Thank you very much for gathering today despite your busy schedules. From now, we would like to start NTT's briefing session on the fiscal year 2022 Q2 financial results. My name is Hanaki from the IR office. I will be serving as the facilitator today. At the start, I would like to introduce the attending members on stage: Representative Member of the Board President, CEO Shimada Representative, Member of the Board, Senior Executive Vice President, Hiroi Executive Officer, Head of Finance and Accounting, Nakayama Executive Officer, Head of Corporate Strategy Planning, Taniyama.
Today's briefing session is streamed live. We are planning to stream it on our website at a later date, so we seek your understanding beforehand. Regarding today's explanation and materials, please refer to presentation materials posted on our IR website. On the first page, points to be noted are listed. So please go through it as well.
From the President and CEO, Hashimada, I will
Good afternoon. Thank you for joining us at the financial results for the Q2. Shall we start with Page 4 of the material, please? Operating revenue increased, operating income decreased and profit increased year on year. Operating revenue and profit reached new record high level as the second quarter.
Now operating revenue increased JPY398,500,000,000 year on year, up to JPY 6,200,000,000 due to increase in revenue at NTT DATA and NTT Limited. Now of this increase, foreign currency accounted for 135,000,000,000 yen As for operating income, although there was positive impact of Increased revenue, this was not enough to cover increase in electricity costs. So operating income decreased 12,700,000,000 yen Down to 996,500,000,000 yen Now from the first half, we have taken cost reduction measures to cover rising electricity cost. And we intend to realize the benefits of these measures during the second half of this year. So we want to achieve our annual guidance through these methods.
As for profit, it increased to JPY 20,800,000,000 year on year, up to JPY 696,600,000,000 due to one off positive impact related to corporate tax. As for overseas operating income margin, it increased by 1.1. Up to 5.8% due to increased profits driven by increased operating revenue at NTG Data and NTG Limited as well as cost reduction through structural reform at NTG Limited. So that is the situation. Let me now turn to contributing factors by segment.
Starting with Integrated ICT segment. While there was negative impact from price reduction in the consumer segment, It was offset by increased revenue at Enterprise and Smart Life Businesses. So both operating revenue and operating income increased in this segment. As for Regional Communication Business segment, both operating revenue and operating income decreased because one off positive factor from the previous year no longer applies And also because of the unexpectedly high increase in electricity cost, we will accelerate our cost efficiency program and increase Revenue from system integration and growth business so that we can achieve our annual guidance of increase in both operating revenue and operating income. As for Global Solutions Business segment, in the case of NTT DATA, well, operating revenue continues to grow from robust demand for digitalization Due to increase in investment for growth and also in part from unprofitable project in Japan, Operating revenue increased and operating income decreased.
As for NTT Limited, both operating revenue and operating income increased due to increased revenue [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] From value added services as well as cost reduction through structural reform. The second as a whole recorded increase in both operating revenue and operating income year on year. As for others, real estate and energy, operating revenue increased due to increased electricity agency business at Enet and also increased revenue from electricity business, reflecting rising commodity prices. Let me now turn to some of the topics on hand. I would like to introduce 5.
Please turn to Page 7. Increase in starting salaries for new graduates. I would like to explain this matter. In order to Higher, more highly skilled talent entity group major domestic companies are increasing the standard starting salary from April fiscal 2033. Also, we'll begin offering higher salaries based on higher levels of expertise at the time of hiring.
Page 8 talks about the new the review of salary system for regular employees. This will take place from next April. So we have the seller system with promotions based on expertise.
Next, I will explain about establishing a new company in the field of human capital. We will establish NTT Human X Corp. In December 2022. We established a new company that uses human capital data analysis to provide comprehensive support from consulting to system integration. Based on NTT Group's knowledge of pioneering human capital reforms, we will leverage NTT Group's Personnel data infrastructure and AI analysis to support company work style reforms, environment building and improvement of engagement for career development of employees.
Next page, please. Next, I will explain about development of technology that enables high speed wireless underwater communications. As the technology that will enable stable high speed underwater acoustic communications, we developed 2 technologies: spatial temporal equalization technology Environmental Noise Immunity Improvement Technology. We have established a technology that suppresses the impact of delayed waves caused by sea surface reduction and noise from marine biologist in a shallow water area that is about 30 meters deep and successfully conducted a transmission test with transmission speed of 1 megabits per second, which is over 10 times of Conventional speed underwater over 300 meters of distance. We apply this technology to realize the wirelessly controlled underwater drones.
Moving forward, we will proceed in field demonstration for practical usage and aim for being used in infrastructure inspection of port facilities And Fishery Industry Field for Marine Environmental Surveys for Aqua Farming. Page 11, please. As for the overview of medium term management strategy initiatives is as shown here. However, I will explain 3 main initiatives With objectives to further promote NTT Group's XR business, NTT DOCOMO has started the business of the new company, NTT Konokyu, from October, as announced last May, based on our business integration plan of NTT DATA and NTT Limited, NTT DATA, Inc. Note that last year, it is said this year, Based on our business integration plan of NTT DATA and TIN Limited, NTT DATA Inc.
Was established as overseas business company under NTT DATA in October. In NTT East and West to further increase Hikari demand. They are planning to lower wholesale price for wholesale Hikari service during fiscal year 2023. And please refer to Page 12. In order to improve capital efficiency and enhance shareholder returns, we have resolved in today's Board of Directors meeting to buy back us shares Maximum total amount of JPY 150,000,000,000.
That is all from my side.
Thank you very much, Mr. Shimada. We now like to go on to the Q and A session. We will first take questions from the members who are here on-site. We will also be taking questions from people who are connected to us on a remote basis.
You will be able to take questions from people who are connected to the phone system who have registered beforehand. So we would like to start with the Members who are present on-site, please wait for the microphone to be brought over to you, so please raise your hand if you have any questions. Please state your name and affiliation and go on to your question. So let us start from the gentlemen in the 1st row. Thank you very much.
Masuno from Nomura Securities. Thank you. I would like to ask about the Q2 results, just the 3 month for the Q2. We could focus on 3 month. Can you give us some response for each of these business segments for these 3 months for the Q2?
Let's start with the Global Solutions. NTT DATA has already made announcement about the results. And on a quarterly basis, NTT DATA, we knew that [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] There was with regard to revenues, I suppose, NTT Limited, when we take a look at this number compared to the Q2 of the previous year, The margin seems to be coming down, profit seems to be coming down. Maybe it's because the profit was so high in the previous year. How do you see the outlook for the second half?
How do you see the outlook for the Global Solutions in the second half? How do you intend to improve and expand your profit for the Global Solutions business segment for the second half? And then I wanted to ask about the regional communications after you respond to my question about Global Solutions. Okay. Thank you, Mr.
Masuno, for your question. Let me start with NTT Limited. This time around, we have already plans for the second 2nd half, yes, we are slightly behind the outlook for the second half. And the major driver for this is as follows. We call this the system integration related services.
The sales of system integrated services has been affected by the semiconductor shortage. The pipeline is building up. There has pipeline has been expanding. Toward the end of the year, JPY 27,000,000,000 has a buildup And as end of September. And I think the scale will be roughly 170,000,000,000 yen at this moment.
So that being the case, revenues have been affected. So that means that the profit in relation to this revenue has not been achieved. So that is why The profit for the Q2 has not reached our plan. Now aside from that, in the case of early added services, We've already disclosed the numbers, but we have seen the growth in data center business, and sales has been increasing by 160%. So we see very robust growth in data center business.
And although we have not disclosed this the following number In comparison with the full year pipeline, it will be roughly 90% of the full year pipeline has now been translated into [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Revenues for data center business. So from the Q3 onwards, maybe we need to increase the investment in the data center business [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So I think we need to be mindful of several issues. First is the handset sales, equipment sales. We have not been able to progress as much as we had anticipated. So that is the issue on hand.
Thank you for that response. Could I turn to regional communication business segment? If we see just third 3 months alone, the profits used to be coming down. This is probably affected by the electricity, I would imagine. You mentioned this toward the second half, you want to introduce [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Efficiency program
will be able to absorb and make recovery in the profit.
May I take it that is the correct assumption? Well, thank you for that. The situation varies between NTT East and NTT West. In the case of NTT East, As far as profit is concerned, last year, we had the Olympics and Paralympic Games. So that was a temporary impact that accounted for roughly JPY 15,000,000,000 in terms of revenue.
So revenue has been affected by that. So this is a downward trend in the revenue and also because of the Rising electricity prices, operating income has also fallen as a result of these factors. Now on the other hand, turning to NTT West. The cost efficiency program [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] It's more skewed toward the second half. So therefore, in the case of the because of the rising electricity prices, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We have to consider that.
Also, last year, although different we also had a different transitional factor, temporary one off impact for NTT West. Because of COVID-nineteen, our call center business was affected. So that factor no longer applies this year. So that is with a negative impact on operating income. And also, adjusted increase has not been covered by cost efficiency program.
But then as far as the second half program is concerned, we have planned. If we are able to meet the plan for cost efficiency second half, We believe that we'll be able to meet the annual guidance of increase in both operating income and operating revenue. Thank you.
So the gentlemen in the second row, SMBC Nikko Securities. My name is Kikuchi. Thank you very much for today. I have two main questions. The first is regarding NTT Limited.
It's kind of the continuance of Mr. Masuno's question just asked. Structural reforms at this Term, you have planned JPY 38,000,000,000. First quarter was JPY 4,000,000,000. Therefore, the second quarter, how much have you spent?
And for the second half, how much more are you planning to spend? Originally, you had planned for JPY 38,000,000,000. But looking at the progress of the Q1, it seems that it is a bit behind. In the Q2, is it behind too? Do you really need to spend all of it?
Or do you need to Add more to it is what I would like to note. That's the first question. And also regarding the data center, Probably, it has increased in revenue. Therefore, it has increased in profit as well. And you are making investments in advance quite a bit.
And where you were explaining. I think the cost at the front is probably heavy. So Is that also increasing as well? Regarding the structural reforms, At the first half, actually, we have not done even half yet, Probably around 40% is correct to understand. Therefore, in the latter half, There will be about 60% of the structural reforms expenses that is going to As I have been saying before, unprofitable countries or unprofitable services, we would like to withdraw from those.
And also, currently, we are using outsourcing in the delivery area or the overhead areas. Therefore, those operations are working on improving the efficiency. Therefore, the headcount optimization Is going to incur cost in the second half. And throughout the year, The low profitability services, especially the cloud services, we are reducing it. So it is showing on an equal basis.
But the two points that I've mentioned right now is going to be more loaded at the latter half of the year. And also regarding the data center, thanks to everybody's efforts. The sales is steadily increasing. And as mentioned before, in terms of the orders received, originally, We have reached already 90% of the orders that we have expected at the beginning, and we also have a plenty of pipeline as well. Therefore, in that sense, capital investment, you'll probably have to spend more in the second half.
And also for next fiscal year, It seems that they're not feeling the impact of a recession yet. And even in Europe as well, They are not feeling the impact of recession yet. Therefore, in a little bit more continuous matter, we need to make investment is what we are thinking. So in that sense, So in that sense, making investments on our own right now is going to surely link to the later return. And actually, we have many hyperscaler contracts.
So the contract period is quite short. Therefore, we are having an increase in the contracts that have a low risk. Therefore, even though we make our own investments, We would like to further expand the business. Thank you very much. And regarding the structural reform, I don't know if I should discuss the detailed numbers.
However, you said you have progressed about 40%. So in the Q2, it was about 10,000,000,000 yen of structural reform that you have done. So if you add that back, Last year, Q2 structure reform was around 3,000,000,000 yen. Therefore, limited profit excluding structural reform and added back, You'll say in profit terms that it is improving. Is it correct to think that way or is the data center driving the numbers?
Well, last year's structural reforms expenses, it was about JPY 44,000,000,000. What we've done in the first half is only onefour of that, and the second half was the 3four of it. So this year compared to last year, in the first half, we have spent more. Therefore, that amount is absorbed And reflected in the current profit situation, the profit is behind the plan. And the reason of that It's about the equipment sales business is not doing well, but the others are In line with the plan.
Understood. So the second half for NTT Limited, right now it's a part of NTT DATA, Inc. So you may not be able to Strapped the second half numbers. So first half, JPY 10,000,000,000 second half, JPY 25,000,000,000 was the operating income plan After you subtract the structural reforms, that is not going to change. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] No, it will not change.
Understood. Thank you very much. Well, not change, but Whatever was behind in the first half, they will catch up in the second half need to catch up in the second half. Regarding my second question, towards the next fiscal year, what is going to be the cost increase, the factors or The factors to reduce revenue. You have mentioned that you are looking reviewing the salary amounts and also the expenses amount.
You were saying that the new graduates, but I believe that overall the younger generation employees I will be impacted by that. I don't know to what age range is going to impact, but overall group wise, I think you don't include overseas employees, but you do have quite a number of employees in the younger generation group. So it seems that it is going to be quite of an expense. So is that going to become a factor that is going to reduce The profitability and for NTT East and West, the wholesale price, you said that you will be reducing that. And that is directly going to be a reduction in profit factor.
So for next fiscal year, how much should we expect 4, the standard salary starting salary increase, we said young people, but The background is 2nd year, 3rd year employee. So the cost increase factors is only it's not that large. It's Quite small and probably will not reach even 1,000,000,000 yen Therefore, I don't think you need to be that concerned about that point. And also what was your question? The wholesale price reduction.
Regarding the wholesale price reduction, It's not clear yet at what timing that we will be doing that because Entity East and West haven't decided yet. But depending on the timing, the impact degree of impact will change. This time, well, Conventionally, if we do this, it will be the 5th time next fiscal year. We have done this already 4 times in the past. Therefore, basically, it will be probably the same level of price reduction.
If that is so, thank you. The net adds are not that bad recently. Therefore, for the FTTH, So I believe that it's not going to be that much of a reduction. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Yes. Well, lowering the wholesale price and have the collaborating partners to promote the sales more is what our intention is.
Thank you very much.
Any other question?
We'll go to
the person in the 3rd row in the back section. Thank you. Tsutto from Citigroup Securities. My first question is this. JPY 150,000,000,000 share buyback.
Appreciate the announcement of the share buyback program. Net of the distributable income is roughly 100,000,000,000 yen out of that 150,000,000,000 yen will be allocated for share buyback. Can you give us can elaborate on how you reached this amount? So this year, it will exceed 500,000,000,000 yen, and I think it will the actual track record will probably exceed 500,000,000,000 yen. Are you going to increase are you going to use the remaining capital for dividend?
Can you talk about the plans for next [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Well, thank you for the question. In the past couple of years among the past couple of years, this fiscal year, I believe, represents the year in which we'll be carrying out the largest share buyback to date. So that being the case, the shareholder return ratio will be [SPEAKER
UNIDENTIFIED COMPANY REPRESENTATIVE:] 77%, I believe.
But having said that, we want to we don't want to increase the Return ratio in such an extreme fashion, we want to pursue a more stable increase in shareholder return. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So that
being the
case, we felt that this was the appropriate level for us. To be quite candid, I believe the current level is quite [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Appropriate. As far as our thoughts about possible increase in dividend, I think we need to monitor the progress of our business performance overall. And also we need to see and monitor how the monitor the progress in operating income. And based on that, we'll make our decision.
In any event, Under the current financial management strategy, we are going to be seeking increase in dividend as our basic policy. So that policy remains unchanged. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] That is my response.
Thank you
very much. So I will not ask about share buyback in the next fiscal year then. Then let me go on to my second question. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] It's about
the pace and the speed of your cost reduction efforts.
In this quarter, JPY 875,000,000,000 so improvement of roughly JPY 5,000,000,000 compared to the previous year. But compared to the previous year, the pace of cost reduction has been slowing down. I don't know how you're going to make the announcement, but Is it so is there a possibility that cost reduction efforts will be delayed by pressure on prices? Can you share with us how you see the challenge? And to the extent possible, since there's a comment about electricity price, to what extent Will this have impact on your overall performance for the group?
I would appreciate your comment. Thank you. Well, thank you for the question. As you point out, The pace of cost reduction is not slowing down. We would like to continue to Follow and carry out cost reduction efforts.
But then there's the impact of increase in electricity prices. For example, in the case of NTT East and West, they need to absorb such cost increase. They also need to make further cost reduction efforts to absorb such cost increase. So this goes back to what I mentioned earlier. As far as the measures are concerned, I think the measures will be more loaded or skewed toward the second half of the year.
So we hope you'll be able to cover the increase in such we hope you'll be able to cover the increase. And we would like to really make an effort for cost reduction in the second half in order to absorb those costs. Thank you very much. That is all. Thank you.
Thank you very much. The center, second from the front second row from the front, please. Mitsubishi UFJ Morgan Stanley Security. My name is Tanaka. Sorry, I have three questions.
The first is related to NTT Limited. The structural reform expenses was already mentioned. For the effect The structural reform in the Q1 was about 7,000,000,000 yen and that impact or effect in the first half in total, how much was it? And the equipment procurement, industry wise, it seems that the situation is easing a bit is what I feel. However, once again, I would like to ask you about your outlook.
I believe you have your pipeline, but Do you think the situation is going to be resolved within the fiscal year? Regarding the structural reform, on an annual basis, About 9,000,000,000 yen is what we are expecting for this year. And from next year onwards, for the full year, We are expecting about 12,000,000,000 of structural reform positive impact to the profit line. The first half, how much? Well, Shimada explained is this fiscal year's structural reforms and there was an Effective last fiscal year, the Q1, it was 7,000,000,000 yen and the Q2 accumulated basis, it was 14,000,000,000 yen That is a total of last fiscal year and this fiscal year in total is RMB 14,000,000,000.
And on an annual basis, it's going to be around RMB 20,000,000,000. So first half is JPY 14,000,000,000 and annual basis is JPY 20,000,000,000. So the second half, it seems that the Pace is going to slow down. Well, what we've conducted last year from the Q3, it's going to be the same amount. So against the previous year, the effect is not going to show that much.
So what we are conducting Conducting a structural reform right now, we will be seeing that effect in the second half. So on an annual basis, 20,000,000,000 yen and next fiscal year, simply thinking it's Additional JPY 12,000,000,000. Okay. Next fiscal year, JPY 12,000,000,000 plus additional. And in fact, the semiconductor supply situation, The equipment procurement or equipment sales will be impacted by that.
The semiconductor industry situation looking at the second half Q2. As explained to you, It is starting to glut, meaning that How much of products can be manufactured at the vendor side? For NTT Limited, Cisco's Supply, how much will that recover? It's all dependent on that, at least. The current situation has not recovered to the level that we want it to.
But we are hoping that the second half, it will start to improve even more. At this point, it is not clear whether we will be able to Respond to all of the pipelines that are accumulated. Thank you. Well, NTT Limited is The distributor from the Dimension Data Days, Well, in that sense, it is a company that's buying the most. So I don't I cannot share you with the content, But we are receiving the supply that matches that position.
Thank you. The second question regarding this human capital, this company Human X, this is a consulting and system solutions is what you have mentioned. But for the challenge of this company, is it going to come from NTT DATA and other group companies? And are you going to pursue the businesses in AI? Or are you going to use the research institutions?
Or are you going to bring in other talent? This entity Human X Corp basically is Going to be comprised by HR talent and combined with the consulting, the business associate and ndg learning talent. The HR of the group or salary or benefit It's done within the group by these companies that the talent will be coming from. So the HR consulting talent, we are depending on the business associate NTT Business Associates. So we will be rolling out the talent from there into this company.
So The system composition of 0 trust in that part, we will be utilizing the entity communications capabilities as well. So at the front line, entity human ex people will be working and behind the scenes, Various resources within the group will be leveraged. Okay. Thank you very much. And of course, the sales channel, we would like to leverage the group's sales channel as well.
Thank you very much. My last third question is On Page 11 regarding the medium term management strategy, where it says promotion of the ION Development rollout plan. So the digital coherent signal processing circuit and optical device As mentioned here, will the sales be recorded? What's the timing that it is going to positively impact the P and L? I would like to impact the P and L.
I would like to have more of an elaboration on this. Well, regarding this area, At the end of this fiscal year, the 400 Gigas DSB Packaged product is what we expect to be able to launch as a product at the end of the fiscal year. So as being provided as a full scale product will be from next fiscal year onwards from 2025. I would like to have a 500 Giga BPS product 800 excuse me, 800 Giga BPS. It's for a specific purpose.
So it's not something that's We are going to see a sudden increase in the demand. So the EON For the photonic photoelectronic converted product, APN it's a timing to supply APN, then the volume of that will increase. So we would like to have more expectations from that timing onwards. And for the other detailed information in next week's R and D forum, we will be able to give you more detailed explanations. Thank you.
Thank you. We would now like to take questions from members who are connected to us through online. For those of you who are connected on a remote basis, please push asterisk and then push 1. So we would now like to take questions from people who are connected to us online. Are there any questions from attendees who are participating through online.
We'll take your questions now. Okumera san from Okusan Securities. The floor is yours. Please go ahead. Okamura from Kokusan Securities, can you hear me?
Yes, we hear you, sir. Please go ahead. Hello? We hear you, sir. Yes, we are hearing your voice.
Please go ahead. Okay. Thank you very much. My apologies. I just have one question.
It's about Antilimited operating income. In the 3 months of Q2, I think there was a drop of JPY 5,000,000,000 on a year on year basis if you compared with the previous year. Now you mentioned that the cost of structural transformation was had a negative impact of JPY 8,000,000,000. But on the other hand, There is also the benefit from structural reform, and the amount is equivalent. So what are the So the factors if you exclude structural reform, the revenue will be JPY 4,000,000,000.
So We cannot visualize the positive contribution from increase in value added services at NT Limited. Can you talk about the positive impact of increase in
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:]
Well, the plan was we are behind by roughly 3,600,000,000 yen [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Because the plan was 10,000,000,000 yen, so that is what the amount that we are behind. So in principle, As I mentioned earlier, we need to focus on equipment sales. The revenue from equipment sales So data center business was a positive contribution. So that was able to offset the negative factor. So that is the equation here.
Okay. I see. Thank you. So value added services Are making positive contribution to operating income. But in the case of others, the other part is declining.
So overall, the overall The operating income is in the Internego territory. Yes, that is how you should understand. Okay. Thank you very much. That is all for my question.
Thank you.
Thank you very much, Mr. Okumura. Next, BofA Securities. Kinoshita san, please go ahead. This is Kinoshita san, BofA Securities.
Regarding the cost increase part, if possible, I would like to know in numbers. Electricity cost In your material presentation materials on Page 18, it says the increase in electricity expenses. It says that 31,800,000,000 yen 318,000,000,000 yen over on the group. On the group basis, what Percentages from electricity increase in an annual basis. How much of a compression impact is that going to have?
In numerical terms, I would like to know if possible. Mr. Kinoshita, thank you very much. The electricity Price hike first half is a 30,000,000,000 yen impact. So About 40% increase occurred in the price and probably second half is going to be at the same level.
Therefore, on an annual basis, In total, it's about 60,000,000,000 yen of cost increase is how you can understand it. Thank you very much. And including that, Regarding the plan at the beginning of fiscal year, well, at that time from last year, the electricity price has been increasing. But this impact, has it been incorporated to a certain extent? Or regarding The price, you were not paying that much of attention or within if it settles within the 60,000,000,000 yen range At the way you think right now, it could be absorbed.
However, moving forward, if the electricity price goes Even further up, is it going to be enough by implementing measures at that point? Well, first of all, when we planned for this fiscal year, we expected About 20% have increased, but right now it's 40%. So it has increased twice than what we had expected at the beginning. Therefore, Let's say the annual basis, it goes up by 60,000,000,000 yen, then we have expected 30,000,000,000 yen. But 30,000,000,000 yen, we have not expected.
So that part we need to absorb by increasing the efficiency in the cost side. Regarding the fiscal year, within the fiscal year, we have a contract. And of course, there is the fuel price adjustment issue as well, but probably around 40% is where we will settle. However, for next fiscal year, currently, we're in the process of negotiating the contracts. And more than this fiscal year's contract situation, the environment is becoming more severe.
What I'm saying, Asafir, it's not that the price is going to increase, but rather conventionally, We're able to have a long term contract. But recently, with the electricity companies having such a contract is becoming difficult. So regarding next fiscal year's plan, we need to carefully pay attention to that. And against next Fiscal year's business plans, how much can be absorbed through a cost reduction is something that we need to thoroughly think of. The electricity prices, well, next year or next year for about 2 years, There's a possibility that it's going to continue to increase.
So we need to be dealing with it cautiously. Thank you very much.
Thank you. Next question from Mizuho Securities, Hori san. The floor is yours. Mr. Hori, please.
Thank you. My name is Hori from Mizuho Securities. Thank you for this opportunity. I will discuss with NTT Limited. No.
NTG Limited, can you have any numbers pertaining to foreign currency impact on NTG Limited on a standalone basis. So the decline in revenue for equipment sales and also increase in value added services, I want to identify these numbers as much as possible. Well, If you take a look at the materials that have been disclosed, there is a supplementary data. This is supplementary data in the disclosed materials. As for the overall so the value added services ratio among the overall sales in the first half It's about JPY 232,000,000,000.
So that represents 28.6% increase on a year on year basis. Of that, data centers accounted for the largest bulk in terms of the growth, JPY 124,000,000,000. That is the number for data center. That represents JPY 40,520,000,000 increase year on year. So that accounts for 67% of the increase on a year on year basis.
Now on the other hand, As far as equipment sales are concerned, 320,000,000,000 yen Is the revenue, so that's roughly JPY 27,000,000,000 increase. That represents an increase of 9.3%. But in the previous year, Because of COVID-nineteen impact, the sales itself was very low. So I suppose it's a reaction to that. So that being the case, it is not yet back to the level which we expected.
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] That is how you should interpret the situation. Okay. So I'm looking at the breakdown numbers in the supplementary EBITDA, but what about [SPEAKER
UNIDENTIFIED COMPANY REPRESENTATIVE:] What is the impact of
foreign currency for NT Limited on a stand alone basis for the first half? Okay. Let me respond. In total, JPY 62,000,000,000 is the total impact of core foreign currency for NTU Limited in the first half. I see.
Thank you. Now turning to data center. In the case of NTT East and West, I suppose they were significantly affected by electricity. In the case of limited data center, you're selling bilateral contracts. So I suppose there wasn't You end up susceptible to cost pressure going forward as well.
You'll be able to pass on the cost to the customers. So may I take it that as electricity will not be a [SPEAKER UNIDENTIFIED COMPANY
REPRESENTATIVE:] Negative factor pushing up costs for
NTT Limited going forward. Well, as far as data center is concerned, it depends on the customers. In principle, 50% of the customers are hyperscale clients. So the remaining 50%, we're able to pass on the electricity price increase to the customers. The customers will be bearing the cost for electricity.
In the case of large scale enterprise customers, many of the customers are able to pass on the cost to the customers. But in terms of contract with Asia, inclusive electricity, we have covered that in the contract. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And this also applies to
some contracts
in Japan as well. As for those type of contracts, when When the contracts are up for extension, we hope that we'll be able to pass on the increase in electricity costs to the customers. That is our position right now. So significant portion of the increase in electricity cost will be able to pass on to the customers, and that is the case for NTT Limited. Okay.
Thank you very much.
Thank you very much. Once again, we would like to receive questions from the floor. For those of you who have a question, please raise your hand. The 3rd row in the center. My name is Andou from Daiwa Securities.
I have two questions. The first As regarding the second quarter's each company's The assessment of the profit progress from the holding companies' perspective. NTT Limited is short a little bit or East and West is impacted by electricity price. But other than that, DOCOMO and other companies' progress assessment is what I would like to know. First of all, regarding entity DOCOMO, regarding consumer business of theirs, Well, you can ask them from now onwards.
But the second quarter, there were some seasonalities It's 4,080 yen in terms of ARPU. And within the year, it is going to hit the bottom probably. And regarding the subscribers number, MNP this year is steadily progressing. Therefore, in that sense, the consumer business, they have a decline in the profit, but we are seeing signs of heading towards a recovery trajectory. And for the enterprise business side, The reaction from the customers is very good.
Therefore, the expectations from the customers is quite high. So towards that expectations, providing the mobile solutions surely is something that has asked for communications as well. So we can have And as for the Smart Life business area, thanks to the efforts in the finance side, they are experiencing an increase and for the other businesses are also experiencing an increase. The only one that is a bit of a concern is DOCOMO Denki, DOCOMO electricity, this year's electricity contracts haven't all covered. But for next fiscal year onwards, I believe that there are still issues that remain.
And regarding that point, I would like you to ask Mr. I later on. They need to once again reexamine this year's plan and probably maintain this year's number of customers. And as for NTT East and West, As I mentioned before, it is as explained to you. So towards the second half, we You need them to work on the cost reduction.
For the NTT East and West, other than electricity, it's on track to the plan? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Yes, We believe so. And also for the Global Solutions, NTT DATA had some unprofitable businesses, but overall, there is a strong digital demand. Therefore, the sales It's strong. So we believe that the Global Solutions business is the growing driver growth driver.
So we're not that concerned for NTT Limited. As I have been explaining from before, the telecommunications equipment sales business is being impacted right now. However, at this timing, the margin is low. So having them improve the efficiency It's something that we also can do. Therefore, it's not necessarily all bad.
Well, of course, the more we sell, it's better. But if They can't sell. We can respond in a way that it doesn't sell with different measures and initiatives. So I believe that they are in the environment that they will be able to pursue such initiatives as well. And as for the other businesses, For NTTNODE, for now, they are having They're managing the business at a satisfactory level.
They're increasing their sales as well. From Tokyo Gas and other partners, entity, Anode, is selling on behalf of them. So they are able to secure the electricity side supply. So they are steadily increasing. For real estate business, Urban Solutions have declined in revenue and Operating income.
So excluding the part that they have transferred over to a node, then they are increasing both in the revenue and profit. Thank you very much. The second question is including the electricity, power and infrastructure Sure wise, maybe not so much in Japan, but globally there is some impact. So simply speaking, in terms of the price increase strategy, how much effort are you going to put into that? I'd like to know that your way of thinking, not just electricity, but also in the United States, my impression is that the personnel expenses It's in a situation that is easy to be increased.
So How should we think about this price increase? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Well, regarding the devices product, what The ones that are increasing, it is already set at that increased level of price. For the telecommunications equipments, The network equipment or the servers, we have quite a bit of volume that is imported. So the impact from that is something that is going to come out from now onwards, and we need to consider that as well. How much of a response can we make towards the inflation within the next year's plan?
How much Can we absorb? Is this something that we need to look into? And as for the personnel expenses, Well, the issue that Japan has is that the personal expenses is not increasing. However, suddenly, personnel expenses are going up. I don't think such a thing is going to happen.
This domestic inflation that we're experiencing here, if it reaches the level of Europe or the United So it's then we probably need to increase the wages and salary accordingly, but CPI is not has increased that much. So CPI plus That will maintain or increase the employees' motivation, something we have to think of, but it's not going to be a sudden increase.
Well, in
the United States, the personnel expenses or electricity, various expenses are increasing. Therefore, There you will have to bear the decline in profit. But if you can increase the price, it will be okay. But you already have measures ready for that direction. For the overseas businesses where we are experiencing increase in personnel expenses, basically we are going to Ask the customer to pay it.
We can pass on to the service price. So we don't have the mindset that the company side us, we are going to absorb it. Okay. Thank you very much.
Any other question? Are there any other questions? Thank you. If not, With this, we'd like to conclude the presentation of the Q2 financial results for NTT. NTT DOCOMO will continue with