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

We would now like to start the briefing on the Refinement of the NTT Group Medium-Term Management Strategy. Thank you for joining us today.

Ladies and gentlemen, thank you for joining us today despite your busy schedule. I'll be serving as the master of the ceremony. My name is Fujiki of the Investor Relations office. It is an honor to preside over the proceedings today. I'd like to introduce the attendees from our side. President and CEO, Mr. Jun Sawada.

Good afternoon. Thank you for joining us.

Senior Executive Vice President, Mr. Akira Shimada.

Thank you, Shimada here. Thank you for joining us today.

Senior Vice President, Head of Finance and Accounting, Mr. Nakayama.

Thank you very much for joining us today.

Senior Vice President, Head of Corporate Strategy Planning, Mr. Taniyama.

Taniyama here. Thank you for joining us today.

So these are the attendees from our side. This proceeding is being streamed live -- is being distributed live over the Internet. We will also be providing streaming later on as well. We appreciate your understanding. After this briefing is over, we'll have presentations from NTT DOCOMO, NTT Communications and NTT Comware. They will talk about a new medium-term strategy for new Docomo Group. We hope that you will also attend that briefing as well. The presentation materials will be available over the NTT Holding Company's website. Please refer to the relevant materials through our website. In the final page, you will find the disclaimer. Please be sure to reach through this page as well. Then I would now like to have the presentation from Mr. Sawada, the President and CEO. And afterwards, we would like to receive questions from you. Now, without further ado, Mr. Sawada, please.

Thank you very much for the introduction. Thank you for joining us today. We appreciate your attendance. Thank you so much. Then we would now like to project the screen. Please turn to Page 1 of your material. Please turn to Page 1. Yes. Thank you. You're not able to view the screen. Okay, good. You're able to view the screen. Thank you. So let me start with Page 1. This page talks about the directionality of the refinement of the management strategy. [Audio Gap] for decentralized society. We also want to enhance corporate value through ESG initiatives. And through these 2 initiatives, we hope to contribute to the achievement of a sustainable society. That is what we have in mind. Next page, Page 3, please. This is our new strategic framework. In fact, in 2018, 3 years ago, we had 4 pillars and 10 items in our strategy. This, we announced in 2018. We will continue with these efforts, but there are new elements as well. We now reorganized into 9 efforts. Today's theme is the top 1, growth and strengthening of the newly formed DOCOMO group. And the next page, please, Page 4. Here, you can see the challenges of the new DOCOMO Group. In the mid-term strategy, there are 7 items, expansion of the corporate business to ESG promotion, there are 7 items. These will be the efforts to be taken, and we will pick up new challenges. The synergy effect will be JPY 100 billion in fiscal year 2023 and JPY 200 billion in FY 2025. This is the current assumption. And this is going to be my last page, Page 5, refinement of mid-term financial targets in a table. As I mentioned, EPS, current target is JPY 320. This year, May, we said we will achieve JPY 320 1 year in advance. In 2.5 years' time, FY 2023, we will revise JPY 50 upwards for the target to be JPY 370. This is the basis of 2018 autumn time, which is 75% increase from 2017, a very challenging target, but the entire group will work hard to take up the challenge of this new target. Our determination is shown in this new target. Now from cost reductions, as you're aware, this fiscal year compared to 2017 is JPY 840 billion reduction. This is the plan for this fiscal year. We have already achieved the target 2 years ahead. And so we are revising at word again, which will mean at least JPY 1 trillion or more. This is not a pure water, but with DX effects coming up as well, which will mean we want to achieve more than this. And then on the other hand, the second line overseas sales. The Cisco device sales we have changed the accounting standards and booking only the net amount, resulting in about JPY 100 billion down. And NTT Ltd. side, the COVID has hit hard on orders received. Considering this, currently, the plan is JPY 19 billion. In 2.5 years, another JPY 6 billion would be a big stretch. In this sense, we will go rather for the profit margin of 7%. We will govern, so as to strictly manage to 7%, and we will not set the overseas sales target. This is the thinking. And other goals such as ROIC and CapEx to sales, these targets are as planned. And in particular, CapEx to sales this fiscal year, 13.5% will be achieved this year. And aiming to achieve new targets, the NTT Group will further move ahead with our reform. This is all for the presentation.

Thank you very much. We would now like to take your questions. As we have already informed you in advance, we are taking questions for those of you who have registered in advance and who are connected to the phone conference system at this time. With regard to how we're going to take questions. The operator will now explain how you'll be able to ask questions.

We would now like to start a Q&A session. [Operator Instructions] First question is from Mr. Ando of Daiwa Securities.

This is Ando here. Can you hear me?

Yes, very clearly, sir.

Well, first of all, with regard to the EPS target is no longer conservative. It is very bold. Thank you for coming up with such an ambitious EPS target. Let me ask 2 questions. My first question is this, it's about the synergy effect -- JPY 100 billion synergy effect that you're envisioning and going forward it will be JPY 200 billion. Can you give us a breakdown? In the early press conference, you mentioned that revenues will account for 30% and cost reductions will account for roughly 50%. But can you give more detailed breakdown as to the contributions you expect realizing the synergy effects? In particular, in relation to cost reduction part. This involves the integration of network, and that should have cost reduction impact. And at least, this was already expected, I would imagine. I suppose that there could be potential overlaps going forward. Is there any potential overlaps even after this integration? That's my first question.

Okay. Thank you for your question. I'm afraid I'm not able to convey very specific details of the structure. Yes, we have 8 working teams up and running and all the relevant parties are involved in this working team and are involved in this process. Yes, costs will be contributing roughly 50% of the effect. That was already shared at the press conference earlier. Now, of this IT network, it has been separated. The account for IT network probably account for 50% of that portion. Now having settled this, well, up until now -- some items were not incorporated into our calculation up until now. For example, an equipment and the integration of the routes, that is not being reflected in this calculation. So therefore, there are some things that we cannot achieve until the organization was integrated. So that effect is being envisioned. But then it will come in to play only next fiscal year onwards. So you will kick in from the second half of fiscal year 2022 and onwards. So that part is there. Can Mr. Taniyama or other colleagues give for greater details on this point?

Thank you. Taniyama here. This was already explained by Mr. Sawada right now. With regard to network, yes, transmission networks and IT transmission routes, we'll now have plenty of communications and DOCOMO share that. And so there is -- system is also integrated as well. And also, there could be volume discounts as a result of a joint procurement. And that will come into the calculation pertaining to the network. And also in terms of monitoring, the operation itself could be unified, thereby leading to cost reduction. With regard to the IT part. Yes, by internalizing the cost, we'll be able to reduce the cash out part. And we can have both shift to cloud, which will also translate into cost reduction. And maintenance as well will be integrated, which means that the IT department efficiency can be improved. So as a result, I believe we'll be able to realize concrete results.

So I think we're going to be reflecting very small items in this calculation, very detailed items are being incorporated. My second question is this. So you're now having the refinement of the NTT Group medium-term management strategy. And what about shareholder return? I would imagine that some transformation will also be incorporated into this refinement. May I take that similar thoughts will be carried out in relation to the shareholder return as well in the context of this refinement?

Yes, in principle, it is the same. Our extense will remain the same. Meaning that as was the case in the past, we'll continue to pursue continuous dividend increase and also we'll also carry out flexible share buyback program as well. So we'll continue increasing our EPS target. This [ isn't ] the case for the past 5 years. This is drawn primarily from increase in profit. But of course, it's carried out roughly JPY 250 billion annual buyback on average. So that will continue. That is our basic thinking.

If that is the case, then this JPY 100 billion synergy effect that you anticipate, this is the major item that you're going to be focusing on? Is that the case?

Well, let me see, how can I put it? Right now, it's JPY 304, I believe. Next year it is likely to exceed JPY 320. So share buyback and cost reduction will be realized. And this will have an upward effect of JPY 20 thereabout. So in the next 2 years, if we want to increase EPS by JPY 50 over the next 2 years. That alone contribute -- that type of contribution will not be sufficient. So we'll have to support this increase in EPS through various efforts. That is indeed the main focus of our refinement at this time. But of course, the major -- the basic part is DX, digital transformation because with digital transformation, we're able to increase our performance. It is a stretch, naturally. But DX is the basic foundation.

Next is Nomura Securities, Mr. Masuno.

This is Masuno, Nomura Securities. I have several questions. Overall structure, I want to confirm. DOCOMO becoming 100% subsidiary, no more minority shareholder at this point is JPY 50. So the conversion of JPY 320 plus JPY 50, JPY 370. And you have the new target of JPY 370. This means that at this time, the DOCOMO and NTT Communications synergy JPY 100 billion cost reduction additional JPY 200 billion, total JPY 300 billion positive factor will be offsetting some kind of other negative JPY 300 billion, it appears. This may be the lowering of the price of the mobile phones and overseas profit size delayed. And all in all you are showing these negative factors, it appears. So what are the negative factors that exist? And how much negative factors do you think you can offset and still be all right?

Masuno-san, thank you very much for your question. The initial structure, 2018, in autumn 2018 we said JPY 320 in 2023. We have decided to raise from JPY 215 to JPY 320. At that time, we included M&A in the thinking. So the M&A part, the conclusion was the M&A was DOCOMO. The investors and analysts often exclude this M&A part and started from JPY 320 without M&A. So you seem to be -- try to win double. It's not that they are negative. In order to achieve JPY 320, yes, we did the M&A, but this was the inclusive factors. And how much more was -- is possible with the question last year. My view is net JPY 50 stretch. Pure JPY 50 stretch. This is the picture here. So it's not that anything negative is factored in. The baseline is yes, ahamo and other 2019 Gigalight and Gigaho lower pricing resulting lower profits. But that is, as you're aware, it by 2020 recovered. We recovered in about a year's time. So in the EPS calculation, we did fill up -- we covered and filled up and then another JPY 50 stretch to reach JPY 370, which means this is a pretty challenging target. So that is how it is structured.

I see then according to that, the current price reduction of DOCOMO this time around what is happening and currently overseas sales is behind. That is already factored in into the current new target?

Basically, yes. Overseas side, yes, concern is the economy and higher prices, if they hit customers more than our current expectation, business can be more difficult.

And then my second question is rather than contents. For this fiscal year's planned EPS from JPY 302 to JPY 370, which means more than 20% in 2 years' time, which means to extend 11% per annum EPS growth would be necessary. Yes. Share buybacks if they are going to happen constantly then in operating profit basis, you would have to be increasing operating profit each year. And looking at synergies with DOCOMO. Next fiscal year, there will be effect next fiscal year. And in March 2023, there will be more synergy effect. How will the synergies be realized?

Yes, you're right, in 2 years' time, the second part of the 2 years, there will be more profits. And JPY 50 increase, out of which 80% or close to 80% is from the profit increase in our plan. Yes, there will be share buybacks as well too, definitely. But structure-wise, we will be driving up EPS in profits. This is the current target.

I see. Out of which, this time, DOCOMO synergy to JPY 100 billion in 2023 and JPY 200 billion in 2025. When you reach JPY 200 billion level, then the contents will be cost reduction. You talked about ITs and DX to reduce costs. More than that, the top line increase would be contributing more? Is that the case? In the top line, looking at NTT Communications, the enterprise business will increase to JPY 1.6 trillion, JPY 2 trillion. And then if there is going to be JPY 400 billion increase in profit, what will be the picture? What is the relationship between top line and profit, JPY 100 billion, JPY 200 billion number? Can you explain?

The enterprise side, JPY 400 billion increase, that is communications 10%, 15%, more than 10% or so profit margin of communications today. So if we calculate quickly, JPY 600 billion -- JPY 60 billion positive, so this profit will be generated as it is. And JPY 200 billion or about half of JPY 200 billion will be more customers, an increase in ARPU or ASP increase, more proposals, more revenues side, inclusive of smart life. So enterprise side, JPY 40 billion to JPY 60 billion in profit increase is expected.

In the case of JPY 200 billion, would the content be the same half cost and half top line increase?

The JPY 400 billion in 2025, which means JPY 400 billion if considered a synergy, that is the assumption. So the structure is JPY 200 billion synergy, out of which -- how do we factor in? There can be more incorporated. So it's difficult to explain in a straight manner -- straightforward manner. I just talked about the numbers that is visible.

All right. There are some decreases and increases, too. Yes. But as you explained, half and half, cost versus top line contribution, this will be the same whether JPY 200 billion and JPY 100 billion synergy effect?

Yes, yes, the 50-50 break is the same. But on the other hand, there will be sales increase other than enterprise business too. yes. Yes, smart life revenue will go up. Smart life and enterprise in both there will be a lot of increase in sales and profits, both. That is how DOCOMO is planning. Within synergies, the top line increase side synergy in enterprise sales activation is one. Another is new service introductions, software services launched to smart life and enterprise on both. Smart life will be counted separately.

I see. And then my final question, sorry, September, on the IR Day, you also announced cost reduction, plus JPY 200 billion. That part. Looking at the content in the company NTT East and West will be the company NTT base mean contributors, but business with fixed line communications will they be benefiting a lot.

What you're talking about in DX total, yes, DOCOMO is also a big contribution, too. But NTT East and West, they will be achieving a lot of IT and DX results. But we lower cost throughout the year. And usually, DOCOMO and East and West are 50-50 in cost reduction usually on a full-year basis. So we're not just looking only at East and West. And as Mr. Taniyama stated, NTT DOCOMO is a bit behind, but they will switch the IP of the cloud in 2024. I think that will be 2024. That will also have effects and pretty big effect.

I see. Then in that case -- sorry, I'm spending a lot of time, but this will be the final. So when DOCOMO and Communications will be integrated, the JPY 100 billion synergy effect and half the cost reductions, and x2 will be added.

But that is not the pure result. There will not be the pure net contributions, but we can expect some results.

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

So with regard to the segment of each operating companies, what about the directionality of the profit of each business segment and the operating companies? That is what I wanted to ask. With regard to NTT Communications, well, the former NTT Communications or the anticipated growth of the enterprise business, which means that the increase in profit for NTT Communications will be quite significant going forward. So the former DOCOMO increase in profitability. What about NTT East, West and NTT Urban, can you share with us the expected increase in profit as a result of this structural reform?

I think across the board, they will all be trending upwards in terms of profitability. Now there's a variance in terms of the level of the increase in profitability. When it comes to the enterprise business, or should I refer to this as new DOCOMO Group, I'm not sure, but enterprise business and also the smart life business, these 2 segments will probably see significant increase in margin among all the increases in profits across different operating companies. Now turning to NTT Data for the last couple of years or the next couple of years, we anticipate quite a strong growth, especially in the global front as well. But as far as the actual amount is concerned, we're starting from JPY 110 billion upwards. So if you compare it to DOCOMO, if it's the same margin, the actual value will be different. But I think that's the third component. With regard to NTT Ltd. and other players. Well, also NTT Ltd., structural reform efforts will continue at NTT Ltd. But as far as the profit is concerned to the structural reform, so this would translate into increased added value services so that this could translate into increased profit. But 7% for fiscal year 2023, that is the target, and it's now within our sight. So the amount percent may not be that large, but the margin will be achieved. So that's the fourth one. With regard to NTT East and West, we still see increase in profitability. But then in some parts of the market, the business is already saturated. But as you know, parts of the business are now having a trend towards increase in both the profits and revenue. It depends on the assessment of the GX in the marketplace. As far as NTT Urban, there's going to be quite significant investment, so it will be a challenging situation. But they will be pursuing securitization. That is the plan. It will not be a one-off event. It will be a continuous effort for securitization. And with that ash, they are considering reinvestment. We're trying to shift to that model. So that being the case, their profit will increase in a robust manner at NTT Urban. So the amount per se may not be large, but the gross margin will increase. As for NTT Anode, it will see improvement.

[Audio Gap] for a picture, how does that sound? Next, with regard to acquisitions, especially outside Japan, you're beginning to make some remarks about potential acquisitions on a global basis. Are you factoring any potential acquisitions in your new target? Or is that not factored in?

Well, this time around, we're considering this -- we are not considering this in the medium-term target at this moment because we are considering this on basis. Yes, we want to see acquisitions going forward. But contributions from acquisition are not reflected in your projection for the increase in profit.

I see. So what about your policy? You're going to -- you want these companies to actively pursue the acquisition. Is that the position of the NTT holding company?

Yes. Well, acquisitions require capacity and abilities. They will have to consult us, but we would like to see these operating companies do that both capital alliance and investment and also acquisitions. And also with regard to joint ventures, especially for NTT East and West, hopefully they will actively be involved, especially in the regional revitalization program type of acquisitions.

The next is Citigroup Securities, Mr. Tsuruo.

This is Tsuruo speaking. And first question, numbers. I want to ask you about the numbers. This time, NTT DOCOMO sales to CapEx, CapEx to sales, 17% will come down to 16.5%. This is the one goal we announced. And the basis to that sales amount and CapEx amount, what are the numbers, respectively? Under the new organization, what will be the sales and CapEx numbers? And how much overlap and at what speed can CapEx be reduced?

Someone state the numbers.

This is Taniyama. Specific numbers, many apologies, is not disclosed. But DOCOMO side sales under the new DOCOMO Group, JPY 6 trillion sales profit is about JPY 1 trillion. The sales will increase. And CapEx, as mentioned, will be streamlined. And there will be reductions in spending in networks and IT. And as a result, we'll achieve 16.5% from the current 17%.

One follow-up question. NTT DOCOMO Group, the new DOCOMO Group Enterprise sales, how much sales increase you have talked about? But in smart life, how much sales increase? And in total, what is going to be the sales, any guidance?

Sorry on that. This time we are not disclosing. Yes, enterprise will go up, increase. But as Sawada mentioned too, Smart life will also be expanding at the same scale. We will be increasing smart life business. And there will also be cost reductions together too.

Smart life, didn't they say they will be doubling the business?

After this, there will be a presentation from DOCOMO. Maybe you can confirm with DOCOMO. Please ask them.

Yes, the remaining questions will be directed to the DOCOMO later. And then my other questions, NTT Group ROIC 8%, DOCOMO increase 1% to 12% is the goal. So there can be also ups and downs. And what will be the conclusion in 8%? What are the positives and negatives resulting in 8% in ROIC?

We will be proceeding with securitizations a lot -- And off balancing, there are 3 areas. One is demand being very strong in data centers. Here, about 1/3 of the investments will be made by partners. They will be making equity investors. Although 1/3, we can off balance and enhance cash efficiency. This is the current plan. And the second is real estate. CRE inclusive. There are several long-term real estate development plans. On upfront, it is difficult to securitize. Therefore, we make investment first -- once, which means we cannot quickly sell existing assets, which means a lot of investments and lower ROIC. So the second element is an element to lower ROIC. And the third is we announced our environment vision by 2030, JPY 450 billion renewable energy investments is assumed. This is low interest rate, but returns will be coming in. But in terms of ROIC, still negative impact on ROIC. So increasing in profit and enhancing cash efficiency, but raising above the current target of 8% and raising to 9% is difficult. We cannot do that because we use a lot today, currently.

Next question is from UBS Securities, Mr. Takahashi.

This is Takahashi here.

Yes, we can hear you now. We hear you okay.

Good. Two requests. First, the first question is this. Maybe this is a repeat of the similar question. So JPY 320 increase -- sorry, sorry, EPS target of 320 -- JPY 370 from JPY 320, I wanted to ask the continuing factors for the increase JPY 320 to JPY 370. But since you answered that in the first question, let me confirm once again. So when you set the guidance of JPY 320, you mentioned that this factor is impossible acquisitions. That's what you mentioned at that time. But are you considering acquisitions that can have a significant impact on EPS, which is on par with the impact of DOCOMO? Was that the case?

Well, no, we're not thinking on par with the size and the scale of DOCOMO when we factored -- when we could consider this target in the past. In terms of the size of profit. Yes, DOCOMO's profit is quite large and sizable. And we thought that we could do something that is close to the size of DOCOMO. But if that could not be done, but then we would have considered a possible expansion of our share buyback program. So that was the flow which we envisioned. But then in the past couple of years, as you are aware, we were able to realize JPY 320 1 year in advance, which means that, yes, we acquired DOCOMO. And we had upside in terms of contribution to EPS. So if we consider the upside contribution from DOCOMO acquisition, JPY 320 is something that we thought that could be achieved considering the upside. To be quite candid, Yes, the major event of making DOCOMO to a whole new subsidiary firm and we were trying to work out how much upside you able to realize because this was very difficult to see how much upside do you able to realize as a result of making DOCOMO a whole new subsidiary firm. But I think we're seeing a very strong robust effect of the DOCOMO as the coming year subsidy firm as a result. So the JPY 50 increase, you mentioned that this over positive impact. When you consider both the positive and the negative elements, what is the true net upside effect as a result of this acquisition? Because -- well, we are not promised acquisition of DOCOMO in the past. We had a positive impact of JPY 180 billion in terms of the profit, and that translates into JPY 50 impact on EPS. So they had an upside. And we were able to realize achieving this target 1 year in advance, which means that JPY 20 -- we were able to see JPY 20 boost. That is my recognition. So organically, maybe would have gone somewhere between JPY 320 and upwards of JPY 340, JPY 350. Organically, we would have revised our target from JPY 320 to JPY 340 or JPY 350. But then this time around also had JPY 100 billion impact from synergy. This will accidently lead JPY 20 or so upside for EPS, which means that EPS target of JPY 320, it's going to be within asset. And that's why we wanted to take on this challenge. That is our thinking.

I see. My second question relates to the synergy part. I just want to confirm. You talked about JPY 100 billion and JPY 200 billion. Is this a cumulative effect? Is this on a cumulative basis? May I confirm that?

No. well, cumulative is cumulative, but the amount that is demand that can be seen for the particularly given year.

So it is cumulative, right? It is cumulative?

Yes.

Okay. For fiscal year 2025, what is going to be, if you will, the ingredient of the curve before you get to JPY 200 billion in 2025?

Well, it's very difficult to say. I'm sure that our working level people have some ideas. But I'm afraid that, that is not going to be a scope of our disclosure. So in 2023 and the 2025, the medium-term target for DOCOMO, these are the 2 major events that we need to consider.

Next is Okasan Securities, Okumura-san.

This is Okumura of Okasan Securities. Earlier, you explained that NTT Ltd., to continue with its restructuring, I think that was the explanation. This fiscal year, I thought that the restructuring will be over to a certain extent. Will Ltd. continue restructuring next year onwards? I want to confirm. And in the current return plan, what is the profit margin of Ltd. in your view?

Thank you for your questions. So NTT Ltd. and NTT Data, both currently, they are undergoing restructuring. And as you are aware, COVID is affecting, and remote work and DX are proceeding, and the movements are very fast. And in global, the various products available and sold and sales structures must constantly change. Because changes are very fast, and we have communicated and communicated themselves. So there will be these future upcoming restructuring that I expect too in this sense. And for profit contribution, 6% is this fiscal year's operating margin plan or target NTT Data and NTT Ltd. together and Ltd. currently what COVID has affected in revenue. And we think that Data will be possible to achieve this. And Global had no profits. But 7% in 2, 3 years is now in sight.

Next question is from Mr. Kinoshita of BofA securities.

Kinoshita here. I also have 2 questions. I know that we're running out of time, but I would like to ask two questions as a way of confirmation. First, with regard to the EPS target, which is JPY 370. You mentioned that it's within sight. But it also represents a stretch. It's quite a stretch target, isn't it, JPY 370. My personal impression is this as far as your company is concerned, with regard to EPS target, you've always set a very lofty target. But once you put out the target, you do achieve this also by employing share buyback as well. That is how I see your EPS target. Now this new EPS target that you have set, is it the same? Can I pursue this in the same manner as in the past targets? You have share buyback of JPY 250 billion, but if that is not -- if that is not sufficient, do you believe that you want to add more? So can you give us your image of how you see the EPS target?

Thank you for your question. Yes. Now, actually, we're following the same principle. Once we set -- well, we have set the target, and we're going to make it an all-out effort to achieve this target. I think our past record speaks to that. We're going to make efforts to achieve that target. So that is the thought behind this new medium-term management target. Now of course, the energy prices are coming up. And of course, there's a question over the real estate, the market in China, for example. So there are some macro level changes. If there should be such significant macroeconomic changes, we may have to reconsider.

Okay. Point taken. Let me also ask the final point. On September 28, you talked about additional cost increase of JPY 20 billion. So the cost reduction will now be increasing for JPY 100 billion up to JPY 1 trillion. In the case of new DOCOMO Group in terms you anticipate JPY 100 billion to be generated as a profit, you also anticipate JPY 20 billion synergy going forward for these 3 integrated companies. Are these 2 separate from each other, dividend and profit increase? I know that this includes contribution from cost. But are there totally separate items? Should we see these two as totally separate?

Yes, you should see them as totally separate items. In the case of DX, DX is the main part for JPY 100 billion -- JPY 100 billion part. This relates to the consideration of the synergy. So yes, these are 2 separate items. But at the risk of repeating myself, the JPY 200 billion part, it is not net based. Please bear that in mind.

Next, Crédit Suisse Securities, Mr. Eguchi.

This is Eguchi of Crédit Suisse Securities. I have just one question to Mr. Sawada. End of the last month, you announced about the carbon neutrality strategy, a change in the strategy. When we talked to you, you seemed to be very confident about IOWN. The basis of the last mid-term plan compared then, the growth direction is now more clear. And the growth investment effect, which means lowering EPS impact. So you revised JPY 50 increase in EPS. But how much push down do you expect in EPS? Or do you not factor this in because this is somewhat quite much ahead in the future? What is the assumption, I want to confirm.

R&D investment, JPY 100 billion to JPY 120 billion, we increased from 2021. This will continue in the assumption. IOWN initial spend is included. But in the mid- to long term, it's CapEx and new fibers, these will be considered in yet. But the range is different. This is the review of the mid-term plan 2 years later. So in that case, for 2 years, yes, we have factored in.

I see. What about carbon neutral? Not much impact, I think you explained.

Yes. '23 to 2025, at these timings, very a little impact, only single order impact. Very little impact on these timings.

Next question is from SBI Securities, Mr. Moriyuki.

Moriyuki is a name. Can you hear me?

Yes, we hear you clearly.

Point of clarification. So EPS, the synergy effect is going to concentrate more or less towards 2023. So may I say that the greatest growth of EPS will be seen in fiscal year 2023? Or is it the case that you'll be adjusting the base through share buybacks? So do you anticipate average growth per annum?

Well, the principal trend is that the significant portion will probably come from 2023. But then how much share buyback are we going to do for fiscal year '22 and fiscal year '23? That is something that we have to discuss going forward. So there could be some variations down the line. We cannot rule the possibility -- we cannot rule out the possibility. But I imagine that the greatest contribution, we'll probably see in fiscal year '22 and fiscal year 2023. So as far as share buyback is concerned, it could be really skewed towards fiscal year '22. We don't know yet. We just don't know yet.

Okay. One more point. With regard to CapEx to sales now changing the view on the profit what about CapEx to sales. I think you're succeeding your previous guidances, but there's significant synergy and cost reduction. And we thought there was room to reduce CapEx to sales even more. so why is it that you're not able to reduce CapEx to sales? What additional costs do you envisage?

Well, this was supposed to be completed by fiscal year 2021. And we have not yet really scrutinized the CapEx to sales for fiscal year 2023. So this year -- this fiscal year, we will probably end up with a CapEx to sales ratio of roughly 13.5%.

But what about fiscal year '23 to fiscal year 2025?

As you mentioned, Mr. Moriyuki, we probably have to consider synergy and also unification of the duplicate network. So network investment will probably come into play. So that effect should be considered. But this time around, we do not reflect the factor in those elements actually.

I see. So it's not -- so you have not refined the number, but there is a reduction -- potential for reduction in costs?

Yes, that is the case.

But with regard to data center investment, well next year.

Yes, I said that, that was the part that will increase in costs, right?

But then this network -- these targets only cover network. What about IOWN? What there is -- what about IOWN?

No, IOWN within the cost will not come into play, well probably be after fiscal year 2025.

Next is Morgan Stanley, MUFG Securities, Mr. Tsusaka.

This is Tsusaka speaking. Can you hear me?

Yes, we hear you.

Just one question this time. JPY 370, there are various KPIs shown and what is the background discussion within the management behind these numbers? You have acquired DOCOMO. And from the time you made 100% subsidiary. There were thoughts about NTT Communications and Comware. These plans existed for a long time. On IR, you said JPY 320 EPS target. And you were very cautious when you spoke about EPS in IR, according to my memory. And what were on the table where there were no many changes, but still JPY 320, very cautious inclusive of DOCOMO and M&A. And now you have a big increase to JPY 370. What is the reason for this big change? What is the mindset within the management? And what were the discussions to decide on this new target of JPY 370?

Thank you for your question. Not much really changed. But M&A part was expected to start with. As of the May timing, we knew that we were 1 year ahead. And the number built up by the companies were a stretched goal. But adding synergies and adding further measures, we thought this number is not achievable -- not necessarily achievable. It can be reached. So we did a lot of discussion within the management. And with the Presidents of the 7 major companies, we had discussions, too. And as you are aware -- sorry, excuse me, this EPS is now a performance target. Therefore, I talked with the 7 companies' members, and we all agreed on this target. We were all positive, forward-looking. And this time, we stepped in to come up with this JPY 370 target. Share buybacks will be managed by the holding company, but cross group cost reductions can be worked upon by the group. But in this DOCOMO is now in the tone to more than overachieve. Is that the kind of tone? Now at the base part, over the past several years into NTT East and NTT West, every year, several 10s of billions yen or JPY 100 billion achieved, and NTT DATA in these past several years, especially under digitization, we can expect upward results and global business that used to be minus is now moving to 0 and to the positive side. In this regard, rather than DOCOMO, the various portfolios are trying hard. And all the work and efforts crystallized together is resulting into JPY 370. The synergy, JPY 100 billion will raise JPY 20 in EPS, we can calculate itself. But there are all others raising up the results. It's the result of everybody making their efforts, the power of everybody.

Thank you. These are all the questions we have.

So we would now like to conclude the presentation with regard to refinement of the NTT Group medium-term management strategy. We now like to go on to the presentation by NTT DOCOMO. NTT DOCOMO will carry out their press conference about new DOCOMO Group medium-term strategy. Please stay connected. Thank you for joining us. Thank you.

Thank you very much for joining us today. [Statements in English on this transcript were Spoken by an interpreter present on the live call.]