Nippon Telegraph and Telephone Stock

Thank you very much for taking the time to join us today despite your busy schedules. We will now begin NTT Inc. financial results briefing for the 3 months ended June 30, 2026.

I am Akaishi from the IR office and will moderate today's session. Thank you for your cooperation.

First, let me introduce today's 3 speakers: Sasaki, Senior Executive Vice President, Representative Member of the Board; Nakamura, SVP and Director of Finance and Accounting Department; and Hattori, SVP and Director of Corporate Strategy Planning Department.

This briefing is being live streamed. Please note that an on-demand webcast will be available at a later date. Today's session will primarily focus on Q&A. For materials related to the financial results, please refer to the presentation materials available on our IR website.

[Operator Instructions] Now we will take your questions. Daiwa Securities, Tokunaga-san.

I'm Tokunaga from Daiwa Securities. I have two questions. First is a very orthodox question, the progress of Q1. My view is that DOCOMO was quite good. So and the East and West is in line and data was also enjoying strong sales. Is that my correct understanding? So compared to your initial forecast, initial target, how are your businesses progressing? That is my first question.

Thank you for the question. So I am Sasaki, became CFO in June. Thank you very much. So your question is on the progress of Q1. Overall, it was a strong financial result. First of all, starting with DOCOMO, mobile communication revenue is almost hitting the bottom. So towards Q2 and Q3, we will take solid measures to achieve strong numbers on a full year basis.

For Smart Life, has already been informed DOCOMO no Ginko is now consolidated. So the sales and profit is recorded, and that is positively contributing to the results. And this will contribute positively in the first half. So that is an upside. And financial business is also trending strongly.

Next, Global Solutions. It is also strong. Some data center business on a year-on-year basis, the data center that were sold to SREIT, the profit was recorded last year, but there's an absence of that profit this year. So it seems like the profit declined, but the data center demand is strong. And we are taking necessary steps and so we are now making good progress for the full year.

IT services, as always, the overseas IT service profit progress seems a bit weak, especially in APAC, is off to a slow start and falling short of our forecast. And so we need to watch closely. East and West are in line with the plan. And U.S. and Anode are also trending strongly.

So against the consensus, it is an upside of JPY 10 billion. So the consensus and your internal forecasts are not that different?

Basically, it's a slight upside, a little bit stronger than our forecast. So yes, you are right.

My second question is a rather vague question. But on a consolidated basis, the inflow and outflow of cash. DOCOMO, due to inflation, the tariff revision to address the inflation will need to be considered. And so you are reinforcing the cash in. But other competitors are now investing in convenience stores or cooperating with government data center deals. So they are cashing out. But you are now reinforcing overseas data center business.

And in the key 17 sectors of the government, you are starting to strengthen your investment for 6G and data center. I'm sure the overseas M&A will continue overseas. So as CFO, how do you find the right balance between cash in and cash out? Where -- which areas do you want to focus on? Or which areas are not so high priority? If you could give us an image.

From Q2 onward, DOCOMO SG is established. And so for DOCOMO, the financial business will be reinforced. So we will generate cash solidly going forward. That is point number one.

And second point, this was in our plan. Our data center investment will be a 30% increase year-on-year. And DevCo, we are using the external fund to reinforce our data center business. And as you mentioned, there is a strong demand now, so we will address and capture that thoroughly. And AI-related business, is dynamic now. So AI-related business will need to be strengthened, and that is very important from Q2 onward.

In Q1, WinWire was acquired. And this is strong in Microsoft Azure. It has around 1,000 employees. And this is part of our initiative to enhance our AI-related business. So AI business will be in Japan and overseas, we will focus on capturing the missing pieces, filling the missing pieces.

So roughly speaking, DOCOMO in Japan, you will generate cash and use it for data to invest overseas. Is that the right balance?

DOCOMO, we have the economics sphere. To establish the solid economic sphere, we need to think of what else we need with DOCOMO. So whether it will be M&A or partnership, we don't know, but we will explore opportunities. So enhancing DOCOMO's competitiveness and data and DOCOMO enhancement of AI business will be the key, including DOCOMO business. So we want to aggressively pursue investment where we can have capture growth going forward.

Next, from SMBC Nikko Securities, Mr. Kikuchi.

This is Kikuchi speaking. I have two questions. The first question is that for the first quarter, it was a strong performance, and you generated profit more than expected. And regarding the profit, well, the details of the breakdown is not still very clear yet, but you had an increase in profit. So there was a progress made.

However, on the other hand, last year, in the latter part, DOCOMO's smartphones replacement program and others increased, and there was a bit of a slow performance. Later on, in the DOCOMO CARD, I would like to ask about it in detail, but the churn rate is also increasing and maybe this is a special factor. But given the situation towards the second half, are you -- are they able to respond to the risk factors this fiscal year?

And on the other hand, generating profit from the data centers. Of course, there are various opinions, but this year, you're planning several billion yen. And within that, the -- based on the capital recycling way of thinking is at the base. So it's not a temporary thing. So I'd like to know about the progress there as well. The data center profit and DOCOMO's second half profit control, do you have a thorough grip on it? That's what I would like to know.

This is Sasaki speaking. First of all, regarding your first question, the downward pressure for DOCOMO, what are the factors? Regarding this fiscal year, the 3G spectrum suspension, we stopped providing the service. So that was a temporary impact.

But basically, we're able to reduce the decline in subscribers and MNP is increasing. And the July recent MNP was net positive is what I heard. So up to now, it's steadily performing. And regarding the second half, as you said, there was a replacement timing of last fiscal year, and we had that impact, but we are reviewing it once again. And therefore, at this point, there is -- we are able to have a control on the negative risks.

Having said that, August onwards, the collaboration with DOCOMO Financial Group is going to start in full scale. Therefore, regarding this part, we have positive expectations. That is the current situation.

And as for the data centers, the data center REIT and including the DevCos, currently, we are moving forward with various preparations. Regarding the REIT, as you mentioned last year, we have established the REIT. So we need the box. So inside that box, what kind of data centers will be included is that what is thought looking at the market situation. And as for the DevCo, currently -- including U.S. and Europe, we have started the preparation work. So within the end of the fiscal year, several projects will move forward. And including the planned sales again, we would like to actually secure that part.

The second question. Maybe there may be nothing that you can share at this point with us. But IOWN, I believe that this fiscal year was the opportunity year for PEC-2. And at Shimada-san's presentation, several pages was used and explained to us. However, the news that we have expected was not included in there. For example, the numbers or where it's going to be adopted or regarding PEC-2, et cetera. Regarding this, at what timing, I'm sure there's nothing you can announce yet. However, at what timing, what kind of things as a possibility will come out? If you able to share something, I would like to know about it.

I, myself, assumed this current position in June. And with the keyword IOWN, what kind of monetization scenario can be created. We have started various discussions regarding that. And regarding the current situation, I'm in the process of confirming various things. IOWN-related technology, in addition to the network-related technology, computing platform or AI model-related technology or data center-related technology and also, as you pointed out, the photonics electronics convergence device type of products -- data center-related technology and also, the photonics electronics convergence device type of products and for improving energy efficiency is the technology as well. So it's broadly rolled out in terms of technology.

And regarding the photonics technology, as you have mentioned, NVIDIA is quite interested in it. So the efforts that we have been making up till now and the direction is not -- was not a mistake. And globally, what is starting to become necessary is this photonics electronics convergence technology.

And we also established an IOWN Fund. We made announcement the other day. And that type of new deep tech-related start-up companies discovery is also conducted in parallel. So including that, how can we utilize this photonics technology and establish an ecosystem globally, it's going to become the key.

So as I have mentioned at the start, towards this broad technology areas, structurally, we want to show that. And in the future, how that is going to be monetized, we are sorting it out and I would like to be able to explain that to you. So I'd like to receive the continuous understanding and support.

Next, Nomura Securities, Masuno-san.

Masuno from Nomura Securities. So looking at the segments this time, the integrated ICT is solid. But on the other hand, Global Solutions, Japan, you're enjoying profit in all segments, all areas. But overseas operating profit is JPY 14.3 billion. So full year, you plan to exceed JPY 200 billion. But excluding the gain on sale of data center, how can you achieve JPY 200 billion from this current JPY 14 billion? Until now, DOCOMO was a shortfall, but data international will be a weak factor or not? What do you think?

So as the former President of DATA Group, let me talk about the numbers. For the international side, we call it hockey stick. Q1 is small, Q4, and the profit growth dramatically towards Q4. That was the plan we had. So towards Q4, profit will grow. Q1, Q2, Q3 are low, but Q4 is much larger. And that has been our plan and our results so far.

Since last year, one trend we see is, IT services profit fall short of the plan and data center profit offset that or cover the shortfall. And in total, we meet the plan overall. That had been the case, the trend since last year. This level in Q1 is not a big shortfall from our expectation.

As I mentioned earlier, APAC, the numbers are a bit weak right now. So we need to take measures on APAC in Q2 and Q3. So that will be very important for our international overseas IT services business. And this profit includes the gain on sale of data center. So we will control that and find the right timing to sell in the appropriate market. So we will combine these measures to build our numbers.

Integrated ICT in Smart Life and Consumer Communications, profit is down, but the profit decline is becoming smaller. Enterprise is a slight decline in profit. So if you could elaborate on the reasons. If enterprise turns up, then the integrated ICT will enjoy a big profit increase. So what do you -- how do you foresee the enterprise in the second half?

As you rightly said, in DOCOMO, enterprise is the only area where the profit is down year-on-year. There are large projects where the cost is recorded first. So the cost -- the expense recording is a big factor here. This is a onetime temporary loss. The business itself is very strong. So from Q2 onward, we think confident -- we're confident we can be positive year-on-year. So including Smart Life, the strong business, DOCOMO, can have a positive number.

So integrated ICT at the current pace will have an upside, exceed the plan quite significantly. So is that the right understanding? Can I expect that to happen?

Yes, I personally have high expectations.

Yes. And last question, in METI, multimodal infrastructure infra project. KDDI has the -- is making an investment for the integrated lab, but NTT has not made an investment. This is a national project. So we wanted NTT flag. NVIDIA 140-megawatt GPU 28,000, and 14,000. NVIDIA CPU Tramexa will be included. So for this national government, the JPY 1 trillion project will be full with NVIDIA. So for this METI project, what is your position at NTT?

For Noetra, we decided not to participate. That is our decision. But on the other hand, we will build the foundational model and leverage it in the country. So we will not participate in the initial project, but eventually, once we develop the foundation model, we will think of leveraging it and partnerships, many partnerships are possible. This dedicated AI projects will emerge going forward.

Noetra is physical AI-centered foundation model. And there are other vertical AI as well that will appear emerge going forward. So as NTT Group, we will be aggressive in other AI areas to contribute to the national government's project. And we are doing a big business globally. So from a global perspective, we will enhance our competitiveness based on the latest trend in the U.S. and think of transferring that to Japan. So that is our stance going forward.

But one point about PEC CPO. So this is a national project. It's a tax project. And so NEC CPO switch will come in, and it's such a city, that is happening. So how can you recover in CPO?

Well, for PEC-2, we are working with Broadcom and Acton and introducing this to hyperscalers. So we are now enhancing our activity on PEC-2. PEC-3 will be further down the road, but for the other PEC technology, we will aggressively move forward to stage recovery.

I have high expectations.

[Operator Instructions] Daiwa Securities, Mr. Tokunaga.

This is to Tokunaga. I have only one question. Mr. Sasaki, it's been what 2 months since you assumed your new position. Currently, if there's something that was different than what you've expected? Or once you've assumed the position, you became more confident? Maybe it's a bit too early to ask. But at this point, your impressions or if you have any aspirations, can you share that with us?

Well, from a comprehensive perspective, I would like to make my comments. Well, DOCOMO's network quality issues and also NTT East and West of legacy business challenges, having various challenges on hand. On the other hand, if we look -- when I look at NTT Group from the comm perspective, well, in DOCOMO, there is over 15 million customer touch points. And as a telecom carrier, we don't see anything like that around the world. We have the IT service engineers by 200,000. And also for East and West, they have an extremely high trust from the regions. So when we think about these positive aspects, by combining these weapons, so to speak, providing a better service or improve the competitiveness, we still can do that. We still have room to do so is what I think. And we have over 2,000 R&D engineers.

So this outcome of the research, how can we use that in the business to turn that into business in a more effective way?

I believe that this group can evolve more and more and develop more. So in that sense, the group-wide comprehensive capabilities, how can we actually show that and practice that? And how can we appeal that to the market and also generate solid outcomes is something that's going to become important moving forward. So -- and at the same time, improving the competitiveness in individual companies and also improve the NTT Group. Our total competitiveness is where I would like to focus on.

Well, up to now NTT for the last several years, the format of the group has been restructured, especially the holding company part. Are you going to further change it? Or are you going to further enhance the current format -- or the structure or the format or organizational structure is about how? So in the AI era, what kind of positioning are we going to acquire?

That what part, we need to sort that out first. That is going to become important and necessary. And within the IE era, the way the IT services should be will change and also the customer touch point is also going to change. So within that situation, how are we going to change our services? We need to determine that point and to think about that how part. I think that's going to be the order, and that's going to be important. Therefore, right now, this how part structure, how is that going to be? That type of a discussion, I think, is too early to have is my current understanding.

Morgan Stanley, MUFG Securities, Tsusaka-san.

This is Tsusaka from Morgan Stanley. So my question is on investor communication. Shareholders and investors and the potential shareholders, your communication method with the shareholders and investors. Can they remain unchanged? So that is my question.

The world is changing very rapidly. In your medium-term plan, your growth driver is changing. So when you communicate with investors, what is appealing? It's important to prioritize your appeal point.

On the other hand, looking at your financial results briefing format, the holding company followed by NTT DOCOMO. And lastly, the social implementation, NTT DATA that is implementing various things societally is coming third. I think this has been decided in the past and has not changed. But now that the world and your business model are changing, so the way you communicate with investors needs to change as well.

And I mentioned this when you announced your full year results to President Shimada. So this bureaucratic financial results briefing format is such a picky. So because you have this great growth and because you came from the global side, if you could share with us your view.

I will take in your valuable input and discuss internally and take the right steps. Our growth strategy needs to be shown clearly to the investors. This is crucial. So how we generate cash and where we bet, which area we bet into the future. We will try to come up with the right format or scenario to be able to clearly explain that to you. So I ask you for your support.

We have surpassed the scheduled time, so I would like to consider the next question as the last question. BofA Securities, Mr. Tanaka.

This is Tanaka from BofA. One question. In the Others business segment, the operating profit is JPY 23.4 billion and the full year is JPY 19 billion. So it is exceeding the plan. So Urban Solutions is steadily performing. But what is the negative factor at Anode Energy? Is there a plan that they're going to record an impairment loss? Are there any factors that are going to create a loss? Or is it just simply you were too conservative? That is all.

This is Nakamura, Head of Finance and Accounting speaking. Well, actually, in this first quarter, more than planned, but a lot of profit being recorded. We had a lot of subsegments that did that. Urban Solutions, which is urban development, they have various real estate. And selling those could occur at any quarter. And in the first quarter, which is the residential sector, there were real estate sold, and that is pushing up the profit. So it seems that the progress in terms of the profit building is faster than expected. Is this answering your question?

That means that from the second quarter, well, it's difficult to assume that 0 profit is going to be generated. So normally thinking it will be 4x of what it is right now. So your plan itself is too conservative.

Well, in that sense, selling the real estate, it's not something that's recurring forever. It is just temporarily. So it's not simply 4x. It's going to become profit. I would like you to understand it that way.

Well, well, that part, I do understand there was a temporary part, but then the other areas, if there is a none like that, it's difficult to think that this is none like that occurs, that the profit is not going to be generated. So to begin with, was the plan not good or no profit is going to be generated moving forward?

Apologies. I may be didn't explain thoroughly. At the time of the plan at the first quarter have temporarily large profit being recorded. This is not going to continue to the latter quarters. The plans afterwards is kind of a flat plan. So that part, you can multiply it by 4. But the others, may be slight ups. But if the business will progress smoothly, there's a possibility that there may be some upside. But actually, not just the revenue and profit side, but on the cost side, at the first quarter, there is ups and downs in terms of cost. So in that sense, expenses, maybe -- because -- it may be planned now, but it may not be used later in the latter part. So in that sense, you can think there will be ups and downs like that.

Well, we have surpassed the scheduled time. So with this, I would like to conclude the briefing session. The NTT DOCOMO's briefing session will continue. So please stay connected. Thank you very much for today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

From now, we would like to start the press conference on the financial results for the 3 months ended June 30, 2026, of NTT Inc. Thank you very much for gathering despite your very busy schedule. I will be serving as MC from Public Relations Department, NTT Inc. My name is [ Ichihashi ]. Let me introduce the attendees today. At the beginning, President and CEO, Representative member of the Board, Akira Shimada; Senior Vice President, Head of Finance and Accounting, Toshihiko Nakamura; Senior Vice President, Head of Corporate Strategy Planning, Akitoshi Hattori. These are the 3 members. As for the materials for today, they are uploaded on our official website at 1:30 p.m. We will start the conference. Shimada-san, the floor is yours.

Thank you very much for sparing your precious time out of your busy schedule to attend this meeting. And this is Shimada, President. First and foremost, our deepest sympathies go out to everyone affected by the recent Kumamoto earthquake and their families. We are fully committed to restoring services and supporting recovery efforts as quickly as possible, working in close cooperation with telecom companies and local governments to restore communication infrastructure and assist affected areas. Well, although mobile services were disrupted in 2 municipalities, they were restored within approximately 2 days. During this period, we worked to maintain connectivity through measures such as the rapid implementation of Japan roaming. We are also continuing to provide support at evacuation shelters through the Tsunagu-Kaeru project collaborating with telecom companies and battery manufacturers. We remain dedicated to contributing to the earliest possible recovery and reconstruction.

Now I will proceed with the explanation of our financial results of the first quarter of this fiscal year. Overview of consolidated financial results, increase in both revenues and income year-on-year. Operating revenues reached new record high levels. Operating revenues increased by JPY 355.7 billion to JPY 3,617.7 billion, driven by the DATA Group overseas and the domestic business growth as well as the Smart Life business will increase centering around the finance of DOCOMO.

And out of this increase, foreign currency impact, positive JPY 75 billion. Profit despite the costs related to DOCOMO's customer base enhancement and network quality improvement, growth in Smart Life business profit and business growth of DATA Group, it increased and EBITDA increased by JPY 34.8 billion to JPY 836.2 billion. Operating profit was up JPY 20 billion year-on-year and was JPY 425.1 billion. To achieve full year plan, we are committed to work to expand enterprise business, both at home and abroad and expand Smart Life business. Net profit was driven by the increase in operating profit and others and JPY 274.8 billion, up JPY 15.1 billion. By segment, in all of the segments delivered growth both in revenues and profit.

Integrated ICT business segment, despite the cost spent for reinforcing customer base and improving network quality, as a result of customer base enhancement initiative and others, while Smart Life business expansion resulted in increase in revenues and profit Y-o-Y. And as a result of customer base enhancement initiative, MNP performed strongly and improved from the previous year. DOCOMO MAX have been -- was selling well and resulted in ARPU improvement and the rate of decline in mobile communication services revenue decreased steadily against the previous year. And we aim for the turnaround to increase revenue year-on-year.

Global Solutions business segment. In addition to business growth in Japan and overseas increased due to foreign exchange impact, both revenues and profit increased year-on-year. Regional Communications segment. And though legacy business revenues declined, increase in Hikari business revenues resulted in increase in revenue year-on-year and profit remained at almost the same level as that of last year. Net increase in Hikari service was almost at the same level as that of the previous year. And others, real estate and energy, growth in real estate business of Urban Solutions led to increase in revenue and profit year-on-year.

Next, I would like to move on to explain 4 topics, starting from the global expansion of IOWN to further drive IOWN business, with the support of government, we accelerate service deployment globally in Chile. Survey and demonstration to advance Remote operations of heavy machinery through IOWN APN have begun at CODELCO-operated copper mines to solve issues such as working environment improvement. In India, a feasibility study aimed at improving energy efficiency of data centers in India through the deployment of switches incorporating Photonic-Electric Convergence devices PEC-2 has begun to achieve power-saving large-scale distributed processing with financial institutions and other partners.

Going forward, we will continue to expand use cases in various countries and industries, steadily promoting steps to social implementation of Photonic-Electric Convergence devices and accelerate global expansion. Next, I will explain launch of distributed GPU demonstration environment using IOWN. We launched the GPU over APN Testbed, a nationwide distributed GPU demonstration environment using IOWN APN in July, enabling customers to experience the use of distributed GPU resources, low latency, high-volume connectivity and distributed GPU resources across 8 nationwide locations enable verification of advanced AI load, including distributed AI training, distributed AI inference and high-volume data transfer between sites. Through provision of real-world environment, we will accelerate the realization of AIOWN through customer co-creation, generating new use cases and practical expertise.

Thirdly, I will explain the initiatives for sustainable operation of social infrastructure. In social infrastructure, including water, wastewater and waste management, aging infrastructure and labor shortages are getting serious and new mechanisms for sustainable operation is expected. To solve this issue, NTT will promote operational efficiency through DX at water and wastewater treatment plants through business alliance with METAWATER. At this juncture, we acquired METAWATER shares to build long-term collaborative relationship. Furthermore, building on this initiative, we will aim for the achievement of cross-sector wide area social infrastructure management services through deployment in areas such as renewable energy, road and disaster resilience and contribute to building sustainable social infrastructure along with the municipalities and communities. The progress under medium-term management strategy since May is as shown here. That concludes my explanation. Thank you very much for your attention.

We now like to take questions from the members of the press. First of all, we would like to start by inviting questions from the present here at the venue. [Operator Instructions] We like to take questions. And from me on the left side in the second row and the reporter in gray suit.

Kobayashi from Yomiuri Shimbun. DOCOMO Financial Group it was launched in July. And in this particular quarter financial results and DOCOMO finances have really greatly contributed to the business performance. And so what is the expectation to this particular service?

Thank you for the question. As Kobayashi-san has just mentioned, and as of the July 1, DOCOMO Financial Group was launched. And banking, securities, loans, insurance, all these were the so-called across the financial sector, comprehensive services are now being available. And with this, making it a very big starting point and end point could also be combined together and to really offer a very robust and strong well financial services. And so we have come to a stage whereby we will be able to build even a more reinforced financial platform. And the major one is the banking arm.

And DOCOMO SMTB is sort of the name. But it is named under the DOCOMO and this banking function is drawing much attention and expectation. And so well, there are approximately 2,000 DOCOMO shops. And currently, as of the end of August, 200 shops will be able to really provide support to the opening of the bank accounts as well as securities. And so other than the DOCOMO shops, we will have 80 shops, which would be able to really offer the support. And by the end of this year, and we would like to really have the facilities amounting to 1,000 to really provide the various support for this financial sort of functions. And then we are really going to have the 50% of them to be able to provide the support from demand really outlets. And so that is what we would like to really see achieved by the end of this fiscal year. The next question, please.

The person at the back row [indiscernible] from Sankei Shimbun.

I have 2 questions related to the response to Kumamoto earthquake. As for the damage in fixed line in East and West, there seems to be some damage in the DOCOMO business. And also in the mobile phone business compared to the past, it was a rather minor damage. It's not possible to have the simple comparison. But what was the factor for mitigating the disaster impact? And now collaborating with the 4 companies, I believe you had a good benefit of Japan Roaming. And what went smooth? And did you have any challenges?

Thank you for the question. This was seismic scale of 7. And with respect to DOCOMO, there were impacts in 2 cities. We partially use Starlink and over 2 days, we were able to recover at an early stage, just spending 2 days. And also in inter-prefectural network and extra-prefectural network, we have operations, and that is related to the cables on the bridges, but the bridge was damaged. And as a result of that, the connection was cut. And now we are diverting to ensure the connectivity. So in terms of the communications, we do not have any issue on the fixed line. So from that perspective, at an early stage, we were able to provide services. Compared to Noto Peninsula earthquake, it was Peninsula. So in order to recover -- to secure the routes for recovery, there were challenges. But this time, in order to recover and restore the environment, the conditions were better.

Along with that, Japan Roaming, each company is using Japan Roaming. So we were able to extend support and with the connectivity project, we did coordinate which areas to support, and we have divided the responsibilities amongst the 4 companies, which ensured efficient support. Along with that, mobile battery with the support of the battery manufacturers, at an early stage, we were able to provide mobile batteries. So from that perspective, broad area support structure was ensured, which was good for the company. This is all -- this should work well. And this earthquake, we would like to reflect and we would like to prepare for the other earthquake that may arise in the future. We would like to move on.

Just in front of us, Shimizu from NIKKEI.

And in July, and well you are really going to have this -- have the issuance of the foreign currency denominated bonds of JPY 1.6 trillion. I think, when I really met in May and we had this downgrade in our S&P and also, well, in terms of your business strategy, what would be the sort of the potential impact from the rate hike? S&P downgrade. As for that...

Originally, making NTT DATA, a wholly owned subsidiary company, we were expecting this. It's not that well, we were taken by surprise, but Moody's and other 2 rating agencies in Japan, they are maintaining the same rating. And so not virtually or substantially, there is not much of the impact. And the rate -- interest rate and 0.1% or so, it's not really up to 0.1%. That is the level of the impact. And so very moderate impact. And basically speaking, we can say that we are free from the impact. And BBB, even with that, because the outlook is stable. So going forward, for the CapEx in our businesses in the future, and also the equity participation or the investment, there is no particular issues related to this in this context. Did I answer your question?

[ Miyoshi ] from NHK. I have 2 questions. The first question. Is mobile communication service revenues. You were able to shorten the level of decrease in revenue, and you have announced a new plan. With respect to the rate plan, a revision of the existing plan? Are you planning to have any plan for revenue increase? That is the first question.

Mobile communication service revenue, thanks to your support, consumer communications last year was roughly JPY 14 billion plus reduction in revenue. But this year, this will be explained by DOCOMO, but it was JPY 1.4 billion decrease in revenue, about 1/10. So we believe that this has bottomed. So from that perspective, ARPU is increasing. And this time, we saw the increase by JPY 70 and MNP is also working positively. And with 3G suspension, this is impacting. But overall, we are seeing the recovery. But on the other hand, as you said, labor cost and expenses, they are increasing overall.

So as DOCOMO at certain timing, cost should be borne and also, there is still 20% increase, and there is a decrease of the capital expenditure for traffic. So we just need to make sure to cover that, and that should be reviewed further by DOCOMO. ahamo, 30 gigabyte and there is addition of 10 gigabyte to 30 gigabyte. And this is from a marketing perspective. And since there is a heightened need from the perspective of the customers, once they use and we wanted to wait and see what the reactions are from the customers. So we would like to make sure to see that in the future.

And I have another question. I'm sorry to ask about the competitors. SoftBank will make the investment to Seven & i and PayPay and ID integration will be promoted. With respect to telecommunication operators, points, payment, strengthening of the collaboration is in progress. And once again, for you to differentiate, what are your strength? You mentioned about DOCOMO Financial Group. But once again, what will be the uniqueness or the differences in order to expand your ecosystem?

With respect to the convenience stores, we are, in principle, open to them with Seven & i, we have a close collaboration to do business. So from that perspective, for example, Lawson, when KDDI made the investment, this was the case. But if you think about the convenience of the customers, all of a sudden unable to pay in d-barai may not be good for the stores. So up to now, Seven & i and d POINT, Lawson and FamilyMart. It's possible to accumulate and also use d POINT, but that was not the case for 7-Eleven. So with the capital partnership with SoftBank, from customers' perspective, it will be helpful if d POINT can continue to be used from the perspective of the customers. From ID and a marketing perspective, DOCOMO itself has alignment with customers and a marketing company called CARTA. So Seven & i collaboration will be SoftBank, PayPay. And other than that, there is even more extensive collaboration. So I don't find any impact.

Next, at this point in time, we would like to take questions from journalists online. [Operator Instructions] Are there any questions? Well, at this juncture, we don't seem to have questions from journalists participating online. So we would like to go back to the venue and those of the media reporters at the venue, if you have any questions, please.

Nakao from Kyodo Tsushin. And I have 2 questions. The first question, a very detailed question. And earlier, Shimada-san at the outset, DOCOMO Financial Group and the DOCOMO shops, which are going to be able to really support the financial, then you're really going to increase this number up to 1,000 by the end of this year or fiscal year -- by the end of fiscal year. And also, I think, well, you are really going to accelerate achievement of this kind of target number. And are there any background factors to support that? And also there are any -- what was the sort of the leadership being played by the holding side? So that is the very first question.

I'd like to really respond to this part. And DOCOMO, well, they were not really saying that they are really going to move slowly in any way, but the -- when the -- and the press conference was made for this financial group, and they were really well talking about what they would like to really well achieve. It's not that we have pushed them to work faster, but that was really well being the case.

Sorry, I was not really confirming very well in advance. And so on a different note and economic policy promoted by Takaichi administration and this time around. And in terms of the growth strategy and basic policy and all these government-related policies have been formulated. And so AI and IT and space and so very well proactive investment is going to be made. That was really decided by the government. And also, I think is the expansion monetary sort of policy, it will be adopted. And also, we have seen quite a big sort of movement in terms of the weaker yen. And so that is the sort of the movement in the market. And so vis-a-vis the general policy of the administration, what is your take on that? And also in addition to that, because of the rate hike, well, probably the funding might become more difficult. And so as for the interest rate, any request or demand that you have for the current administration?

First of all, and what is being promoted by the Takaichi administration and 17 core areas. And so we are to be really engaged and because once again, well, in order for Japan to really revive, I think these are really essential in our view. And in that context, and we are really well called and we have given the opportunity to really explain on our part. And also mainly AI was the main topic. And so the network to really well connect this AI through APN and to really support that, well, you may need to have the distributed sort of the power supply. And well, on the other hand, in terms of economic security perspective and marine cables, well, both in Japan and also the overseas, well, we may have to really pay attention and make efforts to that. And so these are the challenges.

And we hope that the government is going to take the leadership. And we, on our part, would like to be engaged in a sufficient manner. And so first of all, from all the way, we have the APN also between data centers, we do have all these installed. And all the way to the outside of Tokyo in the outlying regions, we may really have to have all these being well installed. And so well, I think something that should be really looked at from the legal perspective. And also, we have to take care of that and to really provide the sort of the system or organization whereby we will be able to provide the adequate support. And I think that will serve as the platform and foundation for further growth. And so in terms of the industrial policy, well, we -- I think it is really important for the infrastructure to be developed.

Now as for the monetary policy, I am not in a position to say anything about that. But if the inflation should be well controlled and then, well, it is a common sense that rates should be well hiked. And for a private company, it is better to see lower interest. But inflation is more -- even more scary. And so we would leave the judgment to be made by the regulator. And so that inflation would not be accelerated. And also the foreign currency exchange rates will hopefully to be stabilized. And so it would not really be volatile and fluctuating too much. Did it answer to your question? Any other question, please?

The person to the left, the third row.

My name is Suzuki. And this is a question about DOCOMO FG. And when I heard from President, Hiroi, securing deposit was difficult. And after acquiring Net Bank, enterprise sales was required and the group asset was required. For example, group employees and the sales resources of the group to be utilized. So can you speak about the progress around those topics?

Yes. Yes, competition over deposit. Now we are in the world with interest rates. So not just the Net Banks, but mega banks and other banks are competing amongst each other to secure deposit. Given the circumstances. DOCOMO no Ginko is trying to secure deposit in this competition so that there will be another business growth. To all the group employees, we can ask to join this financial group, but we cannot mandatorily ask them to open the accounts. So we need to make sure to have our cohesiveness in order to advertise this financial group. And if they can open account and if they can open account for securities, that will be helpful. Thank you.

Any other questions? Well, we have received a question in chat. So I would like to read a question. Mishima-san from [indiscernible]. And semiconductor, procurement, it will take longer. And also, what is your view as to the soaring price of semiconductor?

And we are not directly procuring semiconductor. And well, as the sort of parts and components of devices or semiconductor is being used. And so from the device vendors from the earlier stage, well, there is some request for the potential procurement, an innovative device might see some impact and optical-related parts and components. And they are really asking us to really place orders early on. And so we are aware of that. So that we will not cause any inconveniences to our customers and also to not to lower the quality of services. And so there are some cases whereby we are really well start placing orders and procuring earlier. And so the prolonged sort of the situation, we are going to respond to that. And also as for the soaring prices, well, it depends on the market. And so we will be procuring at the market price. And so thank you.

[indiscernible] first, please.

I'm sorry to ask for the second time. When you talked about the financial results at the beginning, you mentioned that there was increase of revenue due to the exchange rate. From your management perspective, depreciation or appreciation of the yen by JPY 1, what is the impact to the management of the company? That's the first question. And I should have asked this question earlier. DOCOMO's domestic share is now 33% also. And you mentioned that the mobile revenue of DOCOMO is now bottoming. And what is your expectation for DOCOMO?

Yes, for the exchange rate impact, I would like to ask the finance responsible person to respond. And speaking about market share, we mentioned 35% as the target, but that was a message for not going any further down. So in other words, we want to increase if possible. So we said that 35% last time. So we hope it will increase. But on the other hand, if we include MVNO, we have been able to secure to a certain level. So we should be able to keep that. And with respect to domestic share, we do not want to go any further down. So we would like to make sure to hold. And please convey this to Maeda-san, the next speaker.

So if I may add on the impact of the exchange rate now with NTT Group, overseas revenue is roughly JPY 3 trillion per annum. And for example, the exchange rate is between JPY 150 to JPY 160 with JPY 1 fluctuation, there will be roughly JPY 20 billion impact and the profit is roughly 1/10 of that amount. That is all from me.

The person in white shirt.

[ Kashima ] from [ Kyodo Tsushin. ] And so I'd like to really ask a question related to Kumamoto. So there has been much of the impact. And so there is -- are you really going to review the BCP? And as for the unwinding of metal?

If there are any possible postponement. And as for the metal, I don't think there is going to be any impact. And as for the BCP and whether we are really going to revisit BCP or not, constantly, we are reviewing. And so this time, those affected. And so what was in shortage because of the Kumamoto earthquake. And so at this point in time, we have not yet really reflect the lesson on ourselves yet. And so this is something we do every time. constantly, if there is any disaster and if there is any incident, every time, we are revisiting the plan. So that's what we have been doing.

In the interest of time, the next question will be the last question. [Operator Instructions] Since there is no further questions, with this, we would like to conclude the press conference of NTT Inc. We would like to move on to NTT DOCOMO Group conference. Please wait while being seated. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for joining us in spite of your busy schedule. We would now like to start the briefing of financial results for the fiscal year ended March 2026 and financial forecast for the fiscal year ending March 2027 for NTT Holdings.

I am Akaishi from IR office, serving as your facilitator today. Let me introduce today's speakers. Akira Shimada, Representative Director, President and CEO; Takashi Hiroi, Representative Director, Senior Executive Vice President and CFO; Toshihiko Nakamura, Senior Vice President and Head of Finance and Accounting; and Akitoshi Hattori, Senior Vice President, Head of Corporate Strategy Planning. These are the 4 speakers.

Today's event is also broadcast live. The video of this event will be available on demand at a later date. Please refer to the presentation materials on our IR website. There is also a disclosure on partial revision of our medium-term financial targets. First, President Shimada will talk about the key points from the presentation material, the performance of the fiscal year and initiatives for profit growth in the medium term. Then we will take your questions. Over to you, President.

This is President and CEO, Shimada speaking. Thank you very much for gathering today. So without further ado from my side, I'd like to explain the financial results for the fiscal year ending March 31, 2026, and the financial forecast for the fiscal year ending March 31, 2027. And after that, I will explain the initiatives towards medium-term profit growth and the revision of financial targets.

I would like to make it in a digest or a shorter version today. Page 5, please. Operating revenues, operating profit and profit all increased year-on-year. Operating revenues reached new record highs. Operating revenue, driven by the expansion of enterprise business across group companies, growth in the Smart Life business and increased revenue resulting from transferring data centers into REIT rose by JPY 704.4 billion year-on-year to JPY 14,409.1 billion.

As for the operating profits, although costs were incurred due to measures implemented by DOCOMO to strengthen its base and improve mobile network quality, increased profits from the expansion of enterprise business at group companies and the Smart Life business, combined with transferring data centers into REITs. EBITDA was JPY 3,423.3 billion, up by JPY 184 billion year-on-year. Operating profit was JPY 1,706.2 billion, up by JPY 56.7 billion year-on-year. Profit was JPY 1,037 billion, up by JPY 37 billion year-on-year due to the increase in operating profit and others.

Please go to Slide 8. As for the FY 2026 forecast, operating revenues, EBITDA and operating profit will increase year-on-year. Profit is planned to decrease. Operating revenue is planned to increase in all of the business segments and will aim for a new record high led by the Integrated ICT business and Global Solutions business.

As for EBITDA and operating profit, though there is a continuous negative impact for the decrease in network revenues, we are planning an increase in operating profit year-on-year due to the expansion of the enterprise business and Smart Life business led by finance business. Profit is planned to decline year-on-year due to the increase in interest paid and others.

Please go to Page 10. I will explain about the shareholder returns. At today's Board of Directors meeting, it was resolved that the year-end dividend per share for fiscal year 2025 is JPY 2.65. Furthermore, it was also resolved that the dividend forecast for fiscal year 2026 annual dividends per share is forecasted to be JPY 5.4, an increase of JPY 0.1 from FY 2025. This will increase for the 16th consecutive year since 2011. In addition, in order to further improve capital efficiency and enhance shareholders' return, we will be conducting share buybacks up to an aggregate amount of JPY 200 billion.

Next, I will explain about our initiatives towards medium-term profit growth. Please go to Slide 14. First, I will explain about the revision of medium-term financial targets for medium-term profit growth. Regarding our status towards our current medium-term financial target of JPY 4 trillion in EBITDA for fiscal year 2027, our growth areas are steadily increasing process through proactive investments and the realization of their returns.

On the other hand, in our existing areas, profit declined due to our response to changes in the business environment, such as strengthening our customer base and increasing traffic. As a result, consolidated EBITDA fell short of expectations, making it difficult to achieve our fiscal year 2027 targets.

In light of these changes in the business environment, we are renaming our growth area as value-added areas and we'll focus on AI, which is expected to drive further business expansion with the aim of significantly increasing our profits. Furthermore, as an immediate priority for our existing area, we will retain our cash generation capabilities by stabilizing profits while renaming it the connectivity area and transitioning it into AIOWN and AI native infrastructure. Through this, combined with our value area, we aim to achieve an EBITDA of JPY 4 trillion by fiscal year 2030.

Furthermore, in areas we're promising further growth to achieve sustainable growth, we will continue to make strategic upfront investments. Next, we will promote these 7 initiatives under 3 categories: value-added areas, connectivity areas and strategic upfront investment to support continued growth aimed at achieving EBITDA of JPY 4 trillion in fiscal year 2030. Please refer to the following slides for further details.

Please jump to Page 26. This is regarding the medium-term financial targets. Regarding EBITDA, we would like to target 2030 JPY 4 trillion as explained. Also, ROIC, excluding financial business target is set to enhance capital efficiency. There are no changes to sustainability-related nonfinancial indicators. In terms of shareholder returns, we will maintain our policy with a basic policy to implement a steady increase in dividends, coupled with flexibly conducting share buybacks to improve capital efficiency.

And due to increased financing needs, interest-bearing debt has risen in recent years. However, our policy is to ensure a certain level of financial soundness in the medium term. We will expand cash generation capacity so that we reduce the interest-bearing liabilities to EBITDA, excluding the financial business to approximately 3.5x by 2030. Please go to Page 29. This is the EBITDA per business. And this concludes my presentation. Thank you very much.

Mr. Shimada, thank you very much. From now, we would like to open the floor for questions. [Operator Instructions] First of all, we would like to take the questions from this room. So right in front of me, please go ahead.

My name is Masuno from Nomura Securities. First of all, the new EBITDA medium-term target, FY 2030, you said it at JPY 4 trillion. But this fiscal year's plan is already JPY 3,420 billion. So in 4 years, it's 16% to 17% growth. So annually converted, it's about around 4% growth per annum. 4 years from now, I thought it could be a bit higher target. So the overall picture, what are your thoughts on it? That's my first question.

Shimada will answer that question.

Thank you very much. Well, we did create it in a sort of a conservative way. That's the honest saying because we're not able to achieve this fiscal year's plan. So by 2030, we wanted to definitely achieve this target. And if possible, if we can achieve it in advance to that date, it will be great. If you total the numbers up, the disclosed number total is about exactly JPY 4 trillion.

However, there are other segments. So when we think about those other areas, if possible, we're hoping that we can achieve that target before the planned date, and we would like to put our efforts in the management of the business. The Integrated ICT, global real estate, energy, and others, that area, those are negative numbers within the breakdown of JPY 4 trillion.

So I'm sure there are some advanced items that are included in those numbers, and you came up to this number. So not that each business segment, but maybe you have a buffer stated. Well, honestly, you can think that we are placing a buffer there because with the current business base that we have, JPY 120 billion -- about JPY 120 billion is the aggregated number.

And we believe that, that is going to grow. So there is additional room that can grow and will surpass our stated the figure. FY '27, JPY 4 trillion was the original target. So to make it easier to understand, we'll set it at JPY 4 trillion. So if possible, we would like to achieve that number earlier than 2030. And in FY 2030, we would like to have the pace that we can exceed that target set it for that year. Well, by the way, operating profit-wise, if you convert it into operating profit, how much will it be? Do we have that?

This is the Hiroi speaking. EBITDA is JPY 4 trillion to achieve that number, operating profit size will have to be exceeding JPY 2 trillion. Therefore, that is going to be the level of the operating profit in terms of the size of it.

And then -- okay, I will ask another question and finish. But if I look at each business segment, I believe that they probably will be able to reach the numbers. And later, I'll ask this question for NTT DATA. But NTT DATA's overseas business, excluding a data center business, honestly speaking, I think that is a bit aggressive. But I'm just wondering how you're going to achieve that number?

The NTT DATA's overseas business part, we're not thinking of achieving those numbers purely with organic growth, including M&As and also including investment required for that is the base of our thinking. So in that way, there are areas that's not organic. NTT AIVista, we will utilize that to create AI business. And through M&A, we are going to expand our capabilities. So this JPY 200 billion part includes such elements. And with that, we would like to achieve the target.

So the data centers, as you have explained before, the 3 gigawatt capacity is the base of these numbers. Is that correct?

3 gigawatt size, yes, is the base. But in addition to that, selling of the data centers. If you look at FY '25, there are data centers that were transferred into the REIT. In FY '26, we are planning to have other data centers included in the REIT as well. So in that sense, in an advanced pace or in a front-loaded pace, we will increase the profit. So for these numbers, the sales of the data centers is also included as well.

We would now like to take the next question. The gentleman with his hand up now.

I'm Kikuchi from SMBC Nikko. I have 2 questions. First is regarding the medium-term plan target. I also have a question on this. My impression was DOCOMO's consumer platform seems a bit weak. And my second question, I'm wondering how this can be achieved. East and West, JPY 80 billion in profit increase. How do you plan to achieve this profit growth for NTT East and West? And for financial business, this may be to DOCOMO, but since Hiroi-san is here, I'd like to ask about the JPY 120 billion profit increase for financial business. That's a big jump up.

Given the current portfolio, I think this could be quite difficult. So what is the -- what is possible with the current portfolio? And what will be the add-on from the new portfolio? And what is your vision to grow NTT and DOCOMO's financial business for the future? I'd like to ask your vision, Mr. Hiroi. So those are my 2 questions. First question includes DOCOMO and East West.

Well, regarding NTT DOCOMO consumer business, given that the population in Japan will be declining, we have said that we would like to maintain the current level, but it's going to be difficult to maintain the number of handsets. So we need IoT and AIOWN service and robotics, mobile usage in these areas need to increase to maintain the handset number.

But what is more important is the large data plans are now accounting for 30% and above. And so we need to further expand the subscription to these large data plans. And for the human-to-human mobile, we would like to cover that as much as possible with the large data models so that we can maintain the similar level EBITDA for the consumer business.

Of course, for DOCOMO, compared to competitors, we haven't increased our price. We just introduced a new plan, MAX. So given that the labor cost is going up and other cost is inflating, as Shimada-san presented today, we have 20-or-so old plans that are still remaining, and we need to streamline the pricing plans as well.

So there is a big challenge that DOCOMO needs to tackle in terms of improving efficiency. And at some time in the future, we do need to think about increasing prices. So a higher level is probably possible. Now in terms of NTT East and West, corporate business, enterprise business is taking off quite in a robust manner. And as Shibutani-san from NTT East and West mentioned, network between data center, that demand is growing very significantly. And this is not just connecting NTT data centers, but data centers that are being operated by other companies.

So NTT's share in Japan is about 15%, but remaining 85% other companies' data centers also need to be connected. And this network business is emerging as a new business for NTT East and West. Therefore, it is more than enough to cover for the reduction in the legacy business, we believe.

And also there are profit being generated from its subsidiaries. And so there is room for further revenue increase from that. And in terms of the financial business and future growth, at this time, I think it is better to ask the question to DOCOMO given the current role that I have.

But as the CFO of the NTT Holdings, which is my current role at this time, is the current portfolio enough? That was your question regarding the finance business. DOCOMO has the card, the payment and other payment-type solutions as well as Sumishin SBI Net Bank and Monex and [indiscernible] and credit business.

We have a wide portfolio within NTT, and we would like to grow that portfolio. And it is possible, we believe, to realize the EBITDA target by growing these portfolio that we have. Of course, we need growth from all of these elements, but I believe that we have the pieces that is necessary to reach the EBITDA target. In terms of the direction and the contents of the business, we would like to set up an opportunity to provide more detailed explanation at a later date. And please ask the strategy question to DOCOMO.

My second question, going into a bit of details is regarding the impairment of Anode Energy. In the midterm target, energy wasn't playing a large role, I believe. So how do you see the energy business going forward? And what is the reason for the impairment of Anode Energy? So I'm sure that you're looking into the changing environment, changing various systems and the profit structure. So I'd like to ask your strategy. GPI construction cost is going up. So about JPY 50 billion of impairment was recorded.

Regarding the development of GPI, we would like to continue to secure renewable energy, which we believe is necessary. Therefore, we will continue to invest in accordance with our original plan. Therefore, we have -- we do have the plan to invest in GPI. However, last year and the year before, once the construction is completed, we off-balance the asset. Therefore, after the construction is complete, we would like to off-balance the asset to improve the capital efficiency.

What we want is the energy from the renewable energy. It is not a must to maintain the asset on our books. Well, we shouldn't -- I shouldn't say that there is no need, but what is more important is to secure renewable energy for our group. And so we would like to consider different ways, including off-balancing the asset.

I'd like to take the next question, the person in the middle row.

Daiwa Securities. My name is Tokunaga. I have 2 questions. The question is regarding the medium-term management strategy. If I look at Page 15, consolidated EBITDA, JPY 3.4 trillion to JPY 4 trillion. It's going to increase. According to this graph, it means -- it seems that it's going to continuously increase, but there is a possibility that it may not be that light. Maybe that is why it's not written that every year, there will be growth in profit. But on the other hand, DOCOMO is turning around and NTT DATA CapEx since we'll be using third-party capital, it seems that there's not that much of an increase in CapEx either. So if it goes as planned, I have a feeling that you will be able to achieve a continuous growth in profit from JPY 3.4 trillion to JPY 4 trillion. So every year's outlook, the advanced investment will be in here and et cetera, if you can share with us the ups and downs within this period.

What -- as you have commented within your question, when we think about the status of each business segment, with the increasing profit trend, we can bring it to JPY 4 trillion. But looking at the each fiscal year's breakdown, the image of it, as explained to the question regarding data, NTT DATA, through M&A, we're going to expand our scale.

And so there is partially inorganic growth. So we have a counterparty, so we cannot say in which fiscal year. So to clearly stating the ups and downs of each fiscal year may be difficult to do is what I think.

Okay. Understood. The outlook of the CapEx, it is going to be flat like the level of this fiscal year. If you're going to do an M&A, is it going to increase again?

Well, regarding the CapEx, from this fiscal year, the image that it's going to gradually decline. The level of CapEx, of course, we cannot rapidly decrease it. However, from this fiscal year's level, it will be slightly lower. We have no intention of increasing it.

My second question is regarding the financial targets for the medium term. It's regarding ROIC. From the current 5%, you're going to increase to 5.5%. So the operating profit is probably going to increase is your plan. JPY 200 billion every year, you're doing a share buyback and you have about JPY 1 trillion in 5 years, and the operating profit is going to increase. So if you -- the debt is not going to increase, if you have JPY 2 trillion of operating profit, maybe that's the breakdown of this ROIC increasing. So within this target of ROIC, what is your profit image as a company?

Sorry, what do you mean? What is -- what do you mean by profit target with inside the ROIC?

Well, the equity or the balance sheet balance or the operating profit balance, I'm asking something similar, but I would like to know the financial background of this ROIC number?

Well, as I have explained, EBITDA and operating profit, they will both grow. But on the other hand, we have quite of an accumulation of debt. And due to that, we have a certain amount of capital cost. And also, in the same way as right now, we will continue the increase in dividend, and we're going to conduct share buyback to a certain extent.

So the image of the equity cost does exist as well. Therefore, when we think about all these factors, in a way, when we will have some room for the free cash flow is when we get closer to JPY 4 trillion. When we have that size of EBITDA, we will have some more room in free cash flow. So the image is that reaching that level, it will be ROIC of 5.5%. As a CFO, I want to set it at a higher target. But given the circumstances, currently, it is this target.

Third from the front row, please.

This is from Morgan Stanley, Tsusaka. I have one question. From this fiscal year, and looking at the growth during the medium-term plan, enterprise and global and finance, these business domain seem to be driving the growth, the marginal growth coming from these business domains seems separate from the telecom field.

This year's business plan, of course, the DOCOMO Smart Life is going up, but it's not necessarily just organic because some of it is through the past acquisition and the bulk of the growth is coming from NTT DATA. So in terms of the communication with the investors or with the capital market going forward, NTT DATA and IT service, perhaps that should be placed at the forefront because it might be easier for investors to understand what is growing within NTT Group.

For example, now, of course, as the holding company, you have to talk about the entire company, you have to talk about the capital allocation for the medium-term plan. But perhaps we don't need to talk about mobile here of NTT DOCOMO because here, we are not talking about NTT East and West either. Now there are so many business models and there are -- and investors have to search for the growth area. But if the communication is shifted to tell the investors that this is the area that we're going to grow more clearly, I think it might be easier for investors to understand. This is my comment.

Thank you very much. The plan is, as you say, focused on those growth areas. But we discussed the data center business, and we have started to talk about AIOWN. And the data center business itself is going to be combined with AI. Networks are not going to be independent.

It is all going to be connected to AI and the operation will need to be done through AI. And so that business opportunity, I believe, exists. So this is going to take some more time. But toward 2030 to be operating the infrastructure almost autonomously through AI, perhaps some different landscape will open up to us beyond 2030. So in terms of the short-term growth, yes, it is going to be almost solely focused on B2B and Smart Life.

That is going to be the center of the growth for the near term. But infrastructure business, perhaps in the future, we can have some bright hopes. And that is why we have introduced new concepts at this time. So once we have made some progress, we would like to communicate to you on that front as well.

And if I may ask additionally about the medium-term plan target. NTT DATA's overseas business, you said that some of this is from inorganic growth. But my impression is the business outside of data center, structural changes have been made almost every year.

And well, it's hard to say. But it doesn't look like it's going that well, to be honest with you.

Regarding the overseas business, do you have anything that you have within your sights that you are confident that will drive profit growth? Or is it going to be through inorganic ways that you'll be able to make profit?

The current business model is going to be heavily impacted with the growth of AI. Therefore, we need to shift the business. This year and next year is going to be a major transformation period. So the BPO-type digital-type investment, the legacy-type business investment is not going to make sense because the world is changing. So how do we shift the structure of our business? How do we change with the times? It's going to be dependent on how we invest in AI. We need the AI consulting capability to customers and how we can secure that resources, including from external resources. So the system integration and BPO, those legacy service, we need to make different selections from that. Otherwise, it's not going to be successful. But please ask more detailed questions to NTT DATA later. Thank you.

Then the third row from my side on the right-hand side.

Kono from Marathon Asset. Listening to your explanation, and I was looking at the numbers and what I thought is that if my memory was wrong, I would like you to correct me. But I remember that it's very similar to the numbers that you have disclosed 3 years ago. And at that time, you said by FY 2027, the EBITDA is JPY 4 trillion, and you'll spend JPY 8 trillion to the growth area and EBITDA will be growing by 20% was the plan. And that was one set is my impression. And at the same time, the message at that time was very crystal clear. It is investment growth, cash generation. So there was this design plan that was very clearly shown.

However, maybe there was a bit of a timing difference towards going backwards. And maybe a lot of uncertainties have come up as uncertain factors. And that could be an opportunity, but also can become a difficulty. So from the position of providing equity, it's not just that your business model became conservative, but rather maybe the capital allocation that is the foundation of your plan maybe has changed at the start of FY 2023, like the collecting the investment or profit growth or capital efficiency, I think there was an assumption or a base to come up with that.

But what changed from that time? And what I would like to know is that what I feel that your plan is becoming unclear more is that your company's equity, the capital itself, what is the design of it? And if that is not clear, well, continuing increase in dividend and share buyback, it's really good or we appreciate it. But is that really possible? Or are you in a situation that really you shouldn't be doing such a thing? So that is unclear.

So this may be a discount factor from the equity side. So how should we look at it? Or what difficulties are you having because you don't have visibility of certain things? Or what do you have visibility on?

Well, maybe the major factor or the element is the mobile business, meaning that the mobile business profitability, what we thought in 2022 has changed now. Of course, we came up with a lower pricing is one factor. Looking from the current situation, I don't know at what timing, but it is a fact that the cost is increasing.

So how are we going to offset that or absorb that? Is that the mobile business, how should we manage it moving forward -- was actually the trigger point of revisiting the medium-term plan because their profitability, DOCOMO's profitability of the mobile business profitability declined. I think the current plan is created in quite of a conservative way. And I think we can actually boost it up a bit more. We still have room for that.

However, with the rise of AI, the conventional network composition is probably going to change within the next several years. So the next phase or the -- when we come to the next generation, the composition of the network led by AI, how can we change it to an AI-led infrastructure in an efficient way. We changed the naming to the connectivity area. That is because AI, AI alone, robot, robot alone, AI agent alone, that's not the case.

All 3 needs to be connected, meaning that with a simple network business is not going to suffice. So how -- at what timing are we going to transform into that? And how are we going to provide consultation with AI? That's going to be the business area. But how are we going to provide this service to the customer? That's going to become the key. That is right from this fiscal year towards next fiscal year, what is our response going to be towards AI is going to become the key question or key point.

Okay. If the profitability of DOCOMO and others and the declining speed, if it was faster than what you have expected. Regarding that part, instead of looking at the capability of growth, but probably improving the efficiency. So from the capital efficiency, allocating the equity to those areas more strategy-wise is probably not correct, but it's how you can utilize the leverage.

But as you said, in the AI area, if we look at the other investment, it seems that if we don't invest, we will lose. We don't know about how it's going to impact the profitability of the company, but we have to do that. It seems that there are some investments that are made because they're scared or they're threatened to do that.

And that is the kind of the fear I have. And in order to win out from that, what kind of capital will be coming in or what kind of allocation of the capital will be done is the visibility I'm looking for. So what kind of impact in the capital allocation are you experiencing because of AI?

Well, right now, the reason why we have a large amount of investment towards AI is creating -- building an AI data centers for AI's learning process. So that part is a large investment. But this learning process is going to hit its limits at some point. So are we going to invest towards that?

Well, in our case, we're going to make investments or we should make investments in data centers for inference. So it's a distributed type. And at the edge part, we will be making investments. Maybe it's not a GPU, but maybe CPU that we placed at the edge. We need to -- we are thinking of such of a composition. So like the gigantic 1 giga or 2 giga, that type of a scale, a data center for the AI to learn to provide that scale, we're not thinking of investing in those.

If there's a demand from the customers on an individual basis, we will provide the integration service. However, in a way, well, GPU as a Service, we do have that, but that requires advanced investment. So making the investment in advance and creating a foundation first, we are not thinking to make such an investment.

Sorry, if I summarize it in a more total picture, DOCOMO's consumers profit EBITDA, it's about -- from JPY 600 billion, it went to JPY 300 billion. So we did not expect that. And it had a high ROIC business, but it went down rapidly. So we had to provide financing to that. That is the situation for the last several years. And that is -- well, we are kind of absorbing that through debt.

And the area that we're making investments are like data centers where the investment return comparatively speaking, is not that high. So as our finance -- from the finance side, that is quite heavy. So the generation of the return of the investment is happening later. And that is why we are facing the situation that you have pointed out.

However, moving forward, gradually, EBITDA situation, profit and cash will be improved and towards the fiscal year 2030, if the free cash flow improves, then as usual, as I have explained before, it will become closer to the EBITDA multiple financially.

And for investments and cash allocation, as Mr. Shimada said, led by AI, how are we going to replace the infrastructure. But it's not a large-scale investment. But in the last medium-term plan, we said JPY 8 trillion, but towards the 2030 growth investment is JPY 8 trillion. In total, we're imaging about JPY 12 trillion CapEx.

But the size of the infrastructure will be replaced utilizing AI. So it's a cash allocation design looking at the total picture. And within that design, we have right now, the same level of dividend and cash -- share buyback is possible is what we have in mind.

Next, we would like to take questions from participants online. Okumura-san from Okasan Securities.

This is Okumura from Okasan. One question or one confirmation regarding your profit in the midterm plan. So you said about JPY 2 trillion in OP against the EBITDA target. EPS and what is the CAGR image for EPS or the bottom line?

The guidance is profit down this year because of the higher interest payment. So in terms of the profit attributable to investors, how does that work out against EBITDA? And how aware of that bottom line are you?

Thank you for the question. This is Hiroi. In terms of profit, bottom line profit, as we have said time and again, toward 2030, profit and EBITDA will grow, and we will be repaying debt, and that is going to lead to improvement in profit. Toward 2030, about 20% to 30% improvement is what we expect.

And are there any further questions? So the last row in the room, please.

Mizuho Securities. My name is Fujishiro. One question regarding the passing through the cost, what are your thoughts on it? Within the previous briefing session, I believe that in the medium-term plan, you don't have a large amount that's incorporated in the plan in terms of passing through the cost increase. However, moving forward, the cost push inflation, we believe another wave of that may come. So within NTT Group, the area that's easy to increase the price or the area that's difficult to do so. Listening to you today, it seems that the mobile business is difficult to increase the pricing.

But on the other hand, for example, the fiber optics at the MIC it seems that the talks are towards having an easier increase or passing through the cost. So all those included within NTT Group, comparatively speaking, which areas are easier to increase the price and -- or the area that you would like to strongly push in terms of increasing the price. If you can share your thoughts, it's appreciated.

Well, the mobile business, it's not -- we don't think that we cannot increase the price. However, as the CEO of Mr. Maeda-san, DOCOMO has been saying, there are several legacy plans from the past. So how are we going to handle that is something that we need to think together with increasing the price. And I believe that discussions within DOCOMO are going on. It's not that we're not thinking about it.

Our competitors have already increased the price. Therefore, at which is the best timing at this point, it is difficult to share with you. However, we would like to give it a thorough thought. And also for the other areas, for example, the connection fee is basically in the direction of increasing.

So not just the connection fee, but if the overall cost surrounding us goes up, I'm sure that there will be a timing that we will have to have the customers share that cost with us. So we would like to think of various initiatives.

Within the medium-term plan this time, how much of passing through the cost increase is incorporated?

NTT East and West with the connection fee, the areas that is clear that it is going to increase is incorporated, but the other price increase elements are not included.

Any final questions? If not, since we have...

May I make a final comment? This is Hiroi. So I will be stepping down from the CFO post at this time. And I'd like to thank the investors and analysts for all your support. It's been about 17 years since I have been involved in this company's financials. And my dialogue with you has been extremely helpful. And I have reflected that back into the company's strategy and planning.

The buyback of DOCOMO, DATA, the making 100% subsidiary. Your feedback was instrumental in drafting the strategy. I was always looking forward to dialogue with you. I'd like to thank you so much. Of course, I'll remain in the group and continued -- I would like to ask for continued support. Thank you very much.

Thank you. And this concludes the NTT Holdings presentation. We will continue with the NTT DOCOMO's presentation next. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

We will now begin NTT Inc.'s financial results briefing for FY 2025. Thank you very much for joining us today despite your busy schedules. I am Sekine from Public Relations and will serve as a moderator. Thank you.

Let me first introduce today's 3 speakers. Akira Shimada, President and CEO, Representative Director; Toshihiko Nakamura, SVP and Director of Finance and Accounting Department; Akitoshi Hattori, SVP and Director of Corporate Strategy Planning Department. Please note that today's materials were uploaded to the NTT official website at 1:00 p.m. So please check them as well. Now we would like to start. President, Shimada, please.

Thank you very much for your attendance today. I am Shimada, President of NTT Inc. Let me explain our FY 2025 consolidated results and FY 2026 results forecast. Following the explanation of the financial results, I will explain our initiatives for medium-term profit growth and the revision of our financial targets. For FY 2025, both operating revenue and profit increased year-on-year on a consolidated basis. Operating revenues reached a new record high. Operating revenue increased by JPY 704.4 billion year-on-year, reaching JPY 14,409.1 billion, thanks to the expansion of enterprise business of group companies, growth in the Smart Life business and increased revenue from transferring data centers into REIT.

Regarding profits, EBITDA was JPY 3,423.3 billion, up by JPY 184 billion year-on-year, and operating profit was JPY 1,706.2 billion, up by JPY 56.7 billion year-on-year, thanks to increased profits from the expansion of enterprise business at group companies, increased profits in the Smart Life business and from transferring data centers into REIT despite cost for measures to strengthen DOCOMO's customer base and improve mobile network quality. Profit increased by JPY 37 billion year-on-year to JPY 1,037 billion, mainly due to the increase in operating profit.

Regarding revenue and profits by segment. Integrated ICT Business segment. Although Consumer Communications Business decreased due to a decline in mobile communication service revenue, operating revenue increased year-on-year, thanks to the growth of Smart Life business centering on finance and enterprise business. While profits increased in Smart Life and Enterprise businesses, operating profit decreased year-on-year due to costs associated with measures to strengthen the customer base and improve network quality.

As a result of efforts to strengthen the customer base, MNP improved from the previous year and was positive, except for Q2, which was affected by the discontinuation of small data volume plans.

Global Solutions Business segment. Despite a revenue decrease of approximately JPY 35 billion due to foreign exchange, revenue and profits increased year-on-year, thanks to business growth, both in Japan and abroad and increase from transferring data centers into REIT.

Regional Communications Business segment. Despite a decrease in legacy business revenue, both revenue and profit increased year-on-year, thanks to revenue increase in enterprise and fiber optic business. Furthermore, the net addition in fiber optic service subscribers increased year-on-year due to strengthened sales of 10 gigabit plans and all apartment units planned for the condominium market.

Others, Real Estate and Energy. Despite the expansion of the housing business in Urban Solutions, revenue increased year-on-year, but profit decreased due to the recording of impairment losses in Anode Energy in light of changes in the external environment, such as rising interest rates and construction costs.

Next, I will explain FY 2026 results forecast. For FY 2026, operating revenue, EBITDA and operating profit will increase year-on-year and profit will decrease. We plan for increased operating revenue across all segments, primarily in our integrated ICT Business and Global Solutions Business, aiming for a record high level. EBITDA and operating profit will increase year-on-year, thanks to the expansion of our Enterprise business and Smart Life business, mainly in finance, despite the continued decline in network revenue. Profit will decrease year-on-year due to increased interest payments and others.

Regarding revenue and profit by segment. In Integrated ICT Business segment, operating revenues will increase year-on-year and operating profit will be flat, thanks to the expansion of the Smart Life business, primarily finance and the growth of the corporate business despite a decrease in mobile communications service revenue. Furthermore, efforts to improve network quality will continue and be strengthened. And in sales, we plan to build a stronger customer base centered on long-term users through DOCOMO MAX, among others.

Global Solutions Business segment. While revenue and profits continue to increase, thanks to business growth both in Japan and abroad. Operating revenues will increase and operating profit will decrease year-on-year due to transfer of data centers into REIT in FY 2025.

Regional Communications Business segment, despite a decrease in legacy business revenue, revenue and profit will increase year-on-year, thanks to increased fiber optic service revenue and reduced expenses from the rebound effect of future cost mitigation measures implemented in NTT West in FY 2025.

Others, Real Estate and Energy. Operating revenues will increase year-on-year, thanks to increased revenue from the expansion of the data center engineering business in Urban Solutions as well as the rebound effect from impairment losses in Anode Energy in FY 2025.

Next is shareholder returns. At today's Board of Directors meeting, we resolved to set the year-end dividend for FY 2025 at JPY 2.65 as projected. Furthermore, we resolved annual dividend forecast of JPY 5.4 for FY 2026, an increase of JPY 0.1 year-on-year. This will mark our 16th consecutive year of dividend increases since FY 2011. In addition, to improve capital efficiency and enhance shareholder returns, we will carry out a share buyback program up to JPY 200 billion.

Next, I will explain our initiatives toward medium-term profit growth. The contents are as outlined. First, I will explain the review of our medium-term financial targets for medium-term profit growth. Regarding the current medium-term financial target of EBITDA of JPY 4 trillion for FY '27, our growth areas are steadily expanding profits through aggressive investment and achievement of results. On the other hand, profits decreased in existing areas due to responses to changes in the business environment, such as strengthening the customer base and increasing traffic. As a result, consolidated EBITDA is below expectations, making it difficult to achieve the target for FY 2027.

In light of these changes in the business environment, we will change our growth areas to value-added areas, focusing on AI, which is expected to further expand our business and significantly increase our profits. Furthermore, as an immediate initiative, while maintaining cash generation capabilities through profit stabilization, we will rename our existing areas to connectivity areas and promote the transformation to AI-native infrastructure. Together with the value-added areas, we aim to achieve an EBITDA of JPY 4 trillion by FY 2030. In addition, we will continue strategic upfront investments in areas with promising future growth to achieve sustainable profit growth.

Next, I will explain 7 specific initiatives aimed at achieving an EBITDA of JPY 4 trillion by FY 2030 categorized into 3 areas, which are value-added areas, connectivity areas and strategic upfront investment to support continued growth. First, I will explain 3 initiatives in value-added areas. The first initiative is expanding the domestic corporate business by maximizing customer value. In light of the rapid advancements in AI, it is anticipated that the business model will shift from those that rely on traditional human resources to those that are driven by customer value.

By capturing this change and leveraging the human resources created by NTT DATA through the introduction of AI, we can extend these resources to customers of DOCOMO business that have a broader customer base than NTT DATA. This will enable us to provide high value-added integration to a wider range of customers. Furthermore, by combining NTT DATA and NTT DOCOMO business' products and services, we will expand our customer value-driven business by providing a sovereign compliant full-stack AI businesses. Through these initiatives, we aim to achieve EBITDA of JPY 1.2 trillion for our domestic corporate business by FY 2030.

Next, I will explain acceleration of the growth of our overseas business with a focus on AI and data centers. In our IT Services Business, we will create AI native businesses utilizing NTT DATA AIVista and promote the expansion of our inorganic capabilities, mainly in the AI domain.

Furthermore, our Data Center Business in light of a robust demand, we will continue to make growth investments centered on the cloud and AI inference domains, primarily targeting hyperscaler customers. Through these initiatives, we aim to achieve EBITDA of JPY 600 billion for our overseas corporate business by FY 2030. As our third initiative, I will explain further expansion of our personal Business with a focus on financial services.

With NTT DOCOMO Financial Group scheduled to be established in July of this year. At its core, we will grow our financial customer base with payments and banking as a starting point and expand our revenues by promoting investment loans and other utilization. Furthermore, by combining one of the largest membership bases in Japan, the account members' usage data and the vast amount of data generated daily on the network with AI, we will strengthen the competitiveness of our personal agents and marketing solutions. Through these initiatives, towards 2030, we aim to achieve EBITDA of JPY 500 billion with our financial business driving the entire Smart Life business.

Next, I will explain our initiatives in the connectivity areas. First of all, I will explain our vision for transition to AI native next-generation infrastructure. In the future, AI computational processing will shift from being learning-centric to real-time inference-centric and the primary focus of communication will expand from person to person to things to things and further to AI to AI and robot to robot, leading into an explosive increase in transactions. In response to these changes, NTT will first focus on conversion to AI native infrastructure, AIOWN, which optimizes various resources such as GPUs, networks and power to realize a secure usage environment and integrate operations, including NBH first starting in Japan. This will enable full-scale business deployment in the 2030s.

Next, I will explain our efforts towards realization of AIOWN as a next-generation AI native infrastructure. And to date, under the IOWN concept, we have been working on the social implementation of the all photonics network and photoelectric (sic) [ photonic-electronic ] convergence devices. Now IOWN APN will be rolled out to all perpetual capitals by FY 2027, in line with the equipment upgrades of the system services.

Furthermore, towards 2030, we aim to expand nationwide by creating needs in various industries. In addition, we will accelerate the IOWN socia implementation by expanding the ecosystem of photonic and electronic convergence devices through a collaboration with diverse partners and also full possess advantages and competitiveness in each of the fields.

Next, I will explain our near-term initiatives in the connectivity areas, specifically maintaining cash generation capacity by stabilizing telecommunications business profit. In our Consumer Communications Business, we aim to maintain profit levels by strengthening customer engagement and evolving our products to maintain the number of subscribers and improve ARPU as well as by working to improve productivity through the use of AI.

Regarding the migration to alternative services using fiber optic and mobile technologies for fixed line telephones, which began a pilot program in some areas in April of this year. And we will continue to provide a careful support to ensure a smooth transition. And in some of the areas where we have started the migration to alternative services using fiber optic and mobile technologies and for fixed line telephones, we will continue to provide careful support to ensure smooth transition.

And finally, I will explain our strategic upfront investments to support continued growth. In the mobility sector and the space and optical sort of quantum computing. And so we will be focusing our efforts in these areas in the mobility sector. We will continue to provide services such as autonomous driving support through NTT Mobility and accelerate our efforts to realize infrastructure collaborate Mobility aI Platform in collaboration with Toyota Motor.

And in space for utilizing IOWN technology, and so we are to establish the technology so that we are to really have the integration of the space and ground and to -- in the disaster prevention where areas we will really expand our businesses.

And as for the -- in the field of optical quantum computing, we will collaborate with OptQC to develop a world-class optical quantum computer and aim for early commercialization. By continuing strategic growth investments in these areas, we will strive to achieve sustainable profit growth beyond FY 2030. Our midterm financial targets are shown. As I explained earlier, we aim to achieve JPY 4 trillion in EBITDA and our main indicator by FY 2030. And furthermore, excluding the financial business, we plan to set a target for ROIC and work towards improving capital efficiency.

And as for the nonfinancial indicators related to sustainability, there are no changes to our targets. Regarding shareholder returns, we will continue our existing policies with the basic principle being to implement steady increase in dividends, and we will also strive to improve capital efficiency by flexibly conducting share buybacks.

Due to increased funding demand, interest-bearing debt has expanded recently, but our policy is to ensure a certain level of financial soundness in the midterm. By 2030, we will work to generate cash so that we can reduce our interest-bearing debt-to-EBITDA ratio, excluding financial businesses to approximately 3.5x. And the EBITDA breakdown by business segment is as shown here.

Lastly, with this revision, the NTT Group's previously stated midterm management strategy will be pursued under the name New Value Creation and Sustainability 2030 Powered by AIOWN. This concludes my presentation. Thank you.

Now we would like to take questions from the media, the journalists. First, we'll take questions from those present in the venue. [Operator Instructions] We will now begin taking questions. So the person behind this gentlemen, the person behind, please?

Thank you very much for explanation. [ Thomas ] from NHK. So my question is on financial results. Regarding the results forecast, next fiscal year, profit you expect to decline. And your medium-term financial target is also being pushed out, postponed somewhat. EBITDA, JPY 4 trillion for FY 2030, you revised. What is the reason? Is it DOCOMO's financial results? Is that the main reason? That is how I see it. Am I correct?

So once again, could you elaborate President Shimada, on where DOCOMO stands? And towards recovery, what are the key priority areas for its recovery?

Thank you, Thomas-san. As you rightly said, mobile business environmental change led to the revision of our medium-term financial targets and medium-term strategy. Last year and the year before that, DOCOMO strengthened its customer base and focused on the -- made investments to improve the network quality. And so that pushed down its profit. This time, in this time, the forecast, consumer business is still expected to decline. Profit is declining, but the enterprise profit will increase and will offset the shortfall so that the overall profit can increase. This is what we have to achieve.

Now we want to continue making a turnaround. We are 2 years behind now. And AI business, AI introduction -- implementation is progressing rapidly. Last year, AI-related revenue was around -- targeted at JPY 150 billion, but we ended at JPY 180 billion. So AI-centered business strategy needs to be introduced. And in addition, regarding infrastructure, we need to shift to AI-based infrastructure. So that is why we revised, revisited our medium-term strategy. it will take some time. So the JPY 4 trillion EBITDA target will be set now at fiscal year 2030, but we want to achieve this target as soon as possible.

We will take the next question. Yes, the person in the very front row.

[indiscernible] from Nikkan Kogyo Shimbun. And because of the higher cost, what are the impacts your experienced? And interest rate is increasing and because of the Middle East situation. And inflation is being accelerated -- is expected to accelerate. And the impact, well, for FY 2026, what is your view of the potential impact. Particularly as for the electricity charge increase and also the labor cost increase. And so what would be the potential impact you are expecting?

Exactly as you said, well, we hope that the Middle East situation will return back to the peaceful or normal times as quickly as possible. And I think there is quite a significant impact, well, from Middle East circumstances. But we cannot be optimistic with respect to the power changes. But well, basically, it is driven by LNG. And so dependency on oil is not that much because it is not being used for power generation. And so relatively speaking, that impact might be smaller, but we should be cautious and have to keep watching.

In addition to that, energy cost as well as the labor cost tends to be become higher. And within our midterm plan, we haven't factored in some pass-through of such cost increase. And so we really have to consider specific timing because well, the cost itself is increasing. And so whether we will pass that on to the customers or not, that should be considered. But at this point in time, we haven't factored in that factors into our plan yet.

So to my left, yes, please.

[ Shimizu ] from Nikkei newspaper. I have 2 questions. First is on IOWN. In your medium-term plan, this is a priority, key focus area. The existing data center business is, I think, included, but IOWN's profit increase impact, what is the increment positive impact from IOWN, if you can quantify that? And EBITDA by FY '30 -- 2030, new JPY 4 trillion target, how much will IOWN be representing?

IOWN profit increase or revenue increase is difficult to quantify, but one is IOWN 1.0, as I said earlier, APN, it is embedded in APN. It's already started. So we will deploy this as infrastructure and recoup the investment. And the PEC, photonic electronic convergence, in optical devices, it needs to be deployed. We are at that timing now. This year, FY '26 or FY '27 will be the starting year. The optical device market size is set to be around JPY 1 trillion.

So we want to take a sizable portion of that. But in any case, this is a market that we will start very soon, this PEC, photonic-electronic convergence. So we want to gain good business there. So in our medium-term strategy, it will be in the second half of the period. The revenue will be realized in the second half, and we want to prepare ourselves to make that happen. Digital Twin will be similar in terms of progress. So AI-related Digital Twin market will expand. So with those 3 AI will be established. So I think the revenue will be recorded going forward.

My second question is about PEC. NVIDIA has announced its investment plan recently and the overseas players are now becoming very aggressive under such circumstances. The semiconductor players are -- have the decision-making power on which device to introduce. What is your positioning in the PEC, the photonic-electronic convergence, device?

This PEC device, the biggest users are hyperscalers. So hyperscalers and the surrounding various vendors are saying that it's now an era of opticals -- optics, and so they're taking various actions. NTT Group's innovative device products are, in essence, already starting and not many have started yet. And so we are now -- our device is now being evaluated highly, and we want to gain -- make inroads into the market going forward.

We would like to take one more question from the venue. [indiscernible] and as for your HR and DOCOMO Financial President and so Hiroi-san will become the President. And Financial Services is well positioned as the very core in the midterm management plan. And so if you could make any comment as to this [ HR ].

And within the midterm management plan or strategy by FY 2030 and on an EBITDA basis, we would like to read a triple number in terms of the financial businesses. So this is going to be a driver for future growth. And so Mr. Hiroi is well versed and has much of the insight in financial areas. And so we hope that he will be leading the steady and smooth growth in this area. And DATA group, Yutaka Sasaki is going to be replacing Hiroi-san also the data within the midterm management strategy, as has been mentioned, well, there is this sort of much of the growth potential in the midterm.

And so particularly in domestic or corporate business. And if I can just make comments related to that, in Japan, JPY 100 billion or revenue or more, there are approximately 2,000 companies with that kind of the sales size. And then 500 of them are the DATA customers. And then so for DOCOMO business, 90-some percentage is their customers. And so they are really generating almost the same level of the revenue size from these big sized clients. And DATA itself, how they are really being engaged with each of the client business, they are really having a very in-depth engagement.

Of course, there are some sort of duplication and overlapping, but at least the market is 3x that much, and it is still to be tapped, but well for DATA. But we were not able to really secure the resources up until now. And so it was quite challenging for them to really provide support to these customers. And so furthermore, we are really going to leverage AI. And so we are to really have the higher utilization of SEs and to really go into the businesses of the customers with whom we were not able to really have the business transactions. And Sasaki-san has such a knowledge and experience. And so inclusive of the overseas business side, we are expecting him to take the lead.

And also the domestic business and global businesses have been connected under his leadership. And so we hope that he will take advantage of that experience. And so it cannot be just done by NTT DATA alone. And so we will be working together with them as the holding company.

Next, we will take questions from the online participants. [Operator Instructions] if you have any questions please. We don't see any questions from online. So we will come back to this venue again. Any questions? To my right, yes, in short sleeve, please.

[indiscernible] is my name. I have 2 questions. First is on your medium-term strategy. FY '23, you announced the previous plan. The growth investment was JPY 8 trillion. This time, I do not see the investment amount. So what is the size you are thinking of? Or if you do not have the numbers, reason you are not mentioning numbers this time?

No particular reason. As I said at the outset, the overall FY '26 to 2030, we are planning on JPY 12 trillion investment. In the value-added area, the growth area, JPY 7.5 trillion to JPY 8 trillion investment. And connectivity areas, we need to change the infrastructure platform. So that will be JPY 4.5 trillion to JPY 5 trillion. So that's total JPY 12 trillion. So the domestic corporate AI implementation or new system build-out will require around JPY 2 trillion investment. And global, including data center, around JPY 3.5 trillion investment. And consumer financial institutions or security firms, we have acquired quite a few companies. So we have done pretty much, but around JPY 0.5 trillion, JPY 500 billion. And other growth areas, another JPY 1.5 trillion, which we will think collectively.

Of course, the investment in the Hibiya building is one. So we will consider all these options as we move forward. So that is the overall.

The other question is on your financial results. So your operating profit is flat and the profit, as you mentioned. What is the reason your profit goes down?

Because our liability is up, debt is up, the interest burden, interest payment is a big burden. But we will try to keep the profit flat, generate profit so that our final net profit will remain flat year-on-year. Our results forecast of the bottom line profit is expected to be negative year-on-year, but we are making efforts to make it positive year-on-year.

Well, the person in the back.

[ Ito ] from NewsPicks. And after the announcement in [ DOCO ] early commercialization of the new businesses, I have a question. And so you have the optical quantum computing and also the space and the mobility. And so something you can do on your own and something you need to work together in collaboration with others. And I think it is quite challenging to really realize all this. And so what kind of collaboration are you considering to work together with some other players? And already, we have started out a collaboration. And as for the optical data relay and optical-based communication in order to really increase the capacity, we need to introduce the optical communication and SKY Perfect and JSAT.

So we have really developed or established the company. And so not just 2 companies can do everything. And so satellite-related companies in order to ensure the optical communication, and you have to really have some equipment. And so we need to collaborate with the equipment vendors and others. So we have to really work in tandem with others. And as for the space, and so we have the observations right. And so we are working together with the player in this particular field. And so at any rate, in this space business, it is difficult for -- just for us to work in this area. So we are really, well, partnering and collaborating with others.

The next question, please. So to my left to the back.

[ Nikki Otsubo ] So domestic corporate business expansion is my question. So full stack and sovereign response, I think, is for financial institutions, I think, this domestic corporate business expansion. What is your target on financial institutions, if you have any?

[ Otsubo-san ] the target for financial institutions, we don't really have a target there. Of course, we are thinking of financial institutions, but government and public sector and local governments, municipalities and the private sector companies. There's a need where company-specific data does not want to go out. And so the -- all covering sovereign response, AI, we want to work on such AI.

And the other question is data center REIT, data center in REIT. You talked about that transferring data center into REIT.

The domestic data center will be added to Singapore REIT, which we launched. The REIT that we established last year is Singapore and the U.S. So the data center in Singapore and U.S. are transferred to REIT. So the Japanese market, European data centers will need to be added. This will, I think, please the investors, too. So that's our plan. So we will continue transferring data center to REIT. The first year, we did a lot because it was the first year, but we will gradually transfer to REIT vehicle. We will continue doing that.

Well, then we are almost running out of time, and we would like to take one more question if there are -- if there is one. Thank you. With this, we would like to conclude the press conference of NTT Inc. And so we will have further press conference of NTT DOCOMO after this. And so you are kindly requested to wait for a while. Thank you.

Thank you very much for joining us today despite your busy schedules. We will now begin NTT, Inc.'s financial results briefing for the 9 months ended December 31, 2025. I am Akaishi from the Investor Relations department and will moderate today's session.

First, let me introduce today's 3 speakers. Hiroi, Senior Executive Vice President; Nakamura, Senior Vice President and Director of Finance and Accounting Department; and Hattori, Senior Vice President and Director of Corporate Strategy Planning Department. This briefing is being live streamed.

Please note that an on-demand webcast will be available at a later date. Today's session will primarily focus on Q&A. For materials related to the financial results, please refer to the presentation materials available on our IR website. We also disclosed the notice regarding revision of full year consolidated earnings forecast today, so please take a look.

We will now proceed to the Q&A session. Please register questions in advance. Those who have preregistered, we will take questions from the web conference system. [Operator Instructions] We will now take questions.

From Nomura Securities, Mr. Masuno.

This is Masuno from Nomura Securities. I have two questions. The profit plan for the overall company, how we should look at it? Last year, around this time, I did ask about it because it was -- it ended lower than the plan, and this time, you're going to revise downwards again. So next fiscal year, at the press conference held before, DOCOMO, they want to improve the efficiency of the average revenue of the sales promotion. So I think the premise should be that the situation is going to continue for a while. And for the network quality improvement, there's going to be depreciation as well as the disposal expense that will come out. So I think you should make a plan that is more aligned to the reality. What do you think about that?

This is Hiroi speaking. The revision downwards of the guidance this time that we have conducted, we have been causing tremendous trouble to our shareholders, and we really take this seriously. And as you have correctly pointed out, regarding the trend of the business performance, continuance from last fiscal year, the performance has not been strong. And we deeply apologize for that.

And as you pointed out, Mr. Masuno, how we plan and how we run the business, maybe it's better that we should do it in a more conservative way is probably what you have. And what you have pointed out, we will -- like to take it in as it was stated. And as soon as possible, we would like to come up with a thorough plan for next fiscal year that can be trusted by our investors.

Having said that, the situation from last year, this year and towards next year, there are some areas that have the possibility that is going to change. Well, you will be having the briefing session with the DOCOMO after this. So at that time, I believe that there will be some explanation provided to you, and you will probably be asking the question. But on the revenue side, ARPU bottoming out, we are starting to have visibility of that. Telecommunications will compare to our competitors. The mobile telecommunications business compared to the competitors. The billing plan revision.

The timing was late. That is why our bottoming out plan timing was later than them. But we are starting to see signs that it is going to bottom out. Therefore, that is a positive factor in terms of the business performance going forward.

On the cost side, what are we going to do when the competitive environment becomes even more severe? We would like to create the plan that is going to be more aligned to the situation and thoroughly make the plan. That is all.

My second question is related to the overall direction. The group companies on the individual basis have the direction they want to go. The data, the press conference said it's like digital AI. DOCOMO said the finance, they want to create -- they're going to create a holding company, et cetera. And for the holding company yourself, you have the quantum computing is what you are talking about.

So as a group overall, the vision 3 years from now, 4 years from now, what is that going to be? For example, in the industry, there's a strategy option that you will concentrate on AI or you're going to improve your financial positioning and do more investment? Or you're going to have AI implement in all businesses and have AI combined with mobile? I can understand the strategy of each of the operating companies. But as of the holding company, as a company-wide perspective, how do you look at things 3 years, 4 years from now?

Thank you for that. This is Hiroi speaking. In the future, what we envision is that within -- we are operating our business based on our medium-term management strategy. So the strategy that is in that plan, what we -- the strategy we have is not that deviated from the medium-term plan. And we're saying we're going to make proactive investment in the growth area for JPY 8 trillion.

So digitalization, data center investment and just smart light business in DOCOMO, reinforcing the personal business, we are going to allocate our cash as well as more investment in those areas, and we have been doing that. However, the return becoming visible towards the investment that we have made, that coming visible timing may be slightly behind what we have expected. However, regarding the investment towards growth, we would like to really continue it.

And the total business performance, it is not doing as or as expected regarding that. Compared to the starting point of the medium-term management strategy, the business model that we have a planned is not reflecting the existing situation. So we would like to rebuild up the -- especially DOCOMO's business.

And regarding the growth investment that we have shown you at our medium-term plan, we would like to continue that investment and actually accelerate the return that we can enjoy. And the -- we have revised downward this time. So there are some difficult points regarding the leverage and others. So of course, we would like to give a close eye on those factors and continue the business operation.

Next, SMBC Nikko Securities, Kikuchi-san.

Kikuchi speaking. I have two questions. This year, we have only 2 months left. And so I think you are working on -- being in line with the plan. For next fiscal year, I'm sure the numbers are not ready yet, and you will not refer to any numbers but want to know the general direction of each company. What is your view, Hiroi-san?

Of course, I know that it will not be a commitment. So for example, in DOCOMO, I will ask the question again next in the next session, but network expense will increase next year. But overall, we will try to improve. In DATA Group, I think it's strong generally and I think it's about finance, data center capital cycling, how we should look at the profit there and what to do with East and West and overall. So if you could just give me the general direction, I'd appreciate it.

Thank you for the question. So it's difficult to answer because it may imply things for next fiscal year. But generally speaking, as you mentioned, Kikuchi-san, DOCOMO, data and regional communication, my take or my general impression, I'd like to share with you.

First, for DOCOMO. We want this year to be the bottom performance to improve. So improvement of the performance will be the key point. And whether we can do that has not been decided at all at this point, but we hope the financial results will improve even by a little margin.

By maintaining the pace of sales, we will improve efficiency. So to repeat myself, DOCOMO sales, the strengthening of sales, the outcome will be the subscribers and our ARPU trend. I think we have some silver linings. So we want to build on top of that.

And next, regarding data, AI, cloud, in many areas, market is growing. So now that it is a wholly owned subsidiary, we want NTT DATA to continue growing. Data center will be one key point. But overall, financial leverage is still difficult. So in terms of the expansion of data center, we will use outside capital to grow. That will be one key point.

And next, NTT East and West. The optical consumer base, the demand remains strong. So we are pursuing our investment and strengthening our sales. So this robust demand for optical will be captured as we run our business. And enterprise business in East and West are growing now. We have giga school and other solution type businesses and network is now connecting data centers. And so we're seeing various types of enterprise demand. So we will capture them to grow strongly. At any rate, the details will be fleshed out going forward.

My second question is -- I don't know if I can take this seriously as I listened to you earlier, but the President said in the Q&A about IOWN, you said you are still in the price negotiation on IOWN, President Shimada said, so -- the product. Are you already at that stage? Are customers already at that stage? So you are now price -- negotiating price? And if you come to an agreement, you can announce something. Is that how much you've progressed already? Are you already at that stage?

Well, this is about business. And we have the counterpart. And so under our sales strategy, we will refrain from saying anything in specific terms, but we want to commercialize in FY '26. So the message is correct. So there are concrete business progressing. But at this point, I would like to leave it at that.

A while ago, 3 months ago in IR/PR Day, you said that in Q4, the commercial samples will be released, I think you said. That remains unchanged based on your current forecast.

Commercial samples, We have business negotiations with our customers, and we use the material. We have the material already available, and we use that to be more specific on the terms and businesses. Thank you very much.

Next, from Daiwa Securities, Mr. Tokunaga.

This is Tokunaga from Daiwa Securities. I have two questions. The first is regarding the strategy for DOCOMO's share. In order to not lower the shares, one option you can take is inorganic, invest or have an alliance or partnership with MVNO or have a low price plan on the Internet. I'm sure that there are other options other than inorganic. But for your company, instead of doing that, you want to acquire subscribers and organically maintain your share. Is that better is what you think?

Well, regarding the increase of the subscribers, how we will do that? We always pursue various options. In fact, you said inorganic. So within our past various transactions, how to apply inorganic options and regardless of the scale being small or large, we have been doing such a thing. in the past. So it's not that we are ignoring that option or we are not going to take that option. However, if we were to do such a thing, there is the situation of the counterpart that we have to consider.

And also, when we acquire it, we need to look at the price at it. And it depends on the condition at that time. Therefore, for us, looking at the market now, acquiring customers of subscribers in an inorganic way, we are thinking the organic way is what we need right now. But that's why we're doing this. But as an option, of course, that still exists.

My second question may overlap. But when we look at your interest-bearing debt in your financial positions, with the data acquisition, the leverage went up. But when you want to conduct your strategies for the individual operating company, how much of an investment facility room that you have in looking at the current financial situation? How much of it do you have is what I would like to know?

Well, regarding this fiscal year, the interest-bearing debt currently is becoming larger. And as you have pointed out, EBITDA multiple is deteriorating. Regarding this fiscal year, wholly owning NTT DATA occurred, and we had to use a large amount of cash. That was the situation we had.

And regarding the investment, as I have mentioned before, under the medium-term management strategy, we were thinking of JPY 8 trillion investment in the growth areas. Therefore, regarding the increase of investments, that was already incorporated in our outlook. Well, DOCOMO acquired a bank this time and others as well or reflected.

But what you have to recover is EBITDA. The invested amount towards the growth areas. The return I did mention is slightly delayed. But of course, there are investments that are showing effectiveness already. But the foundation business that we have, the cash flow of those or the EBITDA of those or the cash generation capability of those foundational businesses is lower than when we created the medium-term management strategy is what we're facing right now.

So if improve this part, the EBITDA multiple is going to start to improve. However, in various aspects, of course, we have to maintain our credit rating as well. So the depending on the degree of the improvement of EBITDA multiple, how we are going to accelerate our investment, I'd like to do it in a way that we do not damage the trust from our investors by controlling it.

I just wanted to confirm, the investment towards the growth area, there's still room for DOCOMO and NTT DATA?

We are still in the growth market. Therefore, in that way, regarding the very promising investments, we would like to thoroughly do that. And in a way that even though we do that, we can still maintain the trust of our investors by having thorough control in the financial position.

Next, Goldman Sachs Securities, Tanaka-san.

This is Tanaka from Goldman Sachs. This fiscal year and next fiscal year, I have one question each on the financial results. DOCOMO and DATA will be next. So I have a question on East and West. This year's -- how we can look at the financial results this year. Q3 operating profit was up. So on a quarter basis, up and down, it was up and then down, the Q3, East and West year-on-year profit increase. Was there a one-off factor included? And if you look at the breakdown, legacy business decline seems to be smaller. Was there a change in the trend? So that's my first question.

Thank you for the question. This is Nakamura speaking. One-off factor, no large one-off factor. But if you look cash-in timing at some differences, so it's about accounting treatment, universal service subsidy, the way it's posted was changed. So slight change, but largely, it is as usual. We will follow up on this later, the details.

Legacy business, any changes in the trend of legacy business? And if there are no large one-off factors, then including the cost restraint, you are now in recovering the mild profit recovery trend. Next year, price will increase. But is that the general trend now, underlying trend?

Thank you, Nakamura speaking. Tanaka-san, you are right, no change in the trend. So it is now trending stably.

My second question is, has been raised a few times. But once again, the revision of the medium-term plan is necessary, I think. So as much as you can say, what are you discussing in revising your medium-term plan? In the past discussion, you will keep the direction of the growth investment unchanged, but the way you think about profit and M&A, anything you can touch on the discussion that you are having right now?

Thank you. Hiroi speaking. I may repeat myself, but the medium-term plan may need to be partially revised. Yes, you're right. So we are now discussing internally. But at this point, I don't know how the discussion will turn out. We have to look more in detail in each company. But at this point, the large medium-term framework, we -- the direction of investing for our future growth will be maintained. The key is how we can show this growth. That is the key to our discussion. If I could leave it at that, I would appreciate it.

Next, from Okasan Securities, Mr. Okumura.

This is Okumura from Okasan Securities. Can you hear my voice?

Yes, we can hear you.

I have two questions. The first is related to the operating income guidance for next fiscal year. This is just confirming the answer towards Kikuchi's question. So you are having the policy or direction to aim for increase in profit? And the increase and decrease -- sorry, the effect after selling the data center, I want to know what's the impact is going to be.

You're talking about the next fiscal year's business performance? And it's difficult to give you any specifics. But generally speaking, of course, all the time, we like to aim for an increase in profit, meaning that we want to respond to your expectations. Therefore, as a very basic policy, of course, we have that. However, having said that, within each business segment, how that is going to come about, the details of that is something that we will be narrowing down from now onwards. But as I have been mentioning from before, regarding NTT DOCOMO, your concerns exist, is what we are aware of. So for us, too, we need to surely show you the path towards a recovery, and we are quite aware of that.

My second question is maybe related to that is the asset sales, what are your thoughts regarding selling assets? Last several years, the real estate sales of NTT East and West and NTT DATA center sales and the recently DOCOMO towers. So more than from the perspective for growth, but it seems that you're making the decision of asset sales to fill in the gaps of the business performance. So moving forward, with the holding company taking the lead to dispose the dormant assets and others, what are you going to do with the assets? Are you going to show that, your direction to the investors? Can you talk about that?

Thank you very much for your question. The way we think regarding the asset sales, to simplify everything and it's narrowed down to one way of thinking, that is not the case. There are various ways of our thinking because we have a lot of real estate on hand.

Conventionally or historically held assets, especially in NTT East and West, regarding those type of real estate, it's -- the basic thought is how we can utilize that and use that to generate cash is the way we think about those assets. So of course, the telecommunications, equipment and network facility type of a real estate, it's making money through the businesses, utilizing those real estates.

But the real estate, if it's not utilized fully by us holding it, we sell it to a real estate company or development company, and we decide that it's better for us to maximize the value of the real estate that is idle or dormant, then we will sell that. So those type of assets in the past till now, we have been selling those type of assets.

But regarding the telephone telecommunications facilities, regarding the facilities that we are trying to consolidate, of course, we're trying to improve the network itself, we would like to sell those assets ahead of time, consolidate the telecommunications facilities, open up that real estate and actually hand it over to the buyer. So this type of transactions it's a way of thinking as well. So all this is based on the way of thinking that we would like to utilize these real estates in the most efficient way.

But the way of thinking towards the data center is slightly different. There is a very strong demand towards the data centers, and we would like to increase the investments towards these data centers. However, as you have been asking, EBITDA multiple is becoming quite high. Therefore, at this part, how can we expand the data center business is -- from the perspective of how, we can conduct the capital recycling for the data centers. So for the data centers, partially, we will be selling it and acquire the new opportunities for the data centers is what we're doing now. So basically, maximizing this enterprise value is why we're doing these things or selling the real estate. It's not to fill in the gaps of the business performance. Maybe as a result, it may seem that way, but that is not the final goal of us, selling off the assets. I hope you understand it in that way.

Understood. Sorry, it was quite a rude question towards you.

We do not have any more hands raised, then it's about time. So we would now like to close the financial results briefing. We will next move on to NTT DOCOMO session. So please stay connected. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

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.

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.

[ 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.

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.

Next question, please. The person at the left.

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?

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.

Next question, the person in the middle, wearing blue shirt -- navy jacket, please.

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.

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.

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?

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.

Then to my right, the person in the second row.

[ 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?

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.

Next question. The person behind the previous person.

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?

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.

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?

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.

We would like to entertain one more question from the floor. The person at the front row, please.

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?

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.

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.

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?

What prospect?

Performance forecast for each segment.

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?

Moving on to the next question. The person at the front row.

[ 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?

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.

Next question, the person in the second row from the front.

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?

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.

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.

[ 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?

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?

The person in the back with a dark colored jacket, please.

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.

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.

Then we would like to take one last question. Does anyone have any questions? The person over there.

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?

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.

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.]

Thank you very much for joining us in spite of your busy schedule. We would like to begin NTT Holdings briefing session for the 6 months ended September 30, 2025. I am Akaishi from IR. I will be serving as the facilitator.

First, let me introduce the speakers. Mr. Shimada, Representative Member of the Board, President and CEO; Mr. Hiroi, Representative Member of the Board, Senior Executive Vice President and CFO; Mr. Nakamura, Senior Vice President, Head of Finance and Accounting; and Mr. Hattori, Senior Vice President, Head of Corporate Strategy Planning. The announcement will be broadcasted live, and the video will be available on demand later.

Also today, we will skip the earnings presentation and start with a Q&A session. Please refer to our IR website presentation materials for the documents regarding this presentation. We will take questions from those who are attending in person and then those who are preregistered attending via the web conference system. [Operator Instructions].

Now we will start the Q&A session.

First, we will take questions from the floor. [Operator Instructions]. In the front row, on the right-hand side from my side.

My name is Kikuchi from SMBC Nikko Securities. Your company plan, you have not revised the plans. But looking at the contents of it or the breakdown of it, there are quite a change. The data center transfer gain is about JPY 20 billion less than the fiscal year start plan and SBI Sumishin due to the TOB of that, there's an overlap there, too. And NTT DATA, TOB has been completed, and noncontrolled interest is going down. So the profit is going to be boosted upwards.

And also at the press conference, Mr. Shimada, you were saying that DOCOMO in the second half is going to accelerate its reinforcement of the customer base. At the start of the fiscal year, you were saying that the second half, the expenses will be controlled a bit more. It was the explanation. So I feel that there is a difference from there. And even though DOCOMO underperforms, the other areas, there's a buffer about around several -- [ JPY 10 billion ].

And I believe in the first half, there wasn't much that was used over there. So there are various changing factors that have occurred, but the content of the plan has not been revised at this point. You're saying, "It's okay. We're going to completely achieve it. Don't be worried about it." If that is the case, that's fine. But it seems that, that is actually not the case. So can you explain thoroughly one by one, that will be greatly appreciated. That's my first question.

Kikuchi-san, thank you very much for your question. First of all, what we don't have a clear visibility yet is DOCOMO's competitive environment. From the second half of last year, in practice, the MNP as well as the quality issues were the focus point of Mr. Maeda and has been implementing initiatives to respond to that. So no more thinking. You think that last year in the second half, a lot of money has already been injected, therefore, compared to the first half of this fiscal year, you may think that the second half will not have an increase in cost, especially on a year-on-year basis. Normally, that will be the situation.

However, if you look at the current most recent competitive arena, the competitors are seriously responding to the competition. And also for us, this fiscal year, we have in mind that we cannot lose this race. Therefore, if they're going to further strengthen their competitive -- competition measures, then we have to respond to that. But this is the area that we don't have a complete visibility.

But on the other hand, how are we going to absorb that cost? This as well, just simply revising the forecast and allocate expenses to this. That's not the case, but utilizing the unutilized assets or reduce the cost where competition is not the issue. We need to look at the situation in a comprehensive manner. But having said that, on the other hand, selling assets, that is going to require a certain amount of time. Therefore, suddenly, if we try to do it in the fourth quarter, that will be difficult to do. Therefore, in this third quarter period, what kind of competitive environment is going to face us is what we need to see. And depending on that, things will be changing.

So for now, we are responding to various things, and we would like to achieve the targets. But depending on the environment, we don't know what the environment of the competition is going to become. We don't know various things. So we would like to keep a very close eye on the third quarter competitive arena and respond to that.

And for the data center, you said one by one. So regarding the data center is JPY 26 billion less than what we have originally assumed. However, as Sasaki-san from NTT DATA was explaining, actually, the order situation is quite strong. And net sales for the second half -- second quarter, the domestic unprofitable projects came about, and there was negative factors, both domestically and internationally. However, for domestic and overseas, the order situation is strong. So whether all that is going to cover this negativity, we don't have a clear picture, but they're also reinforcing the sales activities as well. So I'm hoping that they will be able to absorb this.

And also, wholly owning NTT DATA, whether that will -- regarding boosting the bottom line because of that, currently, the financial expense is slightly increasing. So of course, this is one factor. However, we have not revised it because of this. And regarding the Sumishin SBI or SBI Sumishin, moving forward, how much of the services can be brought about that will bring synergy to us is the key. And so within DOCOMO, it is thoroughly being reviewed -- well, not just DOCOMO, but SBI Sumishin Net Bank as well. They want to grow. So together with them, this part is being considered and reviewed. And of course, I would like them to come out with a certain outcome. Well, the key is the mobile business is a consumer side competitive environment. That is going to be the key.

So that means that looking at various situations, you will consider selling assets. Well, you have done quite a bit of that 2 years ago. And there are assets that will generate profit? Are there any left, because you've done it 2 years ago?

What we did 2 years ago is the [ sale of ] asset of NTT EAST and WEST. So DOCOMO business also has various assets on hand. So within DOCOMO Group, I want them to think of what can be done.

My second question is about the finance part. Regarding the business, I want to take a deep dive later for each company. But the finance part, then you have issued foreign bonds the other day. And I thought that you will provide us with explanation after everything is done, like the NTT DATA's TOB expenses and SBI Sumishin Net Bank's TOB that will be covered with DOCOMO's asset sales and the data center investment.

So from next fiscal year onwards, the necessary capital -- what we are concerned about is the shareholders' return, which is the dividend and share buybacks. 6 months ago, you were saying that the direction and policy is not going to change and will be continued. And is that really possible? And also, when you wholly owned DOCOMO through TOB, the cash flow at the holdings company, you had about JPY 900 billion, and you were going to pay back your debt and shareholders' return investment. With that amount, you were able to make it through somehow.

But currently, with NTT nonconsolidated, how much of cash flow are you expecting? And that cash flow, do you have to repay your debt? I think that's a discussion point. I think you don't have to repay and lower the leverage. But what kind of allocation of cash are you thinking of to maintain shareholder returns or maintain investment? I would like you to share your views.

So Hiroi is speaking. I would like to answer your question. Well, this fiscal year, NTT DATA has been wholly owned, and SBI Sumishin Net Bank, we have acquired them. So cash-wise, it is quite tight. And also looking at NTT DOCOMO's performance with the cash flow that is recorded, they are using the surplus of the cash flow for the -- responding to the competition. So I think we will be at the bottom and a tight situation in terms of cash flow this fiscal year, making investments for growth and increasing cash is what we're aiming for. EBITDA is JPY 4 trillion, is the target we have. And we are progressing towards that.

So once we see the effect of the investment in the medium term, this gap is going to be fulfilled, and the financial position is going to improve. But in terms of the soundness of the financial situation and balancing that with the shareholder return, basically, what we are doing right now is, the share buyback and the dividend level, basically, we are continuing to increase the dividend. We believe we will be able to solidly maintain that.

And this fiscal year and next fiscal year for a little bit, we will have a tight cash flow situation. And of course, we can think of utilizing debt. But basically, the current credit rating of A-, we would like to maintain that rating and to do things so that we don't cause trouble for the bondholders or bond investors as well. That is how we would like to manage the financial position. That is all.

We will take the next question in the front row, left-hand side, please.

I'm Masuno from Nomura. I have a question for each segment. Starting with the Global Solutions overseas data center. Earlier, NTT DATA President made a press announcement. I believe that we can accelerate investment. I believe that more risk should be taken to accelerate investment. I felt that the President was a bit cautious. Do you have any thoughts about accelerating investment for DATA?

Well, we want to accelerate. To be honest, we do want to accelerate our investment. But there's the construction capacity that needs to be factored in. So construction speed and also, are we going to do this with our own equity? That is another question. If we're going to tap into the funds from third party, then that will give us more power. And that is something that we are studying.

We studied that possibility earlier, but the environment did not work out. Now the current environment is more favorable to involving third-party investment. So we will consider that in more earnest. And in terms of the construction speed, it does depend on the location, but we would like to accelerate investment globally in a way that is well balanced. And of course, we have to enhance projects with higher profit. For example, in India, the return is quite high. And so we would like to focus in areas where the return is higher.

In terms of the construction capacity, that is a physical impediment. In terms of funding, from equity investors, lowering the equity ratio or involving third party is not that favorable, rather increasing debt through project finance rather than lowering the equity ratio. That would be our hope. We have no idea about -- we don't think about increasing equity or decreasing the equity ratio. We're just talking about using third-party funds for investment. So it's not like a third-party joint venture. No, that is not the case.

My second question is regarding DOCOMO. One year ago, at the IR Day, when the medium-term plan was presented, DOCOMO's consumer business operating profit was to rise. And the premises for that was that the sales promotion will be made more efficient for the year ended March '27. But looking at the current situation, the promotion efficiency is actually declining. And so if the competitive landscape doesn't change, I believe that the current sales promotion efficiency will continue into the next fiscal year. So if your competitors don't reduce the sales promotion, what's going to happen in the next fiscal year? So the final year of the medium-term plan?

Well, this may be similar to my answer to Kikuchi-san earlier. You are right that the scenario has changed somewhat from what we had imagined it to be 1 year ago. So our sales promotion cost is about the same as our competitors. In the past, DOCOMO was able to keep the sales promotion cost lower than our competitors. So what happened as a result of that was that our market share was going down. So now we are expanding about the same level of marketing cost as our peers. Now with the current status continue, if that is the case, then, of course, we will need to revisit the scenario. So reducing the marketing cost just by ourselves would mean that we reduce market share, the customer base itself. So we need to think about the balance.

But the overall market is also seeing cost increase across different items, and how we absorb that cost increase is a struggle for not just us, but for all our competitors. So what kind of the competitive landscape you will see going forward is -- needs to be watched. And by closely observing that, I'm sure that I'll be able to better answer your question.

Then accounting-wise, even if DOCOMO sells some of its assets, then, for example, we exclude that. And the data center sales, that is also excluded as well. So going up or down, that will not have a bearing on how it is valued. I think we need to show that DOCOMO recovers on its normalized basis.

Lastly, for the regional communication business, can we say that the recovery is on track? I'm sure that the quarterly result is not sufficient, but the second quarter results didn't seem that satisfactory. Do you think that the structural reform is on track?

In terms of NTT EAST and WEST, basically, the situation is on track. NTT WEST had some profit decline factors, which we had communicated to you before. There are assets that needed to be reduced from the books, which have become unnecessary. And these were already in the plan. So for making efficiency, introduction of AI at the call centers and using more AI in the support teams, all of that is on track. So for the NTT EAST and WEST, I'm not worried about the projections.

[Operator Instructions] The person in the second row, please.

Tokunaga from Daiwa Securities. I have two questions. The first is regarding the new Takaichi administration. Looking at the media report and looking at the Minister of MIC's press conference, they are going to work on the amendment of NTT law. However, having said that, up to now, quite a bit has been considered. And it seems that it has settled down once. So moving forward, what else can be considered is something that I cannot imagine. Therefore, at this point, for your company regarding NTT law, what you are seeking for? Or do you have any expectations for the new government is my first question.

How the NTT law should be, as you have mentioned, Tokunaga-san, with the amendment that was done in the last 2 years, we believe that it has been moved forward quite a bit, is how we look at it. The major issue that remains, if I may say, is the total volume regulation, meaning that only have that imposed on NTT and is NTT the only one that should abide that due to securities manner -- securities reasons. And as Masuno-san mentioned, to improve the efficiency of NTT EAST and WEST, how they should do their work or how the organization should be, how they should conduct their work this time, there was quite of a deregulation done. So regarding the organization, changes are still remaining for improving efficiency.

But within the law, it's stipulated that the discussions will resume 3 years from now. So there is no necessity at this point to rush on things at this point. However, at this point, what we would like the government to consider is regarding universal service provision. Well, the rule itself has been amended. But regarding the detailed how the system should be designed is not completed. So more than the amendment of the NTT law itself, but what has been amended this year -- up to this year, the content of that, we need to accelerate working on the details of that.

The second question is kind of a follow-up question to Masuno-san. So there's -- in two parts. Regarding NTT DOCOMO, there may be a possibility of a scenario change and NTT EAST and WEST are in line as the plan. But I'm actually looking at a different direction. NTT DOCOMO, maybe July and September was tough. But in October, the MNP is turning positive. So in terms of the customer acquisitions, I believe that for the mobile communications, it's going to come back. But compared to the IR Day that was done -- IR Day, maybe the profit recovery level is quicker than that. So the first point is that the changes of scenario for DOCOMO, which KPIs is it? The revenues? The profit?

And the second question is, including the rate change of NTT EAST and WEST, maybe we should not expect a large increase in profitability.

So first of all, regarding NTT DOCOMO and NTT EAST and WEST, Tokunaga-san, regarding DOCOMO, you are a bit optimistic. But as Shimada mentioned before, that's different from how we look at it because the market competitive environment is quite intense. In October, the MNP has recovered, as you have mentioned. But at DOCOMO side, the marketing activities have been reinforced, and that's been increasing. And as a result of that, they're gaining the numbers. And we believe that this situation is going to continue, or we have to look at it that this is going to continue. So regarding NTT DOCOMO, in terms of the revenues and profits, we cannot be optimistic about it.

But regarding NTT EAST and WEST, it is true that regarding the rate increase, we are implementing initiatives so that we'll be able to do so. But as we have assumed at the beginning of the fiscal year, the revenue and also the cost efficiency initiatives are progressing as planned. So I don't think there is a major change. And this fiscal year, GIGA School -- as we see in GIGA School and others, there's a large-scale investment, and that is done by the regional areas' sales rep for NTT EAST and WEST. And actually, that is bearing fruits, and that is contributing to the operating profit. That is the current situation. Thank you very much.

We will now ask the members. [Operator Instructions] Okumura-san from Okasan Securities.

I'm Okumura from Okasan. Can you hear me?

Yes.

I have two questions. First, regarding the data center business. This may be a question that I should pose to NTT DATA, but about JPY 90 billion book value asset was sold at about 2x the price. But the total IRR of these assets -- what was the total IRR? And also, the data center book value is around JPY 2 trillion now. So what is the unrealized value -- unrealized profit from this? Should we assume that it's about JPY 1 trillion? And also regarding the data center portfolio, what is the utilization rate? Or what is the contract period? Can you provide some KPIs for investors?

So this Hiroi speaking. In terms of the data center REIT, IRR, we are not able to provide concrete numbers, but we are aiming for pricing that is aligned to the investors' perspective. So we believe that a fair valuation is being realized.

And in terms of our entire data center business, what is the total value? What is something that we can provide better color on? Well, we are promoting more disclosure on the data center business. Data center valuation, there is a market for that. So EBITDA and profit-based multiple. So some kind of a total value can be assumed for our assets. And perhaps you can reference that in order to value the data center business as a whole.

Now in terms of my second question, in terms of the creation of synergy with NTT DATA, I'd like to ask about the revisions to your medium-term plan. What kind of discussions are ongoing? So the synergy of having NTT DATA as a 100% subsidiary, will you just be updating EBITDA or the leverage ratio? Or will you be introducing new KPIs, like EPS? Or will you be considering balance sheet restructuring or changing the medium-term targets? Are you having those wide-ranging discussions? Can you share with us what is being discussed?

This is Shimada. We are still in the process of discussing the synergy. And I actually mentioned this in the press conference. We need to first review NTT DATA's medium-term plan. And President Sasaki of NTT DATA also mentioned in terms of the global synergy that can be harnessed as a group. That is one very important factor. So NTT DATA's medium-term plan will be announced in spring next year. And the consolidated business plan will also be revisited at that time.

So at this time, numerical targets or contents, how much we will review the medium-term plan, it is too premature to say because we need to have more concrete items to be able to provide more color on this.

I apologize for asking a premature question.

I would like to take a question from Morgan Stanley MUFJ Securities, Mr. Tsusaka.

This is Tsusaka from Morgan Stanley. Can you hear my voice?

Yes.

I have one question regarding the mobile business and also a question related to the NTT DATA. Regarding the mobile business, before, you were not spending money than your competitors, but you are spending now at the same level as competitors, and you're still losing. And I think this is quite of a serious situation. And the other point is listening to Mr. Maeda's presentation for NTT DOCOMO, it seems that various things are being in place or prepared. However, didn't feel something that will stand out as becoming the core for them. So as a holding company, the strategy of NTT DOCOMO, are you making a decision that is really going well? Or if there is a question -- if your question towards the NTT DOCOMO's strategies, towards NTT DOCOMO directly, are you in a position that you can instruct them directly as a holding company? Or are you taking such an action to them is what I'd like to know?

And the second question is related to NTT DATA. And at the NTT DATA, the President of NTT, Sasaki-san, was saying that it's global. And Shimada-san, you mentioned that it's global as well. And for global center business, you hold the #3 position globally. So you have quite of a solid presence there. But for the other businesses, I don't think they -- you can say that they have succeeded overseas, well, numerically -- from the new number perspective. So the reason why you are focusing on global -- the data center being a global business is fine. I understand that very well. But for the other businesses, that being global, I feel that there's no track record that has been achieved, is how we can see it. So how should we think about that?

First of all, Mr. Tsusaka, thank you very much. Regarding the mobile business, whether a discussion is done or not, we are having a discussion with them. Because we are having the discussion, that is why the direction has been changed since last fiscal year, basically. They need to solidly and surely protect their customer base. And as I mentioned before, without spending cost or money and just damage their existing customer base, there's no future for the business. Therefore, we wanted them to thoroughly respond to the situation.

For the second quarter, actually, the [ Elmos 0.5 giga ] was stopped as a plan, and there's an impact of that. And in fact, we slightly lost against the competitors. But as of October, MNP is net positive now. And the second quarter situation, I think, is a temporary situation, is how I look at it. But what's more important than that is regarding quality. We need to improve the quality, especially because everybody now is watching a lot of video. So the challenge is in the metropolitan areas, around the railway routes. We need to work on that, and we need to increase the number of base stations. However, today, it was said that in the second half that they're going to increase the construction process by threefold, but that needs to continue into next fiscal year. And also the 5G base station that has become old needs to be new, and we are replacing that to a new one. And that needs to be completed through this fiscal year and next fiscal year. So those are the two key points.

And we are aligned with DOCOMO on this. And they are thinking of various cost reductions, but these are the necessary costs that needs to be spent. So for this year and next fiscal year as well, in terms of implementing new equipment and facilities is something that is necessary. Therefore, how are we going to overcome this situation and have a bright prospect for FY '27. Of course, I don't know the numbers for FY '27 yet. However, these type of factors will come about, and we are aware of that, and we are continuing our discussions on it.

And regarding NTT DATA, at the global discussion, recently, the demand for AI is coming about quite strongly. And the tech services customers, conventional tech service customers is where the AI demand is coming from, especially South Europe, like Spain, Italy, in that region, the needs is heightening. In Germany, unfortunately, the automobile industry is not doing well. So there's an impact from that. And the U.K., performance is coming back slightly. And in the United States -- well, the U.S.A. is about the same situation like Southern part or Southern Europe. So we do have expectations to a certain extent in those regions. So the product itself is transforming and having the customer base is quite valuable. So in the areas other than data center business, to turn it around into a positive business, I want the business to be managed in that way. Thank you very much.

Thank you very much. So we have exceeded the allocated time. We would like to take one more question either from the floor or remotely.

Since there seems to be no further questions, we would like to conclude NTT Holdings presentation. Next will be from NTT DOCOMO. So please stay in your seats. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

From now, we would like to commence the press conference for NTT's financial results for FY 2025 Q2. Thank you very much for your attendance despite your very busy schedule. I will be serving as the emcee. My name is is Sekine from NTT Public Relations Department.

First of all, let me introduce the attendees today's representative, member of the Board, President and CEO, Akira Shimada; Senior Vice President, Head of Finance and Accounting, Toshihiko Nakamura; Senior Vice President, Head of Corporate Strategy Planning, Akitoshi Hattori. These are the 3 members.

As for today's materials, they are uploaded on NTT official website at 1:30 p.m.

Now we would like to begin. President and CEO, Shimada, over to you.

Thank you very much for attending today. I am the CEO, Shimada. I would like to explain the fiscal year 2025 second quarter results.

The second quarter results -- consolidated results were operating revenues and operating profit, and profit all increased year-on-year. Operating revenue reached new record high levels for the second quarter.

As for operating revenue, though, it has decreased by JPY 60 billion due to the impact of foreign exchange rate, due to the enterprise business of each group company expanding, an increase in revenue from incorporating data centers into REIT resulted in an increase of JPY 182.1 billion increase in revenue year-on-year to JPY 6,772.7 billion.

As for operating profits, although costs will be spent on DOCOMO's customer base, reinforcement and network quality improvement initiatives, profits from incorporating the data center into REIT being booked resulted in EBITDA of JPY 1,740.5 billion, up JPY 54.9 billion year-on-year; operating profit, JPY 945 billion, up by JPY 24.8 billion year-on-year.

In the second half of the year, DOCOMO aim to expand its foundation for future growth by accelerating its efforts and initiatives to strengthen competitiveness such as reinforcing its customer base and improving its network quality.

Although the competitive environment is tough for achieving the profit plan for this fiscal year, we aim to achieve NTT consolidated operating profit by making maximum efforts and continuing to expand our enterprise business as well as reducing costs. Profit was JPY 595.7 billion, up JPY 40.9 billion year-on-year due to increase in operating profit and others.

Next is the revenue and operating profit by each segment. Integrated ICT business segment. Although there was a decrease in consumer communication expenses due to declining mobile communications served revenues year-on-year, revenues increased as a result of an organic growth of Smart Life business led by enterprise and finance business. Although Enterprise business increased its operating profit due to cost spend for initiatives reinforce customer base and improve network quality, profit decreased year-on-year. As explained earlier, we plan to accelerate our efforts to strengthen our competitiveness in the second half and work to diligently maintain and expand our customer base.

The competitive environment is tough for achieving this fiscal year's profit plan. However, we will continue to work to the maximum extent possible to expand growth businesses such as the Enterprise and Smart Life business as well as to reduce costs.

Global Solutions business segment. Although the impact of foreign exchange rates on revenues was approximately negative JPY 60 billion, there was an increase in both revenues and sales due to capturing digitalization demand in Japan and incorporating our data centers into REIT. We aim to achieve operating profits above our annual plan by continuing to increase orders and sales, both domestically and overseas by controlling costs.

Regional communications business segment. Although there was ATPs in the legacy business revenues, there was an increase in Enterprise and Fiber Optics business revenues, which resulted in increase in revenues year-on-year and operating profit in line as the previous year. As for net increases in fiber optics services, due to sales enhancements of 10-giga plans and apartment building-wide services, there was an increase year-on-year.

Others. For real estate and energy and others. Due to Urban Solutions efforts in expanding office commercial businesses and data engineering, operating revenue increased. However, due to the decline in gains from selling a property, profit -- we conducted selling the property last year. And due to that, profit has decreased.

Next, I will explain 6 topics.

First of all, I will provide explanation on the establishment of a new company in the area of autonomous driving. NTT Group has conducted numerous demonstration projects on a nationwide basis to accelerate social implementation of autonomous driving by consolidating know-how of each entity to launch NTT Mobility Inc., dedicated to autonomous driving. This December, the new company will further advance collaboration with stakeholders and address various challenges related to social implementation of autonomous driving. Furthermore, by leveraging communication network where NTT Group has strength deploy related services solutions and aims to realize a safer, more secure and more sustainable autonomous driving society.

Also, on the performance of Osaka Kansai Expo concluded on October 13. After 184 days run, 390,000 visitors came to NTT pavilion, especially the performance using IOWN by Perfume was very well received as the first performance in the world. Thank you very much for that.

In order to operate this pavilion, total of 2,300 NTT Group companies' employees participated which helped to nurture a sense of unity of the entire group and became the value opportunity to enhance EX. We aim to leverage insights gained from diverse use cases powered by IOWN, et cetera, to create new value and realize a sustainable society.

Next, I would like to talk about business development after Expo 2025 Osaka Kansai on the development of IOWN business. For IOWN APN, at the large-scale sporting events, use cases are expanding. From this November, we launched for Hong Kong's financial industries expanding global deployment. As we conveyed at the PR IR Day the other day, IOWN optical computing will be used to commercialize optical switches using photonics electronics convergence devices, in collaboration with partner companies. In addition, using NTT proprietary technology, we also aim to commercialize optical chiplets by 2018. Also, by leveraging IOWN technology such as digital twin, Cho Kabuki, Seka Ohana, Musubi Koto Noha will be launched in December at Kabuki and steadily advancing to our social implementation of IOWN.

Next is on interim dividend. This November, as we announced at the beginning of the fiscal year, we will be implementing interim dividend per share of JPY 2.65. As for the total annual dividends per share, including year-end, we are expecting to increase for the 15th consecutive year. For share buyback, we are currently implementing, and the progress rate is 40%, JPY 82.6 billion as of the end of October against the slot of JPY 200 billion. It is on track. As for the progress since August for the midterm business plan, it is as shown.

That concludes my presentation. Thank you.

From here, we would like to take questions from the media reporters. We will take questions from those who are here at this venue. So please raise your hand if you have a question. Staff will come to you with a microphone. Please identify your company name, media name and your name and then ask your questions. Due to time limitations, we would like to limit questions to 2 questions per person for the first round. Now we would like to take questions. Please raise your hand. The left-hand side person from my side, can you bring the microphone to the person who's wearing a blue jacket?

My name is James from [indiscernible]. Before, out of the 6 topics, you explained about the NTT mobility. Specifically speaking, what kind of a business is that? And I believe that there was a Toyota mentioned as a customer. But what kind of customers do you assume? And what kind of a scale of the business would you like to develop this into? If you have a target, please share that with us.

Okay. So can you show Page 7. As you can see here, at the very end, the customers that will be using this service will be people, local residents or people who use taxis at their local community. And of course, the transportation service businesses that provide that transportation and the public transportation will be provided by the municipalities or local governments. And towards these entities, the autonomous driving system will be delivered in a package, and that will be delivered by this NTT Mobility. So the vehicle of autonomous driving and also providing support for operating and providing a warehouse and providing the surveillance assistant system and other peripheral services that are related to autonomous driving will all be put into a package and provided to the municipalities or the transportation service providing companies.

So in order to do that, the automobile manufacturing companies that will support that autonomous driving system running a vendor and NTT Group. Well, the sales will be done by the NTT Group company. So we all have a collaboration. As you can see on the left-hand side, at each entity group company, they have conducted about 35 demonstration projects nationwide in Japan. Till now, NTT West was doing that or a DOCOMO business was doing this, or DOCOMO was doing that individually on these various group companies were doing it individually. But all that know-how will become consolidated into NTT Mobility and make it into a package and provide this service. This is the purpose of this company.

Do you have any particular target?

Well, the government by 2027, they want to provide this autonomous driving at 100. And 2030, they're saying that they would like to provide the autonomous driving in a more larger scale. So we're hoping that we'll be able to achieve a JPY 10 billion of sales by around that time.

There are taxi companies that have vehicles on hand, but they don't have -- they have a shortage of the drivers. So the utilization of their vehicles is actually a challenge, a societal challenge. So we would like to resolve that as soon as possible.

On the other hand, the demand for such services because of the aging society is going to increase. So we would like to support that challenge.

And one more question is NTT DATA that became a wholly-owned subsidiary company. Their domestic business and synergy being generated, the measures. Originally, you were saying that you will share that around the fall season. However, in IR Day, you have touched upon it just slightly. However, what is the difficulty that you're feeling? And can you share the progress of that?

Well, already, with the -- between the group companies and NTT DATA, the projects are established to generate a synergy. But in practice, well, this year, NTT DATA, the medium-term management strategy, actually, this is the last year for that medium-term management strategy. So not just generating synergy. But the growth strategy from next year onwards should be thought as one became the topic of a discussion. So it's not just a simple matter that, okay, in the group, the enterprise account will be done by DATA Group or DOCOMO business.

However, if you look into more detail, the number of customers are totally different. DATA has a several hundred level, but DOCOMO business's case, they're in the thousands, [indiscernible] thousands numbers of our customers. So the scale is different. So the area that these companies are covering and the depth and the breadth that they are covering differs. Therefore, is it really better to consolidate the accounts or not? The discussion needs to be deepened by each customer or else we need to determine -- well, the key is that we need to determine whether we'll be able to provide the most appropriate service to the customers by doing so. So we need to have an in-depth discussion and also in the group. Each company is providing services, which are not the main group companies, which are companies that specialize in a certain area. So the position of such companies is a better to bring it closer to NTT DATA or not? So those type of discussions on an individual basis are conducted in depth.

And also NTT DATA itself, from next year onward, for 3 years or 5 years, what kind of business models are going to be on the growth trajectory? Under what plan is being discussed right now? Therefore, if you are going to do both, even though we just announced the generated synergy, what is going to be the growth trajectory from next year onwards?

We won't be able to answer that question at that time. Therefore, the announcement that we originally planned around this fall or the winter season, we would like to postpone it slightly and announce it around next spring timing. Thank you.

We would like to move on to the next question. The person in one more front row. Can you -- from Nihon , my name is Takatsuki.

Earlier, you talked about the financial results, and NTT DOCOMO is in intensified competition, and the mobile communication revenue is now declining. Under such circumstances, as NTT's holding company, on a macroscopic level, what are your expectations to DOCOMO with the declining market share? What is your expectation?

And the second question is, you just announced, while content area, a business alliance and against the difficult situation of DOCOMO at the moment, what is your expectation? In relation to that, there is video streaming other than WOWOW that is growing in the market. But is there room for content expansion? Is that within your horizon?

Yes, thank you for the question. For all the recognition of the competitive environment, as I have been mentioning, DOCOMO has the history of dropping share. We have Smart Life business, and we are trying to provide high value-added values to customers. The share is 35% -- not 35%, but we are trying to maintain and increase from the current data. So this year is going to be critical. So I believe you will hear this from DOCOMO. But in Q2, [indiscernible] 0.5 is already abolished. So MNP is now negative. But after October, MNP is now returning to positive. So in the second half, we will try to win in this competition, and that is our expectation to DOCOMO.

Now is the critical timing. Of course, we will try to slash cost. And for the next fiscal year, we will try to -- we are hoping that they will strengthen the sales structure. In order to do that, by injecting a cost, we hope that they will try to strengthen the structure. With the strength that DOCOMO has at the moment, our cost-cutting actions will be taken, including the sale of assets, we hope that they will be creative in doing so.

Responding to the second question on WOWOW, the details will be -- I hope you will ask to DOCOMO for details. But in principle, the DOCOMO MAX content will be enriched. And this was already released, but [ let me know ] will be strengthened in order to do that, content should be added to WOWOW we will be offering as well but also the anime store is another one from the full options NBA and also Datsun, 2 will be chosen by the customers. So we are expanding the choices of the customers through DOCOMO MAX. So that it would lead to a further satisfaction of the customers and also to cater to the needs of the variety of demand by the customers. I hope you will ask to President Maida for details.

For video streaming and anime that I mentioned, by strengthening those contents, the customers interest are quite diverse. The voice from the customers should be received. And if necessary, there will be need for enriching the contents. So first of all, by working with WOWOW, new and independent measures can be strengthened. So this is an area of our expectation.

I'd like to take the next question. On the left end of the room.

Thank you very much for explanation. My name is Thomas from NHK. Related to the announcements to -- related to autonomous driving. So the -- what was announced is that what it was done within the group, it's going to be consolidated moving forward. Till now, what was done separately? What is the benefit by consolidating that and an effect of that as well? And the strength that is unique to entity, what is that, that exists in this?

For autonomous driving, we tend to compare that to the United States or China that in those countries, the Level 4 service is also in commercial operation. But in Japan, it's still a demonstration testing phase. So regarding this autonomous driving, what kind of willingness and determination do you have is what I would like to hear.

Page 7, please, again. Well, first thing is that the key point of consolidating everything is that remote surveillance or the system platform. Up till now, they were done separately by each company, and the proof of concept has been conducted separately as well. However, the platform that will support all that -- those efforts, we would like to make that as one. So we have actually driven the Toyota vehicle of mobility in that we are, et cetera, but the platform and the telecommunications and the vehicle needs to be operated as one. So there's the main system, and there are other system per-fuel systems and making that into one system in a consolidated manner is what we would like to do.

If we -- if it's done separately, cost-wise, it is inefficient. So in a way, in the autonomous driving platform, on that platform, based on that, we want to run the operation companies vehicle. That is the strength and capabilities that we have as the telecommunications company. And that is why we wanted to consolidate those strengths and provide this service.

Of course, we are having collaboration with Toyota. So we are actually conducting all these demonstrations through Toyota vehicle. But I'm sure other automobile manufacturers will come up with other vehicles, but we would like to provide these services to all other vehicles through this platform.

Related to that, the relationship with Toyota. Regarding the traffic accident provision, I think you're working on that. What's the relationship with that?

With the Toyota's safe platform is a nationwide covering platform is what they're thinking about. But this time, the NTT Mobility platform is in the local areas. It is a service for the local area transportation company, but we are thinking of making a more basic platform together with Toyota. That will be the foundation. But what Toyota is doing in that case is evolving more like traffic signals or the distance with the vehicle in front of you or the communications with that and on the calculations that are required to meet that system, all of that, not just autonomous driving, controlling the traffic signals, et cetera, all that information, receiving all that information and creating a safe infrastructure. So it's like a new additional infrastructure. Please think about it in that way.

And what will operate on top of that infrastructure is the platform we're talking about. Of course, there are multiple platforms. But what is the closest to this infrastructure that Toyota is about to build if the platform closes due to what Toyota is doing.

We would like to take the next question. If you have any questions, please? Yes. Please go ahead.

[indiscernible] Newspaper. My name is Mizushima. This is not directly linked to the financial results, but Takaichi administration is now inaugurated. But what is your expectation to the administration? That is the first question.

And the second question is Expo. And you talked about the future related to the exhibitions at Expo. And related to that, Perfume decided to go to cold sleep and decided to stop their performance. And using their video, and I think you have some kind of relationship with Perfume. So if there is any comment to that, I would appreciate it.

Thank you very much. First of all, on the new Takaihci administration, I have a very high expectation. In the past, she was the Minister for Internal Communications. And from that time, on the advanced technologies, she has a good understanding, as far as I know. We are engaged in AI and in the future, in the semiconductor area, so private sector, academia, government, we need to work in unison to do the R&D activities of the new areas and the social implementation of such areas will be expected. So in that area, she has a very keen interest and the Prime Minister with such interest lead this area will be the benefit for the economy in Japan.

Another area is economic security, especially cyber attack is increasing very recently. So she has a very high interest on safety as well. So we have high expectation to that as well.

And coming to the second question on Perfume President Maeda may have more memories, but 5G London, Tokyo, New York in 3 locations, they did the perfect performance in every location. And from that time, we had key interest on their performance. And together with our business, they have extended their support. So I'm very thankful to that.

Just turn to NTT Pavilion, there was very good reputation for our Pavilion. And I believe that, that is thanks to their capabilities. It's necessary for them to rest. And if they can accumulate more and if they can come back to stage again, I'm looking forward to that personally. And also, we would like to wait for that as NTT Group. Thank you.

I'd like to take the next question. On the left-hand side, the person wearing gray jacket.

[indiscernible]. My name is [indiscernible]. I want to ask a question regarding NTT Mobility. The number of employees, how many employees will be there? And simply put, from NTT groups, each company, you're going to consolidate the employees that are in charge of autonomous driving or the other way?

At the first, it will be several -- times people, several [ 10 ] people. And of course, as the number of project increases, probably the scale of the headcount will also increase as well. But of course, at the start, we are created under the holdings stock company. And from the group companies, the people who are in charge of autonomous driving is the first step. But as written here, the automobile manufacturers or operating vehicles requires the knowledge of specific rules and knowledge. Therefore, we need those experts to also participate. Therefore, I have them participate and to go into the alliance with us somewhere. We will -- we need to utilize the external capabilities or else this company will not be able to move forward. So not just NTT Group, but also the external people, people who have knowledge and expertise are being hired, we would like to devise various measures to develop this company. Thank you.

If there is one more person, we would like to take that question. The person at the front row.

Katai Watch, my name is [indiscernible]. On DOCOMO business earlier, you talked about the number of subscription, and also I would like to hear about the financial industry. And also looking at the DOCOMO's material, it seems like there is a significant amount of capital expenditure, but a neo bank and also the quality of communications are the area we are interested in.

The neobank has just become the subsidiary of DOCOMO. So the full-scale new service are within DOCOMO ecosystem, how will it be built into that ecosystem is at a certain timing. We hope that it will be announced to the market from DOCOMO. But currently, together with DOCOMO's team and Sumishin SBI online banking are now studying at this moment. And we only have some topics as the collaboration in points, but creating new services will be essential or please wait for a moment for the announcement.

In terms of quality, DOCOMO is along with the strengthening of marketing, they are now committed to the enhancement of the quality. In major cities, it is now reaching around 80% for over 100 megabyte downlink throughput. And steadily the number of base stations is increasing. But still, there is a still traffic increase. It is still difficult to complete. Within this fiscal year, we will continue to increase the number of base stations, and we will continue to introduce new facilities. But we believe that this will continue next fiscal year. At least during this fiscal year and next fiscal year, there will be focus in order to deliver high-quality communication over 2 years. Please contact DOCOMO for details.

I have one more question about Expo's Pavilion and its future. In West Japan, I'm hearing that there could be experiences in West Japan, but will it be possible or to have a similar kind of experience in other locations?

It's difficult to have the permanent installation. But to what extent, this is something that we need to study. But for example, at R&D Forum, you may be able to have a glimpse of that. That could be one of the opportunities through various opportunities. What was done at Expo maybe commercialized and implemented in other locations. And I think we will be in that stage so that we would like to be creative so that you will be able to see and use, and we would like to make efforts to do that.

Now we would like to take questions from the reporters who are participating online. [Operator Instructions]

No questions from those participating online. There are no questions from the participants online. So if there are additional questions from those of you who are in this room, we can probably take a bit 1 or 2 more questions. Please go ahead.

My name is Taki. I want to ask another question. Today, regarding DOCOMO once again, the zone, the World Cup matches distribution, DOCOMO will be doing that. That was reported today. So if you have any comments regarding that.

Unfortunately, I haven't heard about it at all, so I don't know. Sorry, apologies.

Any other questions from the floor? No more questions? Then with this, we would like to conclude NTT's press conference. We would like to move on to the press conference by NTT DOCOMO Group. Please wait for a moment. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for joining us today at the NTT PR/IR Day, Toward the Future with IOWN, despite your busy schedules. I am Eriko Kaneko, your moderator for today. Thank you.

We are truly grateful to have so many of you participating both in-person and online today. We have scheduled presentations on topics of high interest to our investors, followed by a Q&A session. We hope you will stay with us until the end. The event is scheduled to conclude around 5:45 p.m. Please note that today's proceedings will be available on demand at a later date. We appreciate your understanding.

Now let us start the program. Before opening NTT PR/IR Day, Mr. Riaki Hoshino, Representative Director, Senior Executive Vice President and CTO of NTT Inc, would like to say a few words and presentation: Toward the Future with IOWN; Low-Power Optical Computing for the IR (sic) [ AI ] Era.

Mr. Hoshino, the floor is yours.

Thank you very much for taking time out of your busy schedule to attend our NTT PR/IR Day today. I am Hoshino, Senior Executive Vice President and CTO of NTT Inc. The title of my presentation is Toward the Future with IOWN. Though our time is limited today, I will share with you NTT's initiatives on the future we aim for with IOWN. And our partner companies collaborating with us will give a wide-ranging talk on future strategies, product development status and more, so that you could deepen your understanding on our initiatives on IOWN. In IOWN 1.0, APN and network have been pursued. But today, we titled our presentation to Toward the Future. So what we are trying to do under IOWN 2.0, the optical computing. Let me focus on optical computing.

So the program was on the slide earlier. I will first provide the introduction on today's session, followed by Mr. Tomizawa from NTT Innovative Devices spearheading the development of photonics-electronics convergence, PEC switch and leading collaboration efforts with other companies. And Mr. Anjye Huang, Co-Founder and Senior Adviser of Accton Technology, Inc.; and Mr. Ram Velaga, Senior Vice President and General Manager of Broadcom, who I mentioned earlier, will join us to talk about the outlook for the AI era from the global perspective, where we hope you will gain insight into the potential of the IOWN concept.

And finally, our Executive Vice President, Ms. Oonishi will conclude by reiterating IOWN's role as the foundational infrastructure of the AI era. We will hold Q&A sessions in between. But due to the proceedings, the time will be limited. So we will hold an overall Q&A session at the end with President Shimada. So I hope you could ask many questions to deepen your understanding. So although time is limited, I hope you could understand IOWN more.

Now under the title: Toward the Future with IOWN; Low-Power Optical Computing for the AI Era. I will introduce NTT's IOWN vision, focusing on our progress. We have many attendees joining us, including online participants, and we recognize that your prior exposure to IOWN varies. Some may have heard this a lot. And for some, this may be new. So I'd like to first take a moment to elaborate on the aspects I plan to cover in today's presentation.

First of all, as you can see on the right side, APN, all-photonics network, been focusing on network until now, but this photonics-electronics convergence, PEC, devices and DCI, data-centric infrastructure, are also the components to use the computing in a decentralized manner. In the world of athletics, APN was used. We are starting to see some actual use cases. So the implementation is ongoing. But as I mentioned earlier, we are looking beyond Toward the Future. So this initiative aims to complement the limitations of electronic circuits like power consumption, speed and heat generation with optical technology, and thereby supporting the next-generation information processing infrastructure.

In particular, we have discussed how photonic-electronic hybrid devices can be leveraged to enhance the power efficiency of optical computing resources, which will be utilized more extensively than ever in the AI era. So this is my topic today. I think you've heard this many times, but data center and many power-consuming devices are increasing. We are entering such an era.

With the growth of AI, we've said power consumption will increase. But we have not -- the numbers differ. But regardless of the level, it is definitely increasing. Of course, the data center consumption is increasing, and AI market is expected to grow 20x compared to 2021. And so the implementation of new technology is a must. We have been saying this from a few years ago and been promoting IOWN. But now other players are taking various similar actions. And our actions are in greater demand with the passage of time.

So the general direction of the infrastructure is mainly twofold. First, reducing total infrastructure power consumption by controlling power consumption of networks and individual devices and efficient infrastructure operation by making effective use of distributed infrastructure. Efficient infrastructure operation encompasses not only sharing resource for effective utilization. But given the current electronics power situation, we are increasing usage in regions like Hokkaido and Kyushu. By diversifying the location, we can pursue more green renewable energy, reducing total infrastructure power consumption.

You may know this, but in reality, AI uses GPUs, but GPU server contains not only GPU, but also CPU, memory and storage, and communication is conducted, and GPU cluster functions as an assembly of multiple GPU servers connecting via high-speed switches. And therefore, with the increase in use, these communications need to reduce the power consumption.

Photonics, the consumption does not change with higher speed. But with electricity, the communication frequency increases, and the consumption increases accordingly. So the photonics was sufficient for long distance. Here, the horizontal axis is the transmission distance, and the vertical axis is the power consumption. The blue line, once the power -- the speed goes up, the consumption goes up with electro. So within GPU servers, shifting to photonics will be a must.

Now IOWN road map. IOWN 1.0 PEC-1. We've been using this. But in computer chips, more connections will be seen. So you see PEC-2, 3 and 4. So the package then combined -- there are many multiple packages on the board. The photonics was not on the board, but PEC-2. The PEC element is mounted on the board for connection. Now in Kansai Expo, we had many use cases, Perfume and CHO-KABUKI and remote production of expo coverage for TV broadcasters. And IOWN computing is inside as well. Outside the NTT Pavilion, you can see the shading curtain. And with the people's expression, enjoy and emotion, this curtain waves. And this is realized with the IOWN photonic disaggregated computing, incorporating PEC switch. And this switch -- so the surrounding part, where you see the blue part, switchboard, the PEC device is attached. And ASIC, this narrows the transmission distance, and the electricity distance is reduced to reduce the power consumption.

So before ASIC, the photonics engine PEC-2, NTT Innovation Devices developed this. So he will come and talk later. This Innovation Devices, you may know the company. So NTT is incorporating these devices, AWG, splitter and in this transmission [indiscernible]. We have package -- pluggable package. And the guide and the devices to reduce the heat dissipation are developed. So this PEC part is developed by NTT Innovation Devices. So we will elaborate on this later on.

And the other one, in making this PEC switch, this box, and Switch ASIC and the PEC are combined. And the Switch ASIC, Broadcom. And the switch is made by Accton. So the 2 companies are here with us to talk about the potential of PEC-2 and the optical computing and the necessity, thereof. We need to have this perspective and this knowledge.

Lastly, beyond -- going beyond, we will see higher speed. So now it's ASIC. We can -- we only need to connect to ASIC. But eventually, we need to go inside. We need to have photonics inside. So PEC-3 is also being prepared. So we're preparing PEC-3. And we need to put this into the package, so the chip is miniaturized and made very small. PEC-2 also, but as we compete with other players, the performance, the yield need to improve. So for PEC-3, we need to stay ahead of others.

Now the actual manufacturer, Innovative Devices, Mr. Tomizawa will talk in more detail.

Vice President, Hoshino, Thank you very much. Next: Realizing IOWN 2.0; Development Status and Future Outlook of Photonics-Electronics Convergence Network Switches from NTT Innovative Devices Corporation, Senior Executive VP and CTO, Mr. Masahito Tomizawa, will be giving you a presentation.

Please go ahead.

Ladies and gentlemen, hello. Thank you very much for coming here today despite your busy schedule. My name is Tomizawa. It's very nice to speak to you. I came from the company called NTT Innovative Devices Corporation. This company is a subsidiary company of NTT. And within the NTT Group, it is quite of a unique company. The actual hardware and devices are developed here, manufactured and sold. So very unique company within the group.

So within NTT, the technology that has been developed and researched, that is all put on to the devices, sell it to the outside and have everybody use it so that it will contribute to the people's lives, work and society. So under this title today, I will be making a presentation, and some detailed technical explanations may occur. So please forgive me for that beforehand. And so I would like to spend a little bit of your time today.

Well, right now, it's called optical photonics, photonics. NTT has been working on the optical communication for a long time. And recently, the importance of it has been increasing. And with the keyword IOWN, this importance is spoken about. And when we realize IOWN, we'll be able to realize this. And in order to be able to do this, we are continuing to taking on this challenge to realize this. In fact, IOWN PEC-1, APN, the word came out, as Mr. Hoshino mentioned. In reality, distance will disappear, including latency. A PEC-1 or IOWN 1.0, it started to become to be realized.

But today, I'll be speaking about the right-hand side, to solve the power issue at the data centers. If we use IOWN 2.0, PEC-2 -- this is a data center, on the left-hand side, that's showing a lot of smoke coming out, it will change to society, on the right-hand side, where it's more green. So I would like to keep this in mind while I make my presentation today.

So in the world right now, the word AI is spoken about a lot, and there's a large language model. And I just compared it to the conventional legacy cloud services. So there's tasks here. Conventionally, the size was small, and the processor's performance or capability was larger. So one processor's capability was shared with multiple tasks and, the virtualization was the key technology. And the virtualization technology was the key technology to process these individual tasks.

But when it becomes LLM, the task size becomes humongous. With one processor, the tasks will not be completed. To complete one task, it will require more than 1,000 processors. And what is necessary here is that is the communications network between the processors is going to become important. And the data rate, the enormous amount of data rate is outputed. Therefore, the answer to the situation is only optics. So inside the data center -- between data centers or inside the data centers, the optical communications technology being used and connected, and the demand for that is accelerated, meaning that the need for optical links between processors is accelerating.

So the horizontal line is the computational capability, and the vertical line is the processing power that is required. So just slightly before 2020, this angle started to become sharp and increased. This is since the rise of AI. So accordingly to this line, we thought that we have to do something about this. Of course, the semiconductor industry, people thought about that. And us, in the network and device industry, we have to compile a comprehensive power and catch up to this trend. And it's starting to happen, and it's already happening. In order to increase the capability of the processor, there's various directions that we can follow.

Well, the processors made by semiconductors. So I call it the 3 pillars of semiconductors. And we need to combine these. The first arrow, with the advanced semiconductor miniaturization, it started from 7 nanometers. We have come to 2 nanometers. And from now on, it will be sub-2 nanometers in Armstrong. So we need to continue to go ahead with miniaturization. And in Japan, we are once again putting quite of a focus on semiconductors. And -- but with this, it's not enough. So the second arrow or the pillar, this semiconductor chip, when it's packaged and implemented, the technology that was required was a 2-dimensional, but we will need to do a 2.5 dimensional or 3-dimensional packaging or else we will not be able to catch up. So this is the second arrow.

But today, what I'd like to focus on is the third arrow, which is the photonics-electronics convergence technologies integration. As Mr. Hoshino mentioned before, the data volume going up means that the frequency will go up as well. And that, with a low amount of electricity implementation, if we're not able to do that, the power issue is going to become very severe. And to construct new data centers, we will need several nuclear power generation plants in addition. So by using this technology within a realistic power consumptions, we have to increase the performance of the processor or the capacity of the processor. So this is what I would like to talk about.

So the semiconductor process, this is the first arrow, and miniaturization is something that has been discussed. In 18 months, the semiconductor integrated circuit doubles in its integration rate every 18 months. And so the red line and the green line, please. So there's a frequency and power consumption. As we go ahead with the years, it's not increasing. It has hit the ceiling. So the frequency and the power, how are we going to increase that? With just miniaturization, that is not enough. That is why, as seen in Mr. Hoshino's presentation, the optical technology comes about.

So this -- the vertical is power consumption, the horizontal -- excuse me, is the transmission distance. And please look at the horizontal, it's in centimeters. It was in 100 meters units, but now it's at centimeters. And the power at this distance is extremely important. The blue line is the electrical wiring, 10 gigahertz and 20 gigahertz. And in reality, it's 50 or 100 gigahertz era. This graph is not going to be enough. It will go beyond this graph. And for the transmission distance, even though it's 30 centimeters, the power consumption doesn't go up. If we use the optical wiring, you'll be able to have a clean, eco-friendly wiring. So inside the data centers or inside the servers or inside the semiconductor chips, all the way to there, the optical technology, optical signals will be incorporated very shortly.

So this is a time line, and this is the road map that our company is aiming towards. So from the left, PEC-1, photonics-electronics convergence. So you see PEC-1, 2, 3, 4. On the left-hand side, already at our company, we have a commercialized product, mainly for the telecom industry. We have the silicon photonics or the DSP PEC device, is out there. This is PEC connecting data centers, 100 kilometers or 1,000 kilometers with 400G, 800G, 1.6T. Next, is already commercialized. Next is 3.2T. And it's going to progress more. But categorize-wise, this is going to connect between data centers. This is an important device. So the category is existing category.

But today, what I'm talking about is PEC-2. This is inside the data center between the boards. Right now, it's connected by electricity, but there's the copper wire and heavy cables that are used, but we want to replace that with optics. So switches, ASIC is here. And around there, directly from electric to optics, from optics to electricity convergent devices, will be surrounding this. And the shorter the distance, less power consumption. So 1.6 tera, 3.2 tera, and we're developing 6.4 tera. I will talk about this later. However, we have a model of that. So based on this, the actual switch function -- well, this is a box that will realize the actual switch function, and we would like to provide that and launch this. So I will be talking about the transmission distance about 10 meters.

And next is PEC-3. This is going to connect package to package. So the distance is around centimeters, short distance. So this is about 2028 commercialization target. And in the future, inside the package and within the millimeter distance, we would like to connect that as well, and this is in the road map, and the research laboratories of NTT is working hard towards achieving this target.

And we are saying optical signals or optics. And so I'd like to explain why NTT for this area. This is the technology of NTT, and this is a history of optical innovation of NTT. Early 1980s, the optical fibers mass production, the good quality mass production method has been developed at the NTT laboratories. And since then from 100 meg to 10 gigabit, 100 gigabit, 1 terabit. So the horizontal commercialization year, and you'll see the data rates all the way up to 1 [ peta ]. So now it's called the Generation 3 Optical. So we have this progress, and IOWN targets, is 1 peta of data rate.

So at NTT Innovative Devices -- but before that, the former name NTT Electronics, contribution has been made in these devices, laser or GaAs, circuit chip or new format or the new digital processing, digital -- DSP, COSA. So having these variety of products, it's been contributing to the development of optical communications. And how much of it has progressed? If you look at the history, in 50 years, it's a multiple of 1,000. So by -- being supported by these devices, the optical communications have spread in the world -- or penetrated in the society. And so with this, your phones or the PC and mobile phones and the combination of smartphone and cloud. And right now, we're in AI. And these variety of our services was realized -- were realized.

And on the right-hand side, this is showing NTT's, the digital signal processing, DSP, using [ Justice ], our product is used as 72% within the Japan's network, and in the United States is a 14% plus [ alpha ] is used. So when you are touching your smartphone through our devices, the signals go through your phone and goes to Japan or the United States. And so miniaturization and shorter distance or mass production, having that base, we would like to realize the targets of IOWN.

Now today, I'm talking about switch, but the conventional switch, what does it look like? So Broadcom that will come up to the stage later on. This is a switch chip for information processing. It's here. Conventionally, it was at the entrance of the box, the module, the optical communication module, and the distance was about 30 centimeters. This distance was the problem. It's switch interface. The power consumption is large. And if the distance is big, it will be amount to a large amount.

So first, we had to narrow the distance and reduce the chip power consumption down to 1/10. And so the consumption is lowered, and we decided the development of the switch. So this is the top-view prototype was developed. And here, the optical engine that we developed, the PEC device is used. Now how much impact this had is, In Osaka, there's the Kansai -- Osaka-Kansai Expo. And in NTT Pavilion, our device is used for a new type of switch and new type of computer architecture and the associated software, the optimal software. Altogether, the computer power consumption is down to 1/8 of the conventional type.

And here, you can see NTT Pavilion and the center APN connects the 2, and real-time AI analysis result is transferred. It's not just our device, but the architecture, software, all combined, this is the impact that we enjoyed. So the prototype is great.

Now what about the actual business and the actual product? You can see in this diagram. Our product is here, this silver, long silver box, this one, this long silver box. So this is what we call optical engine 4.6 tera -- the 6.4 tera BP. And this is the switch module. In the center, Broadcom switch chip is mounted and is assembled into this box by Accton. We will hear from them later. This box is assembled into rack and installed in the data center. So this is the project that is now ongoing. The commercialization target is Q4 next year. As module, we will offer the sample.

Now the verification of the component characteristics is in progress. The manufacturing capacity per line is 5,000 per line. So we will have multiple lines to meet this large AI demand. So the production structure line is now being built as we speak.

Now where in the data center will this be used? First, in the data center, there's scale-up domain and scale-out domain. This light blue is rack. In rack, you can see the switch, and they are connected with each other accelerator, and this is scale-up. Now between racks, we need to connect with switch, which is scale-out. In the short term, we are now doing scale-out. So PEC switch will be first used in the scale-out domain. After that, scale-up domain, the light blue part, the photonics will come in. And then blue, and blue will be connected through scale-out with bypass. The domain switch will also be necessary in the future. So 1, 2 and 3 is the order that we will utilize the PEC switch. So this is our current projection.

Now our PEC-2, this is the model -- commercialization will be explained. And the switch is 102.4 tera bps capacity. Tera is 10^12. So 100 tera is 10^14. So in 1 second, 10^14 bit. And switch alone, I mentioned 1/8, down to 1/8 power consumption. Compared to the conventional one, the power will be about 50%, 50% power reduction with switch alone.

Now partnership. We will hear from them later. Broadcom is supplying ASIC chip, and our module is assembled into the box by Accton. So this is the partnership we now have. From 2026, we will launch in the market, the sample in Q2 and switch module in Q4. In any case, by next fiscal year, we will realize the commercialization. And business negotiation with end users is also progressing.

Now compared to other players' products, how our products -- this is shown on this slide, CPO co-package DUT. We see this activity around the world, but ours has -- been saying IOWN since 2019 and have been working on this all since then. So we started earlier, so what is our advantage? Lower right table, please. So others know -- we have to be close to LSI, so we need soldering. This photonics need to be close to LSI. [indiscernible] In our case, we're socket, not soldering. The optical engine can be attached and detached. So that's our difference. So one optical engine interface breaks down.

Here, you have to replace the whole thing. But in our case, we can replace just this one part. So the repair cost can be reduced. And interface, various interface, there are various requirements, short and long term and wavelength-division. So it can flexibly support various requirements. So this is our method. And data center is increasing, and the location changes. So short, long distance changes every time, so we can flexibly deal with that. So that is our advantage.

In the future, Broadcom will probably touch on this later on, we cannot just cover with one supplier. So in the future, multi-vendor, multi-supplier ecosystem need to be built to change the industry. So by flexibly attaching, detaching the standardization, we can move, and we're in line with the future standardization. So that is our difference with our competitors.

Now no problem with the socket? We are often asked. And this lower left shows that it's no problem. But -- so basically, no problem. I will not go into the technical details. 3.9 picojoules per bit power efficiency and shoreline density 0.4 tera bps per millimeter. This is the goal and commercialize by next year.

Now the list of partners. I mentioned Broadcom and Accton. In Japan, we have the substrate manufacturing and module assembly. We have partnership with Shinko. And so this is our team. And our product module looks like this, but optical engines are all separate. And we, of course, design and manufacture this, but we have other affiliates that we invest in. We will utilize that resource and fully leverage the comprehensive capability and then act on assemble in the box. So through this partnership, the overall design and the key part will be done by us, and the coordination with the partners will also be done by us, overall coordination.

So PEC-2 will start from next year. And beyond that, next is, I don't think many players or very few players, even around the world are saying this yet, NTT research lab has unique proprietary technology, and we have compound semiconductor. It's a very thin device, our proprietary technology. Using this, this optical engine can become a very tiny 8-millimeter x 10-millimeter chiplet. And GPU can be attached to GPU and install in the package. And this package communication becomes optical.

So low-power, I mentioned 3.9, but this will be 0.26 down to 1/10. So we are working on commercialization on this, too. And this is the demonstration result. It's a very thin membrane optical semiconductor and the waveform -- electric waveform is made photonics. So 0.26 picojoules or 0.14 picojoules. And we are trying to work for the practical usage so that we can keep up with the global players and gain -- give momentum to this industry.

I'm sorry, I'm talking a bit long, but for -- full-scale implementation of AI is coming. So a huge amount of processors need to be connected by the network to realize the computing. And this optical communication can be connected with low-power consumption. So we will leverage our extensive experience in optical communications to take on global challenges.

Thank you very much.

Thank you, Tomizawa-san. From here, we would like to accept your questions. Throw us your questions, Vice President, Tomizawa and Hoshino, both of them will answer. Due to the time limitations, for the questions this time, we would like to take 2 questions from this venue only. For those questions that we were not able to receive, your questions now, at the end of the program, we have a separate overall Q&A session. So please ask your questions at that time.

Those who have a question, please raise your hand, and the staff will bring a microphone to you. So once the preparation is completed, we would like to receive your questions. Just a moment, please. Thank you.

We are prepared. So once again, Vice President, Tomizawa and Hoshino, thank you for having this Q&A session. So for those of you who are at the venue, we would like to receive your questions. So if you can kindly raise your hand. So in the back side of the room, the gentleman there, he will be bringing you the microphone. Just a moment, please.

My name is Ito from the editing office of the NewsPicks. Thank you very much for very easy to understand explanation. So you will be moving onto PEC-2. Until now, the media, us included, had the PEC-1 image. Excuse me. We had the image of PEC-1. Then from there, it's going to move into optical computing. So there's a lot of expectations, and I felt quite of a potential.

So I have 2 questions. First is, probably, what you have to resolve is the saving energy, lower energy, power consumption of the data centers and others -- and there are other players that are feeling the same thing. So even though it's not optical computing using IOWN, there are companies that are trying to resolve this challenge or issue with other technologies. So my first question is a very straightforward question. Who are your competitors?

And the second question is differentiation or your competitive edge. You said the soldering-type and the socket-type difference. And if the competitors catch up with you and start to come out with a similar technology, but IOWN is your unique concept. But soldering or the socket, by changing the manufacturing process, can others copy your products? So moving onto PEC-3, PEC-4, from your perspective or what -- which part is the competitive advantage you have? And what is the core part of your technology?

Thank you very much for your question. Regarding the competitor, probably already, you have already heard via news, NVIDIA or Broadcom, who will be making a presentation later, they have their own solutions -- proprietary solutions. So if I can call them competitors, there will be competitors as well. But as you will hear later, there are competitors. But as a multi-supplier, the integrated connectivity is secured, and we both should develop or else the multi-supplier seeked by the end users or horizontal deployment of the technology and products will not be able to be realized. Therefore, the right-hand side, we shake hands and the left-hand side, we fight each other. I think that is what the situation is.

So NVIDIA probably, globally, is the largest player in the world, and NVIDIA is working on reducing the power consumption at the data centers. And what they're trying to do, they're probably going to use a new process and try to resolve that. So what is the advantage?

Well, technology-wise, they're not doing the socket. And last week, we've actually met with them, and they were quite interested in our approach. So information exchange or some -- it seems like there is a room for them to use some sort of solution that we can provide.

200 gig bps per line is what they're able to make for us. But with their silicon photonics, that's probably the limit. When it goes up to 400G, the speed is going to double. So it seems that they are facing a wall a little bit right now. So right now, we are starting to have quite a close communication. So that means that the strength and the technology that both companies have utilized that and approach to resolve the challenges. Is that the correct understanding? Yes.

And at the very end, at the fiber, we have to combine the optical technology. And with how much of a short time are we able to realize that? That technology is what they want to see. And that part is our proprietary know-how and technology we have. And that's the place where we can actually contribute towards them.

Thank you.

And also comparing with the other companies, what is our core strength? Well, as I mentioned, 400 gig per line technology and the optical fiber convergence technology, the yield, or we have a good throughput manufacturing technology. And regarding the design of silicon photonics, we have a slightly different way of doing that. Like the process of semiconductors, we have like -- usually, there's a design kit. So it's like a LEGO blocks, and it's how you actually combine them. And you can have the silicon one, but we actually optimize each one of those components. So the performance is different than others. That is the core that we have.

So if that is -- there's companies who have a -- use a standardized package and others that you have your -- each one of them -- components -- unique technology. So there are some areas where one can totally win and cannot. So we need to decide which place -- area that we have the advantage and when -- and enjoy the advantage. That's where we need to actually start to be able to identify.

We will take one more question. So the gentleman at the front, at the -- with the jacket, please.

Freelance, [ Takayama ] is my name. So I have a question on the market -- IOWN PEC market size. It's not just PEC device, but also the upstream. I think the market is huge. So data center and base station, PEC will be used in all these areas. So what kind of global worldwide market size are you envisioning? And how much in Japan? The PEC device will be the key, the core, I think, and PEC device -- when Innovative Devices was established, Tsukano-san said, about JPY 100 billion market will be taken -- captured by Innovative Devices. So what is your projection? So manufacturing device -- manufacturing market? How much market will Innovative Devices capture? And how much market size do you see in Japan and the world?

Thank you very much for the question. May I? So revenue and the business size, we will talk about that in the overall Q&A later. But in terms of number of units, more than 1 million units a year, 1 million pieces a year need to be manufactured, which is a level we've never done before. So we have to prepare our manufacturing structure and Japan and overseas ratio breakdown.

First, we will have this used by hyperscalers, the U.S. data centers or the former GAFA. We need to first offer big volume so that the price will come down. And then make it economically viable and deploy this to NTT and the domestic Japanese market. So first of all, I think it will be pretty much hyperscalers. Does this answer your question? I'm sorry, it may be a bit ambiguous.

Yes. Thank you. That's for the device and for the upstream. Data center architecture and base station design will probably change. So NTT's data center vendors, you are now #3, third largest player in data center. So what is your expectation? So with PEC, the market size may change dramatically. So what is your view on that? Hoshino-san, if you could?

So for data center, it's not just PEC. The distributed processing can be made possible. And AI business may expand. We have to expand our AI business. So in closing, Ooni-san will talk about some case examples of actual collaboration. So I hope you could take a listen. And if I could, answer your question again in the overall Q&A session. If you could do a follow-up question then, I'd appreciate it.

Yes. Thank you.

Thank you. So we will close this Q&A session for now. Thank you, Tomizawa-san and Hoshino-san.

Thank you.

Thank you.

I would like to now prepare for the next session. So I kindly ask you to wait for a moment. Once the preparation is completed, we would like to resume.

The next session will be conducted in English. For those of you who like to use the simultaneous interpretation service, please set your channel to 1. The next session will be conducted all in English. Thank you.

Thank you very much for waiting. We will resume the session. Next, we will proceed with the session titled, Low-Power Consumption Devices Required in the AI Era. Mr. Ram Velaga, Senior Vice President and General Manager at Broadcom; and Mr. Anjye Huang, Co-Founder and Senior Adviser at Accton Technology; and Mr. Tomizawa; and the moderator; Mr. Michinori Sato, Executive Officer and Asia Pacific Communications, Media and Entertainment Sector Leader at Deloitte Tohmatsu Consulting, LLC. This will be a presentation in a panel discussion format.

Please note that this session will be conducted entirely in English. Simultaneous interpretation receivers are available for those who require them. Channel 1 is Japanese. Please take your seats.

Good afternoon. Thank you for your time this afternoon. My name is Ram Velaga. I'm hoping this flicker will work. It's not working.

Hold one second.

I will facilitate. I will facilitate. Hello, everyone. My name is Michinori Sato from Deloitte Tohmatsu. I'm responsible for the telecom, media and entertainment sector across the APAC region in Deloitte. Having closely followed the IOWN initiative for years, including the great experiences in the Kansai Expo or by the good performance by -- good performance by Perfume, I'm very -- looking forward to facilitating the meaningful insights from all of you and for all of you today.

And we've heard that from Hoshino-san and Tomizawa-san regarding the future outlook of the PEC and CPU switches as part of their strategies, like to hear deeper -- real voices from these 3 companies today. They are deeply involved in realizing the IOWN initiative and like to hear especially around the lower power consumption devices.

Today, we have, as [indiscernible] we mentioned earlier, Ram-san and Anjye-san and Tomizawa-san. So to begin, I'd like to have the brief self-introduction from both companies, including their product strategies and their history of their collaboration with NTT and expectation for NTT.

So firstly, over to you, Ram-san.

Thank you very much. Good afternoon. One of the things I wanted to share with you is research published by McKinsey that talks about the next few years, there's almost 124 gigawatts of power coming online to support everything that is happening in AI. And when you think about this 124 gigawatts, that is roughly over 70 million GPUs or XPUs, okay?

Now just to give you a couple of data points to give you some context on this. Some of the large language model companies are, at a minimum, expecting their compute capacity to grow by about 3x every year. Some of them are expecting it to grow much larger than 3x every year. But if you do the very simple math, for the next 5 years, if it grows by 3x every year, you're basically looking at over 200x today's capacity is what's expected in the next 5 years. This is a significant amount of compute that is being added in the world to support the large language models.

Now when you do these large language models, one of the things that you realize in machine learning is it is a massively distributed computing system, right? Because any one GPU/XPU or what we call the accelerator cannot do the work. You have to have many thousands, many tens of thousands of these accelerators connected together. When many of these accelerators are connected together, the network becomes the computer. This is something that Sun Microsystems had trademarked 20-plus years ago -- almost 30-plus years ago, and they said the network is the computer. This is a picture of Google's data centers from the early 2000s.

What you see here is when they built a very large, distributed computing system, which is the search, what they did was they took a lot of the CPUs and connected them with the network, okay? In this particular case, 20-plus years ago, the network is all based on copper, right? Because the speeds which were coming out of these CPUs back then are a fraction or a couple of orders of magnitude less than the speeds that we expect coming out of the accelerators today and in the next couple of years.

So when the network is the computer, and then you look at these accelerator deployments, as Mr. Tomizawa-san has mentioned, you think of the network as 3 different kinds of network: one that sits inside the rack and that's called scale up; one that connects different racks, that's called scale-out; and then one that connects actually between data centers and that's called scaling out across data centers or scale across.

Now when you look at these accelerators, one of the things that is interesting is each of these accelerators has HBMs attached to it. You've all heard of HBMs. Today, shipping technology is HBM3. Tomorrow, the shipping technology is going to be HBM4. Each of this HBM has roughly 10 terabits of bandwidth connection it has to the accelerator. So when an accelerator has 4 HBMs, it has 40 terabits of HBM attached to it, and that's the bandwidth. Next year, there's going to be 8 HBMs, each running at roughly over close to 12 terabits.

So what's happening is you may have 2 accelerators, each of them has 100 terabits of HBM attached to it, 100 terabits of HBM bandwidth attached to it. And both of these accelerators now want to talk to each other. That's the amount of bandwidth that's going to be connected between these different accelerators. Just to give you a sense for how large this is, today, if you think about a server that goes into the data center, you will likely have a NIC that is 50 gigabits per second speed.

Now when you think about an accelerator, each of this accelerator could have 10 to 20 terabits of bandwidth coming out of it. You're going from 50 terabits to 10 to 20 terabits -- sorry, 50 gigabits to 10 to 20 terabits. So you're talking about almost a 200x increase in I/O coming out of an accelerator compared to a CPU. This is a lot of bandwidth.

Now the other thing that's happening is when you're building a large language model, you want to create a cluster of accelerators, all kind of working together, right? And when it fits inside a rack, it's called a scale-up. And typically today, a scale-up is less than 100 accelerators connected together. Typically, you will hear a number like 36 or 72. But these large language models actually want that size of the scale-up to grow beyond 36 or 72. They would like it to be 200, 500, in the future, over 1,000, okay?

So when you think about that problem and you say, okay, today, when you think about scale-up inside a rack, it's all connected by copper. And you are okay connecting by copper when you only are putting less than 100 accelerators inside a rack. But when you're connecting 200, 500 or 1,000 accelerators, it doesn't fit inside one rack anymore. You have to connect multiple different racks.

So when you connect multiple different racks, you no longer can use copper. You have to use optics. So the combination of the fact that you have tens of terabits of bandwidth from each accelerator, multiplied by either 200, 500 or 1,000 accelerators, and the fact that you cannot use copper anymore, creates a massive opportunity for optics to be the choice of interconnect. That is why you've heard other companies talk about co-packaged optics is the way forward.

And now when you think about that and you say, "Okay. There's a lot of bandwidth that's needed. So how do you solve this problem?" First, you need to build the switches, which have the bandwidth. And Broadcom today has this device that's called Tomahawk 6. It's 100 terabit switch device. And this is going to be shipping in very large-scale production next year.

Now it's great to have the switch chip, but then you need to have that connected to other switch chips. And you need all of these to be connected together if you're trying to create a scale-up cluster, let's say, 512 or 1,000, right? So that's what you need to kind of think about as you walk away from here is there's a lot of bandwidth coming from each accelerator. You'll want to connect at least 200, if not 500 or 1,000 accelerators. Copper is no longer going to work. And how do you do this?

Now obviously, you also have to be able to connect across data centers, not just connecting many racks inside a data center. So if you think about all of this, you say, "Okay. There are switches which are available, and Broadcom does a reasonably good job building these switches for sitting inside the rack, across racks and across data centers." But what is really important beyond building switches is providing these interconnections between the switches, right? Because copper is no longer sufficient to create this interconnect between switches to create these very large clusters, either inside a data center or between data centers.

That's where actually our partnership with the IOWN team goes for a few years now, where we both realized that this is going to be a very large market. If you think about the fact that the compute is going to grow, at least expected to grow at least 3x every year for the next 5 years. So it means it's about 200x larger than it is today. And you will need to connect across racks. Optics is the only way to do it.

Broadcom took the approach of saying, "Let's pick some of the best partners in the industry," and the leading one there is the NTT IOWN team. And we said, "Let's work with the NTT IOWN team to build a co-packaged solution." Because when you're building these co-packaged optic solutions, a couple of things are extremely important. One, people who are leaders in technology, who can build very high bandwidth devices at low power, but with significant reach.

Number two, you're able to produce them with a very high quality and yield, okay? Because the volumes that are expected and needed in this marketplace are very, very large. And number three, somebody who is able to scale the production of these. right? We believe the IOWN team is very capable of delivering on all 3 of these, which is building the best technology, building it with the quality and the yield that is needed, and then being able to actually scale to very, very large volumes.

Now what's interesting is we've always looked at it and said, "Okay. Will customers deploy the co-packaged optics as a possible solution into these very large data centers." And last week, Meta, who runs some of the largest data centers in the world, actually published a document that said, they looked at co-packaged optic solutions, and they ran for about 1 million hours. And they found that this is better than running pluggable optics as the solution in the marketplace. So you also now have customers starting to feel very comfortable and confident about how to build large data centers with co-packaged solutions.

Now there was a question to Tomizawa-san previously that said, "Who's the competition in this space for NTT IOWN?" And he very honestly answered the different players who possibly can play in this market. But one thing I would say to you is the following, which is, when the market is so large, which it is going to be in the next couple of years, the end customer, which is the ones who's building the data centers, whether it is Meta, Google or somebody else, they want to see multiple players in the market. Because if they don't see multiple players in the market, they don't have the confidence to go build a large data center on that technology.

So the idea of silicon photonics for it to be successful, you need multiple players. But we are extremely confident that NTT IOWN is going to be able to deliver on the best technology, the quality as well as ramp in volume. And if they deliver on it, along with the others, the market is big enough for multiple players to enjoy. And we are actually -- that is why we have very strongly partnered with Mr. Tomizawa-san's team for a very long time, right?

And then lastly, our relationship with the NTT IOWN team is not something that is recent for the last 3, 4 years working on this particular product. It has stretched for a decade plus. And what we have seen is a consistent delivery of products with high quality, high volumes, but also with the performance that is expected in the marketplace. So we are extremely happy that we have the 100 terabit switch available to be shipping in very large volumes next year. And for it to actually get deployed that we have very strong partners, Tomizawa-san and NTT IOWN, to be able to bring very low-powered solutions and obviously, very disruptive cost structures to our customers.

So with that said, I want to thank you and hand it over to AJ-san.

Thank you, Ram. So over to you, AJ-san.

Good afternoon. And I haven't did this in my last 20 years. I think I'm the oldest man in this room. And so in front of Ram and Tomizawa-san, I cannot talk too much about technical. So in my section, I want -- everyone relaxed. It's not too much technical stuff.

I just want to share with you and answer your question is why we want to do this. And we start from this page. This is our new factory, and we build this factory to produce Ram's product. So all the box that we build from this building is all Broadcom chip. And it took us about 2 years to build this building. 4 years ago -- the building completed 2 years ago, and now the whole building is full. And whole building is producer of AI-related server and switch.

And what I want to say is my dream and why we want to do IOWN. I know Tomizawa-san for many years, and I know [indiscernible], Shimada-san about 2 years ago. They gave me the assignment. Then I attended NTT R&D Forum, and I realized how much NTT have invested in optical. So I would want to say, without Broadcom, without Ram is no Accton today. And -- but I want to say, with NTT and Broadcom, Accton will reborn.

So $3.4 billion revenue is last year. And this year, we are shooting for almost $7 billion. It's almost a double. I just want to echo what Ram said about the market size. And so why we want to do this? Since the day 1, our vision is access. We want everyone can access computing power. Everyone can have their PC, or their server get connected. So it's our vision is access.

And our mission -- basically the vision with the mission is to make the product and technology be very cost performance effective. So it's cost and connection with our company. And so this is just what I tried to say, [ without ] Broadcom, [ without ] Accton today. And with Broadcom and NTT, the new Accton will reborn.

The last one you see the [ NDL ] and -- which I've been working with Tomizawa-san for many years. When I need the optical help, I come to him. So when I heard Broadcom and NTT doing this CPO, I'm very excited. So I immediately jump in to build a box. So I think many people know this already, so I don't want to repeat. But most important message here I got from the IOWN [ book ] is to have everyone can be connected to AI or compute, urban and rural area. And the AI should be fair to all citizens. This is what I learned from Shimada-san last time I met him. And I think it's very, very important. And in order to realize this, we need a very advanced technology, which is from Broadcom, from NTT, and we have played a role to build a box, to build -- reduce the cost.

So I talked about my dream. So when I learned IOWN, I've been thinking about how can we apply this technology to Taiwan. Taiwan and Japan is very close. And in history, 2 countries have a very good. So I asked Shimada-santo help me, asked all good friend in NTT, see if we can implement this IOWN technology in Taiwan. The purpose is to connect all the different AI server in the different location. So you don't need to build a very huge data center. You can just connect a different -- even one single rack and connect together and can be looked as one data center. So that's the purpose and what we want to try, we want to try.

So I saw this last time, and we continue to enhance this. And so we hope Japan and Taiwan, we can collaborate in technology in this AI application. And of course, the most important is the talent. So talent can share the knowledge through this AI server. So we started to do the experiment. So we started to do the experiment. So we have 4 locations, get conducted by IOWN. So start from the Tainan. So we say this is a size park. If we can have this size park contained by IOWN, then we can have the Tainan and Taichung, all the different cities connect together. So this user case, this is for enterprise.

And this is the case for hospital. So now the hospital, they can access their data, and they can share the AI computing power. Today, every hospital, they buy 1 NVIDIA rack and -- or 2 NVIDIA rack, but they cannot connect together. So the IOWN play very critical and important and maximize the value of AI server. And this is real case in -- from the south part of Taiwan is the [ size park ]. And from this size park, then we will connect all the university. So actually, the fiber, Taiwan, besides the telco, they're also like high-speed railroad, like electrical company, and the Minister of Education, they all have fiber. So we want to maximize the value of the fiber by using the IOWN technology.

Of course, I think everyone is talking about this for the global, and I hope we can contribute a little bit, stuff from Taiwan and stuff from our manufacturing. And thank you to NTT. Thank you for Broadcom. They continue to invest advanced technology. So then we build this rack. So IOWN will connect to this rack. And -- so you can plug in the different memory and the AI server, is what we are doing.

So we take the open architecture. So the idea also I learned from IOWN, our vision, they want to enable the more different technology and different vendor and to contribute to make IOWN very successful. So this is our small experiment. And so far, is doing okay. Of course, still a lot of technology we need to invest with NTT and Broadcom.

And one example here is we try to do increase the port density -- increase the port density. So like how to make one optical can transmit more data because to lay out the optical cable is expensive. So we try to maximize the capacity about 32x. Again, this is NTT technology.

This the park that we built. Actually, these are some from [indiscernible]. So we met about a year ago, and he started to draw his idea on the whiteboard, then -- I'm a little bit crazy, and I say we don't have this technology. So I find a company in Korea called InLC. I just acquired them and to make the dream come true.

And this is -- I think Ram already explained very well here. And we'll make this product very successful. And again, cost performance and speed.

And thank you. Thank you to everyone. Thank you, Tomizawa-san, NTT, Broadcom. Without them, we cannot have the good product. Thank you.

Thank you, AJ-san. And again, thank you, Ram and AJ, for sharing the very clear strategic directions and the tangible business trend, including the major players in the market and the expectation and some aspiration with NTT. I again felt that technologies, including the CPO, are very critically important for realizing the higher bandwidth, lower latency and very low power consumption.

Next, I'd like to pose a few questions from the AI market perspective. First one is around additional growth market for the PEC or CPO, especially for the data center market. It is said that approximately more than 60% of data center investment are allocated to the ICT equipment, including server and switches. As the data center market continues to grow, these related markets are also expected to expand. So in addition to this trend, with the advancement of PEC, how large do you expect to capture a market scale and share in the future? So firstly, Ram-san, how do you expect?

Okay. I think the way to think about is there is a relationship between the compute growth and the networking that goes with it. So if the compute grows and this whole AI is growing, the networking will go reasonably proportional to it. And especially as we discussed, as the scale-up part of AI scales, all of that is going to be supported by the switch and the switch bandwidth.

Now obviously, from the optics side, the growth will be even faster because today, most of the first [ top ] connections between the accelerator and the switch is copper. But now, you no longer can support copper when you're trying to do scale-up in the order of hundreds up to 1,000 devices. So basically, a couple of things going on. Compute is growing, but network is going to grow slightly faster than compute because the scale-up is going to happen on technologies like Ethernet, which did not happen today. And then optics are going to grow even faster because today, the scale-up is happening on copper, and that is also going to move towards -- more likely towards optics. So there are 3 compoundings that are happening here.

Thank you. So Tomizawa-san?

Thank you very much. So according to the market analysis, I mean, in the ICT equipment, 30% to 40% will be for the server and roughly 10% to 20% will be for switch. And my guess is that the CPU will start from 100 terabit, very high-end switches. And according to my information or my opinion, the number will be several -- few hundred thousand pieces per year. And accordingly, so we need optical engine, 16x of our switching module. So it makes like several million pieces per year. So probably like 28 or 29x -- 27 or 28x. So our manufacturing capability, I think it is doable by using the multiple lines. This is our -- my perspective.

Sounds great. So the AJ-san?

Yes. I would look from the other angle. We're talking about scale-up or scale-out. And the problem in this scale-out and scale-up, we have to consider one factor is, protocol conversion. When you go to the protocol conversion, then latency happen. So the goal is to pursue the optical from chip-to-chip and to the GPU-to-GPU. So I look at the CPO from a broad view. And so if you look from this angle, the CPO will continue to grow. For example, probably next step NTT would do with Broadcom like plug module transceiver with the CPO. And so as your question about the size, I look at the overall size, not only like one component, but I think from chip-to-chip, [ board-to-board ], everything, CPO will be a very important technology. That's what I look.

Thank you. Okay. So second question is around Edge AI. Currently, most AI processing is performed via the cloud. However, the proportion processed at the Edge site is gradually increasing, maybe. And it is forecasted that around 50% proportion is covered by the Edge site in the late '20s maybe. And under that kind of condition, in what areas do you see CPO technologies or company's products making the significant contributions to these market conditions? So this time Tomizawa-san?

Thank you very much for your question. Yes, we are aware that kind of tendency, the Edge processing started. So looking at the AI processing, I think it can be categorized into 2 parts. One is the machine learning, and the other one is the AI inference. AI inference could be done in Edge processing and partly because of the requirement of a low latency. However, still, we need our machine learning, very, very heavy processing. And still, we need data center cloud, machine learning across all the GPU to GPUs, cyber to server, data center to data center. So still, we need our CPO solution, and a little bit relax from the current requirement, but you saw EX [indiscernible] -- like very steep skyrocketing. So I think it could be no change for the importance of the CPO solution.

Okay. So AJ-san?

You're talking about -- you're asking about Edge?

Edge, yes.

Edge AI. We have a subsidiary, name is Edgecore. I try to promote my company's name. So when we created the company, there's no fixed [ core ]. There's no permanent [ core ], and there's no limit of Edge. So if you look from the other way, they say the training inference probably is more easy to answer your question. And I think will AI Edge will be everywhere. It's how good we are, again, to create the most cost-effective device in this -- we are working on another project is the [ access router ]. Access router combined with the camera. And we work with one of the Japanese customer. It's a historical site. So the camera just to watch what happened and to prevent the fire.

And so I believe Edge will be everywhere. And inference will be also have a different type of application. So again, there's no limit of Edge. That's what I guess. That's why to work as an open partnership is so important. It just reminded me what happened about Tesla. When you think about Tesla being so successful, but the Tesla when, Elon Musk started to do the Tesla, he opened all the IP. He says he want more the EV, not only him, which is just echo what [ Rob ] just said, more competition, more open. And if we can make this happen, I think Edge AI will be unlimited. Am I right, Ram?

That's good.

Great, great. So Ram-san?

I think it's important to realize 2 things. One is if you think about it, today, generally, when you hear a lot about cloud computing, right, cloud computing is a virtualization use case because think about what happened in cloud computing. People said, "Hey, my CPU is not being fully used. So I want to run multiple applications on my CPU, so I virtualize it," right? It's essentially running multiple applications to increase the utilization of a CPU.

Whereas when you think about machine learning, it's the opposite, which is any one accelerator is not large enough to run the workload. So you have to have many of those working together as if it's running one large system, right? That's what even high-performance computing was. So first, once you realize we're moving from a world of cloud computing, which is virtualization-dominated to a world of machine learning, which is a distributed computing system.

In the distributed computing system, network plays an extremely important role, right? Now the distributed computing system could be doing training, in which case, they're running in very large data centers in the middle of nowhere in the world. or eventually, these distributed computing systems are actually doing inference because even when you're doing inference, they have a cluster of 100, 200, 500-plus, even 1,000-plus. Because when you think about inference, there's 2 kinds of inference, inference, which is just trying to give you an answer or inference that is actually what you call reinforce learning into training, okay? And really, a lot of people are doing inference for reinforce learning because the whole idea there is that we've run out of useful information on the Internet, so you have to create a lot of useful information. So there's different kinds of inference.

But long story short is we are in the world of distributed computing, whether it's inference at the Edge, inference someplace else. And network is a computer. And copper is not going to suffice going forward. And you need optics to come solve this problem, and you need something that is cost efficient, power efficient and scalable in volume to bring together all the compute that's expected, whether it's at the Edge or in the middle of nowhere in a desert.

Okay. Thank you. Okay. So the final question is business partnership. Looking back over the past few weeks, we have had several announcements regarding the partnership between the semiconductor-related companies in Japan and the United States. As you move forward with the market deployment of the CPO technology, which player do you believe you should strengthen with the partnership, of course, besides your 3 companies? And additionally, on top of that, what aspects of your own company would you like to highlight to that potential partners? Start from the AJ-san?

It's a very tricky question. To me, partnership is very important with the trust and with the capability and with a long-term partnership. So it's not easy to find -- maybe you can find a start-up. They have a good technology, but they don't have a long-term history and partnership, relationship or maybe they have a very narrow technology, narrow coverage. And -- but to me, NTT and Broadcom technology is good for me to keeping me very busy.

Okay. I think -- or rather, we are living in a world right now where the cutting edge of technology is being built, the most cutting edge of technology and some of the hardest technologies being built. So we would like to partner with somebody who has the cutting-edge technology, who is bringing these to market at scale and obviously, with the quality that's needed, that's one.

And two, I will tell you, you might not like this answer. I want to partner with somebody who has a lot of money because if you think about what's happening in this world of AI, people are talking about $500-plus billion of CapEx being spent just by 4 or 5 of the cloud players today, right? And you now talk about the amount of gigawatts of data centers that are being talked about, 200-plus gigawatts of data centers, you're talking trillions of dollars that are needed all the way from these people who are building these large mega-scale data centers, down to people who are building fabs and people who are building coolers and chillers and factories and everything else. I think for this AI world and everything that we've talked about today to be realized, you need people who have a lot of money. I think some governments have a lot of money. So I'd like to partner with them along with those companies.

Over to you, Tomizawa-san.

Yes. Thank you very much. Definitely, we need collaboration with the end users, for example, hyperscalers and as well as the new cloud player. Without this kind of collaboration, it is very difficult to go forward. And actually, we are already communicating with the potential end users directly, sometimes jointly with Accton, jointly with Broadcom. But this kind of early engagement is being dispensable, get launch into the new market.

And the second collaboration, definitely, we need a collaboration with the processor guy. Actually, we get started with the processor guys, like a big processor guys. And because the PEC-2 or PEC-3, we should consider the integration with the processing circuit. And for this purpose, we need some early engagement with the process of it as well.

Number three, the -- according to our Q&A session, I described, with some potential competition and collaboration with our potential competitor. Because -- as Ram said, the market is huge, and every end user needs multiple supplier. So in that case, we need like agreed interface, agreed specification in some standardized way. These 3 are very important for the collaboration besides the 3 companies.

Okay. Thank you for the clear answer. So now we had very insightful voices from the 3 companies, around low-power devices required for the AI era, especially we learned about that against the limitation of the electronics processing, the PEC and the CPU switches is mandatory to conquer this kind of physical situation. And on top of that kind of technology advancement, the ecosystem, I mean, the collaboration across the, let's say, important and less important even, stakeholders, depends on the situation, is very important to this, let's say, high-speed changing ICT market.

Yes. So again, thank you, Tomizawa-san, Ram and AJ for the very insightful real voices. Thank you. So I'd like to close this panel, and we are having the questions from the audience.

Thank you very much from here. We would like to take two questions from the floor. How we will be taking questions is what I would like to explain. First of all, for the questions, from the media relevant people who are here at the venue, we would like to receive the questions, followed by questions from the investors from this venue. And after that, for those of you who are connected to the web system online, remotely, we would like to take your questions.

For those of you in this venue, the staff member will bring the microphones. So please raise your hand. For those of you who are participating remotely online, those who have a question, please press the raise your hand button on the web system. And once you receive the request from our side to unmute, then please unmute and ask your question. After you asked the question, until the answer from our company, please remain unmuted.

So thank you for waiting. We would like to take questions from the media people who are present here at this venue. You can ask your question either in English or Japanese. For those of you from the media, are there any questions?

Thank you very much. Then -- from -- you, please, over here.

From Nikkei, I'm Takatsuki. Hoshino-san made the presentation as NTT. Why Broadcom this time in the production of PEC device, you're going -- they are going to collaborate with you because they have their own proprietary solution that's being developed? What kind of a meaning -- significance does this have? I'd like to know that.

Ram-san?

Look, I think if you look at this switch, this is what we do. It's a 100-terabit switch. And when you look at it closely, you'll basically see it has a lot of I/O coming out of this, right? And when we partner with the IOWN team, we look at it as we want to make sure Broadcom wins in the switching business. And for us to win in the switching business, we very, very strongly believe in the idea of openness. So Broadcom never has actually created vertically integrated solutions. Every time we've created products. We make sure they are very clean, open, standards-based interfaces and that multiple partners can actually build their solution and ecosystem around us.

So what we tell our customers is, let the best product win. Okay? Because if you think about it, we build our switches, but if our optical technology is not the best in the world, we don't want to lose the switch business to somebody else, because we don't have the best optical technology in the world.

For us, the optical technology is an enabler and it's just one part of the ecosystem. So as long as the IOWN team is able to produce a device that's at least as good or as better than us, we want them to win, okay? That's extremely important. And because at the end of it, also, our end customer looks at it and says, if they only have one vendor, they don't want to buy the solution, because they'll think of it as say, Broadcom is vertically integrated. And if I work only with Broadcom, I cannot make this supply chain very scalable. So it's in the interest of Broadcom as a company to make sure the ecosystem is very, very successful.

So Tomizawa-san, and NTT IOWN has access to all the same specifications on our switch that our internal team has access to, which is why their ability to win or lose is purely a function of their technical capability, has nothing to do that Broadcom has both these products.

And also, one quick thing I mentioned to you about Broadcom is, we are a large company, but inside the company, we are very distinct technology business units, okay? And my business unit builds the switches. Another business unit builds the optics. From my business unit standpoint, I don't care whose optics win. I just want to make sure I have the strongest ecosystem surrounding my switch. So it actually creates a very healthy ecosystem.

I hope that answers your question. Any other media participants in this room, please wait for the microphone.

I have two questions for the Ram-san and Huang-san. And first of all, the Ram-san says the Tomahawk -- Tomahawk 6. My question is about the Tomahawk 6, have they connected with the 512 XPU? Is this a limitation of the, such as, XPU connection of the XPU? Do you have some kind of the prospect for the future or the breakthrough of the limitation?

Okay. So the question was when we showed something like a Tomahawk 6, why can -- why do I have a 512 number, okay? When you're doing a scale-up cluster, you want to make sure there's only one switch hop from one XPU or accelerator to another one. Okay? You can always create a larger cluster by creating a 2-tier switching architecture. But for scale up, you want to, today, keep it to a single tier. That means just one switch of Accelerator switch, accelerator.

Then you look at the switch and say, how many links does this switch have? This switch today is 100 terabits, and each link is 200 gig. So you have 512 200-gig links, so I can connect to 512 XPUs. But when I connect to 512 XPUs, because I cannot put it inside a rack, I have to put it across multiple racks, because each XPU takes a lot of power. So I'll put it in multiple different racks and I'll have the switches connecting directly with one hub, okay? So that's what limits it to 512. We have 512 200-gig SerDes, that gives you 100 terabits.

And then as you can imagine, in the future, we'll have higher bandwidth. That means you'll have higher lanes at 200 gigs and then you will increase the cluster size of the scale-up.

The other question is about -- Mr. Huang, I am very impressed with the network of the university and hospital and data center. But why did you select the data hospital? This is very strange, strange situation compared to Japan, because many of the hospitals has a lot of the individually specification. So the connection is very difficult, very tough. So I'm very strange of the -- you are easily -- I'm not sure, but easy or connected to the hospitals to data center and university. What is the reason why you selected the connection of the hospitals? The hospital has the -- a lot of the privacy or some privacy information, it's very difficult to do that in Japan.

Thank you. This is a very good question. And actually, it's two questions here, right? Why I chose the hospital? And the reason is, hospital is very critical in our society. And we want to help the hospital, they can utilize more AI. I think that this happened to every hospital. So hospital or the medical, they want to combine the AI with medical, right? This is what happening now.

Of course, according to my experience, the gap between two parties is very, very big. Medical doctor, they don't want to learn the IT. And the IT people doesn't understand medical doctors' concern, right? Because -- you are right, medical have a lot of regulation rule, it's not easy. So what we are trying to do is to build the infrastructure first. So this is what I just mentioned in my previous presentation, probably I didn't make myself clear. We want to build infrastructure. And Ram mentioned about AI is networking. Networking is AI. Without networking, AI become very difficult. So what we try to do is build infrastructure. The same concept is in the whole Taiwan.

So I tried to explain to the people who I know in high level of government. I say, no AI infrastructure is no AI. So this is the first one of your questions.

And the second one, why I want to choose this hospital, actually because I'm the member of this hospital. So this hospital is a charity, belong to a charity foundation. And I'm the member of this charity foundation. So to me, I just try to do everything I can to help them to build the infrastructure. This hospital, they have a hospital in a very remote area and a very small area -- very small hospital just help the remote area. So I want that small hospital can also use the AI in the main hospital. So this is the idea I come from. Yes, very good question.

Thank you very much. So for those investors that are here at the venue, I would like to receive your questions. Any questions from your side? So the person in the back room.

My name is Tokunaga from Daiwa Securities. I have two questions. The first question, sorry, that I'm repeating. The solution of Broadcom's and NTT's solutions from -- the question is from the competitive perspective. When I compare the two solutions, what are the strengths that each one has? And is there a difference in the approach towards the CPU or strategy difference? Can you comment about competition?

And the other is the production capability. Looking at Tomizawa-san's presentation, you're saying 5,000 units per month as the capacity, if there is a larger demand, I think you need to speed it up a bit more. But what is the bottleneck to do that? Is that a customer issue? Or is it the production line issue? Can you answer those two questions.

The difference between us and Broadcom, as mentioned in the presentation, we have the optical engine that can be replaced. Meaning that, if one optical engine fails, the whole product does not need to be repaired. So it's a low repair cost. And also, we can flexibly respond to various media requests or if the rack needs to be transferred, we can actually respond to that as well the composition changes, we can respond to that. And that's our strength.

And on the other hand, regarding Broadcom. The timing was slightly a bit ahead or before us. Maybe that is the difference. And also -- sorry, that I'm talking about our benefits. So 400G per lane. We're already working on the next generation technology, and we are receiving various inquiries from various customers.

Well -- but up to PEC-4, we don't have other companies that have a road map up to there. It's 1 line, 5,000 units per month currently. But if we make it 2 lines, 3 lines, 4 lines, it's going to multiple by 2, 3, 4. So basically, the visible demand we have right now, we can fulfill that is what we think. But the #1 challenge is that, and also this actually is our benefit as well. The connection of optical and photonics and fiber connection at that speed, we don't -- we have the strength there. And I believe that, that is the benefit and the difference with others.

So any questions from the remote participants, please raise your right-hand button function. Anyone? Okay? Anyone in the room? Okay.

Masuno from Nomura Securities. I have two questions. So FY '23 innovative devices establishment, since then, you said you will start the mass production in FY '25 and JPY 200 billion sales in Q4, commercial shipping and mass production '27, you're saying. So is this a postponement of the timeline? Or are you talking about something different? When the company was established, the image has changed or not?

And my second question is NVIDIA Quantum switch. We don't know when their quantum switch will come in what volume. But looking at supply chain, there are 12 companies inside. And this time, you are working with Accton and Broadcom partnership. But are you thinking of a larger ecosystem going forward?

Okay, may I? So when the company was established, we had that road map, the plan, but there were various circumstances. For example, the semiconductor crisis, our customers in FY '22 and FY '23, they bought like our products in big volume and it became their inventory. And so customers needed some time to clear their inventory. And that is why our sales dipped a little and was pushed back a little. And we are NTT subsidiary. So the U.S.-China issues was a factor. And so, our advancement into Asia did not progress as much as we anticipated. And so the existing part did not progress as much as we expected. But the development of PEC-2 and PEC-3 are progressing as scheduled. So no change there. So I hope you could understand.

Now, NVIDIA as partnership. Of course, we are aware of that. In the manufacturers, companies, in that group, are not saying that they are exclusive to anyone. For example, the two companies we have here on stage, the two, and you including the end users, we are having various discussions. So we will continue working discussing with NVIDIA and among others. And so that is not the only option for anyone. So our three companies are very close now. But going forward, the processors and end users, we will evolve and talk with many others. We are working right now. So, I hope you could have high hopes.

I think to your question about NVIDIA Quantum and stuff, if I know correctly, Quantum refers more to InfiniBand than Ethernet. What I would say is, what you're seeing here is a technology partnership on technologies like Ethernet, which are very open technology.

And even the whole discussion about Broadcom versus NTT IOWN, this kind of shows you the only way you're going to scale to hundreds of gigawatts of data centers being deployed, is having an ecosystem that works around standard interfaces, because otherwise, you cannot scale to the amount of opportunity that is out there. So we collectively, as an industry, have come to the conclusion, if you think about it, few years ago, people said, if you want to build a large machine learning cluster, you have to build it with InfiniBand as a technology, right? But today, the entire market, it's building them with Ethernet as a technology, because Ethernet is the only one, which is open standards based.

So that is the most important thing, I think, for you to take away is, it is a very large market, and there's a massive transition that's going to happen with from copper to optics. And this requires multiple companies work together. In some places, you compete, some places, you're going to partner, but that has to happen for this market to explore. Otherwise, if you're vertically integrated and trying to do everything yourself, this market will not happen.

Are there any more questions? If not, we would like to conclude this session for the panelists. Please give them a round of applause.

We would like to prepare for the next session. So we kindly ask you to wait a moment. We would like to resume at 5:15 p.m. Thank you.

[Foreign Language]

[Foreign Language]

This is showing the data centers of power consumption. If you -- the red line at the middle is showing the Tokyo's total power consumption by 2030, with the advancement of AI. If this continues, by 2030, the data center power consumption will exceed the total Tokyo's power consumption. If this trend continues, the rapid increase in electricity consumption driven by the expansion of AI usage could become so severe that it might impact our daily lives, potentially leading to situations like planned power outages.

Another aspect is the rapidly increasing cost burden on users due to AI utilization. The graph on the left shows the annual AI-related budget amounts for companies. Costs for fiscal year 2025 are projected to increase by 75% next year. And while AI usage expands, concerns about declining ROI are also emerging.

While the cost breakdown, please look at the graph on the right. This is showing the AI adoption. This graph shows the composition of AI market consisting of three major areas: consulting, application and infrastructure, such as GPUs and data centers. Among this infrastructure domain, including GPUs, accounts for the largest over half of total computing infrastructure, such as GPUs is driving the rapid increase in power consumption and cost growth.

So in this sense, the -- given the situation, two major points are required for the computing infrastructure supporting AI utilization, that is reducing power consumption and cost through efficient operation and reducing the power consumption of the devices that make up the infrastructure itself.

IOWN is a key component that enables the simultaneous achievement of AI utility efficient operation and reduced power consumption.

First, let me explain the efficient infrastructure operation. As AI used to expand into various business processes, changes are occurring in the utilization rates of computing resources like GPUs. Even when building GPU resources individually for specific AI applications, as one done in the past when AI users, as mentioned, they functioned at relatively high utilization rate.

However, as AI adoption expand across diverse industries and various business functions such as finance, legal and marketing. And when GPU is composed per, how it is used as shown on the right graph, it leads to inconsistency in utilization rate.

In fact, when examining specific time periods, there are instances where only 50% of the total GPU resource are utilized. Furthermore, with the increasing demand for computing infrastructure like GPUs, power supplies is reaching its limits, especially metropolitan areas. This necessities -- necessitates distributing GPUs to regional data centers with surplus power capacity.

While the idea -- idea would be to efficiently offer GPU resources for various AI applications within a single cluster at one location, the reality is that, power supply limitations are driving the decentralized deployment of computing infrastructures like GPUs.

Leading companies are already utilizing multiple large-scale AI models just as generative AI image analysis and real-time processing alongside the expanding scope of AI applications. Consequently, thousands of GPU resources are required for AI training and inference. Consequently, companies have already distributed GPU installations and are visualizing GPU usage costs and power consumptions at each site and are beginning initiatives to efficiently manage distributed GPU resources such as assigning a more demanding AI processing to locations with surplus power or GPU resources to efficiently manage distributed GPU resources.

The first requirement for computing infrastructure supporting the AI era, which is efficient infrastructure operation is achieved by connecting the vast distributed GPU resources at high speed via IOWN APN, effectively creating a single massive computing platform virtually depending on the application and usage conditions. It flexibly optimizes the allocation of distributed computing resources like GPU and assign resources to sites capable of supplying the necessary power based on GPU load and power consumption ensuring stable and efficient operations.

Next, I will address another requirement reducing the power consumption of the equipment that constitutes the infrastructure itself. As AI processing volume increases, the number of required GPUs also increases, leading larger capacity of internal computer communications.

The bottom diagram shows the configuration of NTT DATA's GPU-as-a-service, used as the training environment for NTT's LLM, tsuzumi. It may be difficult to see it significantly scaled down like this, but you can probably imagine the large amounts of communication occurring within the computer from the numerous capable wiring.

The diagram on the right, which was also shown in Mr. Hoshino's explanation at the beginning, presents communication volume in the vertical axis and communication distance on the horizontal axis. As you can see, communication exceeding 10 terabits per second, even within a computer where components are extremely close together, faces barriers with increased power consumption and heat generation and electrical communication has reached its limits necessitating to shift to optical communications. While the processing demands AI usage and increase in GPUs, internal computer communications have already reached the terabyte level. Electrical methods have reached their limit making time for IOWN Photonics devices to step up.

The second requirement for computing infrastructure supporting the AI is reducing power consumption as the infrastructure itself, as shown in the diagram on the right. Implementing this PEC device, PEC-2 in the switch is connecting components within the computer enables both increased communication capacity and reduced power consumption.

The utilization of AI is steadily progressing. The line graph here shows that since 2023 in November, NTT announced its LLM model. The number of inquiries from domestic companies regarding tsuzumi and AI-related matters have been steadily increasing, exceeding 1,800 cumulative cases. Additionally, the bar graph shows that orders related to generative AI have exceeded 1,800 cases combined domestically and internationally.

Alongside this, steady progress, inquiries regarding the construction and operation of computing infrastructure supporting AI utilization, such as data centers, cloud services and GPU-as-a-service are also increasing. The NTT algorithm provides GPU-as-a-service, a managed service that delivers the necessary computing resources at the required time and scale tailored to specific AI usage scenario. The ability to deliver secure and efficient operation and provision of GPU service storage resource management, security and other resources required for AI utilization efficiency in security is leading to the previous shown screen of AI orders.

The Mobility AI Platform, we jointly announced with Toyota last October to realize society with zero-traffic-accident requires massive GPU resources. In addition to Toyota's existing computing resources, we plan to build NTT data's new GPU-as-a-service and deploy it in a distributed manner with an efficient operation and power reductions are going to become key.

To sustainably and while I deploy the benefits of AI, the computing infrastructure for the AI era, must have efficient operation and reduced power consumption, connecting the increasingly distributed GPU resources via IOWN APN and with the low apparel consumption device, the PEC switch, we will take the challenge of reducing the power consumption of computing infrastructure as well. And thank you very much for your kind attention.

Thank you very much, Ooni-san. We will now have an overall Q&A session. Please wait until we get ready. Thank you. Thank you for waiting. We will now have the overall Q&A session. President, Shimada; Senior Executive Vice Presidents, Mr. Tomizawa, Mr. Hoshino; Oonishi, EVP; and Kinoshita, EVP, will answer your questions. Please come up to the stage.

So, I will explain how you can ask your questions. First of all, we will take questions from the media in this room, followed by the investors. And then, we will take questions from those attending the web conference system remotely. Please raise your hand. If you have any questions in this room, we will bring you a microphone. And if you have questions from the remote sites, please use the raise hand button. And if you want to take down your question, please press the raise hand button again.

When we appoint the questioner, please state your name and company name, and we will ask you to unmute. So please unmute your button on the web conferencing system. After your question, please unmute yourself until our response is completed. First of all, we will take questions from the media in the room. Please raise your hand. Thank you. So the gentleman at the very end, please.

Nikkei BP, Horikoshi is my name. So Broadcom mentioned regarded highly the NTT IOWN team's capability. That was very impressive. So I have three questions related to that. So NTT as a device manufacturer, Broadcom ASIC and Accton manufacturing. So you will manufacture on the supply chain. First, you said your first goal or target is the hyperscalers. Tomizawa-san, who will go and sell? Will the entire team promote the product or someone else? So that's my first question.

Second question. If one hyperscaler is adopted, you mentioned 5,000 pieces a month. PEC manufacturing capability -- capacity, and you may run short of your capacity. So how are you preparing your production increase? Or how much excess capacity do you have now?

And lastly how will NTT's profit increase going forward? I want to have a clear image on that as a device manufacturer. If the final product is shipped in a big volume, the revenue will rise, I understand. But are there any other revenue streams? Those are my three questions.

So Akira Shimada would like to answer that question.

First of all, today, we had Broadcom and Accton and NTT. The three parties are forming a supply chain. All three companies will do sales and marketing activities. Of course, we do the overall coordination, and have started contacting various customers. But with both partners, we have various customer channels. So we are leveraging each other's customer channels.

Next is about our production line. As you rightly said, 5,000 pieces a month. But we can have three shifts and 24/7 operation. It will be practically automated, the machine will do the production, the manufacturing. So with that, we can triple the production volume, and we're thinking of increasing the production line. For the time being, we have already planned to increase to 2 and 3 lines. Next year, the second line will be up and running. So according to the customers' demand, we will do sufficient divestments.

Next, profitability. So as we mentioned today, the market is not fully formed yet. It is a new market. So it's difficult to mention the level of revenue we can achieve. We have not finalized the customers and the unit price has not been set yet. And the pilot users revenue is only a guess.

So, and the optical interconnect market will be JPY 7 trillion in 2032. And our PEC device is not included in that at all. So the conventional metal wiring will be replaced by optical, copper will be replaced by photonics. And we don't know the size of the copper market. And so, how many people have interest and what the market size looks like will be elucidated through the market research company survey. So on that basis, we will work on getting the market share. We will have better understanding and make our move. So today, I'd like to refrain from quantifying the market size.

The next gentleman in the front row.

My name is Abe from TV Tokyo. I would like to ask you Mr. Shimada a question. The first question is related to the development situation of IOWN. The overall progress from your perspective, how are you looking at it? And there are an increasing number of competitors regarding the photonics-electronics convergence technology. But in 2025, commercialization, it seems that the third-generation part is a bit delayed than originally planned. So the progress on this, how are you -- what is your view on that?

Regarding the progress itself, basically, I think it's progressing as planned. I don't think it's behind at all. And probably, Mr. Tomizawa was talking about the inventory regarding -- that is related to the existing products. So regarding this PEC products, it's actually moving faster than planned.

And for APN, steadily at the Osaka, Kansai Expo and we connected about 29 sites through APN and the World Athletics competition, TBS from, well, they remotely connected all to Akasaka, and they use that for the remote connected production. So with this, we can see that the usage is steadily increasing.

As the overall IOWN project is progressing as planned is how I look at it. And the most important point of IOWN is how to reduce the power consumption and create a society with a lower power consumption. So, -- but we have explained today, which is the PEC device is at the core of this. Therefore, next year, we would like to surely launch PEC 2. And for 2027, 2028, bring it to those years and come out with another device is what's important.

So today, at least one we wanted to convey is that, NTT is not alone doing this. But rather globally, we have assured partners out there that will work with us. And we are making progress is what we were able to show you today.

One more question. This to move forward this IOWN concept, the collaboration with the Japanese government is indispensable as always, what I think. Ms. Takaichi is now the President of Japan's LDP and she used to be the former Minister of MIC. So she is a politician that does have a relationship with NTT already. So with the new Prime Minister, coming in, what are your perspective?

So Ms. Takaichi, since she was the former Minister of MIC, I've known her. So the PEC device that we are developing, and within the semiconductor world, Japan to once again come back. As a main player, I believe that we will be able to receive good support. Well, together with the government, in fact, the R&D related to IOWN, we are receiving support from the government already. So with receiving additional support, we would like to come about with products that has ensured content and contribute to the society.

Now we will take questions from the investors in this room. So any investors with questions? So the front row.

Morgan Stanley, Tsusaka is my name. So first of all, IOWN device. The one you showed us, Broadcom has -- uses Tomahawk 6 and sell the switch. So this clear product output is there. And so it is convincing, I think this can be launched. And in the next generation will be embedded in chips. So it's not the final product. The chip manufacturers who make -- who was used in the final product need to adopt your product. So it will be a higher hurdle, I think. And then next, the depth of collaboration will deepen, I think. And the difficulty will rise, I think. That is the image I have. Am I correct or wrong? If you could give me your insight.

Yes. Tomizawa would like to answer that question.

So the level of difficulty will rise, yes, you're right. And because of that, we decided to collaborate in PEC 2 and use that as a foundation to go. So that's step one. And in reality, in chips, the PEC device will come into the chips. And in METI, we have been entrusted the national project. And in that formation, logic manufacturers are giving us cooperation and advice. And so this discussion is ongoing. It has already started. So to meet this large-scale, global chip manufacturers, and you need to collaborate. But in niche area, will it just be a niche logic area? Or are you thinking of scaling up even further?

This is a device. And so we need volume to make sense -- to make business sense. So we want to work with the #1 or 2 logic manufacturers in the world. Initially, the volume may not be large, but in the end, we want to aim for the mass.

And my next question is for NTT as a whole, you will sell AI. So what will the structure -- NTT structure be? The order is now ramping up, you said. So NTT East and West, is there an NTT DOCOMO, is DOCOMO business and then NTT DATA and the global business. So tsuzumi and unique products to global AI products, you have a broad product lineup. So the corporate enterprise business, sales formation is suitable or will there be a difference, a change in the way you will sell the enterprise?

Okay. Let me answer that question. Now we have data in DOCOMO business, in East and West. They all have AI sales posted already. And the customers are slightly different from one another, NTT East and West, many are local governments. Local governments are using this in many cases. The types of AI used is -- it's one is tsuzumi, but we're not planning to have do tsuzumi alone. We want the AI solution that is most suitable for the customers. That's what we propose to our customers. Customers who want and need tsuzumi or data, NTT DATA customers, for example, where they want to process data in a closed environment.

So now with the data request and customers that we are dealing with, we will be announcing this soon, but we will release tsuzumi 2 this month. So with the current accounts, the revenue is rising in a balanced manner. So I think the current formation is appropriate. And Ooni-san's area is overseeing the overall structure. And so, and we have each responsibility in developing the current technology. So I think the current formation is appropriate. Anything else to add?

So DATA and DOCOMO business, and East and West have their respective customers and the AI solution that is necessary or the infrastructure that is needed are shared as needed. But each operating company offers the preferred technology to each customer.

Any other investors from the room? The gentleman in the back of the room, please.

Tokunaga from Daiwa Securities. Just one question. When the IOWN Global firm establishes NTT, Intel and Sony, three companies were the founding companies. This was my understanding. And today, the collaboration with Broadcom was featured. But about the Intel, what's the collaboration? What is the progress? Then it seems that Intel is also collaborating or having alliance with SoftBank. So IOWN and Intel, can you share with me the situation regarding that?

Kinoshita would like to answer the question.

Currently, around PEC 2, we don't have a direct collaboration, but net or the Internet networks interface card, we still have the continuing collaboration.

So we will take those from the online. [Operator Instructions] Are we okay? So SMBC, Nikko Securities, Kikuchi-san.

So this is IR Day, IR/PR Day. So we want more information from the investor perspective. So in terms of CapEx, what is your plan? Who is the main producer production? Is this the joint venture or -- and what level of investment will NTT do? And where will that fund come from?

So Shimada will start off.

So for investment, innovative devices will increase the production line. And our stake and if necessary, we want to increase our capital -- increase our investment. But innovative devices will do maybe 3 or 4 lines at most. And beyond that, we're still discussing with Tomizawa-san. We still have some open lines next to where innovative devices is. So we can perhaps in Mito, we can expand the factory. And the back end of the process, it's like semiconductor back end of the process. So we can work with partners like Shinko Denki, we can produce together with Shinko. So we are exploring multiple options. This will require investment. But the investment will be needed in phases. So for the time being, innovative devices can cover the required production volume. Tomizawa-san?

Yes, that is right. So 5,000 pieces a month.

So per line, how much investment per line should I expect?

Sorry, I don't have the numbers off the top of my head. So if I could get back to you later.

Yes. And my second question is, so sales, revenue is still uncertain, but in Osaka, Kansai EXPO, I think you had various business negotiations. Did you have good traction for possible revenue? So Q4 next year is October, December quarter or? So in October, December quarter next year, you have a good prospect of recording revenue?

Basically, it was not -- the negotiation was not at the EXPO site. So what we did in EXPO was well received by the customers and visitors, but the panel and the technology, how cutting edge the technology is. That needs to be evaluated.

So like Tomizawa-san said, large usage -- we want to get customers who can use this in big volume. So I cannot name names, but a few hyperscalers and new cloud players are having business negotiation with us. And that is where we want to expand our business from.

And my third question is, in the annual IR Day, we ask many questions from the investors' point of view. So this is nothing to do with IOWN, but what the investors are now worried about is DOCOMO's Q1. Is that okay? And Q2 and onward, how DOCOMO will recover? That is our concern.

On the other hand, on the data center side, so you launched and the share price is moving, the REIT, including utilization of REIT, your future data center business using REIT. Are you seeing any drivers of the business? Or are you being a bit conservative? So this year, your financial results and the shareholder return, because this is IR day, I want you to give us information that is convincing to the investors.

Okay. So we'll ask you a question first. So what about DOCOMO, should I answer specifically? The full year results briefing and Q1 financial results briefing, we had some gaps in what you said. And in the results briefing, it seems that you did not explain clearly. Maybe I'm feeling different, but the general direction remains unchanged, I think.

But from Shimada-san, from your point of view, DOCOMO is operating sufficiently, do you think?

Today, Sumishin SBI and NTT DATA, we were expecting some comments there. So Sumishin SBI included, we want some comments and NTT DATA in data center. I'm sorry, I'm being a bit greedy here, but -- that competition itself is becoming quite severe. The competition environment is probably becoming more severe than what was originally expected. But as to DOCOMO, we are telling them to respond to the competition. So of course, what that means is that the marketing costs will increase and there will be a cost push.

However, on the other hand, they work on cost reductions initiatives or initiatives to improve efficiency or sell the assets that they have. So that will enable them to have the resource to respond to the competition. And through that win through this competitive environment from before telling them to not drop their market share further. So DOCOMO themselves are thinking that as well.

Having said that, the commitment to the investors, we have to keep, is what I think. So, in the next 6 months, we would like to continue to respond in that way. And for the Sumishin SBI Network Bank, currently, the new business is under consideration with them before we actually launched the brand and bank.

And we would like to give you the detailed explanations regarding that, but please give us time to do that. And regarding NTT DATA, the discussions of the synergy that will be generated and also within the NTT Group, the affirmation of the group companies, it's not a major change of the formation, but maybe their business is better to transfer over to NTT DATA. We're in the midst of such discussions. So it seems that it is not going to require some more time.

Therefore, from the fall season to the winter season, where I was saying that we would like to share some initiatives and provide the explanation of that. But currently, it seems that it may be a bit behind schedule than what I originally said.

So the medium-term strategy of NTT DATA itself, it will be close to -- for them to come up with the next medium-term management strategy. So within being able to convey to you the formation. And then through that explanation, we're hoping we'll be able to provide you the explanation of the synergies that will be generated. That's all.

Thank you very much. Due to the time of restriction, we would like to make the next question the last one. Please go ahead.

My name is [ Takatsuki. ] Today, the explanation was mainly focused on IOWN 2.0. When you think about the future demand growth of hyperscalers, the IOWN 3.0, how are you going to develop that? And how are you going to sell that? And the mass production affirmation for IOWN 2.0 was explained. But regarding 3.0, which you can expect a larger demand, how are you going to respond to that? And at the end towards you, Mr. Shimada, the NTT business is, IOWN, there was a strong impression that the telecommunications business. But now it seems that you're expanding wings to the semiconductor area as well. So can you comment on spreading your wings further or expanding your business scope?

Regarding IOWN 3.0, in what way the manufacturing will be done is not determined yet. However, at least, Furukawa Electric, that we are collaborating with them for the national project. They are the indispensable partner that we need to continue the collaboration. So Nikkei, before you had an article out there about something which I will not deny here. But when it comes to 3.0 stage, what kind of a supply chain will establish is something that we will consider moving forward. But regarding the technology development, we will be collaborating with Furukawa and that is something that is indispensable. So the production itself, what are we going to do about that is something that we're going to review further and then I'll share with you an appropriate timing.

Thank you. So now it is time to close the Q&A session. So Mr. Shimada, Mr. Hoshino, Mr. Tomizawa, Ms. Oonishi, and Mr. Kinoshita, thank you very much.

Thank you very much for giving us many questions. With this, we would like to conclude the schedule program. Thank you very much for participating in the NTT PR/IR Day towards the future with IOWN. We seek your continuous support and understanding. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]