9432.T FY2026 Q3 Earnings Call Transcript
Date: 2026-02-05
Source: Financial Modeling Prep

Akira Shimada: Thank you for participating today. I am Shimada, President of NTT, Inc. I will now explain the financial results for the 9 months ended December 31, 2025. The consolidated financial results for Q3 FY 2025 show increased revenue and profit year-on-year. Operating revenue reached new record high levels in Q3. Although operating revenue was impacted negatively by approximately JPY 55 billion due to foreign exchange as a result of expansion of enterprise business across group companies and increase in revenue by transferring data centers for REIT, operating revenue increased by JPY 371.3 billion year-on-year to JPY 10,421 billion. Regarding EBITDA, while there were cost investments at DOCOMO to reinforce its customer base and to implement measures to improve mobile network quality due to increased profits from the expansion of enterprise business at the group companies and transferring data centers for REIT, EBITDA increased by JPY 104.8 billion year-on-year to JPY 2,657.3 billion, and operating profit increased by JPY 57.9 billion year-on-year to JPY 1,457.1 billion. Profit driven by a rise in operating profit and other factors increased by JPY 75.4 billion year-on-year to JPY 926.1 billion. As for operating revenue and operating profit by segment, in the Integrated ICT business segment, Consumer Communications business declined due to factors, including reduced mobile communication service revenue. However, growth in smart life business centered on finance services and enterprise business led to an increase in operating revenue year-on-year. Despite profit growth in smart life business and enterprise business, because of cost to reinforce the customer base and improved network quality, operating profit declined year-on-year. As a result of measures to reinforce customer base, sales capability is steadily improving and MNP was positive during Q3. In the Global Solutions business segment, despite an approximately JPY 55 billion negative impact from foreign exchange rates, driven by business growth domestically and internationally and transferring data centers for a REIT, operating revenue and operating profit increased year-on-year. In the Regional Communications business segment, although there was a decline in legacy business revenue due to factors such as growth in enterprise business and the fiber optic business revenue, operating revenue and operating profit increased year-on-year. Net adds in fiber optic service increased year-on-year due to strengthened sales of 10 giga plan and comprehensive bundled service for condominiums. In Others, such as Real Estate, Energy, et cetera, due to expansion in office, commercial and residential businesses within NTT Urban Solutions, operating revenue increased year-on-year. Next, I will explain the full year financial results forecast. In order to reflect the revised forecast of DOCOMO and NTT DATA Group, we have revised downward the consolidated forecast for NTT this fiscal year. Details will be explained later by each company. Regarding DOCOMO, amid intensifying and prolonged competition requiring greater-than-expected investment to reinforce its customer base, it is necessary to make sure to continue implementing key measures for future growth, such as measures to reinforce customer base and improve network quality. As a result, operating profit has been revised downward by JPY 83 billion. Particularly with respect to DATA GROUP, reflecting the realized profits of gain on the transfer of data centers for REIT based on market environment exchange rate fluctuation, the operating profit was revised downward to JPY 26 billion. Particularly at DOCOMO, intensified competitive environment is expected to continue in addition to the achievement of the results by strengthening of customer base and improvement of mobile network quality, we endeavor to recover performance by accelerating efforts through growth in smart life business, focusing on finance and enterprise business and cost reduction through fundamental review on organization and business processes. The summary of fiscal year 2025 financial result forecast by company is shown on the slide. Next, I would like to go over 4 topics. First, let me talk about the mass production of photonics-electronic convergence devices. The switches using photonics electronics convergence devices through collaboration with supply chain partners, including Broadcom and Accton Technology will begin commercial provision within FY 2026. Furthermore, for the mass production of photonics-electronics convergence devices, innovative device is continuously preparing to increase production volume per line through automation of assembly, mounting and inspection processes to expand production lines in response to demand. Through these efforts, up to 30,000 units production per month will be feasible, and we would like to proactively cater to the demands of hyperscalers and cloud operators. Next is social implementation of AI, integrating digital and physical domain. Till now, NTT has been promoting introductory support to respond extensively to globally major LLM in addition to the development and provision of genuinely Japan-made LLM tsuzumi. The order amount for our AI business for FY 2023 Q3 was JPY 147.8 billion for the entire group, far exceeding the pace of achieving annual target of JPY 150 billion. Currently, initiatives at Toyota Motors, Mujin and Trial Holdings are making progress. And while we continue to collaborate with the leading companies of each industry domestically and overseas, we will accelerate the social implementation of AI that integrates digital and physical domains. Next, I will talk about exhibition at MWC Barcelona 2026. At MWC Barcelona 2026 to be held in Barcelona in March, photonics unlocks an intelligent power optimized future is our key message. After 7 years, we will jointly exhibit as NTT Group. I will deliver a keynote speech on March 4 and speak about our efforts to reduce power consumption through optical technology centered on IOWN, such as photonics-electronics convergence devices and optical quantum computers. Please come to the event. On the progress under medium-term management strategy, our efforts since November is shown on the slide. This concludes my presentation. Thank you for your attention.
Operator: First, we will accept questions from people in this room. [Operator Instructions] Are there any questions? The person -- the left in the back as seen from my side.
Unknown Analyst: [ Nippon Kanakia ], [indiscernible] is my name. My first question is, fiscal year-end DOCOMO 3G is going to end. And so there's this milestone. And before this milestone, are there any comments? And on a related note, DOCOMO, operating profit and full year guidance, there are to be revised downward. And in the current fiscal year, customer base reinforcement is to be accelerated. And towards the next fiscal year, do you think this trend will continue, this accelerated trend will continue? These are the 2 questions I have.
Akira Shimada: Thank you for the questions. First of all, fiscal year-end, there is the 3G milestone. And towards this, vis-a-vis 3G customers, we are making sure that we recommend the 4G or 5G to them. And in addition, handset device discounts are also offered. We are making sure these measures are steadily taken. But ultimately, about 2 million subscriptions, I think, will end up remaining and most are IoT-related subscriptions are likely to remain. And therefore, to actual users, we would like to explain in detail, respond meticulously so that they can migrate as much as possible to 5G. And DOCOMO, their most important mission now is to maintain and expand the customer base and quality improvement has to be made further. These are the 2 main challenges of DOCOMO. And this fiscal year, they are making utmost effort in this regard. And next fiscal year, this effort is to continue. And 35% has to be met by all means, I may have mentioned. And the message was not to reduce share to below 35%. That was the message I wanted to get across, to make it easy to understand. But maintaining DOCOMO's current share is important for the future, whether it be finance service or entertainment in order to offer value-added services. This kind of customer base should not be deteriorated any further. And we have to be able to offer value-added service to a variety of customers as much as possible. And for that purpose, we have to expand our customer base. This concludes my response.
Operator: Next question, please. The person at the left.
Yasuhiro Kobayashi: From Yomiuri Shimbun. My name is Kobayashi. I have 2 questions. The first one is on IOWN. Photonics-electronics convergence devices, mass production will be commercialized. And what is the scale of sales? That is what I would like to know. And with AI, the order amount will be JPY 148.7 billion. But in terms of net sales, how will that translate to be?
Akira Shimada: Starting from the photonics-electronics convergence device, at this point in time, we cannot state net sales. That is because the price negotiation is ongoing at the moment. If I state figures, you will be able to arrive at the unit price. So I would like to refrain from responding to that question. AI, JPY 148.7 billion -- JPY 147.8 billion. Some of them are early processes or some of the orders are in the order of JPY 10 billion, and the period will be slightly longer. So in principle, within 6 months or so, they will be booked as sales, but some of them would require a few years. Next fiscal year, we are anticipating the half sales from there. So we are already entering into the fiscal year and some of them are order placed in the first quarter.
Operator: Next question, the person in the middle, wearing blue shirt -- navy jacket, please.
Unknown Analyst: Nikkan Kogyo Shimbun, [ Shimada ] is my name. I have 2 questions. First, downward revision of guidance. I take a look at the reason for vision and DOCOMO's intensifying and the prolonged competition environment as well as network improvement -- the network quality improvement that is incurring cost. I want to know a bit detail about the reason. Sales promotion, much more than expected. There's more cost incurred for sales provision. Why is that? It was network quality improvement, base station construction cost is increasing much more than expected. I want to know in more detail the reason for the revision.
Akira Shimada: First, quality improvement. It's mainly investment. Of course, to a certain extent, there is cost incurred. But rather, we have a plan and about JPY 50 billion per year, there's increase in investment. And that is how we will respond, mainly speaking. And cost is increasing because of the sales promotion cost. And the point is residual value is set when handsets are offered to customers. But when it comes to customer percentage or customer rate, there are more customers than expected that return their handsets, and we had to provision for that. And there's that. And in the case of DOCOMO, I think details will be explained by DOCOMO. And sales promotion is being conducted by competitors as well. And under such circumstance in Q3, the 3 months as well as in January, they are facing difficulty and they have to respond to the extent possible, and that is incurring cost.
Unknown Analyst: And the second question, wage hike, spring wage negotiations have started towards a wage hike. And under such circumstances, wage hike, Mr. Shimada, what is your thinking about the wage hike and the price pass-through cost reduction? How are you intending to secure a source of funds for wage increase?
Akira Shimada: Basically, 12 years in a row, we have been conducting a wage hike already. So it's important that we continue this wage hike. However, when it comes to the level of wage hike, we have to negotiate with the unions, and it depends on the outcome of negotiation. It's true that cost, there's various kind of cost increasing and labor cost is increasing as well. And the services that we offer, conducting a price hike might have to be necessary. But as I mentioned, particularly in mobile, intensified competition continues. In that sense, in various ways, we have to try to reduce cost and increase efficiency, and we have to introduce AI. By taking these various measures, we have to absorb increasing cost. That is what we have to do for the time being. And if possible with the understanding of customers, if we can increase unit price in various ways, that will be desirable.
Operator: Then to my right, the person in the second row.
Unknown Analyst: [ Koyashima ] from Kyodo News. I have 2 questions. The first question is about Rapidus. There's additional investment, and I would like to confirm the fact. And what is the expectation to Rapidus? And the second one is TEPCO, they are requesting for external partners. And data center and AI, there are some areas you excel, but do you have the intention to participate? Or do you have interest?
Akira Shimada: Starting from Rapidus investment, I would like to refrain from making comment. Please ask the question to Rapidus. But on the other hand, with Rapidus, we have much expectation. Photonics-electronics convergence device, as you saw in the materials, at around PEC-3, we should be able to work together. And together with the President Koike, we have been speaking and Rapidus has a front-end process and the back-end process, and they want to have the full initiative. So in the back-end process, something like a PEC-3 will be embedded so that the product value will be enhanced. So we would like to participate in that effort. And about TEPCO, we do not know the details at all. So we would like to refrain from making comment. My apologies for that.
Operator: Next question. The person behind the previous person.
Unknown Analyst: NHK, [ Toma ] is my name. About DOCOMO, DOCOMO has a finance service. They're trying to strengthen finance business. And Mr. Shimada, in your interview and so forth, you talked about the concept of setting up a holding company. And what is the progress of this concept, the aim, timing, et cetera? At this point in time, what is the status?
Akira Shimada: Thank you for the question. Holding company or holding company and operating company for finance service, I've wanted to set up this kind of company, and I've said that in various occasions. And if possible and if the environment allows, from around April of this year, we want to set up this company. And of course, our M&A -- well, DOCOMO SMTB, Sumishin Bank, and Monex and DOCOMO Finance. And these M&A partners will belong to the holding company and there's d CARD, d-Barai , d PAYMENT and a company that can handle all kinds of finance services that we want to set up. And for one thing, FSA, we dialogue with FSA and finance-related governance matters would have to be clarified, and that's one purpose. And MIC, Ministry of Internal Affairs and Communication have been our regulatory authority, but finance business will be within the realm of JFSA. So we have to be able to respond sufficiently to JFSA-related matters. And if things proceed as scheduled around the summer, we do want to change this kind of a structure.
Unknown Analyst: By the way, DOCOMO, as you explained, there's the competitive environment and there are cost-related matters and finance-related business, bringing them together. And by so doing, do you think the company -- the group can recover and grow further?
Akira Shimada: First, we have to reinforce customer base. And in order to do that, finance business is important as well as entertainment as well as new venue business, as I mentioned in my explanation, and we want to offer these kinds of services as value-added service to the customers. And of course, for that, we have to be able to collaborate well. And details, if you ask Mr. Maeda, he may not be available to respond in detail, but at some kind of a timing, we do want to create an opportunity so that we can explain about DOCOMO is intending to do. At a certain timing, I think we'll be able to explain in detail.
Operator: We would like to entertain one more question from the floor. The person at the front row, please.
Unknown Attendee: Free writer, [ Sano ]. I have one question. The other day, NEC from the announced withdrawal from the existing base station business, and you made the investment in 2020, and you have been trying to expand to now. And I understand that the business would continue, but NET (sic) [ NEC ] is going to downsize this business. And what is the perception of NTT as a shareholder of the company?
Akira Shimada: Well, NEC on the existing base stations, I have been speaking with President Morita, and he will continue to do that. And what is used for the services such as the equipment and the software of NEC, we do not have any concern over that. But on the other hand, from that perspective, in 5G, domestic vendors are not so competitive, which is unfortunate. So in the next plan or for the new service deployment, domestic vendors to produce good products so that it will be desirable for us to use again. So we would like to look forward to that. So specifically, are you considering to have any actions -- specific actions we do not have from our side.
Operator: We will now respond to questions from reporters participating online. [Operator Instructions] Are there any questions? No questions? Since there are no questions from people participating online, we would like to ask any -- if there are any questions among the people in the room, the person in the right-hand side, please.
Unknown Analyst: Toyo Keizai, [ Chaima ] is my name. Downward revision of guidance in relation to that, once again, I want to know that I think a substantial factor is concerning DOCOMO. And compared with the initial guidance, you made efforts for sales promotion, but other companies were making effort in sales promotion as well. As a result, the competition intensified and things are not going as planned. Well, what specifically was different -- is different compared with the initial guidance? And bearing that in mind, next fiscal year by segment, including Integrated ICT segment and DOCOMO, what is your current prospect as much as you can share with us?
Akira Shimada: What prospect?
Unknown Analyst: Performance forecast for each segment.
Akira Shimada: First, sales promotion -- concerning sales promotion, actually, Q2, DOCOMO lost in terms of MNP competition, 0.5, we stopped that service. And as a result, there was a decrease in volume. And after that, we should not intensify competition too much. That is what we have to agree upon with our competitors, but still, our competition is not slowing down, moderating, not moderating. And last year, from the second half of the year, we made a lot of effort towards sales promotion. And this year, we thought the competition will settle down. That was what I was expecting. But in reality, competition rather is intensifying further, not moderating, which means we had to respond sufficiently in this kind of situation, and we should not be defeated, and that is why this current situation is continuing. And we've all spent a lot of cost, all main players in the industry. So next fiscal year onwards, what is the situation likely to be? It's very difficult to forecast. But if there is a competition, we have to win. So we have to continue our effort. If there is competition, we have to continue our effort. And by segment, DOCOMO segment, is that what you want to know? Microphone was not on. Next fiscal year, we have to prepare our next fiscal year's plan. It's not fully prepared. And DOCOMO, at least this year will be the bottom for DOCOMO. However, quality improvement about 20% growth every year and number of chats is increasing because of increased video usage. We have to respond to these needs so that we can ensure customer satisfaction. So we do have to continue our effort to improve communication quality. And NTT East and West, enterprise business and the [ smart life ] business of NTT West and so forth, they are recording solid performance and stable performance, and we think we can stably continue these businesses. End of next fiscal year, or this year or next month or so, fixed telephone, we would like to explain. I think there will be an opportunity for us to explain about what to do with our fixed phone business. And NTT DATA Group, they are enjoying organic growth. And globally, in order to grow further, what should be done. And NTT DATA's midterm plan is to be reviewed. When we announce our financial results for this fiscal year, we have to think about what to do with our midterm plan, and we want to be able to use NTT DATA so that we can enjoy synergy for the group as a whole. So that is what we are considering to do going forward. Does that answer your question?
Operator: Moving on to the next question. The person at the front row.
Unknown Analyst: [ Kita Watch ], my name is [ Sekiguchi ]. On DOCOMO's business, this is related to downward revision. What is the view on capital expenditure, especially next fiscal year? To what extent are you going to tolerate the increase of investment? Today, when I look at the materials from DOCOMO, the capital expenditure is going to increase by JPY 32.7 billion. And now how do you evaluate JPY 56.5 billion? You mentioned that the performance is now bottoming out as an expression. But this capital expenditure, how do you evaluate? And after next fiscal year, how are you going to increase or decrease? Can you share your view?
Akira Shimada: It may be better to ask the question to President Maeda. The increase of base stations, capital expenditure will continue. And as I mentioned, quality will be secured. That is important. But on the other hand, this year, venue-related investment is quite significant. So smart life investment will not be so high next year. Basically, large venues have been established quite significantly this year. So totally, we're expecting to see the drop according to our understanding.
Operator: Next question, the person in the second row from the front.
Yuka Nakao: Kyodo News, Nakao is my name. In the presentation material, AI, social implementation. Social implementation of AI, I have a question about this topic. And in each industry, you want to collaborate with leading companies to implement AI. And continuation from this, what areas do you expect after this, any future prospect? And do you want to work on transportation and retail industries and so forth? And in relation to that, AI, there are various use cases and social implementation is likely to proceed more and more. On the other hand, some companies seem to be taking a wait-and-see mood and how much money should they spend and what part should they increase efficiency in? There are some companies who have not been able to make this decision, and that is what I actually feel. And President Shimada, what is your perspective on this? And in order to accelerate social implementation of AI in the NTT Group, is there anything that NTT will work on as -- in the group as a whole?
Akira Shimada: What we explained today is for digital and physical, connecting digital and the physical domain and physical domain has written this Toyota, Mujin and Trial. LLM, not the LM foundation model, but rather the quantitative model -- numerical model. Numerical model related to AI would have to be combined and not just foundational model because factories should not make any mistake in their manufacturing. So LLM is a language model. So mistakes do tend to occur. However, what's written here, everything that's written here should not make any mistakes. If there are mistakes, there will be accidents and incidents. We have to be able to create a model that does not make any mistakes. And for that, we need both technologies, and that's why we decided to share this example. And globally -- and before globally, in Japan, there's tsuzumi. And there are about 2,000 inquiries for tsuzumi from customers and mainly speaking, local governments, finance and medical and health industries because there's data that cannot be made open, cannot be made into Open AI. These are the entities that are inquiring and showing interest in tsuzumi. Private and sovereign related aspects, we think are likely to increase going forward. In that sense, in Europe, NTT DATA in Europe, there's Mistral. There's a lot of demand there. And in that sense, sovereign related AI, we think we'll see an increase in demand. And what's selling most is agile Open AI in our case as well. But rather, we want to be multifaceted and open. And the AI that can be applied by customers, we want to offer consulting on and support implementation. That is what's desirable for us. Depending upon how customers use AI, there are different kinds of features of AI that can be used. And I think various kinds of evolution will take place in the future. But in particular, private-related demand, I think, will increase in particular.
Operator: The person who asked the questions earlier may raise questions as well. We would like to take 1 to 2 more questions. To my right.
Unknown Analyst: [ Nikin ] of [ Financial or Trade Magazine ]. And with respect to tsuzumi domestically -- domestic LLM. And you mentioned about the increase of private and there may be increase in finance, but with 3 mega banks rather than domestic companies, they may be using large-scale AI from overseas. But the regional banks who do not want to employ cost, are you planning to stress small and midsized financial institutions, including regional banks? Do you have any thoughts?
Akira Shimada: I would assume that the financial institutions and as to where the AI will be provided, the choices will be different. Large financial institutions with LLM with large parameters, some will be introducing them or it may be more closed area where they would like to cater to their needs. So the real large LLM will be used in certain locations and a relatively smaller scale in the closed data environment, there may be both opportunities. So rather than scale, it's how it's going to be used that would determine the choice. We do have inquiries after the local government, financial institution is next. So we have the inquiries, and we are receiving quite extensively. There are many sections. And by section, I believe the inquiries are being made. Does that answer your question?
Operator: The person in the back with a dark colored jacket, please.
Unknown Analyst: This is [ Taksuki ] from [indiscernible]. Sorry for the second time. And first about the interest rate environment. On a year-on-year basis, interest-bearing debt in order to expand businesses increase in interest-bearing debt and the CapEx in the case of a company, I think will be costly. As from these 2 perspectives, interest rate hike, how will that impact your company's business? That's my first question. And my second question is the depreciation of the Japanese yen and the foreign exchange rate, how will your group be affected by the foreign exchange rate? NTT DATA, data center REIT because of Japanese yen depreciation, there might be more business coming in, or from both positive and negative perspective, how will you be impacted by depreciation of the Japanese yen? If you could please comment on these points.
Akira Shimada: What do you personally think and what I think as a company happen to be different. My personal perspective is different from company's perspective. Interest rate in Japan, how should I say, gradually is increasing. And I think that's taken for granted. As a person with common sense, I expect that to happen. But of course, I'm responsible for the company's business. And from that perspective, the lower the interest rate, the better. However, on the other hand, data center business, thanks to people's cooperation, there's a lot of return. So even if we bear interest rate, there's a growth potential, we'll be able to absorb that. So we're not so worried there. And depreciation of the Japanese yen or foreign exchange rate impact ends up being positive, which is helpful for us. But the foreign exchange rate, minimum foreign rate -- exchange rate volatility is the best. And the dollar and Japanese yen and dollar and euro relationship, the relationship among various currencies is becoming more complicated. And when it comes to currency or foreign exchange rate, it's best to maintain a stable situation without so much fluctuation.
Operator: Then we would like to take one last question. Does anyone have any questions? The person over there.
Unknown Analyst: Nikkei xTECH, my name is [ Morioka ]. NTT DATA Group is now wholly owned subsidiary, and you spoke about the synergy. But currently, I believe it is under review. But compared to the initial stage, are you expecting to see more synergy? Is there anything that you can share with us?
Akira Shimada: Yes. Thank you for the question. As I have been mentioning initially, synergy is something that we need to anticipate. But more than that, DATA's growth will be even more important. This is both organic and inorganic. Within NTT Group, SI business accounts for roughly 40% and substantively rather than the synergy inorganic would have even greater effect. Midterm plan is something that we need to review and DATA's midterm strategy will be considered as a large positioning, of course, including synergy. But rather than synergy, non-synergy will be greater. This is as I have been mentioning from the outset. Thank you.
Operator: It is now time to close the NTT, Inc. press conference. Next, there will be NTT DOCOMO Group's press conference. If you could please wait a while. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]