DCM Ntt Docomo, American Depositary Shares (delisted)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Information furnished in this form:

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Earnings Release		July 27, 2017
For the Three Months Ended June 30, 2017		[U.S. GAAP]

 

Name of registrant:		NTT DOCOMO, INC. (URL https://www.nttdocomo.co.jp/)
Code No.:		9437
Stock exchange on which the Company’s shares are listed:		Tokyo Stock Exchange-First Section
Representative:		Kazuhiro Yoshizawa, Representative Director, President and Chief Executive Officer
Contact:		Hideki Maeda, Senior Manager, General Affairs Department / TEL  +81-3-5156-1111
Scheduled date for filing of quarterly report:		August 2, 2017
Scheduled date for dividend payment:		—
Supplemental material on quarterly results:		Yes
Presentation on quarterly results:		Yes (for institutional investors and analysts)

(Amounts are rounded off to the nearest 1 million yen.)

1. Consolidated Financial Results for the Three Months Ended June 30, 2017 (April 1, 2017 - June 30, 2017)

(1) Consolidated Results of Operations

(Millions of yen, except per share amounts)

(Percentages above represent changes compared to the corresponding period of the previous year)

2. Dividends

3. Forecasts of Consolidated Financial Results for the Fiscal Year Ending March 31, 2018 (April 1, 2017 - March 31, 2018)

(Millions of yen, except per share amounts)

(Percentages above represent changes compared to the corresponding previous year)

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* Notes:

* This earnings release is not subject to the quarterly review by independent auditors.

* Explanation for forecasts of operations and other notes:

Forward-looking statements in this earnings release, such as forecasts of results of operations, are based on the information currently available and certain assumptions that we regard as reasonable, and therefore actual results may differ materially from those contained in, or suggested by, any forward-looking statements. With regard to the assumptions and other related matters concerning forecasts for the fiscal year ending March 31, 2018, refer to “1. (3) Prospects for the Fiscal Year Ending March 31, 2018” on page 13 and “5. Special Note Regarding Forward-Looking Statements” on page 21, contained in the attachment.

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CONTENTS OF THE ATTACHMENT

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1. Information on Consolidated Results

(1) Operating Results

i. Business Overview

The environment surrounding our business has changed significantly. In Japan’s telecommunications market, competition has intensified due to the government’s pro-competition policy, the rise of low-cost smartphones offered by Mobile Virtual Network Operators (MVNOs) and other factors. In addition, we have seen technical advancements in areas such as artificial intelligence (AI), IoT* and drones, as well as an expansion of customer touchpoints by various service providers leveraging loyalty point programs and other means. These changes have brought about both active competition in the telecommunications market and collaboration with new players from other industries, accelerating competition in new markets that transcend the conventional boundaries of the telecommunications business.

Amid these changes in the market environment, in April 2017, we developed and unveiled our Medium-Term Strategy 2020 “Declaration beyond” to realize a richer future with 5G. We have positioned the fiscal year ending March 31, 2018 as a year to “Challenge to Evolve” by taking the first steps towards the delivery of our Medium-Term Strategy 2020, “Declaration beyond.” We will do so by moving forward with the creation and evolution of services, the evolution of our business through “+d” and the reinforcement and evolution of our business foundations.

During the three months ended June 30, 2017, we introduced new billing packages such as “Simple Plan,” “Ultra Share Pack 30” and “docomo with” in an effort to improve returns to our customers. We also strived to boost the usage and enhance the convenience of “d POINTs” by increasing the number of stores participating in the “d POINTs” program, and, in addition, we promoted our “+d” strategy through launching a “5G trial site” and undertaking initiatives that take advantage of AI, IoT and other advanced technologies.

<Actions for Future Growth>

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For the three months ended June 30, 2017, operating revenues increased by ¥28.0 billion from the same period of the previous fiscal year to ¥1,136.7 billion. This was mainly due to an increase in optical-fiber broadband service revenues due to growth in the number of “docomo Hikari” users as well as the recovery of mobile communications services revenues as a result of growth in packet consumption and a decrease in the negative impact of the “Monthly Support” discount program, despite the negative impact from our various billing initiatives implemented for the purpose of enhancing returns to our customers, due mainly to our provision of lower cost services.

Operating expenses increased by ¥49.0 billion from the same period of the previous fiscal year to ¥858.4 billion. This was mainly due to an increase in expenses associated with the expansion of “docomo Hikari” revenues, an increase of the sales commissions incurred for agent resellers due to growth in the total amount of smartphones sold and an increase of depreciation expenses.

As a result, operating income decreased by ¥21.0 billion from the same period of the previous fiscal year to ¥278.3 billion for the three months ended June 30, 2017.

Income before income taxes and equity in net income (losses) of affiliates was ¥281.8 billion, and net income attributable to NTT DOCOMO, INC. decreased by ¥16.9 billion from the same period of the previous fiscal year to ¥189.9 billion for the three months ended June 30, 2017.

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Consolidated results of operations for the three months ended June 30, 2016 and 2017 were as follows:

<Results of operations>

<Operating revenues>

<Operating expenses>

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ii. Segment Results

Operating revenues from telecommunications business for the three months ended June 30, 2017 increased by ¥29.4 billion, or 3.3%, from ¥894.9 billion for the same period of the previous fiscal year to ¥924.3 billion. This was mainly due to an increase in optical-fiber broadband service revenues due to growth in the number of “docomo Hikari” users as well as the recovery of mobile communications services revenues as a result of growth of packet consumption and a decrease in the negative impact of the “Monthly Support” discount program, despite the negative impact from our various billing initiatives implemented for the purpose of enhancing returns to our customers, due mainly to our provision of lower cost services.

Operating expenses from telecommunications business increased by ¥58.4 billion, or 9.3%, from ¥624.5 billion for the same period of the previous fiscal year to ¥682.9 billion. This was mainly due to an increase in expenses associated with the expansion of “docomo Hikari” revenues, an increase of the sales commissions incurred for agent resellers due to growth in the total number of smartphones sold and an increase of depreciation expenses.

Consequently, operating income from telecommunications business was ¥241.4 billion, a decrease of ¥29.0 billion, or 10.7%, from ¥270.4 billion for the same period of the previous fiscal year.

<<Key Topics>>

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Number of subscriptions by services and other operating data are as follows:

<Number of subscriptions by services>

<Number of handsets sold>

Notes:

Average monthly revenue per unit, or ARPU, is used to measure average monthly operating revenues attributable to designated services on a per user basis. ARPU is calculated by dividing telecommunications services revenues (excluding certain revenues) by the number of active users to our wireless services in the relevant periods, as shown below under “ARPU Calculation Method.” We believe that our ARPU figures provide useful information to analyze the average usage per user and the impacts of changes in our billing arrangements. The revenue items included in the numerators of our ARPU figures are based on our U.S. GAAP results of operations.

Average monthly communication time per user.

Aggregate ARPU= Voice ARPU + Packet ARPU + “docomo Hikari” ARPU

Data ARPU= Packet ARPU + “docomo Hikari” ARPU

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Sum of number of active users for each month ((number of users at the end of previous month + number of users at the end of current month) /2) during the relevant period

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Smart life business—

<Results of operations>

Operating revenues from smart life business for the three months ended June 30, 2017 were ¥113.5 billion, a decrease of ¥11.7 billion, or 9.3%, from ¥125.2 billion for the same period of the previous fiscal year. This was due mainly to a decrease in revenues from a subsidiary which began recording revenues on a net basis as a result of a change in its business model effective from April 1, 2017. This decrease in revenues was greater than increases in revenues from our finance/payment services and other services.

Operating expenses from smart life business were ¥96.9 billion, a decrease of ¥11.2 billion, or 10.3%, from ¥108.0 billion for the same period of the previous fiscal year. This was due mainly to a decrease in expenses attributable to a subsidiary as a result of the change in its business model described above. This decrease in expense was greater than an increase in expenses associated with various initiatives that we undertook towards future growth.

As a result, operating income from smart life business was ¥16.7 billion, a decrease of ¥0.5 billion, or 3.1%, from ¥17.2 billion for the same period of the previous fiscal year.

<<Key Topics>>

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Other businesses—

<Results of operations>

Operating revenues from other businesses for the three months ended June 30, 2017 amounted to ¥106.6 billion, an increase of ¥11.8 billion, or 12.4%, from ¥94.8 billion for the same period of the previous fiscal year, driven mainly by an increase in the number of subscriptions to our “Mobile Device Protection Service” and the growth of revenues relating to IoT businesses.

Operating expenses from other businesses were ¥86.3 billion, an increase of ¥3.2 billion, or 3.9%, from ¥83.1 billion for the same period of the previous fiscal year, due mainly to an increase in expenses associated with IoT businesses, despite a decrease in expenses as a result of pursuing further cost efficiency.

Consequently, operating income from other businesses was ¥20.2 billion, an increase of ¥8.5 billion, or 73.1%, from ¥11.7 billion for the same period of the previous fiscal year.

<<Key Topics>>

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iii. CSR Activities

We aspire to help build a society in which everyone can share in a prosperous life of safety, security and comfort, beyond borders and across generations. We believe it is our corporate social responsibility (“CSR”) to fulfill the two aspects of (i) “Innovative docomo,” to solve various social issues in the fields of mobility, healthcare and medicine, education and learning, and climate change through the “co-creation of social values,” an initiative that we plan to pursue together with various partners to create new services and businesses, and (ii) “Responsible docomo,” to thoroughly ensure fair, transparent and ethical business operations as a foundation for the creation of such values. Accordingly, we will strive to realize a sustainable society while expanding our own businesses.

The principal CSR actions we undertook during the three months ended June 30, 2017 are summarized below:

<Innovative docomo>

<Responsible docomo>

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iv. Trend of Capital Expenditures

<Capital expenditures>

We pursued more efficient use of capital expenditures and further cost reduction, and expanded the area coverage of our “PREMIUM 4G” service to construct a more convenient mobile telecommunications network. As a result, the total amount of capital expenditures we made increased by 24.5% from the same period of the previous fiscal year to ¥120.9 billion for the three months ended June 30, 2017.

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( 2) Financial Review

i. Financial Position

ii. Cash Flow Conditions

For the three months ended June 30, 2017, net cash provided by operating activities was ¥301.2 billion, an increase of ¥57.4 billion, or 23.5%, from the same period of the previous fiscal year. This was due mainly to a decrease in cash outflows for the payments of income taxes.

Net cash used in investing activities was ¥115.1 billion, a decrease of ¥93.7 billion, or 44.9%, from the same period of the previous fiscal year. This was due mainly to an increase in cash inflows from proceeds from redemption of short-term bailment for consumption to a related party.

Net cash used in financing activities was ¥149.2 billion, a decrease of ¥40.8 billion, or 21.5%, from the same period of the previous fiscal year. This was due mainly to a decrease in cash outflows for payments to acquire treasury stock, despite an increase in dividends paid.

As a result of the foregoing, the balance of cash and cash equivalents was ¥326.3 billion as of June 30, 2017, an increase of ¥36.7 billion, or 12.7%, from the previous fiscal year end.

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(3) Prospects for the Fiscal Year Ending March 31, 2018

The environment surrounding our business has changed significantly.

In Japan’s telecommunications market, competition has intensified due to the government’s pro-competition policy, the rise of low-cost smartphones offered by Mobile Virtual Network Operators (MVNOs) and other factors. In addition, we have seen technical advancements in areas such as artificial intelligence (AI), IoT and drones, as well as an expansion of customer touchpoints by various service providers leveraging loyalty point programs and other means. These changes have brought about both active competition in the telecommunications market and collaboration with new players from other industries, accelerating competition in new markets that transcend the conventional boundaries of the telecommunications business.

We have positioned the fiscal year ending March 31, 2018 as a year to “tackle evolution” by taking the first steps towards the delivery of our Medium-Term Strategy 2020, “Declaration beyond.” We will do so by moving forward with the creation and evolution of services, the evolution of our business through “+d” and the reinforcement and evolution of our business foundations. Through these initiatives, we expect to post an increase in both operating revenues and operating income for the fiscal year ending March 31, 2018.

Operating revenues for the fiscal year ending March 31, 2018 are estimated to increase by ¥165.4 billion from the previous fiscal year to ¥4,750.0 billion, driven by an increase in optical-fiber broadband service and other telecommunications service revenues due to the projected growth of “docomo Hikari” users, an increase in mobile communications services revenues due to the reduction of negative impact from “Monthly Support” discount program and other factors.

On the expenses side, operating expenses are expected to increase by ¥150.2 billion to ¥3,790.0 billion, due to an increase in expenses associated with the growth of revenues from “docomo Hikari,” an increase in depreciation expenses and other factors.

Accordingly, operating income for the fiscal year ending March 31, 2018 is estimated to be ¥960.0 billion, an increase of ¥15.3 billion from the previous fiscal year.

As we are not currently aware of any factor that may have a material impact on our projected results of operations, we have not revised our forecasts announced on April 27, 2017.

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2. Other Information

(1) Changes in Significant Subsidiaries

None

(2) Application of Simplified or Exceptional Accounting

None

(3) Change in Accounting Policies

Balance sheet classification of deferred taxes –

Effective April 1, 2017, DOCOMO adopted prospectively Accounting Standards Update (“ASU”) 2015-17 “Balance Sheet Classification of Deferred Taxes.” This ASU requires that all deferred tax liabilities and assets be classified as noncurrent on the consolidated balance sheet.

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3. Consolidated Financial Statements

(1) Consolidated Balance Sheets

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(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

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(4) Notes to Consolidated Financial Statements

i. Note to Going Concern Assumption

There is no corresponding item.

ii. Significant Changes in NTT DOCOMO, INC. Shareholders’ Equity

None

iii. Segment Information

DOCOMO’s chief operating decision maker (the “CODM”) is its Board of Directors. The CODM evaluates the performance and makes resource allocations of its segments based on the information provided by DOCOMO’s internal management reports.

DOCOMO has three operating segments, which consist of telecommunications business, smart life business and other businesses.

The telecommunications business includes mobile phone services (LTE(Xi) services and FOMA services), optical-fiber broadband service, satellite mobile communications services, international services and the equipment sales related to these services. The smart life business includes video and music distribution, electronic books and other services offered through DOCOMO’s “dmarket” portal, as well as finance/payment services, shopping services and various other services to support our customers’ daily lives. The other businesses primarily includes “Mobile Device Protection Service,” as well as development, sales and maintenance of IT systems.

Accounting policies used to determine segment operating revenues and operating income (loss) are consistent with those used to prepare the consolidated financial statements in accordance with U.S. GAAP.

Segment operating revenues: