Thank you very much for attending today despite your busy schedules. We will now start the briefing on NTT's financial results for fiscal year twenty twenty second quarter. I'm Fujiki from the IR office and will be serving as today's facilitator. First, I would like to introduce today's attending members. Mr.
Sawada, representative member of the Board and President Mr. Shimada, representative member of the Board of Senior Executive Vice President Mr. Nakayama, Executive Officer, Senior Vice President, Head of Finance and Accounting Mr. Taniyama, Executive Officer, Senior Vice President, Head of Corporate Strategy Planning. In view of preventing the spread of COVID-nineteen, today's briefing is held via live voice streaming.
Please refer to the presentation materials posted on our company IR website. On the first page of the presentation materials is going to be considered stated. So we kindly ask you to read through them. Now Mr. President of the company will explain the financial results outlined and take your questions later.
Without further ado, Mr. Sawada,
Thank you very much. So I would like to base my presentation on the presentation material entitled Financial Results for the Six Months Ended 09/30/2020. I'll be very brief in my presentation. So please turn to Page four of the material. This shows you the fact that we saw a decline in operating revenue but increase in operating income for the second quarter.
Yes, so we saw decrease in operating revenue but increase in operating income. We made very strong progress in the second quarter, but as the situation is unclear with the second wave of COVID-nineteen hitting primarily Europe and The United States, we will not be changing the annual guidance at this juncture. And also with regard to operating revenue, due to decline in DOCOMO's handset sales and also decline in overseas system integration revenue due to COVID-nineteen, operating revenue declined by JPY178.2 billion year on year. As for operating income, while there is decline due to COVID-nineteen and there is increase in DOCOMO Smart Life business a question as for operating income, while there is decline due to COVID-nineteen, there is increase in DOCOMO Smart Life business and profit improved global business profitability. So operating income improved from negative JPY7.6 billion in first quarter to positive JPY25.8 billion year on year in the second quarter.
As for overseas, top line has dropped due to COVID-nineteen, but margin has improved by 0.7%. This is due to streamlining effect. Now as far as the second quarter results are concerned, the impact of COVID is negative JPY130 billion on revenue and negative JPY20 billion for profit that is the impact of COVID-nineteen for the second quarter results. Please go on to Page five. This shows you the contributing factors by segment.
The top shows the operating revenue and the bottom column indicates operating income. The red part shows the areas that are declining and the blue part shows the areas that are increasing. So as for mobile and data, you're probably familiar with the results already. As for regional communication business, yes there was decline in both operating revenue and operating income, but then due to strong net sale net adds rather in fiber sales and also there's increase in subsidiaries revenue. So for the second on a second quarter standalone basis, both NGTs must enjoy increase in both operating revenue and operating income.
As for Regional Communications, they have a guidance of increase of revenue and operating income. So they're making strong strides to achieve this annual target. As for long distance and international communication business, it may seem as though the operating revenue has dropped significantly, but then it's just that at Entity Limited, the accounting method has changed. In other words, recognition of revenue for straightforward supply sales and maintenance has been shifted from reflecting and recognizing total amount to posting that amount. That has impact of JPY50 billion.
And also there's also JPY40 billion impact from COVID-nineteen on currency. So the operating revenue dropped by JPY114.5 billion. However, as for operating income due to structural reform, they have been very favorable. So they were able to post increase in operating income at the end of the day. Let's turn to the following page, Page six please.
This shows you the medium term debt levels. We wanted to clarify that for your reference. So let's start from the left hand side, JPY4.7 trillion. That is the amount of interest bearing debt at the end of fiscal year twenty nineteen. The ratio is about 50% and debt to EBITDA ratio is approximately 1.5 fold.
So very, very clean. And we'll be spending JPY4.3 trillion for bridge loan rather to acquire Entity DOCOMO. And this may increase up to JPY9 trillion. However, please bear this in mind. The target for debt will be set at JPY6 trillion.
And we want to make sure that since EBITDA for our company is JPY3 billion, so therefore we're considering up to JPY6 billion. That's the ratio of 60% that's lower than the average of 80% for single A rating. So that is the target that we want to set. As you know we have spun out leasing business. So therefore we've been able to off balance CNY1.1 trillion in debt.
And also, DOCOMO's credit receivables and handset receivables, they will also be securitized. So 1,000,000,000,000 over next four to five years. Right now 700,000,000,000.0 is very clear. So these are probably expected feasible. So the actual increase in debt will be JPY 2,200,000,000,000.0.
So if the target is JPY 6,000,000,000,000, it means that the amount of debt we need to repay would be only JPY 900,000,000,000.0 after the math. We take a look at the average free cash flow for the past three years is roughly KRW0.9 trillion and we can generate and also pay that dividend of KRW0.3 trillion, which means that we are able to generate KRW0.5 trillion in cash every year. So we believe that we will be able to implement both share buyback and also increase enrichment of shareholder return and also be able to repay in a planned manner while we carry out to the required investment for the growth. So we believe the JPY 900,000,000,000.0 debt can be repaid over the next couple of years, maybe over the next four to five years. So as a result, we believe that for this fiscal year, we will be able to realize shareholder correction share buyback as part of our shareholder return program.
Now as for the good there will be no goodwill from the transaction to make DOCOMO into a wholly owned subsidiary firm. So let's talk about share buyback. For the past two years, we have carried out JPY $250,000,000,000 worth of share buyback on every year for the past two years. So that being the case, as if we have consistently mentioned, we believe that we are able to continue shareholder return as we have done in a consistent manner and still be able to make repayment. So we want to implement that.
As for APS, toward the year end, we're headed toward the year end. So we believe that considering the operation, we'll be able to increase 1 yen at this juncture. As for topics, are three. One is to create initiatives to create a remote world. We have created a new service brand called the Remote World.
This is a new title brand. And I want you to do seven services and I hope that you'll take a look at this at your leisure later on the second.
The second is the own media door. We will be preparing that. The R and D forum will be held remotely. So November 17, R and D Forum's situation or exhibition to be able to view that we are going to digitalize that. Of course, this is going to be a place where people other than NTT employees can attend and it will be a three d media and so the people can experience the remote world.
And next is regarding the progress of the mid term management strategy. There are several of them and I would like you to take a look at all of them later on, but three points here. First is the promote B2B2X model and it has reached 88. Our target is 100 next fiscal year, so we are in line with our plan. And the second point is that the satellite offices actually station facilities are convergent to satellite offices.
We will have employees come here. In October, we have converted Noborito and in 2020, 2010 and by fiscal year 2021, we would like to convert 50 of them. Lastly, ESG related matters, we have received the climate change initiative approval for SBT and we have announced it today together with the National Institute for Quantum and Radiological Science and Technology in order to have a field demonstration of nuclear fusion energy. We have signed the alliance and partnership agreement today. That's all from myself.
Thank you very much. We will now take your questions. We'll take questions for those of you who have registered beforehand and also who are connected to the phone system right now as we have informed you in advance. The operator will now explain how we will be taking your questions. We will be starting the Q and A session at this juncture.
From SMBC Nikko Securities, Mr. Kikuchi. Your question please Mr. Kikuchi.
You very much. Kikuchi here.
Have two questions if I may. My first question is about NTT Limited. You talked about cost reduction benefit and as a result you mentioned that the performance has been of the halt or the worsening of the performance. So we have a very good image of NTT Limited as a result. But having said that, both Europe and The United States, the COVID-nineteen situation remains very harsh in these regions.
So I wonder how you see the outlook for the second half of this fiscal year against this situation. That is my first question. Yes, thank you very much. First, the impact of COVID-nineteen. We believe there will be roughly JPY45 billion impact on NTT Limited that has been the case so far.
So over the short range with regard to short range order taking, the many customers are very quick to withdraw their contracts. And NTT Limited has a large pipeline of such projects. So as far as operating revenue is concerned, yes, the situation is somewhat challenging. But as I mentioned, cost reduction benefit will really accrue. And we believe that the benefits of cost reduction will continue on to the second half of the year.
So declining operating revenue and increase in operating income will probably continue under the current level of COVID-nineteen impact. So that's one positive factor. There's another positive factor. With regard to value added services, we have found we want to make sure the value added services account for 36%, but now that percentage has increased to 37% of the total revenue. So value added service has been very strong due to COVID-nineteen.
Remote the demand and digital event for remote service the demand for digital event and remote services are very strong. So we believe that this trend will continue. So that represents another positive factor. Now having said that, should the lockdown due to COVID-nineteen become very prolonged, then more than the first half, if the situation were to become more stringent, then that could be potential negative factor for the second half of the year. Thank you very much for that response.
So with regard to your annual guidance, operating income JPY5 billion and JPY4.5 billion for the second half. So the impact as opposed to any upside you have with annual guidance will not be will it be that significant. But I think with regard to operating income, think there's still cushion, right? Comfortable cushion for you as far as the annual guidance is concerned, would that be correct in understanding that? Well, you for your question.
Well, is there a cushion? Yes, I think there is an upside as far as operating income is concerned for the full year. First of all, NTT Limited, People NTT Limited, I think this will be a very positive driver for the People NTT Limited as they go into the next year. So yes, that is our expectation. Thank you for that.
My second question is this. It's about DOCOMO, making DOCOMO into a wholly owned subsidiary firm. After this is delivered and realized, what will happen to DOCOMO's performance? Generally the general consensus on the stock market is that since the percentage of non controlling interest will be coming down, that should enhance your flexibility for your business operation with fewer non controlled interest. So what will you be the policy based in which you will be practicing control over the operations at DOCOMO inclusive of the possible rate plans?
That's my first question. You're talking about control at DOCOMO, right? Yes, that is my question. For example, you'll be able to review rate plans because you have the ability to weather any potential decline in operating income. Well, that is not in line with our basic thinking.
We are listed as is the case when we Dokong was listed company, it's important that we have very strong robust governance. So that being the case, there was a transition to audit the committee based company at DOCOMO and that practice will continue. And outside directors will remain on board and they'll be part of the governance at DOCOMO. Now what will happen to DOCOMO after they become a wholly owned subsidiary firm? Well, investor relations type of activities and interaction with media and the analysts and the securities firms.
We hope that they will continue even after they become a wholly owned subsidiary firm. So they thought they just become Doukou becomes part of the group and we have the room to accept declining operating income. That type of thinking is not right. I see. Thank you.
Okay. So may I say that in terms of as part of entity holding company's policy, you will continue your policy of safeguarding the profit at NJD DOCOMO. Yes, that is the case. Already the EPS target in the medium term target and also cost reduction and return on invested capital. We have these targets.
And the major subsidiary firms will we are going to assess the critical set of major subsidiary firms in a way which is linked with the target set forth and the medium term target. So the actual valuation will start, this program has been introduced in the previous year and this will continue. So again, as was the case in the past, in an integrated manner, we hope that the companies will make will companies will contribute will be contributing to increase in operating income. So your interpretation is correct in that context, I think. So it's important that each operating company generate profit and add on a consolidated basis is important that so you're not going to take deposits because on a consolidated basis you have strong operating income you're going to accept the decline in one particular company.
That's right. That is not the case. We want to make sure that there is synergy among the operating companies. Thank you very much.
Thank you very much. We'd like to take the next question. Nomura Securities. Mr. Masuno, please go ahead ask your question.
This is Masuno from Nomura Securities. Can you hear my voice? Yes, we can. I have several questions. Related to the result this time, the limited restructuring in the full year cost wise and value added wise, what is the scale that you're expecting?
And you said this is going to continue on to next fiscal year. What is the upside scale that you are thinking? Thank you very much. This fiscal year, it's a 300 and it will exceed 300. And next fiscal year, actually in December, we have started the discussion, but entering December, we're going to establish the plan for next fiscal year.
And the PMI plan was set for two years originally. Therefore, it started from 2019 and up to July, various PMI initiatives are running or implemented. So especially the effect of the IT initiatives, we are going to accumulate those effects. So scale wise, it will be several JPY10 billion level is what we are considering. Okay, the breakdown of that cost and the value added contribution, what is the ratio fifty-fifty?
Well, at the beginning when we were considering the mid term the cost was 300 and value added was 400 or 30,000,000,000 yen 40,000,000,000 yen but maybe the value added is going to be an actual larger. Value added in absolute amount is not going to decline, correct. So the total improvement effect is going to start to show. That is my wishful thinking. Thank you.
My second question is related to midterm. DOCOMO is going to be a wholly owned subsidiary company regarding the sales, service and finance related matters. DOCOMO alone at what time what is going to happen and the alliance or partnership with communications whatever way it is at what time and what way is that going to be done. I'm asking these questions several times, but the size or the timing or the content of this if anything that you can share, I would like to hear well. As reality, this is not that has been thoroughly considered because we're still in the TOB period.
Mid this November, TOB will be completed and then from there we are going to have a thorough discussion. So at this point, there's nothing that I can share with you. However, generally speaking, well DOCOMO compared to its competitors, they're behind that is because the fixed line network or the corporate customer side, they don't have the entity communications type of parts in their business. So how should I say this? Before it's becoming a wholly owned subsidiary, we need them to continue to actively work on that part.
And in terms of the sales activities, if it becomes a deeper together with NTT Communications, then the pie of the corporate customers is going to be larger. So that will be the next step. But on the other hand, the NTT Communications side, they didn't have that much of a wireless solutions. So as the sales activities for NTT Communications, they'll be able to sell integrated services. So that's going to be a one synergy effect.
And as I have mentioned to you before, the network or the facilities and equipment that side, how much are we going to integrate is the question. And looking at DOCOMO alone for the various service developments, comm and communications in an agile way are developing it and in the several months they can provide service in of the solution. So how are we going to provide that also? So explaining what the scale will be at this point is difficult. However, as the president of the group or CEO of the group, I want them to put their full efforts out there.
I just wanna check that with the communications of sales activities, collaboration, that is not going to be able to come true at the field? Yes. However, DOCOMO or what to say the prohibited actions, there are some regulations that are imposed and that probably is going to be discussed further. So it will depend on how that discussion goes. Okay.
Thank you very much. And also on the finance part, Page six, the interest bearing debt level target level. If you look at the actual, it's JPY4.7 trillion. However, you have cash also. So the net debt, I think it's the JPY1 trillion left, JPY3.7 trillion.
So in reality, this target of JPY 6,000,000,000,000 and net debt is going to be JPY 5,000,000,000,000. So I think you still will have some more buffer or room is what I think. So how are you looking at this? You're exactly right about the 1,000,000,000,000 yen of buffer we have. However, as explained to you, our basic business is the telecommunications business.
Therefore, natural disasters or some unprecedented natural disasters that happens, we will have to be we want to secure the capability that we alone will be able to respond to such disasters. So cash or capital on hand, we would like to have a comfortable level of that buffer. But as you say, the working capital or that part, how much can we allocate that to lower the debt or improve the capital efficiency or cash efficiency is some challenge that we have to take on. So we would like to continue to review this. Thank you very much.
That's all.
Thank you very much. Next question please. Next question from Citigroup Securities, Mr. Tsudo. The floor is yours.
Thank you. Good afternoon. Name Tsudo from Citigroup. Thank you for this opportunity. Thank you.
And also looking at page six, so could we talk about page six? So you want to have debt repayments of 900,000,000,000.0. You talked about five years in the previous sessions. Can you elaborate on the debt repayment program? You have assets, idle assets or unused assets.
If you sell off those unused assets, you'll be able to accelerate debt repayments. Is there such a buffer? If there is such a buffer, what options will be available for you? To the extent possible, would appreciate some hints, clues. Thank you.
Those figures as I shared on assets, we are not reflecting that on this slide. For example, data centers or real estate, those elements are not incorporated into the slide, but that would be part of the target. And we're giving these matter consideration as we speak. We're not able to have concrete numbers that is why they're not reflected on this page. But I believe there is some sort of cash that can be available to be allocated for debt repayment purposes.
Well, can you give us certain range? Is there a certain size that you'll be able to give? And also what about the timeframe? If you could give us some pointers, we would appreciate it. Thank you.
Well, the overall program will take roughly four to five years in our opinion, but there is share repurchase and also there's going to be requirement of cash for investment for the future that might be the case. So several tons of billions of yen on a per annum basis, I think that would be one possibility. See. Thank you. Then so if you're able to accelerate the debt repayment, then how will the free debt cash be utilized?
For if you're able to accelerate debt repayment, are you going to allocate that for dividend or share buyback or any other purposes? How are you doing then to dent such cash at that juncture? Well, thank you for the question. Well, first, we have not reflected the impact from synergy on this page. So how much synergy can we generate?
That is up to a consideration and study from now on depending on the level of synergy, there might be need for future investment or there might be need to increase R and D expenses. We want to consider that possibility as well. So compression of assets and also compression working capital and also by improving efficiency then we will be able to generate some benefits. And we'll be able to accelerate debt repayments which will mean less interest burden. So if that is the case, we want to be able to allocate that for shareholder return and also for other purposes.
And also if I may add, in this calculation, in this formula, when it comes to cash. Well, we talked about JPY 900,000,000,000.0, but we want to work with EBITDA and bring this back to JPY 3,200,000,000,000.0. If that is the case, then we'll be able to do this much earlier and then we'll be able to have greater cash available for shareholder return purposes. So paid out dividend is already 400,000,000,000 yen This is factored in. Paid out dividend is already factored in this calculation, which means that cash wise we have many potential pockets and capabilities available for us.
If I may, one other question, one additional question, and I will this will be the final part of my question. This might be a sensitive question. So to the extent possible, if you could give us pointers. Among DOCOMO's assets, when J Tower was listed, you talked about carving out of base stations at that juncture. This, I believe, represents one important factor for debt repayment.
Is my understanding correct? Well, realistically, I don't think we'll be able to make such a move quickly. But that is a possibility. That is a possibility. But then we are not progressed that far as far as the consideration of the scheme is concerned.
So that's accurate. It's not factored in in the current debt repayment plan we have. Thank you. That's all. Thank you very much.
Thank you very much. I'd like to take the next question. Next question is Daiwa Securities. Mr. Ando, please go ahead with your question.
Hello? Can you hear me? Yes, we can hear you. Hello? My first question also is related to Page six.
Share buyback JPY $250,000,000,000, you've done that. Thank you very much. And this repayment plan, we'll keep an eye on this plan or regarding EPS. DOCOMO become a wholly owned subsidiary. It's going to go up by 50 yen or so.
So considering that there's a 250,000,000,000 yen in a midterm perspective, is this a becoming a reality level? Or this year, there are some factors involved? So you have added some additional factors to this and come up with JPY $250,000,000,000. Well, up till now about this amount is the share buyback that we have conducted in the open market. So the message we want to convey is that as already mentioned to you, this JPY 4,300,000,000,000.0 even though we borrow this as we have been doing till now shareholder return in terms of dividends and share buyback, we are going to continue that.
And we are actually practicing that. And that is the major message that we want to convey and in the midterm perspective whether this amount is going to be too much or less, are we going to increase it more? I'm very sorry but it will depend on how much synergy will be achieved or when we think about the new mid term management strategy, what is the effort that is going to be generated from each company is going to be considered. Therefore, at this point, there is nothing that I can share with you at this point. Okay.
Thank you very much. My second question is regarding the question from the Japanese government to lower the mobile phone rates. KKDI and SoftBank for the 20 giga through the sub brand they are responding to that pressure is the current situation. However, for your company with the Japanese government, I believe that you are sharing your thoughts and having discussions with them. This 20 gig 5,000 yen, basically, this time in the short term perspective, it seems sufficient.
And as DOCOMO on their own or proactively going out there to take more market share. Is that the background story on these actions? Thank you very much. There's a 20 giga. You did international comparison and compared to the major cities around the world, the rate is high.
That seems like the standard of the guidance that the government is saying and the other competitors rate is around 4,000 yen. So the consensus we have is how we're going to respond to that and furthermore as you have mentioned marketing wise how we're going to expand our market shares and in DOCOMO's case it doesn't have a sub brand so there's some cannibalization may occur and so what kind of impact is going to occur including the sectors that they are examining various points and we have not have seen specifics yet at this point. Thank you very much. Thank you.
Thank you very much. We'll go on to the next question. Next from Mr. Kinoshita, please. From BOFA Securities.
Thank you. We hear you, Kinoshita san. Thank you. I would like to ask several questions, if I may. First, with regard to the future, to the extent possible, if you could share with us, it relates to DOCOMO and NTT Communications.
Are do you have is there a possibility or is is the do have a plan to integrate these two companies? I think you talked about the possibility of integrating the businesses of these two companies. But then because of Dongmong not being able to carry out certain activities, would that represent a problem for closer integration between the two businesses? As far as Docomo is concerned, they After they they become part of an integrated company, will they be forced to offer equitable treatment to all party to all partners? And also, furthermore, even without any regulatory issues, does the current scheme allow for the integration of these two businesses?
Thank you. Well, integration of DOCOMO and Internet Communications, that is not the assumption that we have. We talked about collaboration between the two businesses. One possibility is to bring Internet communications under the wings of DOCOMO, but we're not even considering that at this moment. So as far as the target is concerned, the discussion for integration of these two businesses, it's very difficult for me to respond to that.
Generally speaking, We have to scrutinize the situation because any further integration could involve certain regulations. I think we need to again this is for going this is down the road, but I think we will have probably have to discuss with regulators about the regulation. So full integration of the two companies when it comes to full integration of the two companies, if you have two separate entities in a vertical fashion, would that be a separate issue? Again, that probably will give rise to a whole set of new issues. As for the competition, in the context of fair competition and also for the and the continuity of policies, that they have been focusing on these elements through their communication with the media.
So again, it's a matter of how MSC responds to these questions. I think we need to bear that in mind. Oh, alright. And then after the tender offer is over, is there any possibility that due to regulations or rules, you'll not not be able to make Dokomo a wholly owned subsidiary firm? Is that a possibility?
Well, that's something that we're not we're not in a position to know. But generally speaking, one wouldn't assume such a scenario to occur. I see. So so I suppose there's very little risk of that scenario then. That is my interpretation.
Okay. Then let me now ask about the the rate plans. In the previous session, you talked about the launch of the rate plans at DOCOMO. And due to the press coverage, mister Zawada, I understand that you made a tough talk to DOCOMO to be more bold in the rate plans. Now going back to what you mentioned earlier, this summer, DOCOMO is still giving this matter consideration.
I believe that it was the gist of your comment.
May I
take it that in principle, DOCOMO consults with you beforehand. And so I suppose after the tender offer is over, you you can make a comment. But have they consulted beforehand? And has the entity holding company given the green light to the rate plans? So DOCOMO will submit their rate plans after they have received approval from entity holding company.
Is that how things will evolve from now? That's my second question. Well, thank you for your question. First of all, I I think the media was quite mischievous when they talked about how they reported that I give a pep talk pep talk. I was not I was not that upset when I talked to DOCOMO.
I did say though that you are much more capable. I did when I talked to people at DOCOMO, yes, I did encourage them that they were more capable. But I think the media coverage was somewhat sensational. When it comes to the rate plans, when mister Sukka became became the prime minister, at that time already, we had already had talks with the MIC on this on the on this matter. So we did communicate to them that we will not be able to say anything while the tender offer was being conducted.
We're not sure about how they responded to that. We're not sure what the MSC's position is and what the response is. But at the end of the day, KDDI and SoftBank in this order, they gave indications for rate reduction. So these are the facts. If I may ask, the final decision will only be reached after consultations between DOCOMO and entity holding company?
No. In principle, it's DOCOMO that decides the right plans. But of course, there's always the relationship between the company. So we do have discussions. We do talk about them.
Thank you. Then well, thank you very much.
Thank you very much. Thank you very much. We'd like to take the take the next question. Next, FBI Securities. Mr.
Moriyuki, please go ahead with your question. This is Moriyuki from SBI Securities. Hello. Thank you very much. Regarding cost reduction, this time, the factor to push up the operating income, the cost reduction, are there any emergency responses type of cost reduction incorporated in that when the COVID-nineteen settles or comes to end, is it going to further come back or improve is the background of my question?
Or the are you saying that cost reduction is going in a front loaded manner, so it's not going to happen, but if there's like an emergency major type of cost reduction, I would like to know. I don't have the actual figures with me right now. However, the factors incorporated is that the operation center is going to be centralized, that's going to have an effect permanently. And we've done quite of a streamlining especially for the backyard operation, the overhead and all the overlaps in that area were all streamlined. So that's going to be effective for a permanent manner.
But the traveling expenses due to COVID-nineteen, there's no traveling expenses that are occurring. So there is a possibility that that may return or recover in a way, but we don't know the size of it. I don't think it's going to be that large. It's a low global so it's probably the range about 1,000,000,000 yen but it's just around that level that that's going to be the range or the scale. Okay understood and also for NTT DOCOMO, DOCOMO is aimed to further increase their profit and conduct their business.
And as the synergy effect from NTT Communications, they'll be able to improve their competitiveness. But listening to your explanations for the corporate customers, it seems that there will be an effect a positive effect coming out for synergy. But for the consumers, unless they sacrifice the profit, I don't think that they're going to recover that quickly. But you're not going to sacrifice the profit that much. That stance hasn't changed for consumer side.
The consumer side is going to gradually improve, that's the image. But first, the corporate side will improve rapidly and boost up the profitability. Well, if we separate from consumer and corporate, we will see and it's easy to understand the positive impact for the corporate side. But in the mass consumer side, the COVID-nineteen, how should I say it, the Smart Life business which is not the telecommunications related business, they have that Smart Life business. So how much will communications or commerce software and solutions can help out that part including the marketing activities.
And the other point is that traditional or conventional telecommunications services towards the mass consumers. And for communications, they have OCN, they have OCN mobile. So in telephones for businesses, they have the toll free services also that they provide. So for the telephone services or the mass consumers services that they have various services on hand, even though it's a legacy type of service, DOCOMO when compared with our competitors, they don't have the fixed and mobile combined service, meaning that they don't have the PTSN combined service. So just having the lineup of such a thing as a base load, there are certain amount that they will be able to recover is what we think.
But as you mentioned, the new non telecommunications area, it's not that immediately we'll see some sort of a positive effect. I'm sure they will it will require some money. So if I may summarize and it was asked you before the second brand whether you're going to have that or not. So it means that the collaboration is going to become stronger with Oceana brand and they're going to become sort of a second brand in the near future. Well, that is one discussion topic is that what we think.
And at this point from my side, I cannot share anything with you regarding that question. But he sacrificed the profit and try to differentiate themselves by price that strategy is not going to be taken. Yes, of course, because we have to secure a profit. However, the market share and if we can say that the backyard part is also become efficient that maybe that factor may be incorporated into such a thing. Thank you very much.
Thank you. Next question please. Next question from Morgan Stanley, MUFG. Mr. Tsusaka, Mr.
Tsusaka, the floor is yours. Hello, Suzuka here. Thank you very much. Thank you. Well, I would like to ask one question about DOCOMO and another question about a different topic.
The cost synergy as a result of incorporating DOCOMO as part of the group. So if I may, I would like to share with you some comments about and impressions that I have as a result of observing DOCOMO for a long time. I felt that in order to enhance the competitiveness for DOCOMO, they need to do reform, which might actually relate to some painful sacrifices on the revenue. I think they will be able to restore competitiveness just by a little half hearted attempts here and there. So therefore, the short term risk as far as revenue is concerned, well to be very blunt with you, if for example, you were to introduce second brand which is one of the shortfalls for DOCOMO, I think this might be very painful because DOCOMO is such a big company.
That is my personal impression. But what are your thoughts? As in the context of group management, how do you intend to control the operations at DOCOMO from that perspective? And also is that even necessary or do you believe that that's not even necessary that you believe that you'll be able to that things will be alright just by simply adjusting a little bit the current system. I would appreciate hearing your thoughts.
And my second question, if I could go on to my second question as well. Back in 1992, well I think you had a philosophy back in 1992. NTT DOCOMO was considered a totally separate company in terms of the network, in terms of various systems included, Dokong had to be operated as a totally independent company. So that being the case, operationalize, there are some redundant parts from the context of entity group. That is my view.
But so after this integration is over, how much cost synergy do you think you'll be able to realize as a result of incorporating DOCOMO as a wholly owned subsidiary firm? If you have any numbers that are available through your brainstorming exercises, I would appreciate your pointers. Thank you. Those are my two questions. Thank you for your questions.
So let me go on to your first question. Indeed, the competition are very strong. And the needs of the market and the needs of the customers are very dynamic and that pace of change is even accelerating. So there's need to be flexible to cater to that market. At the same time, there is need for agility in our decision making process that is being required, but that is very difficult to do.
Up until now both on DOCOMO and NTT Holding Company, we really were dependent on one single pillar. For example, in the case of DOCOMO, was mobile communications. In the case of NTT Holding Company, was the fixed line business. So I think we to be more multifaceted. We need more division.
So DOCOMO needs to expand Smart business, they're trying to expand their Smart Life business. But on top of that, it's important that they enhance their corporate business and also work with partners and also incorporate platform and also go on to system integration and also go to software development. They need to expand into that. And also in terms of the retail business, they need to expand into the finance business financial business and also respond to the requirements of the power business and also to deeper partnerships with construction business. So there are a lot of evolutions that could take place.
In terms of geographical footprint, I believe outside Japan global business could be another possibility. So it's important that there need there is a need for reform of the governance and the mindset. So they need to be multifaceted. They need to follow multi multiple checks at the same time. That is my thinking at this moment.
Now on the other hand, you mentioned that from 1992 we were a separate company. That is true as far as operation is concerned when it comes to long distance communication. Yes, we have seen duplication as a result. So we believe that there is potential benefit from that. So and according to simulations, the benefit could be as high as several 100 billions of yen.
So how can we integrate that? So that's one possible agenda for discussion between DOCOMO and entity communications going forward. Net source buildings and facilities are concerned. The number is not many, but there are separate buildings and facilities owned by entity communications and DOCOMO. So how do we deal with that?
And also as far as operation is concerned, the size and the scale density communications is not all that sizable. But I suppose if the two companies are compliant, the size could be in the range of JPY10 billion, JPY100 billion. So I'm talking generalities here. So what step can we take and what synergies can be generated? After the tender offer period is over, we would like to set up a working team and then give give these matters consideration.
So that is how you should understand the current situation. Thank you very much for that.
Thank you very much. I would like to take the next question. Next question, Mizuho Securities. Mister Hodi, please go ahead. I'm Hori from Mizuho Securities.
Hello. I have two questions. Last time, DOCOMO twenty nineteen in April they came out with a new rate. At that time it seems that you Mr. Sawada your tone was in a way that they have to be more proactive, more aggressive is how I understood it.
It was a tone of go and get your customers. So it seems is it better to think that your tone has changed slightly? Basically, it hasn't changed. However, in reality, they've done the new rate for one year and how should I say this? Whether they are increasing their market share or not, they are struggling.
Therefore, we need them to think reality and come up with measures and consider measures is what I want them to do. It's not that my tone has become softer or anything like that. Thank you. So you are thinking the reality too, yes. Okay.
Then my second question is that when it becomes when you had the meeting regarding the wholly owning TT DOCOMO towards the midterm plan, the minority shareholders profit being able to incorporate that, that they'll be able to add JPY 50 to the EPS. That was the calculation that you've done is what I've heard. And currently you are in the Visa GOV period and DOCOMOSA rate, how is that going to respond and something that's going to discuss moving forward and as a question right now, the synergy part also, all that are being considered is reflected in this JPY 50 or is it going to be more than or an upside of 50. The midterm plans EPS target all those numbers after they all come out at the year end result announcement, can we have expectations that you will have some sort of a guidance as such? Thank you very much.
That is the target I have for the actions to be taken moving forward. So timing wise, it will be May. But regarding the content, the target is $3.20 yen right now. This 50 yen, is that an incremental? That's not the that's not the fact.
It is one of the measures, but this 50 yen, the minority shareholders incorporated in 200,000,000,000 yen increase and there's an EPS of 50 yen increase. That's true, but that's that. It's the same way of thinking of when we conduct M and As. So including this point, our midterm management strategy, how much of an increase can we have there? I think that's the way to think of this.
So you mean that's not just this, but there's synergy that's becoming more realized and there are some upside factors? Yes. Okay. Thank you very much.
Thank you very much.
I think we have taken all
the questions that were registered. Are there any additional questions from those of you who are connected? Please push zero followed by one if you have any questions seems that there are no additional questions. At this juncture, we just would like to conclude the presentation of the second quarter results for fiscal year twenty twenty. Thank you for your attendance.
Thank you
very much, ladies and gentlemen.