Thank you very much for participating despite your busy schedules today. We would like to start the briefing on NTT's fiscal year 2022 third quarter financial results. My name is Hanaki from the IR Office. I will be the facilitator today. I would like to introduce today's attending members. Representative member of the board, Senior Executive VP, Hiroi. Executive Officer, Head of Finance and Accounting, Nakayama. Executive Officer, Head of Corporate Strategy and Planning, Taniyama. Today's briefing audio is streamed live. We are planning to stream this on our website at a later date. We seek your understanding beforehand. Today's materials, please refer to presentation materials on our IR website. On the first page, points to be noted are listed. We kindly ask you to go through them.
Without further ado, Senior Executive Vice President Hiroi will explain the outline and the financial results, followed by taking questions from the floor. Mr. Hiroi, please go ahead.
Thank you very much. This is Hiroi speaking. I would like to share with you the financial results for the 9-month ended December 31st, 2022. Please turn to page 4 of your slide presentation material. This shows you the status of the consolidated results. Operating revenue increased year-on-year, operating income decreased, and profit increased year-on-year. This is the same trend following from the second quarter. As for operating revenue and profit, this reached new record high level as the third quarter result. Operating revenue increased by JPY 649.4 billion year-on-year, up to JPY 9,572.6 billion due to increase in revenue in the Global Solutions Business Segment. Of this increase, impact from foreign exchange or currency was roughly JPY 220 billion.
Increase in operating revenue boosted our operating income, they could not cover the increase in electricity costs, especially in the Regional Communications sector. The operating income declined. The decline was JPY 18.8 billion year-on-year, the number was JPY 1,520.8 billion. Toward meeting the annual target, we are already promoting various measures to reduce costs to cover the increase in electricity costs, which was the main factor. Through these measures, we intend to achieve the annual plan. Turning now to bottom line, the profit. This went up JPY 2.2 billion year-on-year. As we have been explaining since the first quarter, there was decline in the non-recurring factors such as corporate tax burden. Therefore, profit went up JPY 2.2 billion year-on-year and reached JPY 1,032.5 billion.
As for O&ES operating income margin, in line with the increase in profit, we also had cost reduction related to structural transformation, this increased 1.0 point and reached 6.4% overall. Let me now turn to contributing factors by segment. Let me start with the Integrated ICT Business Segment. There was negative impact from price reduction in consumer communication and reduction in mobile communication service revenue continues. However, this recovered by increase in enterprise business and Smart Life business. We also had cost reduction efforts. Both operating revenue and operating income increased in the Integrated ICT Business Segment. As for Regional Communications Business Segment, as I have already explained earlier, there is the impact from increase in electricity costs. Also with regard to fiber service, remote work and online class-related demand has more or less run its course.
We did not have the one-off positive factor or non-recurring factors such as Olympic Games and Paralympic Games last year. Therefore, both operating revenue and operating income declined in this sector. At the risk of repeating myself, in the case of Regional Communications Business Segment, on top of, we see some very challenging impact from the electricity cost increase. However, toward the year-end, we will work to reduce cost. We see expanding revenue from system integration and growth business. As we move toward the year-end, we hope to expand revenue from this segment. We want to reach the annual guidance, which is increase in both revenue and income. That is what we hope to achieve. Turning now to Global Solutions Business Segment.
As far as this segment is concerned, we see increased revenue from strong demand for digital services. In and out of Japan, we see increased revenue from digital services. Returning to NTT Limited, they have expanded their high-value services. Global business, global operating companies have worked to realize service transformation through cost reduction. Both operating revenue and operating income increased in this segment year-on-year. As for the other segment, we have seen increase in electricity and business at ENNET. As we have been explaining, we see increase in revenue from electricity fees reflecting the rise in commodity price. We're able to pass on the cost to our customers and revenue in this segment is increasing.
In this segment, we see increase in both operating revenue and operating income. Let me now turn to some of the topics on hand. Please turn to page 7 of your material. Let me start with the initiatives to resolve food and environmental issues. As far as our efforts in this area is concerned, we will form a planning company in furtherance of establishing a green food business with a company called Regional Fish Institute Limited .. We intend to do this in March. Well, what type of business will this be involved in? Please take a look at the chart and the diagram. There are two parts to this. We have the land-based aquaculture. It will be for the land-based aquaculture system, and also we'll be also harvesting algae on land as well.
Regional Fish Institute is a company with genome editing in relation to land-based aquaculture system. They're able to accelerate the growth of the fish. They're able to increase the flesh, meat of the fish. Now on our side, we have technology related to genome editing of algae, the technology to accelerate the growth and the harvesting of algae. We'll be able to cultivate and accelerate the cultivation of algae, which means that their ability to absorb CO2 can expand. They have the ability to fixate CO2 that they absorb. By accelerating cultivation, we'll be able to use algae as the feed for fish. By using this as a land-based aquaculture system, it means that we'll be able to further expand the size of the land-based aquaculture system. That is the system which we hope to establish down the line.
As the first step towards this end, we will be establishing a green food business with Regional Fish Institute, and we're going to set up a planning company. We plan to establish a joint venture between the planning company and Regional Fish Institute in the first half of fiscal year 2023. This will be the company that will actually be involved in this business on the ground. That is how we would like to start the business. Through these initiatives, we hope to resolve various social issues, reduction of global environmental impact, revitalization of Japan's fishing industry, and so forth. Through this, we hope to be able to respond to food shortages that we see around the world. That is what we would like to contribute toward down the line.
Next on page 8, initiatives in the space business. For this initiative, with us and Space Compass, have established a company to promote the space business. In order to for the early realization of a global rollout of this, we have concluded a partnership agreement with Skyloom Global Corporation. This means originally is that, as you can see on this diagram, the so-called the LEO, the low Earth orbit satellite. This is something that a satellite use for Earth observation. From here, to the surface of Earth, they will transmit data, but it's only during the unlimited time length and only limited data capacity. For us, this GEO, the geostationary orbit satellite, by using that, we will provide the optical data relay service.
Through this GEO to the surface of Earth, we will provide a high-speed transmission data service. It will become possible with a large data capacity as well. Together with this Skyloom Global Corporation, we will work together with Skyloom. We will launch three geostationary orbit satellites. To begin with, at the end of fiscal year 2022, we will start this business and we will launch one GEO over Asia and gradually expand the business globally. Next, on page nine, this is the status for remote working. Last July, we have introduced the work system with working remotely as standard. It's about six months have passed since then, and I would like to report the status.
The employees eligible for the system, we started as 30,000, and currently, it's 40,000. We have expanded the eligible employees by 10,000. By using this working system, how many employees are posted away from their family were reduced was about 400. In actual numbers, the employees posted away from their families was reduced by 900, and there were 500 employees who have newly started being posted away from their family. As a total, overall, 400 employees were reduced for being posted away from their families. The next page, this time we have conducted a survey for working remotely of our employees, and the results are shown on page 10. Having this work system with working remotely as standard
We were able to improve the flexibility of working and the productivity is also improving. We would like to expand the scope of the eligible employees and promote this initiative. Lastly, on page 11, we are showing the progress of the medium-term management strategy initiatives and showing the third quarter progress. We would like you to go through them. That is all for my briefing. Thank you.
Thank you very much. That was Mr. Shimada, Senior Executive Vice President. We would now like to go on to the Q&A session. With regard to questions, we're able to take questions from those of you who are taking part online and who have registered beforehand and who are connected to the phone conference system right now. If you have any questions, please push asterisk followed by number one.
If you wish to cancel your question, please push asterisk followed by number two. We would now like to take your questions. We have a question from SMBC Nikko Securities . Mr. Kikuchi, the floor is yours. Kikuchi-san, please.
Thank you very much. Kikuchi is my name. Thank you for taking my question. There was a Q&A during the press conference, you talked about this earlier as well. The impact of the impact from the rising electricity prices, that's what I would like to confirm. The trend continues from the second quarter into the third quarter. NTT West cost is increasing, you're now able to absorb the overall increase in costs.
At NTT East, based on the supplementary data, if we take a look at supplementary data, JPY 6.9 billion increase in cost and JPY 12.1 billion increase for NTT West. In the Regional Communications Business Segment, close to JPY 20.4 billion increase is seen. What is the impact from the electricity fees? I think you mentioned the number JPY 60 billion in the press conference. Can you talk about the impact of the rise in electricity price? Also, can you give us a breakdown of increase in cost, so that's now related to increase in electricity price. You mentioned that this impact could expand in the fourth quarter and the same trend could continue into this following year. Can you give us some numbers to indicate the potential increase in electricity cost?
That's my first question.
Yes. Thank you for the question. With regard to the impact of rise in electricity price, well, overall, we got, I think the number that we've given you is JPY 45 billion overall. At DOCOMO and NTT East, they account for the bulk of this increase. It's very difficult to be specific as far as numbers are concerned, but I think the impact is roughly similar across these companies. I think that is the rough understanding that you should have in addition to the impact. Also, with regard to quarter-to-quarter electricity rise impact, well, for the second quarter and the third quarter, the impact of rise in electricity price has been quite significant in both the second quarter and third quarter. I would imagine that the similar trend will probably continue into the fourth quarter as well. That is our outlook.
Having said this though, there is the issue of the government's assistance and support. In the fourth quarter, there's going to be introduction of the government support and government assistance. The impact, there's going to be the impact of reducing the burden on our company. I believe that it's a very complicated system. We're not here to about the specifics of the assistance scheme, but I believe the government assistance will probably have a positive impact to mitigating the impact from the rising electricity prices. Thank you. That is my response.
Thank you for your response. If I could go on to my second question.
Because of what this next year will be the final year for the medium-term management strategy, I'm sure that we cannot get these final numbers at this juncture. I just want to hear your thinking on this matter. I think around in the previous year and at the beginning of this fiscal year, compared with your prediction for at the beginning of this fiscal year and in the previous year, for the most part it was negative. Of course, the trend of the electricity price is a downside factor, but also indicates the different segments. Urban solutions, for example, their progress in profit growth is not very strong. The impact of the electricity price and also increase in energy costs, that has been a factor on urban development.
On the other hand, in the global business, I think the problem is primarily exceeding your expectation, perhaps. The next fiscal year will be the final year for your medium-term plan. What are some of the potential upsides and downsides as you embark on the final year of your medium-term management strategy plan? That is my second question. Thank you.
Thank you very much for the question. This is a very difficult question you have raised. I think you want to hear our outlook for the next fiscal year. It's very difficult to talk specifically about the coming next fiscal year, but maybe we can share with you what we see as the trend for this fiscal year. First of all, when we take the consolidated portfolio, DOCOMO is a very major part of the portfolio.
What about DOCOMO? What is the assessment? I think it's a mobile communications service revenue. I'm sure that DOCOMO will explain in their meeting later on. I think we see an improved trend for the improved ARPU. This has been continuing from second quarter and this trend continues. in terms of the revenue structure, I think the improved ARPU. So if this continues into next year, I think this will put this will help to stabilize the revenue structure for DOCOMO. on top of that, in the case of enterprise business at DOCOMO, we have of course converged and integrated enterprise business for NTT Communications and DOCOMO. that effect of the integration is now beginning to translate into concrete results.
That being the case, I believe that we are on track with what we expected, which means that the business structure at DOCOMO Group has really improved as a result of this integration. We see very positive progress in this area. Turning to Global business, NTT Limited and NTT DATA. Again, here, with regard to digital demand, digital transformation or DX is very strong. This applies to the domestic business for NTT DATA as well. The strong demand with DX now is translating to concrete orders, and this is then turning into revenue. There are of course ups and downs from different factors, but in terms of totality, we see this very positive trend.
As far as we're concerned, we believe that we've been able to see progress in the transformation of business structure. I believe we are on track as far as the progress we envisaged for the mid-term management strategy is concerned. On the other hand, in terms of the macroeconomy, there are uncertainties as far as the macroeconomy is concerned. For example, the rise in electricity prices, one reason, one factor out of that. Also we've seen the rising trend in the interest rates and the interest rate hikes. Turning to the United States, the Fed, FRB, is continuing to tighten their interest rate policy. There are questions as to potential recession as a result of this policy. We turn to the next fiscal year.
Compared with what we had envisioned earlier, as a very great as entered this, we've got electricity price. This has had impact on our domestic business for DOCOMO as well as for NTT East and West. For DOCOMO, they just embarked on an electricity business of their own. That has had a very negative impact on the business which they just started. As far as there are positive sides which we envisaged, but also negative effect. This was more than we had expected. Turning to next fiscal year, I think there's going to be a mixture of both optimism and pessimism. It's going to be a mixed bag, if you will. I hope you understand our position. Thank you.
Thank you very much. Very clear. Thank you. That is all.
Mr. Kikuchi, thank you very much. We would like to take the next question from Nomura Securities. Mr. Masuno, please go ahead.
I have two questions. The first is regarding the segment breakout of the Global Solutions segment. In the three months year-on-year, it's around JPY 12.9 billion increase. Just looking at Limited, three months, it's JPY 7.1 billion increase in profit. The remaining is about JPY 6 billion, and that is data and others. I think that is the breakdown of that number. Is that breakdown correct? Limited did structure reform and the data center business has increased. Those were the drivers for the Global Solutions.
For the others, overall, JPY 5.4 billion increase in profit is what I think. Urban Solutions is JPY 6.2 billion operating income decline has occurred. Other is JPY 11.6 billion increase in profit. Probably the wholesale markets are selling electricity, the gain has contributed is what I think. That means that for NTT East and West, the negative impact due to electricity cost, probably half plus of that is recovered through an old business, seems to be the situation. I just wanted to confirm the actual results of these. Thank you.
This is Taniyama from Corporate Strategy Planning. I would like to answer that question. First of all, for the Global segment, for NTT Limited, just the single third quarter as a profit, JPY 12.8 billion. For first quarter, second quarter, first quarter is JPY 6.2 billion, and the second quarter is JPY 100 million. In the three quarters, and the third quarter is JPY 12.8 billion. The total is the number shown here. Deducting that, what remains is the DATA's numbers. That is the degree of the increase of a profit for three months. Compare these three months and the previous three months, with the over Global Solutions is JPY 12.9 billion, but just looking at just Limited is JPY 7.1 billion. At DATA and Others is JPY 5.8 billion.
Limited is JPY 7.1 billion is good. The increase, JPY 7.1 billion, out of that, the structure reform factor, positive factor and data center business increase.
How much of that?
Occurred. Can it be accumulated number or three months?
Three months please, accumulated.
Okay.
Just looking at the single third quarter, the structure reform positive impact for limited is JPY 5.3 billion. It's, well, JPY 5 billion. That's year-on-year. It's about JPY 5 billion. Structural reform is the opposite, gone down by JPY 2 billion. Plus and minus of that is a JPY 7 billion profit was generated. For the others, the three months and single month year-on-year comparison, urban solutions is JPY 6.2 billion. That's a 3-month year-on-year, has a JPY 6.2 billion decline. At a node, it will be JPY 11.6 billion increase. That is selling electricity. I just wanted to confirm if that is correct.
That Mr. Masuno, you are correct. Okay.
If that is so, the NTT East, the NTT West, and DOCOMO's electricity price increase seems to be the focus point. On a consolidated basis, probably half of that increase is offset. Is the correct understanding or is it more that's being offset?
This is Nakayama speaking. Yes, as you have mentioned, at the third quarter, electricity price increase overall group is JPY 65 billion. Masuno-san, your question is that probably half of that ENNET is generating a positive profit, right?
No, just three months. Just three months.
Just a moment. I don't have the numbers for only the three months, on an accumulated basis, the trend is as I explained and as you have commented. Okay. Full year in the group is a minus JPY 60 billion. Third quarter, nine months is JPY 45 billion.
Fourth quarter, just simply calculating, is about JPY 15 billion. ENNET, if they have about JPY 10 billion of a profit, I'm just thinking that you're able to offset quite a bit of it. The profit of ENNET, the secured business price and at the market, what the price is going to be, also it depends on that also. Whether the same trend is going to continue on into the fourth quarter, we cannot simply just say that that is the content.
Understood. Thank you very much. I understand about that. The second question is the Integrated ICT Business Segment, a very strong performance, especially the mobile's ARPU, the mobile communication service of revenue for three months compared to a year ago, it's only gone down by JPY 2.4 billion.
I think it's very good. As for consumer communications, the operating profit in three months compared to previous years, a JPY 7.2 billion decline. I was wondering if an unexpected cost has increased in addition to the hiking electricity cost. Why is the mobile revenue or the ARPU strongly performing? The enterprise business is also performing well. As explained before, the enterprise business synergy effect, how much is that generated? They are performing very strongly. I just wanted to know the back-background and the reason behind this.
Yes. Regarding the ARPU from the second quarter, as been explained, the trend has not changed, meaning that the medium bucket, the large bucket usage has increased.
We call that an upsell, but that has increased, and that positive effect is largely contributing is what we think. On the other hand, the downside factors, for example, the from the existing old plans, transferring over to Gigalight in 2018, 2019, we had the price decline and due to the impact, we had a large number of subscribers moving over to a lower price plan. The Gigalight customers are increasing and this transferring over to a different plan, the number of subscriber is declining. The degree of the decline itself is becoming smaller. Also for the enterprise business, the mobile and fixed line services can be provided as a set, and that is showing a very positive impact.
We are able to respond to the customers' demand and needs and do sales activities that meet those needs. As for the synergy effect, how much is the difference from before is difficult to express. In actual numbers of revenue is where I would like you to look at to grasp the actual situation.
Thank you very much. Regarding the synergy, the operating profit, the enterprise business is increasing strongly. There is a positive impact of the synergy as well. Is that correct?
It has a good effect on the profit, yes, because the revenue is strongly performing, and that is contributing to the push up in the profit side or the bottom line. Thank you
Thank you, Mr. Masuno. We'll go on to the next question from Mr. Morgan Stanley. Mr. Tanaka, the floor is yours.
Thank you very much. Tanaka here. Can you hear my voice?
Yes, we hear you.
Thank you very much. Yes. I would like to ask one question, if I may. It relates to NTT Limited. Earlier, you mentioned that you carried out structural transformation and that the effect is now being translated into reduced cost. Now, as far as this matter is concerned, first of all, I think you mentioned JPY 30 billion in the annual target. But I think the effect benefit was actually JPY 4.1 billion, right?
So if we base ourselves on the number that you mentioned earlier, structural on a cumulative basis, I think JPY 34 billion is already down for structural transformation.
The effect remaining is JPY 1 billion.
As far as expense is concerned, are you going to spend in line with the plan? In the first quarter, you didn't spend that much, but then the large spending is second quarter, but the maintenance quarter. Will the expenses be increasing in the fourth quarter? I would like to ask how you intend to spend in relation to cost for structural transformation.
Thank you, Tanaka, for corporate strategy planning. With regard to structural transformation expenses, yes. We invested JPY 30 billion for the full year, and we spent already JPY 23 billion until the third quarter. As right now, we intend to go in line with the plan. We intend to use success in line with the plan. As for the specifics of the spending.
Well, operations have been overhead and optimization of human resources. We made progress until the quarter, and we intend to continue this in the fourth quarter as well. Also on top of that, we will continue to introduce cloud service. We intend to secure immigration. The security business will continue. Right now, yes, we intend to spend JPY 38 billion at the end of the year as in line with the plan. As far as the effect is concerned, we mentioned JPY 41 billion. Year-on-year basis, yes, it will be roughly JPY 20 billion. That is the increase we invest.
Thank you very much for that. If I could ask, with regard structural transformation expenses, you talked optimization of human resources. Was it more skewed towards the second quarter? Well, are you really going to be spending that much money at the end of the day?
Again, we intend to proceed in line with the plan. We mentioned JPY 30 billion. Right now, we intend to spend that money as we, as we planned. Of course, we have to monitor the circumstances and consider whether or not we're going to actually spend the full amount at the end of the day. Right now, we cannot give you a clear response on this matter at the... Yes, we do intend to spend, at right now, we intend to spend JPY 30 billion.
Thank you for that response. Do you think that with the next fiscal year, will the expenses coming down in the next fiscal year? Can you talk about the trend starting from next fiscal year as far as the spending is concerned?
Next year, I think structural transformation needs to be pursued to a certain degree. We will be embarking on a different phase. NTT DATA, Inc. We will now have discussions with potential integration with NTT DATA, Inc. Probably shifting to spending within integration of NTT DATA, Inc.
Okay. Thank you very much. Thank you very much. That is clear. Thank you.
Mr. Tanaka, thank you very much. We'd like to take the next question. Goldman Sachs Securities. Mr. Tanaka, please go ahead.
This is Tanaka from Goldman Sachs Securities. Can you hear me?
Yes, we can hear you.
Thank you very much. I have two questions. The first is slightly related to Mr. Kikuchi's question, I just wanted to confirm. The electricity cost hike, what the annual impact of JPY 60 billion, has that not changed? NTT East and West are strongly impacted by that. They probably forget the plan. They're struggling. The cost reduction plan in the full year, are they in line with the plan? Can I just confirm that first?
First of all, the JPY 60 billion impact of the hike in electricity cost, that outlook, we believe, will be as such. We have not changed that. Looking at the actuals, we think that it is going to be in line with that outlook. Regarding the NTT East and West, the cost reduction initiatives. They are facing quite of a difficult situation as the regional communications business. Within that situation, if you look at how the expenses and costs are being generated, it seems that NTT West has a more of the difficult situation. There's electricity cost hike as well as in terms of a cost reduction. The expenses decline on the expense side, they're not seeing that much of a track record.
In that sense, NTT East and West are both facing difficulties. In terms of the degree of the difficulty, West is facing more of a difficulty.
Understood. My second question is related to probably what was said right now. In terms of the company-wide cost reduction progress, I'm looking at the supplementary materials on page two. The progress up to the third quarter for the two past quarters, the cost reduction amount itself seems to not be progressing that much. The JPY 930 billion of the full year, how much from where are you looking for the fourth quarter? Is the progress itself facing a difficulty as well? Can you please explain?
This is Taniyama from Corporate Strategy Planning. It's JPY 930 billion in annual basis. Up to the third quarter is JPY 880 billion. FY 2022 in a single year, we are planning to reduce JPY 90 billion, and the progress is JPY 40 billion. As we have been explaining since before, the impact of the hiking electricity cost group wide is JPY 45 billion, so excluding that. Add JPY 45 billion, so it's JPY 85 billion. That is the progress. It's how we look at it. However, having said that, the hike of the electricity cost does exist. NTT East, West, and DOCOMO, in order to cover that hike, they have several initiatives and several additional cost reduction initiatives being worked upon in NTT East and West in order to achieve that cost.
In order for them to achieve the profit target, the cost reduction must be done. They are implementing various initiatives to further reduce the cost. Towards achieving the target, they will put their full efforts into this.
If that is so, up to the third quarter, the progress was not just strong. It seems that the strength has stopped from the second quarter, the impact of the electricity cost increase. Due to that, there was a slight of a delay. Is that understanding correct?
Yes.
Okay. Understood. That is all from my side. Thank you very much.
Thank you, Mr. Tanaka. We'll take questions from other people. If there are any questions, we would like to take them now. They're from Daiwa Securities. Mr. Ando, you have the floor. Mr. Ando, please. Thank you.
This is Ando here. Can you hear my voice?
Can you speak up a little bit, please?
Yes, of course.
Thank you very much.
Thank you. I would like to ask one question about the electricity situation. Earlier, you mentioned that during the fourth quarter, the electricity fees could actually be supported by the government assistance. You mentioned the possibility of government assistance in relation to the electricity fee burden. If I may ask, do you think that this will be a factor in the next fiscal year as well? Are you going to factor that in as you plan for the next fiscal year?
Are you going to predict the performance at the outlook for NTT East and West based on the premise that the government assistance will be incorporated? I would appreciate your philosophy with regard to the prediction of the performance for NTT West, East and West for fiscal 2023, and how you see the government assistance at that juncture. Thank you.
Yes, thank you very much. With regard to the government assistance and support, I think the idea is that it will continue until September. That seems to be the makeup of the mechanism here. In the first half, yes, we can probably rely on this assistance. That is the first investment which we'll be coming up with the plan for the next fiscal year.
Having said that, this would benefit the government budget, and also this will depend on how severe the impact is on the lives of the Japanese public. This will be the variable here. With regard to the base electricity price for this fiscal year, yes, this went up significantly during fiscal year 2022, and also in fiscal 2023, I think we have to be prepared for the situation that the electricity prices could rise to a certain level as well. That increase in prices is likely to be quite significant as a possibility. In the first half, we are likely to rely on the assistance from the government. We have to see we will not be able to predict the concrete outcome, concrete impact without the assistance from the government assistance.
At this juncture, we cannot give you the very detailed prediction. I hope you understand.
Yes. Thank you for your response. Let me turn to my second question. I think you mentioned this during the Q&A session of the press conference. Mr. Shimada mentioned that data center remains a very strong business, and it was mentioned the next fiscal year data center business growth can be expected. That is my understanding of the Q&A after the press conference. Let me now turn to my question. With regard to the technology sector, the data center, it still remains strong. In the tech sector, the demand for data center remains still strong. It has not been affected too much. Despite the concerns in the stock market, I believe the strong performance in the data center business continues.
Where is the gap coming from, do you think? Is there a reason why there's a gap between the market expectation and the actual performance of your business? If you have any interpretation of the situation, I would appreciate it. Thank you very much.
Yes. Thank you for the question. As far as this matter is concerned, it's very difficult to respond to your question. As you know, when we have discussions with various data center businesses, this of course, this relates to the macroeconomic situation, but I believe the overall trend towards digital transformation and DX still remains very firm and strong. This is also applicable to the global market as well. That is the backdrop. Players like GAFA and the so-called hyperscalers, they still have very strong demand. And also they're working to reduce costs on their own, in their own right.
With regard to data centers, the investment to our data center resources, they continue to expand. It seems the demand for expanding their data center resources has not yet waned, that is, has not yet eroded. That is our interpretation of the demand among the hyperscalers. Right now, the interest rate is on an upward trend. That factor needs to be considered. There are concerns about possible recession as a result of the hike in interest rate. When we talk to different, when we talk to various businesses, the need for digital transformation and data centers, they still remain very strong.
If the interest rates were to hike or to increase at a certain level, yes, there, that creates the possibility of a recession, the basic requirements for DX will not disappear. The speed might be moderated somewhat should the interest rate reach a certain level. Once the interest rate stabilizes, again, the demand is going to be translating into an upward trend. There might be some impact from recession, but it's not going to have a severe dent on the demand. It's maybe people, as I said, saying that they will defer the plan. That is the only effect. That is my interpretation of the trend.
If I may add, as far as the data center is concerned, the fund and financial players are very active because it was very profitable for them. As far as financing is concerned, we are reliant on outside sources. When the interest rate is rising, you have to increase the price, which means that the demand and the supply, question of the match, the demand and the supply may not be in sync. Of course, we are monitoring the interest rate hike, but we are able to, we're confident that we are able to realize return which exceed the increase in interest rate. Maybe that is the, maybe that accounts for the difference in the views between the marketplace and the actual performance.
Thank you very much.
Mr. Ando, thank you very much. We are getting close to the ending time. We would like to take the next question as the last question. BofA Securities, Mr. Kinoshita, please go ahead.
This is Kinoshita speaking. Can you hear me?
Yes, we can hear you.
I have two simple questions. The first is, this fiscal year, how it will end up. Regional Communications seems to be facing a slight difficulties, and they want to achieve the target. From the overall perspective, the others is performing strongly, and if it goes as it does in Global Solutions, maybe they may exceed what they have been planning. The negative factor, even though the Regional Communications goes under these two other businesses, probably can absorb that negativity.
Is that way of thinking correct? Also ICT, looking at the overall ARPU trend, I think that there may be an upside. Can you share your rough thoughts on these points?
Roughly, I would like to respond as well. It's not that we can stay back and relax. That's not the situation. As you have pointed out, the Integrated ICT and the Global business, we can have a certain degree of expectations for their performance so that they can, we will put our efforts in so that we can achieve the annual target, and I would like you to take it as the answer. For the others, last year in the fourth quarter, they have had a decline in the operating revenue. It's the same trend is going to happen this year as well, because on the annual basis, they have already achieved the profit level. For the first quarter, we don't expect them to have a large decline.
Okay. Understood. Thank you. Regarding this fiscal year, up to the third quarter, the profit before tax and how it goes down to the profit, the full year plan, it seems that the third, fourth quarter, the profit, whether the tax rate is gonna go up maybe. There's in the first half, there was a reverse on the tax and there's a little unique factor. Naturally, it is going to be this way? Or are there any special factors that are going to impact the final numbers in profit?
As you have mentioned, Mr. Kinoshita, that situation does exist. The corporate tax or the deferred tax asset in the quarter basis, it goes up and down. On the full year basis, the current annual outlook, I think, is what you should look at.
Thank you very much.
Thank you very much, Mr. Kinoshita. With this, we would like to conclude the briefing session of fiscal year 2022, third quarter financial results. This will be followed with NTT DOCOMO financial results, briefing, session. For those of you who will participate in that, please stay connected as right now. Thank you very much for today.