the KPI to be adopted. And that needs to be presented to the investors as well. That's how you will be able to ensure transparency. So that's the management this time which we would like to see. Well, right now, in the case of staff remuneration, this is something -- an ongoing discussion. And I do hope that we'll be able to take a look at the various global companies and also take a look at the blue-chip Japanese companies to use them as a reference and deepen our discussion on this point. That is what we want to achieve. I'm afraid we are running out of time. So let us now take a question from the audience.

Can I just say one last word? NTT and others, the corporate governance reform has progressed significantly, but this is not the final form. The form, the shape is in place. More than 94% of companies have 2 or more outside and 1/3 significant majority. But the operation, that allows the proper function of outside directors. Some are doing, others are only having the shape, the form, but not substantially, not in substance. So outside directors express the opinions for company President's proposal, but do not like oppose in some cases. So in order to enhance the growing capability, it has to have good discussion. So the outside director needs to be involved from the shareholder and society's view to allow for high-quality strategy. COVID-19 has not settled. But in post-COVID era, what will the world be like? And what will be the management challenges?

The post-COVID will be a completely different world. So how should the management strategy be pursued? Until now, the shareholder profit had been a very important point. But in post-COVID, of course, shareholder value is important, but society, contribution to society will be very important. Environment, equality or the narrowing of gaps, disparity and FBG's, companies need to address these challenges. So outside directors need to have this view of the society and view of the shareholders and express their views clearly, this is the challenge for all the companies. So this is what I have in mind recently. NTT's medium-term strategy is the solving -- resolving resolution of social challenges. So I hope you could look at us rigorously so that we can work harder. So we will now take questions.

Mr. Sawada, Mr. Sakakibara, thank you very much for engaging this dialogue. Mr. Sawada about the medium-term management strategy, I know that you have been leading the company -- you will be leading the company for many years to come, but I wanted to ask about the structure of the organization?

To be more specific, you might say, "Oh, not about NTT DATA again, you might say that again. But my understanding about NTT DATA is that for the past 15 to 25 years, very little synergy was realized with that company. That is because the structural -- the structure of the company and the elements of the operation, there are many factors. And I think it's going to be impossible for you to realize synergy with NTT DATA. So there's a very strange demarcation and both -- and you're actually a drag on each other. So why not sell off the company? And why not find a new partner? I think that's probably better for the growth of the respective companies. That's my view, especially in the recent.

It's been couple of years since you became the President of the company. And the latter half of Mr. [indiscernible] administration, they had a task force. But despite those deliberations, you have no concrete output, and I really can't expect any concrete outlook going forward. So what is the meaning of hanging on to NTT DATA? What are your thoughts about my proposal that you sell off your stake and NTT DATA? I would appreciate your response.

Thank you, Mr. Kikuchi for this question, it's a very bold view. To be quite candid, as far as NTT DATA is concerned, have I ever considered selling off of NTT DATA? I have given that a thought. But NTT DATA, from your perspective and NTT DATA from my perspective probably are different. I think we view NTT DATA in a different way.

And what about the future?

NTT DATA is thinking that they want to focus on consulting and the world of IT is shifting to software. For example, Everest is right now providing the back system -- backend system for Telefonica. Naturally, this can be delivered to 5G world as well. So we are now partner with NEC including various systems and that system can now be sold by Everest could be sold by NTT DATA. That model is becoming more invisible. So when we take a look at the future, there is indeed, a universe where such synergy can be more easily acquired. So right now the focus is on consulting. System integration that is focused on consultation and consulting. It is important that they be part of NTT Group, it is important that we have such system integration player within the NTT Group. Actually I'm hoping that this player will become the central player in NTT Group.

So is there a possibility that the company could be sold off?

That possibility is part of the -- I know there are many possibilities. However, for myself, I want to make sure that we hang on to NTT DATA so that we would be able to deliver further synergy for the future. Have I responded to your question?

Your mentioned the future, what about the time line? What about the sense of speed? Do you believe that while you're still at the helm of the company, some sort of output or results can be visible? Is that your sense?

Yes, I believe we can become visible from one thing. For example, with Toyota we were able to launch this initiative and we're trying to create a platform for NTT DATA development team and NTT Labs, working together to create and develop such a platform to drive this auto drive -- autonomous drive platform. So therefore, this is going to be component of the platform. We'll just talk about platform. So it's important that various systems we implemented introducing to the cars. And this will require a 5G system to drive this and managing the system. That requires the capacity of NTT Communications. So that being the case, the application that is developed by NTT DATA, that could be actually together with partners outside the group and also with up companies be sold off to other players. So NTT DATA is going to be at the core of the B2B2X model. And we believe that this is something that can be delivered within the next couple of years.

Thank you very much. If I may add to one other word, with MIS Kyushu Corporation we involved in value chain innovation. That also involves NTT DATA. By expanding that, we believe that IT modernization can be pursued in both wireless and fixed line environment. So this could be driven by NTT DATA. This could be delivered much earlier on, I believe. I just wanted to add that. Thank you very much for that.

NTT DATA, do they have the willingness to become the central player at NTT Group. I never felt that intention on the part of NTT DATA. What about you?

Well, it's been 2 years since being the President of NTT and I've been talking about this quite repeatedly. And I think Mr. Honma, the President of NTT DATA is now having that type of recognition. It's true that in the past, I would say, NTT DATA should be at the center. But then they will say, no, we want to be at the margins of the group. But right now, that type of discussion is going on over there. They are not saying that, yes. NTT DATA is saying that they are considering how they can support NTT in the collaborations. I think they're gradually coming to the center of NTT Group. Thank you very much. We are looking forward to that. Thank you very much.

Next question is from Macquarie Capital, Mr. Yamashina.

This is Yamashina from Macquarie. I have a question on the long-term view on R&D. So DOCOMO after becoming a wholly-owned subsidiary, the Yokosuka and Musashino R&D roles and responsibility in IOWN? Are there changes in the roles and responsibilities? Do you have any thinking there? And in IOWN and the positioning of NTT DATA was just asked earlier. NTT DATA's positioning in IOWN, how should we understand that?

Thank you. So first, including DOCOMO, the holding company's R&D and DOCOMO's R&D will missing an assignment change. We have not decided on anything. We need to discuss that going forward. It's one of the important agenda items. But I think we need to change. In other words, the basic research will be holding company R&D and DOCOMO combined a new organization or holding company done by itself. So the fixed line and mobile need to be covered both. So the basic research need to cover both. On the other hand, DOCOMO will develop service and applications, and develop areas that are close to our customers. That will be done by DOCOMO R&D in a more enhanced manner. So Comware and Com R&D members will support that. So I think it will be polarized. In IOWN, IOWN is very broad based. NTT DOCOMO is focusing on wireless format. Next is 6G, but wireless software platform that is integrated behind the scene, so Shibutani talked about the integration. There is this integrated part. So we want to work on that together. And so the mission will change in that direction in NTT DATA's role. The system construction capability and the know-how and capability and expertise data has strong expertise there. So NTT DATA does not do basic research. Rather, with customers, with partners, the system will be built. And the seeds in the R&D will be captured by data in the downstream. Different from the past, the elemental technology developed in R&D will be developed into a solution into data by data. For example, the system to detect abnormalities, NTT DATA is developing the solutions and sell them. So data can be captured in upstream and downstream. Does this answer your question?

Yes, I understand.

Next question from Daiwa Securities, Mr. Ando.

Ando here. I have a question about R&D and IOWN, in particular. It's a very large, very lofty vision. You -- in order to have global talent to commit to this, how do you tend to communicate this? Your ability to provide a narrative, what you intend to do about it? For example, NVIDIA, do you believe that if they do -- if they work well, then you'll be able to get the global talent? Or are you going to create a resource center so they will be able to capture global talent? So can you share with us your thoughts, if you will, and your policy about how to capture global talent?

Well, In terms of development, I think there's a need to consolidate those centers. That is true. But before we get to that stage, NTT Labs and NTT DOCOMO need to collaborate. And maybe we could create such a central organization for NTT DOCOMO and Labs can cooperate. So center for development and working with partners, that type of organization will be required so. And as a precursor to that, IOWN Development Center, IOWN Development offices now established with the NTT holding company. And that needs to translate into concrete centers going forward. But as you mentioned, Mr. Ando, to promote that and to provide a narrative so that people can understand what we're doing, that is an area where it is who we have not done sufficiently. Are we going to do this or are we going to do this based on our own team or not? Quite recently, I hope that we'll be able to make some sort of an announcement about what we're going to do. And there's a third element. Right now, domestically, we have enormous amount of facilities.

But all photonics network that will be developed through IOWN, how will this be introduced? When we sell this outside Japan, whatever migration plan can we present and propose?

It's important that we set a very concrete implementation plan, and we need a team to promote implementation. So development, promotion and introduction and delivery. So I think we need 3 types of organization as we go forward. I hope that answered your question.

Well, in the case of NTT, I know that we can expect a lot from efforts to be made on the part of NTT holding company, but your ability to communicate globally based on English language. How do you see your capacity to provide such a narrative in English?

Well, we have teams such as NTT Limited and NTT DATA team in Japan that are already out there. And also the ability to promote IOWN. I think there's a distance between the 2.

So are we going to create such an organization or team together with our partners on a joint venture basis?

I think we're not yet at that stage. So for the next year or 2, it's important that we pursue opportunities before we make joint announcements. By the way, in the case of IOWN Global Forum, everything is conducted in English. All the participants must communicate based on English language. So I believe the members who are participating in the IOWN probably will not feel any stress about communicating in English.

I see. My second question relates to the first question. In the case of optical chips, when it comes to chips, technologically speaking, what type of chips need to be developed?

It's very difficult to see from people outside the group. But when we look back in history, behind the development of semiconductor, there's a large contribution from the development of SBEs.

So in the case of photonics, in terms of cost reduction and mass production, de facto technology needs to be developed. And need industries to support this initiative, but what are some of the challenges you see as you try to further spread and develop the required chips down the road?

Well, it is, as you pointed out, when we take a look at the current semiconductor chips, there are a lot of complicated long process involved in semiconductors and chips and the edging component. The edging part will be done through electronic form, but no, that's not the case. We want to add photonic component on top of the chips edging. We don't want to use photonics or electronics rather.

So it's -- so in principle, it's a semiconductor type of process. But how do we implement the photonic electronic convergence component and the device-related technology needs to be developed in parallel. NTT Laboratories and NTT Electronics, that's a subsidiary firm. They're already creating semiconductors. So although -- they have the ability to develop and produce photonics electronics convergence, although not on a massive scale. So how do we introduce such a line?

We have a very small-scale line already.

So how can we expand that in the future?

Naturally, Intel and NVIDIA, both companies are now shifting to fabless production. So how do how do we identify production technology and with whom, that's going to be a major issue. So yes, I think your question is very much on the mark. Thank you very much for that.

Next question is UBS Securities, Mr. Takahashi please.

Yes. This is Takahashi from UBS. I have 2 questions. First, in the first R&D presentation, the virtualization and IOWN were explained. As business, I think virtualization will be launched sooner as the business. So once again, including your global vendors, we are all moving in the similar direction, so NTT, NEC collaboration. Where is your strength, your competitive advantage? And what time line do you have to have a positive impact on your financial results?

First of all, the point I would like to communicate is the collaboration with NEC. And we are also in discussion with Fujitsu too. So Japanese vendors in 4G and 5G device, we are still small. As Shibutani said today, in the vertical integration structure, we had little room to enter because of lack of sales and engineering. On a global basis, we lack in sales and engineering capability. And we cannot expand this overnight, but all ORAN equipment, there are not so many ORAN equipment around the world. So if the ORAN is discussed, many formats will come into play. I cannot name the carriers, but LETT -- LEC equipment is one suggestion. In that case, NTT will support as [indiscernible] and NEC will become the manufacturer, and the software will be combined and the carrier will be used. So there are no other comparators, if you will. So if the carriers say we want to introduce ORAN, NEC and Fujitsu have the advantage to begin with. Altiostar vRAN may be the competitor. So are you -- or do you see you -- the interface, the intra availability is not insured yet on a software base. So we are still equal on equal footing. Time line will be 1 to 2 years. We think this expand in 1 or 2 years.

My second question is, so core virtualization. So PSTN and IT network will be integrated, you said. So east and west network will be included here. They will also be part of this virtualization. Any legal impediments or obstacles?

East and west are now -- we are thinking of them as wholesaler. So the basic node wholesale part that east and west uses and the service part that the mobile carriers will use on top of that, the core software, I think, will be divided into 2. So as has been informed, in 2024, PSTN will be migrated to IP, the FLETs Optical side.

But we are talking about beyond that. So will we use the optical phone forever?

No, not really. The communications line phone and Skype phone are already changing. And so the critical voice communication still remains. That's also a fact.

So the Node, the Cornette, what kind of combination will be needed?

Maybe it will be mobile-centered with fixed-line critical. But as I said earlier, east and west will have some part and the operating companies will have the other parts. We think there will be a division.

Yes, I understand.

Next question from Merrill Lynch, Mr. Kinoshita.

Kinoshita here. I hope you can hear my voice.

Yes, we hear you clearly.

I would like to ask several questions, if I may. I know that there have been repeated questions both about ORAN and vRAN, let me ask question about your philosophy or thoughts. In principle, NTT DOCOMO will be positive in addressing ORAN and vRAN. But at the same time, though, Nokia and Ericsson they are not earnest about this. So at the end of the day, we are -- we see the situation being stalled. I think that is the prevailing situation or that's the image that I have. But in the case of incumbents, they have a certain scale of operation. Nokia is very reluctant to come on board. And Ericsson also has no intentions. Can you really introduce ORAN with the presence of those carriers? I'm somewhat skeptical about the possibility of ORAN and vRAN. So if you could talk about that?

Thank you for your question. I suppose that's one way of putting it. When we take a look at the various trends in places like U.S., U.S. government authorities understand that ORAN is beginning to move. At the same time though, they understand the presence of vRAN. For players like Nokia and Ericsson, they already have vertical integrated model and they're trying to recommend that. In Samsung -- in the case of Samsung, Verizon wants to use Samsung. That also represents a bit of vertical integration as well. So I think it's going to really be a competition between these camps. In the case of DISH, it's a combination of RTU.

So will it be ORAN, will it be vRAN, will it be combination or will it be vertical integration?

I think carriers will continue to lead the situation. It's a combination of which models offer the greatest advantage. In the case of NTT, as a carrier, we -- one of the reasons why we believe ORAN is most positive is because you're able to have control over your software. You're able to strengthen your competitiveness under the ORAN model. And going forward, the hardware will be hotbox, but value added can be captured. So offering inexpensive hardware dedicated system, that's our intention. So carriers that are in line with this thought, probably will come onboard for ORAN or maybe they'll skip ahead to vRAN eventually perhaps. But I know that this is not the response to your question. You mentioned that you're skeptical. This will be all determined by the market. It will be determined by the competition, and we have to make sure that we don't lose out in this competition.

Let me go back to what your comment. DOCOMO has the technological capacity. But non-Japanese carriers do they have sufficient ability to control softwares?

Well, the carriers in developed countries, they want to be able to exercise control over their software. That seems to be the situation. But outside Japan, carriers and vendors are very close, and the management team actually hop between the 2. So there's a different factor at play. In the case of developing economies, they probably have a preference for full turn key and that's a possibility. But is it -- but at the end of the day, it's all about cost performance. So security whereby you're able to exercise or your own control or a free hand whereby you'll be able to drive growth and is the trade-off between the 2, control and growth. So right now, a very limited number of developed economies perhaps are involved in this whole discussion.

I see. Point taken. Second question, let me confirm. This goes back to Mr. Ando's question earlier in the case of optical chips, photonics chips. As far as the chips are concerned, you mentioned that competition is primarily with existing systems who are able to extend their limitation, is that the case? Is that the only competition that you have? Also when you produce optical or photonic chips, are there other potential production methodologies? And is there a possibility that a different type of production methodology could emerge as a competition to the current photonics chips? Is there a possibility that you'll not be able to take the lead and that you'll lose out from benefiting from mass scale production? If you could clarify the situation for us?

Thank you for that. In the case of photonics or electronics converged chips, NTT was covered by Nature's article last year. And the reason why Nature, the journal covered this is because this is already being implemented. And IBM, Huawei, these players in relation to digital signal processing, wanted to adopt photonics and electronics convergence. I understand that they actually produce this. But then they were not able to spread the technology. So technological breakthrough needs to make sure that on top of silicon, photonics be introduced. How do you place photonics on top of the silicon, so NTT has that edge. So the competition -- in terms of competition within photonics and electronics convergence, NTT is one step ahead without a doubt. Also, as mentioned by Mr. Shibutani earlier, we're talking about 6 nano to 7 nano universe. We're talking about the edging, but this could probably come down to 2 nanos eventually. So the level of concentration could actually improve. However, the situation with regard to temperature will still remain. So energy consumption, power consumption is the key. So either photonics and electronics convergence is delivered. It's a matter of power consumption. It's a trade-off. So within photonics and electronics convergence, we are ahead. In terms of comparison with existing chips, it's a discrepancy between the performance, but the limit will come. See eventually photonics and electronics convergence will probably go ahead compared to the existing chips.

I see. Then in terms of your technology, photonics and electronics convergence, I know that you have not disclosed this. But unless you have a third-party manufacturer and involve industries, this -- the base for this technology probably will not spread. Are you going to consider licensing for this technology? Is that the case?

Yes, I take your point, but we're not yet at that stage. And also, when we talked about photonics and electronics converge chips, the first usage will probably be in the digital signal processing. But the interposer needs to be converted into photonics. And then later on, we need multi-layer for the chips. That model is already visible. So placing photonics and electronics converge material on top of the silicon, it will come later. So what type of value chain will be created for the industry, that needs to be organized beforehand. So let me rephrase this. So interposer connecting chips. Interposer will probably be developed within the next couple of years. Are we going -- we have to consider whether or not we're going to produce this and see this as an industry. So the -- so it's important that with players like Intel and NVIDIA, we discussed that. My personal view is that maybe, hopefully, we'll have the ability to produce that eventually. It's not yet determined.

Can -- is there a possibility that you will become a FAB?

Well, as I mentioned earlier, we already have a FAB that's carried out by one of the subsidiary firms. But this is limited to chips for the -- it's only limited. We already delivered that to Huawei. But because of the National Defense Authorization question, we've stopped delivering that to Huawei last year. But we have manufacturers. So we have that ability. Please bear that in mind.

Next question is from Citigroup Securities, Mr. Tsuruo.

This may digress from today's topic, but I want to ask you a question about power in the resource, the -- you will do the offshore wind power generation you said. So as of now, including J. Power in the power generation, what kind of investment are you thinking of in the next 10 years? So J. Power, what kind of return are you thinking of or the power source development?

So the regional grid, we want to do this direct current, Anode. This is the one terminal on direct current. So that is the basis. So in power generation, there was some miscommunication. So power distribution was how the mass media understood and wrote the articles on. But we will work on the power generation, renewable energy, and that will be JPY 600 billion in 10 years. But this is not -- the JPY 600 billion is not just our own cash. We will work with partners and do take this off balance. And go up to JPY 600 billion. Right now, it's a little less than JPY 300 billion profit. But in it, with -- in its resale, so by having the power source, we can improve the operating margin. But because of the nature of the power, this will not go up that significantly. So in the next 10 years, we will use renewable energy. We only use 4%. And so we will rise this to 30%. And through -- deliver this through Anode. And so use that as a baseload and be -- and when the oil supply stops, we can generate power on our own. So that is the energy vision along with the environment vision, and this has started.

Understood. Another different theme. If you cannot answer this fine because it's during TLV, but NTT DOCOMO on the subscriber base is largest, but a third player in terms of profit. So there's a structural problem in price. So that was the price if you align yourselves with other parties. So [indiscernible] and NTT executives, what do you think is the opportunity in your cost structure?

So first, others have the long distance and international and wireless together. In case of DOCOMO, when it separated in 1992, the facilities had to be owned by themselves, that was ordered by the rule. But this time, this discussion on DOCOMO was judged that it is not a legal judgment. And therefore, Com's backbone is the largest in long distance. And DOCOMO backbone want to be combined, integrated in buildings. DOCOMO is newer. So DOCOMO's building will be used as node. And Com will be integrated into that. So the first point is the total cost of facility. Group can work to reduce the cost there. Second is IT system. This is also discussion centering on cost reduction. We have a company called DOCOMO Systems and the ERP that is developed there is used within the group. In the next few years, SAP -- we are trying to shift to SAP cloud. And Comware will drive this. DOCOMO Systems and Comware need to be discussed. So collaborate or merge or combine. By combining them, we can reduce more cost. And we want to start studying that. At this point, I just have this in my brain. We have not discussed it yet. But these facilities and IT cost reduction can be possible.

I understand.

I'm afraid that the time to complete the session has come, our apologies, but this will be the final question for the session. We apologize. Next question from Nomura Securities, Mr. Masuno.

I know that this is the final question. My question is this. It's not so much about NTT, but because of -- well, I want to talk about the future of the IT industry, telecom industry, inclusive of your competition. With fixed line broadband spreading, with smartphones having 80% penetration, and there is a price-related pressure. But in the case of open Internet, new smartphone-based payment is now emerging and we see enormous payment business emerging and they're converging. In retail power, contents are now being integrated in the form of super applications. So in terms of this consumer-related trend, what -- how should telecom industry change going forward? That's my first question. My second is about business. We're not in the 5G, 6G era. And I think it's only natural that fixed and mobile network be converged. And if you put on top of the data center, the network added value will increase. And also, large data cloud -- data service operators are now beginning to come into this area. So against this business environment, how should the telecom industry change? How should they address this ongoing trend? I would appreciate your thoughts about the industry as a whole.

Thank you very much. Let me talk about the retail individual users. DOCOMO is pushing, of course, this smart life business. In the case of fixed-line business, in the case of mobile as well, they try to generate profit and now the prices is based on flat rate. Not so much usage space. It's not so much based on usage rate system. Once the market becomes mature, you shift to flat rate system. But the upper layer contents and payment business naturally is emerging on the other hand. In the case of payment, it's all about finance and money. And there's going to be a lot of demand. In the case of health care, it's about life. This is also going to be a very major segment. And also, the emotion and the mental universe, in other words, how do you deepen communication. And the other is about comfort, a sense of comfort. So then we come to robotics. So this also involves mobility as well. So in order to make individuals want more service secure and even richer, from that perspective, up until now, elements there also had the telecom industries now began to be part of this universe. So that, I believe, is the situation of the discussion pertaining to the consumer side of the business. So telecommunication is simply one of the elements. In the case of health care medical, it's very important -- it's very large. Wearable devices are very -- now increasing and if implantable devices are to be incorporated, the situation will really change. On the other hand, when it comes to business, as you pointed out, what we're offering as cloud is primarily private cloud and it's very customized. In the case of public cloud, we were in important for the cloud, but AWS, Google and Azure, we could not be victorious against those players. So we shifted our thinking, and we decided to offer a hybrid fashion. And we decided to deliver solutions that offer hybrid. But that alone would not be sufficient to compete against these giants. But these are players in the application front that really have global dominance. In the case of ORAN and vRAN, who comes after ORAN and vRAN, they're beginning to engage in the software side of the equation. So I believe that people -- some say that we should compete against these players because they are not getting -- they are now entering the telecom field. Why do we need to compete with them? Because I think the telecom industry's weight in the business community will increase going forward. For example, all things will be connected. And this applies to autonomous drivers, plus every functions in the cities and urban settings. It also applies to implantable devices in all aspects of individual lives. So offering connection and platforms, these players are trying to make platforms their own. So as for telecom carriers are concerned, it's important that we offer those platforms on our own to the world. So therefore, that is going to be the competition going forward. So communication for the business, this is going to be essential. This is the most essential component as we try to deliver value. I hope we are on the same page.

Yes. In terms of consumer, it's a very data question, I apologize. But in terms of consumers, when it comes to the new approach, I think health care and life is going to be very important, especially in post-COVID-19 universe. And also in terms of business -- dealings with business, as you pointed out right now, we have no idea who is controlling the software. Is it the vendors? Or is it the service operators? So I think that's the universe that we're headed to. So how you get -- how you dominate the market is going to be very critical? Yes. I take your point. So yes, trying to take the piece of the market, is it going to be the manufacturers? Or is it going to be the likes of GAFA? Or is it going to be the conventional traditional carriers? Or is it going to bring even customers? Or is it going to be devices like Apple?

I think all possible scenarios are out there. And this applies to both the business market and to the mass market. So as you pointed, Mr. Masuno, I think we are beginning to be a global competition, that is transcending various boundaries. And the focus is going to be on this type of global competition that transcends various boundaries.

With that, we will close the Q&A session. President, Sawada. Thank you very much.

Thank you.