We will now start the briefing of NTT's financial results for fiscal year 2021 third quarter. Thank you for attending. Thank you very much for participating in today's session despite your busy schedules. I am Fujiki from the IR office and will be the facilitator today. I would like to introduce today's attending members. Mr. Shimada, Representative Member of the Board, Senior Executive Vice President. Mr. Nakayama, Executive Officer, Senior VP, Head of Finance and Accounting. Mr. Taniyama, Executive Officer, Senior VP, Head of Corporate Strategy Planning. Today's briefing session is streamed live. This will also be streamed on our company's website on a later date. Furthermore, NTT Docomo will be holding their financial results briefing session after this session, so please attend this also. Today's presentation materials are posted on our company's IR website under the title Presentation Materials.
On the first page of the presentation material, points to be considered are stated, so we kindly ask you to please go read through them. After this, Mr. Shimada will explain the outline of the financial results, followed by opening the floor for your questions. Mr. Shimada, please.
Thank you very much. My name is Shimada, the Senior Executive Vice President. Thank you for joining us at this session despite your busy schedule. We appreciate your attention. I'd like to start with the financial results for the third quarter of fiscal year 2021 and share with you the status of the consolidated results for the third quarter. Please turn to page four of the material. This shows you the consolidated results for the third quarter. We saw year-on-year operating revenue and operating income increase. Operating revenue, operating income, profit all reached record high levels. As for operating revenue, due to increase of revenue at NTT DATA, this increased JPY 185.2 billion year-on-year, up to JPY 1,123.2 billion. Of this, foreign exchange or currency had a positive impact of roughly JPY 94 billion.
Due to the increased revenue at operating companies, including NTT DATA, as well as cost reduction efforts, operating income increased JPY 37.3 billion year-on-year, up to JPY 1,539.7 billion. Profit increased JPY 199.2 billion year-on-year, up to JPY 1,030.3 billion due to profit related to minority shareholders that, as a result of making NTT Docomo a wholly-owned subsidiary firm. Overseas operating income margin improved due to the increase of NTT DATA's revenue as well as structural transformation efforts. As for details, you're probably familiar with the materials, so I would like to turn to page nine and share with you the financial results forecast for fiscal year 2021.
As I explained, operating revenue, operating income, profit, EPS and overseas operating income margin forecasts have all been revised upwards, reflecting strong business results. Operating revenue has been revised upwards by JPY 180 billion, reflecting the announcement of upward revision by NTT DATA, which reflect the robust demand for digital services. Operating income was revised upwards by JPY 15 billion, reflecting the increase in operating revenue. In terms of specific companies, aside from upward revision at NTT DATA, we made downward revision for NTT Ltd., which I will explain in the following page on page 10 and onwards. Profit will be revised upwards by JPY 15 billion due to improved financial profit as a result of decrease in interest payment as well as reduced tax burden. EPS was revised upwards by JPY 4, reflecting the increase in profit.
Overseas operating income margin was revised upwards by 0.1 point, reflecting the upward revision at NTT DATA. We believe that the medium-term financial target of 7% in fiscal year 2023 is now within the range and within our sight. Please turn to page 13.
As for shareholder returns, as for our dividends, it was approved in today's board of directors meeting to increase the year-end dividend by JPY 5 over the forecast at the beginning of fiscal year 2021 to JPY 60. Annual dividend per share is JPY 115, an increase of JPY 10 over the previous fiscal year. This is a response in lieu of expected increase in income due to a steady progress of this fiscal year's performance against the annual results forecast. As for share buybacks, we have completed the buybacks of JPY 250 billion as authorized at the board of directors meeting last August. That is all from my side. Thank you very much.
Thank you. We'd like to take your questions now. As we have already informed you in advance, we will accept questions to those of you who have registered in advance and who are connected to the phone conference system at this moment. The operator will now explain how we'll take questions for the Q&A session.
We will now start the Q&A session. For those of you with questions, please push zero followed by one. If you wish to withdraw your question, please push zero followed by two. We'd like to go to . Mr. Ando, please.
Thank you. This is Ando. Can you hear me?
Yes, we hear you, Mr. Ando. Thank you very much.
I would like to ask two questions. My first question is about NTT Ltd.
In the supplementary material page seven, in the supplementary data, I see some numbers with regard to NTT Ltd. Here the added services shows strong progress, it seems, but when it comes to equipment sales, they seem to be struggling. NTT's data is showing strong performance. How do you see the situation? Based on each service line-up, how do you see the situation for each service line-up? I would like to ask for your explanation. Also, this time around, you're talking about structural transformation, even you talked about reinforcement of structural transformation. For impact, what about the forecast for the upward, for the upside impact on profit for the next fiscal year?
Thank you. This is Shimada here. I would like to respond to your question. First, with regard to the situation for NTT service line, as you pointed out, Mr.Ando.
Ando, in your question, as for value-added services, the situation is very strong. For example, with regard to data center, the JPY 32 billion increase we see, and that represent 35% increase. Managed services is going to JPY 27 billion. That represents 26% increase. As for network-related services and also for cloud-related services and cloud-related core services, yes, we're still struggling. As for value-added services overall, we see an increase of 18% overall for value-added services category. Now, on the other hand, when it comes to telecommunication equipment sales and maintenance, well, here, because of the impact of COVID-19 and because of the shortage of semiconductor, we see stress on the supply chain.
That indicates, in particular, when it comes to Australia and also India and the APAC area, overall, we see very strong impact as a result of these factors. That may indicate the 11% decline, or JPY 58 billion in absolute terms. Without COVID-19, of course, the equipment sales and maintenance business would have done better, I'm sure. We could have taken time and made efforts to shift to value-added services if we had the luxury of time. Because of the prevailing situation, we have had to accelerate shift learning efforts as a result. That's the basis of our decision this time around. Also on top of that, with regard to overhead, we need to improve efficiency of the overhead. We want to promote that. That relates. That turns the additional JPY 15 billion structural transformation cost increase.
That's the mainstay of this cost increase. Also, in other parts, migration to cloud and also reorganization of security is all included. Overall, although we were anticipating structural transformation cost of JPY 28 billion initially, but we added JPY 15 billion on top of that, which means that we are considering JPY 43 billion overall for structural transformation cost. As, of course, based on the recent forex, that's it will be JPY 47 billion based on the recent foreign exchange currency. This is the level of reorganization cost increase, which we will spend to improve our efficiency. Now we're expanding costs for this structural transformation. From the next fiscal year onwards, what impact will this have on profit? We anticipate that this will be able to improve profit by JPY 26 billion as a result of spending this level of transformation cost.
With regard to structural transformation overall, please, as you see in the supplementary data, at NTT Ltd., we've decreased personnel by 1,850 people, and also we are employing new people for value-added services. Overall, right now, we've been able to implement personnel reduction by 2,000 overall. To the extent possible by the year-end, although we will not increase this by double fold, but we are hoping that by the year-end, we'll be able to realize streamlining and cut and streamlining personnel addition to the extent possible. With regard to unprofitable services, we want to withdraw from unprofitable services. We're considering withdrawing from unprofitable services. For the time being, as for NTT Ltd. is concerned, for fiscal year 2023 onwards, we're aiming for 7% operating income margin in fiscal year 2023.
To make that, to achieve this in a certain way, we need to respond to the changes in the marketplace in fiscal year 2022. We're aiming for 2023 target and working towards that. That is all.Thank you very much.
Thank you very much. My second question relates to page seven, NTT Communications Group. When we take a look at this data on page seven, we see slight decrease in operating profit. As for operating revenue on a quarterly basis, when we take a look at the quarterly basis numbers, they seem to be up and down on a quarterly basis. That is the situation. If we take a look at the substance, we find that we are not yet seeing a clear upward trend as far as operating revenue for NTT Communications Group is concerned.
Can you explain to us how you see the situation at NTT Communications Group?
Thank you. Shimada here. Let me respond to your question. We've got operating revenue. Yes, there's a decline of JPY 12.4 billion in this category. You'll remember that last year, in the first quarter of fiscal 2020, because of COVID-19, conference related revenue spiked on a temporary basis. There is a reaction to that. I think this is a reaction to that. As for operating profit, there's a decline of JPY 9.7 billion, down JPY 12.3 billion. Conference related revenue is on a downward trend. We are building our new data centers. As a result, the depreciation amortization cost is increasing because of the build of new data centers. Our solution related offerings, we see some delay in the offering of solution services.
We're receiving orders, but we're not able to execute them, so therefore we're not able to reflect that revenue. We see that reduction in both operating revenue and operating income. As for the fourth quarter, we'll be able to start offering new data centers for large customers, so that will have a positive impact. Smart healthcare and smart city related projects are now in the pipeline. We anticipate revenues from those projects as well. With regard to network security and operations, we're going to offer them in an integrated manner. We want to expand solutions in embracing all these factors. We believe that we'll be able to improve recovery of revenue from network related business. We believe that we can achieve the annual target. Thank you. That is all from my side.
Thank you very much for your response.
Mr. Ando, thank you very much. We would like to take the next question. The next question will be from SMBC Nikko Securities Inc. Mr. Kikuchi, please go ahead with your question.
This is Kikuchi speaking. I have two questions. I'll ask about DOCOMO later on, so I would like to ask about NTT Ltd. and dividends. Regarding NTT Ltd., due to the lack of semiconductors was included in your explanation. They're handling network equipment, so I thought there was quite an impact on them. As of end of March, maybe the impact may expand more is what I think. Numerically, what is the impact and what are you planning to do moving forward is what I would like to know in my first question.
This is Shimada speaking. As for NTT Ltd., the impact from the shortage of semiconductors, the equipment delivery is being delayed, and that is one of the causes of the impact. Because if we cannot install, we cannot receive the revenue for maintenance work either. In that sense, in addition to that, in the Asian area, actually the sales people, due to the lockdowns, they cannot conduct their activities, so there are impacts from COVID. With overseas business on the revenue basis, about JPY 20 billion is the COVID impact. As for the shortage of semiconductors, the impact from that, we need to examine it from various angles still.
However, as of the third quarter, about JPY 30 billion impact is what we think has occurred. Of course, we will continue to keep a close eye on the situation.
Thank you very much. By the way, the impact of COVID-19 pandemic, for example, in the other businesses, it seems that it's starting to calm down compared to last year. NTT DATA as such, also NTT Communications domestic business also. However, the COVID-19 impact to NTT Ltd.'s business, the reason why it is larger, is there a NTT Ltd. unique reason? Is it because an equipment sales model? Is it, does it have a larger impact? How do you look at this?
This is Shimada speaking. Well, regarding the domestic business, we have consulted with our customers and used alternative products. We have responded quite in a flexible manner so that we will not be that behind the actual delivery date towards our customers. However, in the global supply chain, that type of flexible response is difficult to do, therefore. The procurement source is specified, and if that specified supply source is impacted, then the impact that we will incur becomes larger.
This is the same for NTT DATA also, but NTT Communications and NTT DATA domestic business, the equipment that we originally wanted to deliver to our customers, we have sourced that from an alternative source vendor, and that's difficult to do in the overseas business.
Okay, understood. Regarding my second question, this time you have increased the dividend, and I think that has a good impression, and I hope that is reflected on the share price. However, on the other hand, the phenomenon that's happening right now, and I do not know if there's an exact link, but NTT DATA revised upward and because the profit was revised upward, the dividend increased. But NTT DATA actually maintained their dividend. The 25% payout ratio according to their original plan.
After the revision upward, it was 20.5% and it's maintained at quite a low level. I should say it's deteriorated or declined. On the other hand, your company has a dividend income from NTT DATA. They are virtual, so well, NTT itself, non-consolidated, is gonna pay it. The income from NTT DATA is not increasing, but you're increasing your dividend. I wonder if that's aligned. Also, how does the money circulate? It seems that they have a different or unique cash management. By increasing the dividend, what kind of impact will it have on the cash management, is my second question, given the situation?
This is Shimada speaking. Thank you very much for your concern.
First of all, regarding NTT DATA, whether they will increase their dividend or not, that's a decision left up to NTT DATA, so I'd like to leave that up to them. Having said that, this fiscal year, as for the overall holdings company, we wholly owned NTT Docomo, and due to that, we experienced a cash increase. This year, at the time, due to the timing of wholly owning NTT Docomo, we did not receive the dividend from them. Next fiscal year, it is already decided that we will be receiving the full dividend from them. Therefore, cash flow-wise, basically our understanding is that there are no problems.
Okay, I see.
The increase of a dividend this time and the NTT Data's upward revisions and your company's consolidated upward revision, are they linked or not? You're saying they're not linked.
Basically, NTT Holding Company's policy is that within the medium-term plan's original policy, we will have a continuous increase in dividend, and that basic policy is incorporated in this medium-term plan. Therefore, as much as possible, based on the situation of cash flow, if it is possible to increase the dividend, we would like to continue that. That is the way of thinking of the management. Therefore, this time that thought has been reflected in the dividend.
Okay, understood. If I start this discussion here, it may be longer and it may be complicated, but within NTT Group, NTT Data puts priority on investment.
Therefore, the dividend or the shareholder returns is kept at a lower level compared to their peers in the industry in Japan. Your company gives that mission to NTT DATA within the group. However, you, as a holding company, is increasing your dividend. Is that the issue of the parent company and the subsidiary company both being listed? How the cash is handled or the profit is allocated? It seems that it is not aligned appropriately, but do you have the same understanding as myself?
Well, NTT DATA is a listed company. Therefore, NTT DATA's dividend policy or capital policy, including share buyback, they should think about what they want to do on their own.
However, as a shareholder of them, conveying our thoughts to them, we do such a thing. However, at this point, requesting NTT DATA to increase their dividend, we have not done that.
Okay, thank you very much. That is all.
Mr. Kikuchi, thank you very much.
Next question, please. Next question from Mitsubishi UFJ Morgan Stanley Securities, Mr. Tanaka. You have the floor, Tanaka-san.
Thank you. Tanaka here. Can you hear my voice?
Yes, we hear you, Tanaka-san. Please go ahead.
Thank you. I would like to ask two questions, one at a time then. The first question goes back to Mr. Ando's earlier question. It's a confirmation of what Mr. Ando asked. At NTT Ltd., for this fiscal year, you were anticipating JPY 28 billion structural transformation cost, but this reflecting foreign exchange could jump up to JPY 47 billion. That is what you mentioned. Now for next, what about next fiscal year onwards? How do you see the situation for next fiscal year onwards? You talked about impact of JPY 27 billion per annum. Can we scrutinize this? JPY 47 billion will be spent this fiscal year. This is that's level structural transformation cost. To what extent will you be able to reduce the structural transformation cost for next fiscal year onwards, and at the same time, what will be the effect of this expenditure?
How much impact do you see for the next fiscal year, and what about the year after that? Can you give us those numbers, please? I would appreciate it.
Thank you. Thank you, Tanaka-san, for your question. Shimada here. Let me start. JPY 47 billion in structural transformation cost, this is the temporary cost. If we spend, if let's say that for next fiscal year, let us assume that we withdraw from unprofitable markets and also we suspend unprofitable services. If we don't have to spend cost for that, then we'll be able to recover this amount fully. Now, the JPY 26 billion impact I was talking about earlier. The separate, we had a separate measure for this fiscal year, and this is the level of cost which we will no longer have to spend from next year onwards. That's what we're talking about, JPY 26 billion.
JPY 26 billion is the cost we won't have to spend any more from next fiscal year. JPY 47 billion plus JPY 26 billion, that's the added positive impact we anticipate. At the same time, though, we have to the appropriate change in the market environment. In response to any changes in the market environment, we will have to respond at that juncture. It's not a straightforward calculation. We can't see this as a straightforward return. That is what we think.
Okay, I understand. Thank you. I guess, JPY 26 billion impact can be expected, and the JPY 47 billion yen, this part, I'm sure that you are going to be considering withdrawal from these unprofitable markets and countries.
The JPY 47 billion, some of which some cost will have to be spent, we can't expect JPY 47 billion to have a full positive impact. Yes, that is the case. That is the right assumption.
Okay, thank you. I understand. My second question is this. You made a revision, but what about the regional communication segment? You are not revising your forecast for regional communication services. Going to the simple calculation for the fourth quarter, regional communication is going to fall into a negative territory in the fourth quarter based on your assumption, I guess. Was it too cumbersome for you to make a revision, or is it reasonable to be spending this level of cost for the fourth quarter in the regional communication segment? That's my second question.
Thank you. Shimada here. Well, as for the fourth quarter.
Well, in the second quarter, we reduced the wholesale price for Hikari, so that impact will be felt, and also system integration-related revenues. In the second half of 2020, we had telework and online demand. That special factor will no longer be applicable for this fiscal year. As for NTT East, this is Zero Trust related, remote work-related business. They had additional cost for this segment, and also they will no longer have the sales proceeds from real estate. When we take these factors into consideration, we decided not to revise our full year forecast at this juncture. Having said that, so that they can achieve the plan, it's important that these operating companies make the effort. That is our recognition.
Okay, thank you.
If I could ask about NTT East and the Zero Trust related cost. Also NTT West, how much sales proceeds did you have in NTT West last fiscal year?
Thank you. Taniyama with the corporate strategy planning. With regard to sales, the sales proceeds and cost, we're not disclosing that number, but less than JPY 10 billion. That is the level that we're talking about. With regard to NTT West real estate property proceeds, it's roughly around JPY 5 billion, thereabout.
Thank you.
If you're talking about Zero Trust, it would be slightly above JPY 5 billion.
Okay. All together it would be less than JPY 10 billion all together. Okay. Thank you. Got the picture.
Thank you very much.
Mr. Tanaka, thank you very much. We would like to take the next question. Next question will be BofA Securities. Mr. Kinoshita, please go ahead.
Hello, this is Kinoshita. Can you hear me?
Yes, we can hear you.
I have two questions also. It seems that the question concentrates on NTT Ltd. Very sorry about that. However, this fiscal year, the effect of the structural reforms that is added. What kind of a positive effect has come out from the reforms is what I would like to know. That is my first question. The accelerated positive effect, is that going to come out earlier than planned or within the conventional initiatives that you have implemented, is there something that came out with more positive effect? If so, please explain.
Are you talking about the effect coming out from the additional cost that we have spent or overall?
There's JPY 3 billion of a structural reform. It seems that it has a positive impact than the beginning of the fiscal year. Can you please explain the reason behind that?
Simply speaking, it's the reduction of personnel cost. Meaning that due to streamlining the business, we did no longer have to pay the personnel cost.
You're saying that at earlier timing, you were able to, let go of a certain number of people, so it became out this way?
We started around December and that positive effect is starting to show.
Earlier than what you have originally planned, then the personnel cost went down by JPY 3 billion then earlier than what you had planned?
Yes.
My second question is regarding this. This is all about the structural reform too, but accelerating that, you have accumulated the cost required for that. Conventionally, what kind of a structural reform plan you had, I don't know in detail. However, in order to achieve the midterm management strategy within the outlook towards that, the structural reforms, the required overall cost, did it increase this time or is it just front-loaded? Can you share what your thoughts about this?
This is Shimada speaking. It's not that. If we were achieving this earlier than planned, then we should spend time more on streamlining and the existing product sales, business, downsizing it. We did originally have that plan. However, as mentioned before, due to the COVID-19 pandemic and due to the shortage of semiconductors, accelerating the process and moving that forward is one thing we are doing. Other than that, regarding the services, for example, the cloud migration and others, compared to the conventional timing, we are accelerating it more. Of course, other than this, the IT integration, system integration is done. Of course, if there's streamlining, we can integrate the offices and others and that can be accelerated also. Therefore, in that sense, within those factors, the major one is the streamlining.
Sorry, I just wanna confirm. Instead of the cost outlook, it's that you have started implementing these measures earlier than planned?
Yes.
It's not that additional something has come up that you have to implement the structural reform measures?
Correct. There's nothing new that has occurred. It's just that what we have originally thought, it is done earlier than planned and also accelerated. I would like you to understand that in that way. Thank you very much.
Thank you very much. Next question, please.
Next question is from Citigroup Securities, Tsuruo-san. Please go ahead with your question.
Thank you for this opportunity. Tsuruo from Citi Securities. I would like to ask two questions. My first question is this: When we take a look at NTT Docomo and the communications and synergy, integration synergy in the last three months, have there been any updates in the synergy from the integration of NTT Docomo and NTT COMWARE and NTT Communications?
Thank you. Shimada here. I'm sure that Docomo, correction. I would appreciate you directing your question to Docomo in the following session. It, as far as the integration between Docomo and NTT Communications is concerned, we see, for example, OCN Mobile ONE being offered at Docomo shops, that type of sales was launched at Docomo shop. We see some small progress in a very steadfast manner, and they're translating into results. That is our expectation going forward. Now, of course, as far as some major policies are concerned, after this summer, for example, from NTT Communications, network operation and construction team will be shifting to Docomo. In actuality, already, they're working together on the ground, and they're drawing up a plan for the future.
That being the case, in terms of efficiency as a result of integration of communications and NTT Docomo, and also with regard to sales strategy, for the sales group, what was separate in the past are now being brought together as a result of this integration. The study is being considered together as a result of this integration. This represents the update and progress in the last three months.
Thank you. I'm looking forward to that. My second question, maybe I might be premature, but what about the forecast for the next fiscal year onwards? I'm sure that in the full year session, in the full year presentation, you'll give us number. Can you share with us to the extent possible, the projections and forecasts for the next fiscal year? We talked about NTT Ltd. What about other operating companies? To the extent possible, can you share with us your outlook for the performance for the group next fiscal year?
Okay. For one thing, as we talked about the impact and effect of the integration of NTT Communications, Docomo and Comware. It's important that we translate them into concrete results. For example, this fiscal year, we had rate reductions through ahamo. You've seen the impact of that already. This is translating the positive impact for ARPU. It includes for the competition, there has been impact. It's important that we embrace these changes. It's important that we absorb this impact through cost reduction efforts. At the same time, though, it's important that we prepare for such situation, and that is going to be one of the important issues for the company in the next fiscal year onwards. In turning to regional communication, we see very strong progress as a result of the streamlining efforts. That being the case, they're launching new businesses.
It's important that these new businesses be nurtured so that they can grow further. Aside from that, at NTT Anode Energy, power business will be integrated, and also real estate business at NTT Urban Solutions. For these businesses as well, it's important that we encourage steadfast growth in these business segments as well. Turning to NTT Ltd., if I were to explain a bit further about NTT Ltd., we talked about the data center business. We mentioned that the increase, there's a 35% increase in revenue for data center business. We see very robust demand for data center outside the Japanese market. It's important that we accelerate the growth in this area through our responses. Thank you. That is all.
Thank you. That's all.
Thank you very much. We would like to take the next question.
Next question will be from Goldman Sachs Securities. Mr. Tanaka, please go ahead with your question.
Hello, this is Tanaka from Goldman Sachs Securities. Can you hear me?
Yes, we can hear you well.
Thank you very much. I only have one question. The structural reform in NTT Ltd. Next fiscal year, how much is going to be spent? It's probably not clear at this point. However, originally in the midterm plan, this structural reform by accelerating it this fiscal year, to what level have you reached in terms of progress? And how much more you need to do? Image-wise is fine, so can you please share that?
To what level of the mountain have we climbed? To express that will be difficult, but we have climbed quite a bit, is our understanding. As I have mentioned from before, what NTT Ltd. has been covering in business, the area of that is over 80 countries globally. We have been conducting businesses in this number of countries. Within that, of course, there are areas that are profitable. However, business-wise, unprofitable areas do exist. I cannot specifically name them, but they do exist. Therefore, what are we going to do about these unprofitable businesses is an urgent issue that we need to tackle. At the same time, regarding the unprofitable businesses, the area and the unprofitable business needs to be considered as a set. To where we need to withdraw, we will withdraw.
The areas that we need to take an offensive stance, we will. Therefore, next fiscal year, the issue for us to tackle is to do these things. I think next fiscal year will be the grand final finale of the structural reforms.
Okay, thank you very much.
Thank you. Next question, please.
Next question is from Nomura Securities. Masuno-san, you have the floor. Mr. Masuno, please.
Thank you. Masuno from Nomura Securities. I would like to ask several questions. The first question, it's about domestic enterprise network-related business and the market environment for this business. When we take a look at the industry, there's very strong demand. We see increase in both revenue and income. When it comes to NTT Communications, that is not the case. I'm sure there are various factors behind this. That is why you're integrating NTT Communications with NTT Docomo because of that situation. After the integration of the functions for the next July onwards, what is lacking in NTT Communications? And how this will change after the integration in July 2022? How do you see the outlook? What is missing, and how do you intend to fix? How do you intend to fulfill the missing piece?
Thank you. Shimada here.
Turning to NTT Communications business, I think NTT Communications is at a turning point in terms of their business. That is how we take a look at it. Now, they are working on a Smart Data Platform. In the future, it will not be a straightforward network. They want to combine cloud and AI on top of the network and translate that into platform, and they deliver the services on top of this platform. That is what the customers are demanding already. The SDP, we already have the Smart Data Platform already.
We want to increase the actual use cases of the customers on top of this new platform. It's important that we enrich the product lineup, and the product lineup will be changing at this juncture. We are at that juncture. Naturally, as far as legacy services are concerned, they will begin to shrink, which means that we have to add new services on top of the shrinking legacy business and try to pave the way for growth in revenue going forward. Now, what is important at that time is that we utilize Docomo's network service, in particular, 5G. The standalone service was launched back in December, so therefore, network slicing and that type of network-related new services will be delivered. It's important that NTT Communications incorporate that in their sales.
We believe that this will allow them to shift away from business centered on dedicated lines, shifting to new mobile network-based service. As I mentioned earlier, they'll be able to use the data-driven platform and also combine that with mobile cloud. They're now at a transition period where the shift is taking place.
Okay, thank you. If that is the case, cloud and mobile will now be integrated. I think that's a natural outcome of this integration. At last, these services are now in sight, so the issue is more or less how you can actually reinforce your marketing and sales team in order to deliver those services. That mechanism is going to be within sight as a result. Is that the case?
Do you believe that this, you have to work further to deliver concrete services together with Docomo? Is that going to take years? How do you see that? How do you see the timeline?
Well, already, as far as Docomo is concerned, they already have 5G services, and I believe that they have some 40 projects on the go already in the 5G area. They want to combine that with solution services offered by NTT Communications, which means that they will be able to enhance their service and their delivery capabilities.
Okay, thank you. My second question is about NTT East and West and the telephony services at NTT East and West, the home denwa. What impact, what retention impact will this have on NTT East and West subscriber customers?
If customers shift to this newer service, this should help the cost. How do you see the last one mile for NTT East and West? Can you talk about the long-term per outlook for the last one mile for NTT East and West services? Masuno-san, might I say that is a very difficult question you have raised. You've raised a very difficult question. Of course. We want to migrate from PSTN to IP network. We already have the plans for shifting from PSTN to IP network. At the next stage, how are we going to translate or transfer from IP network to the next generation network? That's something that we have to consider. It's a very important issue which we have to consider in the future, shifting from IP to the next generation network. Now, Docomo is going to be launching home denwa.
This is more or less in response to what the competition is offering. We are offering this service because it's important that we counter the services delivered by our competition. home denwa does not represent something that will cover the existing fixed telephony network. That is not how we characterize this product. As we look into the future, the PSTN will be shifting to IP network. What will happen to that IP network and the services? What will happen to the services for that IP network? That is a very important issue that we need to consider. It's important that we scrutinize this matter.
Okay, thank you very much. If I could ask just one more question. It's about your overseas business. You've been spending labor and cost for the last 10 years in this segment.
You've been pursuing social transformation repeatedly. Or you think that this will be the last effort, necessarily for the next fiscal year. Maybe it would just be better for the management of your company to just focus on data center. Wouldn't that translate into better returns rather than focus on overseas business? Do you believe that you'll be able to restructure the overseas business as a result of this transformational cost?
Well, as far as NTT Ltd. is concerned, combining. Well, we are competing on a full stack basis. We're combining NTT Ltd. services, as well as NTT DATA services. Of course, as far as NTT Ltd. is concerned, as for data center business, they're now positioned as number three player. It's important that we expand and reinforce that position.
With, of course, our IP backbone network, it's important that we be among the Tier 1 players. Tier 1 members are very small in number. We have that strength. It's important that we reinforce those strengths we have. It's important that we provide services that the customers require. That is very important. Mr. Masuno, you pointed out about the need to focus on specific service in your comment. We have to fully respond to any requirements for which the customers ask of us. We have to fully respond to the customers. We'll continue to reinforce our services going forward. It's important that we also want to tackle new challenges as well. Thank you. NTT Ltd.
Will the work related to NTT Ltd. be completed for next fiscal year or during next fiscal year? Do you think this effort for the transformation will be completed 2022, 2023 for Ltd.?
We'll do our best. Thank you.
Thank you very much. We would like to take the next question. Okasan Securities, Mr. Okumura, go ahead with your question.
Thank you very much. My name is Okumura from Okasan Securities. Can you hear me?
Yes, we can hear you.
Thank you very much. I would like to know about two things about NTT Ltd. briefly. Sorry, I was not joining from the beginning, so sorry for the overlap. The high added value products for the three quarters, can you share with me that impact on the profit? Without that, it is increasing from the second quarter, is my understanding. Even though there's a shortage of semiconductors, you did talk about the data center, but data center and managed services, can you elaborate more in detail? That's my first question.
Regarding the high value added service increase was JPY 52.3 billion, and out of that, before an exchange impact is about JPY 20 billion. Thank you very much.
The two quarters accumulated is JPY 15 billion, so third quarter is JPY 5 billion. Even though you subtract that, the profit did increase quite a bit. Is that understanding correct? Yes. Thank you very much.
Also, another point I would like to ask. The high value added services of NTT Ltd., the order received amount, you probably know monetary amount, you know that. I would like to know about that situation, NTT DATA. Through the structural reforms, they have a positive impact in terms of the orders received. For NTT Ltd., are you seeing any signs of changes in the positive way moving forward, looking at the orders received?
This is Taniyama from Corporate Strategy and Planning. Regarding the order received situation for NTT Ltd., as explained, the data centers are performing strongly and increasing. As for managed services, year-on-year basis, they're experiencing an increase. As for network, unfortunately, year-on-year, it is showing a decline. The overall value added services due to the data centering being the driver, overall, it is increasing.
Thank you very much. Thank you very much for the detailed explanation.
Thank you. That seems to be all the questions. As we are running out of time, I'm afraid we will have to conclude the session. That completes the presentation of third quarter results for fiscal 2021 by NTT. This will be followed by presentation by NTT Docomo. Please stay with us. Please stay connected and wait for the start of session by NTT Docomo. Thank you very much for your attendance today.