Thank you very much for taking time. I leave your busy schedule to attend NTT IR Day today. I am Fujiki from NTT IR, and I will serve as the moderator till the end of the meeting. Today, we will have presentation on three themes: technological strategy, global strategy and governance. And then move on to the Q and A session by President Saboda at the end.
If you have questions or NTT DOCOMO subsidiary questions that we announced on September 29 will be entertained at the end. We plan to end at 05:30 p. M. Today, we have the live streaming by the Internet, and this will be distributed on demand at a later date. I hope you could understand.
Without further ado, the first theme, technological strategy, will be explained by Senior Executive Vice President, Shibutani. Who will talk about NTT's growth strategy from the viewpoint of the CTO. Mr. Shibutani, please.
Good afternoon, ladies and gentlemen. Thank you for the kind introduction. Manu Shibutani, the Senior Executive Vice President of NTT. I was appointed in the current position back in June. Allow me to briefly introduce myself.
I was involved in network reliability building design for network reliability building back in Fukushima at 03/2011. I was involved in the reconstruction and the rebuilding of the network after the earthquake and tsunami. Since then, I was involved in business development. And also, as the President of eSport, I was involved in exploration of new strategic business. Now from June, I was appointed as the CTO, CIO and the responsible for CDO responsible for digital transformation.
So I'm responsible for technology matters overall at Entity Holding Company. I look forward to your kind support and understanding. Now on the '19 on the twenty ninth of this month, we announced the JPY 4,000,000,000,000 worth of tender offer for NTT DOCOMO. I'm sure you're highly interested in this particular topic. Back then, we had the largest market cap at NTT in the past.
And also in the heyday of the IMO technology, DOCOMO's market cap was around 43,000,000,000,000 yen But then subsequently, the likes of GOFA and also BAT of China, these players have grown, and there is now a major gap. Yet NTT once again be reemerge as an innovative company. That, I'm sure, is the topic that you're most interested in. With regard to the short term growth plan, DOCOMO and other group operating companies will go up with rate plans and also will come up with new services. And that is how we'll be responding to the requirements of the market.
But in terms of the medium term and beyond, the strategy for medium term and beyond, It's important that R and D capacity of NTT Group and the technology capacity of NTT Group as a whole, how can we bring this together so that we can drive innovation and contribute to the society? This is very important, and this is not a matter of great interest to the public. So that being the case, today, I would like to talk about NTT's growth strategy from the perspective of CTO. That is why I decided to choose this topic. I would very much appreciate your kind attention until the very end.
So let me start with the substance of my presentation. On the twenty ninth, when we announced the tender offer, President and CEO, Mr. Sawada, mentioned that because of this tender offer, this is the direction based on which we're going to see growth. And he identified four directions of growth. And the two boxes that are not covered in black, the Smart Life and digital transformation.
In the case of digital transformation, 800,000,000,000 cost reduction until 2023. And also with regard to Smart Life and B2B2X model business, by 2023, again, we are aiming for 600,000,000,000 yen These are the targets we have set for these two boxes. And we have made concrete progress to date. But with the consolidation of the group this summer end, we'll be able to further expand these sites, and we'll be able to accelerate this growth. In terms of the medium term growth, the boxes that are covered in red, number one and three.
Development and provision of new services based on a remote world will be very critical. How can we provide that to the society at large? And the other box is three. We want to make sure that we're able to promote global scale R and D and drive innovation. So for these two topics, I would like to primarily focus on during the presentation today.
So in order to deliver these targets and by the way, on the twenty ninth, Mr. Sawade used these materials at the press conference, And we are going to pursue four pillars, and we are going to contribute to the society at large. In particular, I want to highlight the most relevant topics. The yellow one on the top, strengthening global industrial competitiveness. We want to develop new services because the world becomes more virtual in nature.
It's important that we have the ability to deliver various services on our own volition. So we want to bring about that change. And the second, right now, five gs is being introduced, and we want to expand the area of coverage so that we'll be able to see the dawn of the new IoT era. We really are in the new development stage. We're in the new era.
Mr. Sawada talked about six gs. Inclusive space and outer space and underwater, it's important that the scope covered by Wireless further expand going forward. So inclusive of the deal of DOCOMO that we announced, it's important that we further accelerate the expansion of Wireless. And the third topic, this is in the blue part.
We want to promote B2B2X. We want to support the society and enrich the society. So digitalization and smartification and also revitalizing local communities and economies, these are things that we need to promote. So these would be the three targets which I'll be covering today. And one further point that I wish to address.
There's a common platform, the common theme that runs across these three aforementioned targets, which is to increase your resilience and increasing cybersecurity. So increasing the resistant information ICT system against disasters and strengthening cybersecurity is the key. As there's decoupling in both The U. S. And China, it's important that we offer trusted services.
There is a how do we deliver that in Japan? Because there's an increase in this topic on a global scale. So at the basis this is a common basis. So inclusive of R and D, it's important that we address this very common theme that ranks our various targets. So let me talk about the two mentioned the two targets.
How do we intend to pursue the growth? I want to focus on these two growth strategies and focus on how we intend to deliver them. First is to develop and provide new services based on so called remote world. Let me try to explain the backdrop of what I mean. There's reference to local area network.
This is the access network, and the core is the upper network, upper layer network. So RAN is the bottom layer. As you've seen, specific vendors provide vertical model covering all the way from application hardware to software, And they are now providing that to carriers and end users. This is a very efficient model, by the way, and it is very integrated. So therefore, it is efficient.
However, having said that, if you want to be innovative with regard to software, you have to you were reliant on vendors. So therefore, this did not drive very healthy innovation. What we want to pursue is a model on the right hand side, which is the open model. This is what we would like to pursue. There are two approaches.
First is the so called multi vendor approach where various equipments could be selected, where you have a variety of available options. This is the CU, DU world. The other is for the upper layer equipment, which we translated into software, which means that we, ourselves and our customers, will be able to expeditiously create their functions in a desired manner in an open environment. This is what we would like to achieve as soon as possible. If this could be delivered, then on the right hand side, this actually is the fixed line network, the telephone network offered by NTT Asumas and also NTT Flex, which is the broadband fiber network.
So NTT ComWare and other operating companies are trying to create a virtual situation. If that's the case if this is delivered, then full fledged fixed mobile convergence could be realized through software. Then to be more specific, so let me try to summarize. So a dedicate so we want to make sure that we have a general purpose open system so that we're able to create a situation where we'll be able to advance the given environment. So let me share with you some of the specific examples.
On June 26, we announced that we'll be investing in NEC, And that initiative involves the following. We are having a very heated discussion right now. And in three major phases, we're trying to consider the development going forward. In order to pursue multivendor situation, it's important that RUN equipments be connected through open network, open connection and expand globally. And the control units on the top, VUNCU, these control units, they should be driven by virtual software and developed based on a new system.
Then on top of that, what we would have is our strength, which is operation and also flexibility and advance and reliability. These functions and these features would be offered on top. And we what we want to do is to deliver this to other vendors and to other carriers. So on the right hand side, you find preference to software and NEC with software technology, production technology and also the ability to use them at DOCOMO and also entity that has LSI. And both coming together, we can offer installation support and maintenance and operational and operational services.
We believe that we'll be able to expand our business in this fashion. Now that being the case, when this model is achieved, what type of universe are we going to welcome? This is the integration of mobile and fixed technologies for core networks. The left hand side shows mobile network and fixed line network. These are two independent networks right now.
But with softwareization, based on virtual platform, we'll be able to integrate them. So what are some of the challenges in the connected world? For example, in the case of Zoom, the telecommunication with your friends. And also when you have connection for mission critical functions and also when you want to connection with for government agencies, if you use SNS and other meeting systems, the authentication and reliability issues are really going to be critical. So by using the softwareization platform, the authentication security authentication billing, security, XR, device management contents, we believe that we're able to offer them because we have the advantage and know how in these functions.
And on top of that, then we'll be able to offer trusted service. That is the platform which we want to deliver. And at the same time, it's important that on our own, we also have the ability to deliver new services. And also, it's important that with other partners, we provide trusted remote services through collaboration with those partners. So we believe that, that is the services that we are offering in the context of remote worlds strategy, which is the first topic.
And the third pillar, which is the worldwide promotion of R and D. Let me explain about this particular topic. From two about two years ago, our President, Mr. Sawada, when he was appointed as the President, he talked about the road to ION. The major pillars are as follows: But the primary pillars are Ofotonic Network, two Inosodisclosure and Computing, which is three and the Cognitive Foundation.
These are the major elements. Now this time around, with DOCOMO becoming a wholly owned subsidiary, then the wireless component, this was not connected up until now, but this will not be connected with very strong connection. So therefore so wireless, all photonics network, digital turn computing, all these functions will come together. Then that being the case, how can we leverage our strength in these different facets? I would like to talk about this one by one.
So let me talk about our strength in wireless. Right now, the five gs universe is expanded. Well, these are simply area coverage for smartphones on a land basis, 370,000 kilometers square kilometers in area. In Japan, we have the exoeconomic zone. We have 2,440,000 square kilometers.
If you include the waters, such as the inclusive economic zone. So we need IoT world that can cover not only land but also massive water space. And in order to achieve this, it means that we need to further advance the current five gs technology or also pursue development in outer space and sky. It's important that we expand the coverage rather into outer space and sky. In the case of Spain, we have the pace of communication satellite needs to be further expanded by tenfold.
And NTT has already verified that. And also we have partnered with JECSSA. And right now, we have various satellites in 10 times numbers from space and creating constellation. And we have initiatives with her, but we'll be able to offer communication through in this constellation version. And two ninety four megahertz, which is the platinum bandwidth.
We've used this platinum bandwidth. And with very inexpensive terminals, we'll be able to have communication with space. We're trying to promote that technology. So therefore, space level coverage, we hope that we'll be able to further promote going forward. And also in terms of undersea, be it the culture and also wind farm, it's important that we be able to monitor what is going on undersea as well as above the sea.
And so if you cannot deep reach the deep area, there are still many unknowns, but we have 300 meter class or mega class, high speed sea exploration technology. And therefore, we will combine these technology to have the true IoT wireless network that connects the land, ocean and lead the world. Now DOCOMO, the other day, announced six gs beyond five gs. And so extremely high data rate capacity, extremely wide coverage, extremely low energy and cost and low latency, high safety reliability and this extremely massive connectivity, it will be covered from the outer space. And therefore, multiple devices need to be connected at the same time to make this work.
So the speed and the simultaneous connectivity will be 10x more than five gs. And furthermore, we have to support the smart society, so the reliability has to be two orders of magnitude higher. So TOB, backed by TOB, the Wireless DOCOMO and Research Institute can lead this technology. So we can once again take on the challenge to lead the world. We have the core technology to do that.
Second point is all photonics network, ATN. It is a bit complex, so let me explain. Currently, in this diagram, the IP network at the bottom and PSTN are the mainstream IP network. Why this was so innovative was the DoD, Department of Defense, even if one communication network is damaged, it can still function. So put in IP packet network, send to the recipient and look at the POP and deliver to counter the attack.
All the communication data was integrated under this network. And in the sender, plus plus bit, this is priority, this is highest priority, can be flagged. So voice, which was the biggest profit maker, was put into the IP and send it real time because it's high priority. So right now, network integration is now underway. And so this was very innovative.
But going forward, many traffic will become on play. So IP weakness is emerging. First of all, to do packaging, there is a delay. And you have to look at the routines. So there's routine delay latency.
So this has to be resolved. Otherwise, this red to blue, the smart mobility, smart city, health care, as the integrated network, is still not enough. So end to end optical network has to be established. Then in mobility, multiple video need to be reflected to the transportation at low latency. And in health care, many people's health information, even with smart delay, has to be archived.
So this is a completely different requirement. And we, in our network, have to be provide that to provide digitalization and smartification. So that's the kind of communication that we have to realize. So with this optical network, what is our strength? LSI.
In the optical communication, we have led the world. Fiber is not dependent on coding. And with Internet, global crossing, when the wide broadband increased, we led the world to increase the wavelength. This time, we have to go beyond the limit of more and go into the miniaturized world of the opticals to reduce the power consumption and have enough capacity. NTT is leading the world there.
More specifically, it is the integration of photonics and electronics. This strategy is our technological development that we lead the world. And the component level chip, 400 gigahertz transmission equipment is already in the commercialized stage, and we can offer this by next year. Next is chips and inside chips. We will incorporate optics to chips.
The latency to convert to electricity or the power consumption converting to electricity can be reduced. And Intel and NVIDIA are now coming on board. Processor, we are starting from the communication device. The computer processor or GPU server, these can be integrated in photonics and electronics for higher efficiency. So the top we are leading this research among the top players in the world.
And the third component, this is the digital twin computing. This is the world of computer. This shows digital twin computing, the real world is created in the virtual world and conduct simulation to forecast the future or manage the health or enhance efficiency to digitalize society. So left side is the personal level and the right side is the national level or town, city level and globe. And the AI, data science efforts, for example, in smart city, we are doing this in Las Vegas or Uber City with Toyota and smart agri and smart chain with Mitsubishi Corporation, we are taking on many challenges.
So we are honing these use cases, and this is a world of competition now. And other than that, we have other strengths, too. And that's what I want to touch upon today. Two points. One is for the digital platform.
In the digital era, this is a must. Digital map is a must, and we are running at the forefront. And another is health care. Digital data. When we collected medical digital data, it is precise.
You need a precise dedicated sensor. So the optical and audio technology is something we have. So the device technology is what we are trying to promote. So the first digital twin four d digital platform. For example, ZenRing or Shia, the overseas player, we formed the Alliance, Capital Alliance.
Google Map and others, there are many semantic information, warehouses are, where are stores and what transportation network exists where. But that alone is not enough in the digital era because the precision is low. Zenri map is by meter. It's deviating by meter. But if the person is walking, if using for walk, it's okay.
But for autonomous driving or for the infrastructure development to dig underground, then it has to be the area can only be 10 centimeters at most. Otherwise, it's not functional in four d. The vertical and horizontal and depth, the vertical and height, you have to have the map of the height and depth. Otherwise, Kubota and the heavy machinery manufacturers, you need to have digital instruction to show the height and the depth underground. That's three d.
In addition, time line. With time line, you can see the deterioration comparing with past data, the health or the geographic data or how environment is changing. You can see all that. So four d data digital platform is now used advanced geographic space information database. And the right side is the business use case.
So the navigation, high precision location navigation and the smartification in industry and the city design, we are trying to apply in these areas. Next is digital twin device. Various cases here and some are commercialized. Wearable electrocardiogram with tore. Our sensor is embedded in fiber to always take the electrocardiogram vital data.
And other than that, the temperature inside the body and with AI stethoscope, we can have even if you're not an expert, you can take the pulse very accurately or implant, sensors embedded in implant. And on digital twin, it can be reproduced. So by combining with your heart, we can use this technology. So this optical technology, we are leading the world. Terumo and other manufacturers will be making the products, but we have the core technology.
So that is what we are thinking and pursuing, our core technology that we excel at. And one more new area. So wireless and fixed line and computer are integrated in this world. But we think this will be disaggregated. What I mean by that is the computer power, the left side, the red one, currently, the network, Amazon and Microsoft Cloud, it's accumulated there and processed there.
But in terms of collection, it is efficient, but it uses much power and the collected data needs to be converted to electricity again to analyze. So the process speed and it is not efficient. So network and computing need to be modularized. Some will be down premise, some will be end user, some will be core network or Amazon Cloud. So it will be distributed.
As you see at the top, the computing that can support the society will be required. It says OS. So we want to optimize this in totality. The operational scheme in Software Innovation Research Lab is now addressing this challenge. And this discussion is now just starting in the world.
So we want to lead this endeavor. So my time is almost up. I talked about NTT's medium term strategy promoting with technology, and I talked about many new developments. The use cases or the progress On November '20, we will have an R and D forum online. So President Sawada and Research Lab Center at Kawazu E san will do a presentation like we did today in more detail or show you some actual examples so that you can directly experience.
So I hope you could enter and attend. That concludes my presentation. Including the large scale deal, we want to support the society and help realize the digital society from technology. We want to lead the technology. So I ask you for your continuous expectation.
Thank you very much.
The first question is from SMBC Nikko Securities, Mr. Kikuchi. Mr. Kikuchi, please go ahead. Thank you very much.
My name is Kikuchi. Thank you for your presentation. I was able to identify very interesting topics, and I would like to very much study about these topics going forward. If I may ask a question, sir, about R and D organization. Within the group, the operating companies have different research and development organizations.
Now there's been a major shift in the transformation through this deal. I've imagined that, that is going to be the case possibly. I know that the specifics of what you're going to do are not determined yet. But with regard to how if you could share with us the policy with regard to the structure of your R and D going forward. As explained in the course of my presentation earlier, as Mr.
Kyuchi mentioned, the role of R and D will become even more important down the road. At the same time, we're going to have a tender offer for DOCOMO. The we want to make sure that we're fully connected to the iON because we're a part which was not yet connected. So because wireless is going to be so critical, it's important that this component to be part of the iON concept. So this is the top priority for us.
So with regard to reorganization, of course, it's a matter of what type of organization we're going to create. But this wireless part, holding companies, R and D, talk about the outer space and also underspeed WiFi, they're very strong. But in the case of DOCOMO, they have strength in five gs and also strength in the six gs, which will follow. So it's whether we converge these two so that in the wireless area, we'll be able to accelerate R and D. So without a doubt, that will be the top priority for us.
And one other point with regards to R and D itself. With open innovation, we need to involve various global parties. So therefore, it's important that we accelerate our global activities. And for that purpose, we integrate such a team. We're going to focus on this global oriented team even more as we go down as we go further ahead.
So it's important that the emphasis of R and D be further strengthened in the management. That is all. I know that there are a lot of study groups and tours that you're carrying out in various parts of your group, and you are very highly motivated. So I'm not sure whether or not this is included. But I hope that with NTT data as well, I hope that you'll be able to do something that which can translate into concrete output.
It's important that you provide some economic analysis also so that we'll be able to have a dialogue with you. I would appreciate some sort of explanation about how you intend to advance your organization going forward. Thank you very much. Thank you. Yes, thank you.
Thank you for your encouragement. We will certainly do our best. Thank you for those comments.
Thank UNIDENTIFIED you very much, Mr. Kikuchi. Next question is Nomura Securities, Masuno san. Mr. Masuno, please.
I have two questions. First, as you mentioned at the outset, network virtualization, CU and DU virtualization, VRAN. Altiusstar is already realizing this. So what is the difference? And the future progress, how do you see the future progress?
And you will do this in parallel with ORAN? So that's my first question. REPRESENTATIVE:] As you correctly mentioned, Rakuten and Telic, they are already VRAN with Altius Star is already being commercialized. But our difference with Rakuten is the ones that can build with zero base are introducing VRAN. And other global carriers, including Rakuten, have the existing network and migrating to virtualization.
So that's the challenge they have to overcome. So we want to build the virtualization that can meet those needs. AltiStar, we will consult with them initially to move forward. However, as I mentioned in this material, what we are trying to pursue is NEC, the ORAN, CU, DU, not just the virtualization there, but furthermore, core network, white box and software. We are trying to go that far.
And R and D team will be involved and with Intel working with Intel and other players. Thank you. My second question is about the semiconductor, optical semiconductor in terms of IR. This is ESG social contribution and the power consumption may be reduced by one hundredth. After this spring, Intel, Microsoft were invited, and a few dozen companies came up with the standard and moving towards the commercialization, taking steps towards commercialization from R and D.
This is an aggressive short term target, but the commercialization is targeted in five years' time. So the current progress, the current status and the outlook, if you could update us once again. So what is mentioned here, 400 gig transceiver on the silicon, the optical will be included and power consumption version can be launched next year. And the next one, interposer in chips, electrical circuit in chip will be done optically. So chip to chip connection will be optical.
And then package will be made to optical. And in the end, we will build chips optically. But in the meantime, in the next two three years, optical interposer device can be realized. So we will go in phases. And in the end, the optical and electric will be integrated.
So this photonic electric convergence will be released as soon as possible. So the global standard is already underway. I own global forum. NVIDIA is now involved. Intel, NVIDIA are now part of us.
So open innovation, standardization will be produced and co innovation, collaboration will also be established. So various strategies will be utilized as we move forward.
You. Thank you very much, Ms. Masunosa. I'm afraid because of the time constraint, this will be the final question. So this will be the last question of this session.
Next question is from Citigroup Securities, Mr. Tsuru. Tsuru, the floor is yours. Two questions. My first question relates to Masuno san's previous question about ORAN.
You mentioned that some will start from Pure, some will start from Brownfield. So very briefly, what are the advantages and disadvantages of these two approaches, starting the pure approach and the brownfield approach? And that being the case, how does NTT intend to offset any negatives that could be suffered by the companies who follow the brownfield approach? Well, in terms of virtualization, the Packet Core virtualization is something that DOCOMO has already begun to launch significantly. So as a replacement, virtualization can be introduced in certain parts.
So EOL timing. In other words, once the equipments needs to be replaced, then we will be able to replace that. So already, in some parts, this is being done. On the other hand, in the case of CDR RDU, as I mentioned earlier, This interoperability between these components need to be considered. They have to be ensured.
So this is the area where regardless of any combination, you have to connect to VRAM, virtual RAN. Sorry, it is not yet done. This is one that we have a decision where everything can be connected to VRAM. So making sure that we ensure connectivity of existing systems with VRAM and then pursue replacement. That type of approach needs to be pursued.
Also, right now, five gs is expanding. In the case of rural communities, we can use the greenfield approach. So in those approaches, we can actually deliver and introduce and launch virtual from the beginning. So it's important that we have a good combination between the ecosystem, reduce the CapEx and, at the same time, make sure that we leverage the strength of the virtual platform. If I could ask a follow-up question.
When you make this coordination, do you believe that you'll be able to overcome the gap with companies that are able to follow the greenfield approach? Well, as you point out, what is the pricing? What can we deliver? That's something that we need to scrutinize further. My second question.
I'd like to go back to your the partnership. I know that what is the competing technology vis a vis ION in relation to 16? And so that being the case, in order to have a de facto victory, what are some of the focus emphasis that you need to focus on? Of course, partnership is important, but what is the emphasis you're bearing in mind when you as you try to grade six gs de facto standard? You're talking about competition between six gs and ION.
Is that what you asked? No, no, no. That is not the case. I think in the case of optical semiconductor, this is very important to drive six gs technologies. Is my understanding correct?
If that is the case, then is there a standard technology that can compete with in the context of six And also, if you want to compete with such technology, must be done? I guess that is the gist of my questions. Well, yes, perhaps my explanation was not sufficient. In the case of six we are trying to expand the wireless technology, wireless universe. In the case the main target for the photonic electronic convergence is to create all photonics network.
We want to apply the all photonics technology. So it is not a direct competition between the two. But the wireless world, most when you say corporate digital signaling processor, They need more advanced digital signaling processor. So that being the case, so photonics and electronics conversions could be applied in that particular area as well. Now in terms of any computing technology, well, in how far can the non photonic electronic convergence world advance?
I guess that is going to be a dictating factor. But we can't talk about collaboration, but Intel and NVIDIA might decide to further brush up their executive technology. So the cost so cost competition is going to be the key. How advantageous can Photonics and Electronic Convergence be? But these two companies are now part of the IO partnership.
That is because we believe that they want a new perspective. They want to be involved in this new LSI development. Unless they're involved in this development, then they will not be able to overcome whatever boundaries or obstacles that may exist. So that being the case, I do hope that they will further be involved as partners in this initiative. REPRESENTATIVE:]
Thank much. That is all. Thank you very much, Mr. Furugao. So with that, we will close the Q and A session.
Thank you very much, Mr. Shibutani. Next, second theme, global strategy. Our Global Business Promotion Office, Mr. Ozaki and Mr.
Nakayama, Senior Vice President and Head of Finance and Accounting, will do a presentation. Mr. Ozaki has been involved in the global business all along and three years from 2016 was in Hong Kong, NTT COM Asia President of Local Subsidiary. The overseas data center launch and enhancement had been his business. He has been led the global business of NTT.
And in July, he became Global Business Promotion Office Head. Today, we will talk about the overseas company, NTT Limited, that was launched last year, the progress of the business reform and the future business strategy. Nakayama, Senior Vice President of Head of Finance and Accounting, will ask questions, Ozaki will respond to that. There will be a Q and A session.
So Mr. Ozaki and Mr. Nakayama, please.
Thank you very much. My name is Nakayama, the Head of Finance and Accounting. As was introduced by the moderator, I would like to pose questions that are heard from investors on a day on day basis. And based on that interest of the investors, I would like to ask questions to Mr. Ozaki, who is the Senior Vice President and Head of Global Business, in this dialogue.
And also, we have set aside time to accept questions directly from the investors. So we hope that you will take part in the Q and A session as well. So without further ado, let's start the session. So Mr. Ozaki, first of all, NTT's global business reorganization was carried out in July, starting in July, and NTT Limited was established anew in July.
So can you talk about the activities of the past year at NTT Limited, if you could share that with us? Thank you. Yes, thank you very much. Thank you very much. I was appointed as the Head of Global Business since July.
My name is Ozaki. I really appreciate this opportunity. So as you are aware, in July, NTT Limited was established. NTT Limited combines NTT Communications, Dimension Data and NTT Security. 150 companies have come together to create NTT Limited.
And in each of these three companies, they were we had presidents, we also had employees for Dimension Data, NTT Communications and NTT Security. So it's an aggregation of a very large number of people and companies. So that being the case, it's important that our line of vision are totally aligned among the total employee base. So we wanted to prioritize expansion of profit, not scale. And the second is that we shift to value added services that are more profitable in nature and deliver value to our customers.
So focus on value added services and shifting to value added services. And the final point was that we implement structural reform by the end of the year. That's what we try to keep in mind. Now last fiscal year, we launched the structural reform, and we were able to implement structural reform. So in terms of the most recent financial situation, because of the structural reform, last fiscal year, we had very large deficit.
But now the structural reform benefits are now beginning to be seen. So therefore, I believe the company is back on track to drive profit. Now this fiscal year, we believe that oh, question. We have a target of JPY5 billion as a profit, and we're making efforts as a team to achieve this. The progress up until August has been very robust so far.
But then because of COVID-nineteen, the greatest risk is that our sense of urgency become lax. So therefore, it's important that we do not that we become, it's important that we not become lax and that we further accelerate reform. Next, let me talk about the percentage of the value added services. This if the company is to become further profitable and if the company is to drive profits in a stable fashion, it's important that we increase the percentage of profitable business. And we have a situation where we have a structure whereby we can continuously drive value profits from value added services.
Let's just go through. 32% of sales was the percentage, but this is clear. In the COVID-nineteen universe, value added services are actually increasing. 36% of sales will be achieved. And by 2023, we hope that 50% of our sales could be driven by value added services.
So that is the reform and improvements which we're trying to drive as we speak. Now in terms of examples of value added services, let me try to explain what they are. This is an example from North America. In North America, usage of cloud is by far most expeditious compared to other regions. And these customers, their mission critical services are shifting from their customer premise to cloud in a safe environment.
There's a demand that customers be able to migrate their mission critical servers from on premise to cloud, which means that they have a high performance environment. And not just in North America, specifically Europe and Asia included, they want to pursue IT reform. That type of demand is quite prevalent. So that being the case, in the case of North America, we have private cloud services being used. In case of Europe, we have data centers.
In Asia, Microsoft Public Cloud, that was being utilized by customers. So we are accommodating multi cloud environment and offering managed services. So that is the type of proposal which we provided to this particular case. And the customers ended up choosing our service at the end of the day. So by reflecting value added services, we were able to resolve customers' issues.
And we came up we were able to come up with an IT plan together with our customers, bearing in mind to those elements. Next. From March through July this year, we had spread of COVID-nineteen on a global scale. At NTT Limited, we offered NTT a safe remote work environment. More than 500,000 remote offices environments were developed.
And also, we also offer security environment for the customers. So we made so we're involved in this first step as that work. And also, as is the case with the program today, it's very difficult to have face to face events. So digital event services is now being proposed to many of the customers. Now from this point onwards, if Anti Limited is to further drive profitability, what is required?
There are two elements. First is sales transformation and the other is improved productivity business productivity. So let me talk about improving global operation efficiency. This activity has already been launched. Indigateso shared service center, this is a consolidation center for various operations.
In April, we decided to establish two such centers. One is in Romania, the other is in Malaysia. And here, operational support services and also personnel and accounting services were consolidated. And we innovated the IT system and improved cost efficiency. And we are expecting 50,000,000 yen cost reduction from fiscal twenty twenty to fiscal 'twenty three.
That is our expectation. Now what about sales transformation? A question. This is something that reviews go to market service go to market strategy so the customers will be more incentivized to use our system. Around 1,700 customers are there, and we decided to categorize, resegment to these customers.
And digital transformation and demodernization of all these companies will be coupled with our value added services. And we wanted to put proposals to these companies. So that being the case, we decided to recreate the sales system based on this new categorization. So based on one NTT concept from October, we'll be further accelerating our sales effort based on one NTT strategy. So sales transformation and go to market reflecting such services and shifting to value added services and also cost efficiency improvements by using shared service center and improving our cost efficiency.
With this, we believe that this fiscal year, as things stand right now, our operating margin is 2.6%, approximately $300,000,000 That's our profit. But we want to improve this 10,000,000 yen and operating margin of 7%. That is our goal. So allow me now to ask three questions to Mr. Ozaki. So
Ozaki, rather. My first question. The impact of COVID-nineteen, that is what I would like to ask. Fiscal year 2020, the guidance for fiscal twenty twenty for overseas sales is 120,000,000,000 yen impact. And also in terms of operating income, 25,000,000,000 negative impact is being foreseen.
That number has been disclosed. What is the current situation with regard to such negative impact? And also, I would assume that this might be a difficult question for you to respond to depending on the situation on how the situation evolves. But after next fiscal year, what is going to be the likely situation? Can you try to envision what is going to be the situation for the next fiscal year?
So the impact of COVID-nineteen. For this fiscal year, in the first quarter, the impact in terms of sales at NTT Limited was 16,000,000,000 yen impact. On a full year basis, we believe that close to 80,000,000,000 yen impact is likely to be there for sales on a full year basis. That is the current plan that we have. On a monthly basis, we cautiously monitor the situation.
At NTT Limited, we've established this plan, and we believe that the situation is very much in line with the plan which we have established. So the impact on sales right now up until the month of August is roughly very much in line with our projection. So 8% in terms of the in terms of the impact on sales is seen. Especially in Asia, we are beginning to see significant impact in sales in Asia. Now turning to NTT Data.
Right now, the financial impact of COVID-nineteen is not yet prevalent. But primarily based on North America, the order taking is beginning to slow down. So going forward, there could be potential impact. So we are cautiously monitoring the situation.
So second question. The investors' biggest interest is the international global business. So the medium term strategy, what is your financial target in fiscal year twenty twenty three, USD 25,000,000, 1,000,000,000 and seven percent operating profit margin? On the last page, you talked about limited activities, the image of the activities. So if you could quantify this, 2.6% in three years' time will go up to 7%.
If you could quantify this a little more, please. This year, 300,000,000 is the profit target. In fiscal year 'twenty three, it's $1,000,000,000 So it's a challenging goal, but we will take measures one by one and accumulate block one by one. And with that, we think we can achieve this target. As I mentioned earlier, sales transformation will be driven from October around the world.
And this activity, from my experience from the front line, will take a little time because the customers' IT challenges need to be heard carefully, understood and planned and budget need to be secured and have our services used. It takes time for our service to be installed. So the activities that we've taken so far will become orders in one year time. And in fiscal year twenty twenty two or 'twenty three, it will have a positive impact on our financial results. I think that's the kind of time line.
So the key here is, in the meantime, from now to fiscal year 'twenty one, we need to take measures of the business process optimization expeditiously. And by reducing costs, we can have competitive price. And if the customers can choose us, then it will lead to profit. So this is something we have to do. By having two wheels of a car, 7% can be achieved in fiscal year twenty twenty three.
So in your explanation, you talked about the sales on the offence side, how the high value added service can be grown. This is important. I understand. So in your presentation, you talked about the high added value service ratio of total sales. The graph, if you could project that slide.
So in IR Day last year, NTT Limited, Jason Goodall, CEO, talked about 50% in fiscal year twenty twenty three. We are frequently asked by the investors that so the 60% high added value services, data center, managed service ratio or the breakdown. So we are asked to give the breakdown, rough breakdown. So could you enlighten us on that? Data center, 30% managed service, 30% network, 20% and cloud communications, this is voice service is the remainder.
Understood. So data center, 30% managed services, 30%. So those two account for a large portion. So one additional question. Data center, managed services, market size, how do you think the market will evolve?
Will this grow strongly? And as the player in the market, what do you think is NTT's competitive edge, differentiation that allows us to capture market share vis a vis the competitors? What do you think are our strengths? Thank you. Yes.
The market size the global market size is 40,000,000,000,000 yen and especially the cloud type managed services is now growing strongly. The growth is around 20%, JPY 8,500,000,000,000.0, 20%. Data center market size is around JPY 13,000,000,000,000. Growth is 10%. Now our current status is in Managed Services.
North America is strong. On a year on year basis, a 30% growth, although the sales is still small. Data center is now also growing at 15%. So this is where we stand at. And our strength, as mentioned here, we have global network and data center and cloud service platform that can allow us to offer managed service.
So the global capability and another strength is our relationship with our customers. Customer intimacy, We can provide good service backed by good technology and automation, and that allows us to generate profit. So that model is our strength. Thank you.
The first question is from Nomura Securities, Masuno san. Mr. Masuno, you have the floor. You very much. Two questions.
My first question is about the data center. You talked about the strength. You mentioned the strength for the Entity Group overall. But with regard to data centers, if the migration to cloud is accelerating and in the post COVID-nineteen universe, I believe that this will continue to project very strong growth. But in terms of comparison with your competition, what is your strength?
I know that there are variances and differences from region to region. But in terms of digital reality, Equinix, what is the difference between your competition? That's my first question. Well, DRT, Equinix competition. What is the comparison between our competition such as DRT and Equinix?
As I mentioned earlier, Network Cloud data center included, NTT has the capacity to provide total comprehensive services. So in the facilities that we deliver, we're able to provide very robust management and deliver that to our customers. We believe that represents our strength. And the customers' demands and requirements are changing. For example, back in 2016, when I was in Hong Kong until 02/2009, this was at a time when customers were beginning to explore the possibility of cloud in Asia.
And at that time, we had data centers and cloud and migration, and we're trying to drive migration to cloud. And we provided very meticulous technical support to our customers, and we're able to support customers' migration to cloud. We actually offered implementation of cloud as well. So this is something that we really cared about and we emphasized. Well, in the case of North America, I think you have begun to see increasing capacity for hyperscalers.
You talked about 100,000,000,000 data center CapEx. You mentioned that you're going to continue this caliber of CapEx for data centers outside Japan. How sustainable is this investment? And also, as NTT and DOCOMO work together, I know that there are possible talks about the selling of the assets and incorporating REITs. What about the possibility of taking off balance some of those assets going forward?
Well, first of all, with regard to the investment, the requirements of the hyperscalers continue to be very robust. So up until 2023, we believe that this will continue to a certain degree. At the same time, though, it's important that we become an asset light operation that we have that very strong mission. So taking assets off balance, that is something that we're pursuing in parallel as well.
Next question is from SMBC Nikko Securities, Mr. Kikuchi. Mr. Kikuchi, please. Kikuchi speaking here.
My question overlapped with Masuno san. It was about the Next question is from SBI Securities. Mr. Moriyuki, please. Can you hear me?
Yes. So earlier, you talked about your strength, managed services. What do you think your weaknesses are vis a vis your competitors? And in what time frame, how do you plan to resolve those weaknesses? Yes.
Private cloud service is our core to deal with the cloud migration to cloud. Our customers, some have needs to migrate to public cloud. So in case of migration to public cloud, our customer support and the various automated performance monitoring and patch for security problems. These are routine tasks, but customers, as managed service, we do these businesses for them. And our cloud service is making profit automating this at high efficiency.
But once there's migration to public cloud, we cannot do all these services for them. But it's a market trend. So public cloud, cloud security, strength will be explained. We will explain our strength in private cloud and support the public cloud, too. We can support to a certain extent.
So that is what we will do in the sales activities. So any initiatives on the public cloud side? You will continue what you are doing now after migrating to public cloud? Or are you going to take any particular actions in public side? We announced a strategic alliance with Microsoft the other day.
Our strategic partner, Microsoft Azure Service, will be offered to those who want public cloud. That's our policy. And managed service can be provided in that opportunity. And you will expand that going forward? Yes.
This strategic alliance to go to market, service development, it covers wide range of areas. So we will drive this forward.
I'm afraid in the interest Next question is from Daiwa Securities, Mr. Ando. Mr. Ando, you have the floor. I wanted to ask a qualitative question.
I would like to ask about your feeling as an actual management of Antique Limited. Let me first ask a question about the organization. I know are you going to revisit your reporting line? Going forward, have you already completed the restructuring of our reporting line? That's my first question.
Well, last fiscal year, this organization was established, And the head office was located in London, and the management team has been active since July. In principle, based on that management team, we are pursuing our business and operations. But for example, depending on regions, starting from yesterday, actually, in the case of Asia, APAC and Australia was integrated into one region, close as a region. And the requirements of the customers are very close. So depending on the situation, the organization will be revisited.
But the basic policy will follow this situation we established last July, which is having head office in London and having hub offices in other regions. That principal structure remains unchanged. It seems is it correct to understand that the reporting line follows a very well entrenched top down system. Well, let's say that with regard to integration policy and the intentions of the management team from the head office being projected to the various regional sites, that needs to be important. But yes, it has to be directional.
In support that we get, we'll be able to get feedback from the people on the ground. So that is very important in terms of the governance structure. And compared with the time that we launched the system last year, I think that situation has really significantly improved. My second question. Especially in North America, we see a market that is very dynamic and very rapidly changing.
If you could just share with us your impression. You mentioned that you mentioned the record of value added services accounting for 50% of the sales going forward. But I guess my question is, as you try to migrate to this platform, if there's if you are making progress, do you believe that you are in a position where you're able to reach your targets ahead of your competition? Or do you believe that the targets you have set is simply in line with the prevailing situation? In the case of North America, we have companies that operate data centers.
We have managed service operating company. We also have network company as well. And we have the head office, and we have a very robust sales team there. Up until now, in the context of NTT Limited, we would provide proposals to the customers. And we're now beginning to receive orders for value added service projects inclusive of value added services and data centers.
We believe that going forward, together with our sales force at Entity Data, Entity Limited will be able to propose value added services to Entity Data's customers. So we want to accelerate L1 Entity team activities going forward. So I hope that you look forward to the results. It might take a bit of time. But if we start now, we believe that by next fiscal year, we will be in a situation where we're able to provide proposals, very positive proposals that also reflect value added services.
And that will lead to new orders taking, and we hope that this will further bring back the results in 'twenty two and 2023. That is my expectation. And that, I believe, is the expectation on the part of NTT Holding Company, and we want to make sure that we drive this. Thank
Thank very much. Thank you, Mr. Ando. With that, we will end the Q and A session. After this, we will have a Q and A session.
So please ask more questions there. Mr. Ozaki, Mr. Nakayama, thank you very much. Thank you very much for your attention.
Next topic will be NTA's governance reform. Senior Executive Vice President, Mr. Shimata and Independent Director, Mr. Sakaki Bera will be joining us on stage, and we will have a dialogue style presentation format. Mr.
Sakaki Bera served as the President and Chairman of Torrey Industries. And for four years after 2014, he served as the Chairman of Kei Danin, Japan Business Federation, and he was involved in the delivery of Japan Society five point zero. He developed to the he contributed rather to the development of Japanese economy. Ever since he was appointed as the independent ASA Director of our company in 2012. Over the past eight years, he has provided very constructive and very candid, valuable advice from a very objective position.
Today, he will talk about he will share with us his thoughts about the situation of entities' efforts to reform governance. And also, he will share with us what his thoughts are. So we're looking forward to a very wide ranging dialogue. I'd now like to invite Mr. Shimada, Senior Executive Vice President and ASI Director, Mr.
Sakakimira, to the stage. Thank you very much. In this session, we would like to focus on entities governance reform. When we take a look at the history of Japanese corporate sector's governance, how has NTT addressed corporate governance along the way? As I mentioned earlier, Mr.
Sakagura has been our independent asset director for Kotai, and we have invited him to the stage as our guest. So without further ado, shall we start our session? So how was the Corporate Governance Code introduced in Japan? In 2012, ABEN Administration was formed, And as one of the third era of Abenomics, the government was trying to drive private sector investment. And therefore, in 2013, Japan Revitalization Strategy was formed.
And one year later, in order to further fortify this policy, strengthening of corporate governance was actually positioned as part of Japan's growth strategy. And this was incorporated into Japan's Japan revitalization strategy. And at around the same time, at SETI Group under the Ministry of Economic Trading Industry or METI, the investors and companies, it was pointed out that corporate enterprise value being incorporated and enhanced through further dialogue with investors and the private sector. The so called Ito Report, Ito Review, was announced. And this report recommended that ROE target should be set at 8%.
I know that the investors community had positive view of Ito Review. Many investors at that time pointed out that they very much like to see the Japanese companies deliver eight percent ROE. Now in 2015, in a very speedy fashion, the Corporate Governance Code was introduced. And this the task force under the Financial Service Agency and TNC, Takusaka Agency, Takusaka Exchange, together created this corporate governance. So that's how corporate governance code was established in Japan.
Now this was at a time when Mr. Sakakebara was leading Keidane as the Chairman. So can you talk about how the business sector addressed the corporate governance question? Thank you very much. As you pointed out, under the second decision correction, in December, the second Abe government was formed, and revival of the Japanese economy was the top foremost priority for this administration.
And at the same time, under the Cabinet Office, Industrial Competitiveness Task Force was also established, and Prime Minister Abe himself chaired the session. And the relevant ministers and also several representatives from the private sector took part. I also took part in the Industrial Commodities Council as the representative of the private sector, and we discussed the growth strategy. And the issue presented by the industrial by the business community back in 2013 was that the competitiveness of Japan was being undermined by six factors. There were six factors that are actually undermined the growth of the Japanese economy, and that needs to be resolved.
First was the strong yen. It was the $0.08 0 yen to the dollar, so we need to resolve the strong yen. And also, corporate tax was already at 35%, the highest in the world at the back half back then. And also, EPA, economic partnership agreements. Compared to neighboring countries such as Republic Of Korea, we have very, very few.
And so the energy costs and environmental regulation issues and also labor code issues. So we outlined six challenges that need to be resolved in order for the Japanese competitiveness to be enhanced. That was the view from the business community in Japan. At the same time, so we wanted to ensure growth by securing competitiveness. At the same time, it was important that we need to be more profitable as business community.
And members of the academia pointed out that in the case of companies in Europe and The United States, ROE was around 10% to 15%, but the Japanese companies' average ROE back then was 5%. Why the gap? They analyzed the reason. The corporate governance was the key. In the case of companies in Europe and Europe, their perspective was based on interest of the investors.
And outside directors were very much involved in this decision related to management strategy of the companies, in particular, strategy, portfolio review and productivity improvement. They had very lively debate among the management and the investors, and that led to the company's ability to drive profitability. In order to realize revitalization of the Japanese economy, corporate governance was indispensable. So therefore, one of the outputs of this industrial competitive task force was indeed this corporate governance related recommendation. As a result, in 2016, the Japan Revital Strategy came out with this new policy.
And I was the head I was the Chairman of Keidan at that time. Corporate Governance Code really came into being. So it's not so much the government showed the way. The government and the private sector together created this code. So therefore, the industrial community was very much involved.
Unless they pursued this code, they could not secure the growth of the industry. So that's how this code was established. At the time of the Corporate Governance Code, I was responsible for this issue within my company. And within a very relatively short period of time, it was spring that TSC announced this. And already in summer of this year, it was implemented.
So this was unprecedented, very high speed implementation in Japan. So the members of Well, I was the President of Kei Dunen. And to the member companies, I tried to plead to the importance of the corporate governance reform. As you pointed out, it was very speedy.
Within a very short period of time, we had to come up with a concrete plan. So there was a sense of of course, many in the business community in Japan were perplexed. And also, back in 2014, there are a lot of different forms of corporate governance, Japanese way, European way, American way. And many Japanese companies felt that there was a Japanese way. And one other point was that in the case of independent Asai Director and the significance of having outside independent director, How could independent asset director who was somewhat versed in the management of the company will be contribute to the decision related to management policy?
Many Japanese executives question the ability of such independent asset directors. That is no longer the case. So therefore, introduction of asset directors initially was not done in a very smooth fashion. However, via the corporate governance code and concrete numerical targets were set. So as a result, in a short period of time, introduction of outside directors were implemented.
So for example, in 2015, back then, companies with more than two outside directors was only 20% among the companies listed on the Tokyo Stock Exchange. Now in 2020, 96% of the companies already have more than two outside directors on board. And also 60% or more of the companies have more than onethree outside directors on board. So that's the current situation. So that's been the case.
I think we now have a very good situation. That is because the Corporate Governance Code was it was delivered as a concrete model by the government and to help to create the situation. So that, I believe, is one of the outputs and results of the administration. Actually, we'll come to this later on. We have form.
But what is the substance? Is there in terms of substance, do we have a situation, very strong corporate governance management like the ones we have in U. S. And Europe? That, believe, is the challenge.
Okay. So moving on to the next point. So corporate governance code has various principles, especially regarding the Board of Directors, the responsibilities and the transparency are important themes. From your view, Mr. Sakakibara, which point do you think is particularly important?
The top one, Evaluation, the acceptiveness of the Board. Board is the most important, highest decision making body of the company. So the corporate strategy needs to be deliberated sufficiently there. Outside directors need to take part from the shareholder and society view, leading the discussion from the societal view, shareholder view is important. So in pursuing corporate governance code, the company's growth strategy, profit generation will be pursued.
So from outside directors, the shareholders' view need to be included to pursue the growth strategy. And compliance, they need to be overseen, supervised. So that is the most important role of the Board. And another point is the Nomination and Compensation Committee. The growth strategy is important component of the company, but nomination or denial rejection of the executive from the shareholders' view.
Rejection of the CEO may be necessary in some cases, and that takes time frequently in U. S. And Europe. So the outside directors need to play a role there. And at the same time, as you see here, for remuneration, transparency and the objectivity and the strategy viewpoint is required.
The outside directors need to supervise from shareholder and social view. So these principles listed here, to realize them, the outside directors have a big role to play. Understood. So now let us review what NTT has done so far. So Sakashibara san, you talked about this as the most important thing.
The effectiveness of the Board, evaluation of the effectiveness of the Board. From around 2015, NTT has had the involvement of Mr. Sakakibara, the independent outside directors and the independent auditors had discussions. NTT DATA and NTT DOCOMOs, outside directors and holding companies outside directors had discussions. So in various formats and, of course, discussion with the executive side, too, we've had many rounds of discussions.
And in addition, from 2018, directors and auditors' survey questionnaire started. In the 2018 questionnaire, governance, organizational design, whether we should study organizational design more or not. For this question, 80% to 90% replied. Yes. So we've been discussing this topic for one or two years now.
How did you see this as you were involved in the discussion? Yes. As you mentioned, from around 2015, the governance had been discussed in many fora. In the past two years, after Mr. Salada became the President, governance reform has progressed significantly, I think.
Us outside directors have been involved in many areas to be involved in the discussion on strategy. And for governance reform from around two years ago, we started the discussion. So in the course of this discussion, a company of NTT size and a company that will pursue global expansion going forward, NTT's governance structure, organizational design eventually need to have companies with nomination committees. So needless to say, the executive side and the supervision side is clearly divided. And the three companies, nomination, remuneration and audit committee will have the independent authority, and the majority members will be outside directors.
And the overall directors outside director will account for majority in the overall directorship. So the supervision, that is the ultimate form of well supervised format. So that is what we suggested. And you conducted the organizational design this time. As you mentioned here, the company corporate with corporate auditors is maintained, but you have a big reform.
So you have the executive outside. You had 15 members before the change and two outside directors. But after the change, the total is eight directors, of which four are outside. Four is internal. One is nonexecutive.
So executive is 3%, nonexecutive is five So this is a well governed director structure, we think. And one female in the outside director and two in the audit. So in terms of gender diversity, we are making good progress. And another important point is this Nomination and Remuneration Committee's role is enhanced. The transparency, objectiveness are ensured in the discussion.
It was established in June, so we just got started. But starting June, NTT's governance structure has stepped up, I think. Yes, as you just correctly mentioned, starting this summer, strategic discussions have become deeper because we optimize the size of the Board. And another important point is diversity. So among the directors and auditors of the thirteen, three are female.
Under NTT law, you have to have the Japanese nationality to be a director. So unfortunately, those with foreign nationality cannot become the director of NTT Holding Company. But instead, we established Global Intermediate Holding Company, and we four foreign nationals are appointed to capture our global insight and knowledge. What do you think about that? UNIDENTIFIED Yes.
In this NTT's organizational reform, the directors and auditors, total three females are appointed, and I think this is highly significant. Gender diversity is very important in the decision making. In The U. S. Statistics, female directors, companies with two or more female directors and the ones who don't, if you draw a line and compare the ROE between the two groups, there's a gap of 2%.
So companies with two or more female directors, ROE is 2% higher. So if the female are involved in the executive, the discussion becomes more active. And the management decision making quality is enhanced, and this is proving it. So in the June organizational reform, three female executives are coming on board, and I think it's an important step.
Originally, foreign nationals should be part of the structure, it would be the best. But as you mentioned, in the case of NTT, foreign nationals cannot take part. But it's such an issue for the future. As you're going to pursue global operations further, then it's important that foreign nationals be on the Board as an independent director. I think that's the structure you should aspire to achieve.
So it's an issue for the future. We have two officers as executives as well. So we are trying to enhance that. So let's go on to the next topic then. Mr.
Sakagubira, earlier, you talked about the appointment and compensation committee, and they have a very critical role to play. In the case of NTT, we have already in 02/2005, we already had voluntary appointment and compensation committee. Especially over five times, we had discussions for this committee over personal management and also with regard to compensation remuneration question as well. So what are your impressions about the discussions taking place in those committees? So in 2012, when I was appointed as the asset, an independent director of NTT System, I've been a member of the Appointment and Composition Committee along the way.
In the initial couple of years, we had the form. But the what would happen is that Coffeos would present a personal plan. That was the nature of the meeting. But as I mentioned earlier, under Mr. Sawada, we began to have discussions, more substantive discussions at the appointment and the compensation committee.
Appointment and compensation committee plays a very critical role, especially when it comes to appointment. They play a very critical role, and that is the expectation, in particular for the company. Appointment and the CEO appointments of CEO and President, this is extremely critical. So that has to be determined with the viewpoints of the investors in mind. So decision of CEO, that should be fully deliberate at the appointment of compensation committee.
So it's not just a matter of presenting proposal. It's important that you have a long list, bearing in mind the candidate for the future. You should explain the long list of candidates. And along the one you should along the way, through discussions, you should narrow down and then appoint the candidate, as you said, on the candidate of the CEO. That's the process which we proposed.
And that was the process which we actually took into consideration. So I think I was able to play a role as a member of this committee. With regard to executive officers, in the case of selection of executive officers, as is pointed out here, clarification of expectations and specifications needs to be done. It's important that we have a selection of diverse candidates. It's important that we select members from diverse candidates.
And as Mr. Sakakubara pointed, the fact that the appointment of the composition committee, I believe the nature of the discussion in this committee really evolved. So let me go on. So procedures to determine the remuneration of executives. As you pointed out earlier, it's important that the corporate performance will be determined by remuneration of the executives.
Right now, the monthly remuneration and the bonus, we have 70% monthly remuneration and 30% performance like remuneration. That is the breakdown. In the medium term target, we pointed out various KPIs in the medium term financial management strategy, and we delivered on these KPIs. In terms of the KPIs which were set, what are your thoughts? If you could share that with Sakagubura, Mr.
Sakagubura. Well, monthly so fixed remuneration, monthly remuneration and performance linked remuneration bonus, you categorized into two. That represents a major progress. And also when setting performance linked remuneration, you clarified KPI. That was very important.
In the case of entity holding company, you have a very wide ranging business operations, all the way from IT to real estate and also to global. So setting of KPI requires a lot of creativity. You need it has to be fair, clear and transparent. Also, the KPI should be very productive. And that's how you should determine the KPI to be adopted.
And that needs to be presented to the investors as well. That's how you will be able to ensure transparency. So that's the management side of which we would like to see. Well, right now, in the case of stock remuneration, this is an ongoing discussion. And I do hope that we'll be able to take a look at the various global companies and also take a look at the blue chip Japanese companies, use them as a reference and deepen our discussion on this point.
That is what we want to achieve. I'm afraid we are running out of time. So let us now take a question COMPANY from the audience.
Can I just say one last word? NTT and others, the corporate governance reform has progressed significantly, But this is not the final form. The form, the shape is in place. More than 94% of companies have two or more outside and onethree significant majority. But the operation that allows the proper function of outside directors, some are doing, others are only having the shape, the form, but not substantially, not in substance.
So outside directors express the opinions for company President's proposal but do not like but oppose in some cases. So in order to enhance the growing capability, it has to have good discussion. So the outside director needs to be involved from the shareholder and society's view to allow for high quality strategy. COVID-nineteen has not settled. But in post COVID era, what will the world be like and what will be the management challenges?
The post COVID will be a completely different world. So how should the management strategy be pursued? Until now, the shareholder profit had been a very important point. But in post COVID, of course, shareholder value is important, but society, contribution to society will be very important. Environment, equality or the narrowing of gaps, disparity and SDGs, companies need to address these challenges.
So outside directors need to have this view of the society and view of the shareholders and express their views clearly. This is the challenge for all the companies. So this is what I had in mind recently. NTT's medium term strategy is the solving resolution of social challenges. So I hope you could look at us rigorously so that we can work harder.
So we will now take questions.
Mr. Sakakibara, about the Ministry of Management strategy. I know that you have been leading the company you will be leading the company for many years to come. But I wanted to ask about the structure of the organization. To be more specific, you might say, oh, not about Data again.
You might say, not again. But my understanding about NTT DATA is that for the past fifteen to twenty five years, very little synergy was realized with that company. That is because the structure of the company and elements of operation, there are many factors. I think it's going to be impossible for you to realize synergy with NTT Data. So there's a very strange demarcation in both, and you're actually a drag on each other.
So why not sell off the company? And why not find a new partner? I think that's probably better for the growth of the respective companies. That's my view, especially in the recent. It's been a couple of years since you became the President of the company.
And the latter half of Mr. Unoda's administration, they had a task force. But despite those deliberations, you had no concrete output. And I really can't expect any concrete output going forward. So what is the meaning of hanging on to Entity What are your thoughts about my proposal that you sell off your stake in Entity Data?
I would appreciate your response. Thank you, Mr. Kyuchi, for this question. It's a very bold view. To be quite candid, as far as Entity Data is concerned, have I ever considered selling off of Entity Data?
I have given that a thought. But Entity Data, from your perspective and Entity Data, from my perspective, probably are different. I think we view Entity Data in a different way. But what about the future? Entity Data is thinking that they want to focus on consulting, and the world of IT is shifting to software.
For example, Everest is right now providing the back system, back end system for Telefonica. Naturally, this can be delivered in the five gs world as well. So we are now partnering with NEC in creating various systems. And that system can now be sold by Everest, could be sold by NJData. That model is becoming more visible.
So when we take a look at the future, there is indeed a universe where such synergy can be more easily created. So right now, the focus is on consulting. System Integration is focused on consultation and consulting. It's important that they be part of NTT Group. It's important that we have such system integration player within NTT Group.
And actually, I'm hoping that this player will become the central player in NTT Group. So is there a possibility that the company could be sold off? That possibility is part of the any of the many possibilities. However, for myself, I want to make sure that we hang on to NTT Data so that we'll be able to deliver further synergy for the future. Have I responded to your question?
You mentioned the future. What about the time line? What about the sense of speed?
REPRESENTATIVE:]
Do you believe that while you're still at
the helm of the company, some sort of output or results can be visible? Is that your
Yes, I believe it can become visible. For one thing, for example, with Toyota, we are involved in Smart City initiative, and we're trying to create a platform for entity development team and entity labs working together to create and develop such a platform to drive this auto drive autonomous drive platform. So therefore, this is going to become part of the platform. We're just talking about platform. So it's important that various systems to be implemented, introduced into the cars, and this will require a five gs system to drive this.
And managing the system, that requires the capacity of NTT Communications. So that being the case, such as the application that is developed by entity data, that could be actually, together with partners outside group and also with the companies, be sold off to other players. So Entity Data is going to be at the core of the B2B2X model, and we believe that this is something that can be delivered within the next couple of years. If I may add one other word. With Mitsubishi Corporation, we're involved in value change innovation.
That also involves scientific data. By expanding that, we believe that IT modernization can be pursued in both wireless and fixed line environment. So this could be driven by NTT data. This could be delivered much earlier on, I believe. I just wanted to add that.
You very much for that. NTT do they have the willingness to become the central player in NTT Group? I never felt that intention on the part of Entity Data. What about you? Well, it's been two years since becoming being the President of Entity Data.
And I've been talking about this quite repeatedly, and I think Mr. Houma, the President of Entity Data, is now having that type of recognition. It's true that in the past, I would say Entity Data should be at the center. But then they would say, no, we want to be at the margins of the group. But right now, that type of discussion is no longer there.
They are now saying that, yes, Entity Data is saying that they are considering how they can support Entity in the collaborations. I think they're gradually coming to the center of NTT Group. Thank you very much. We're looking forward to that.
Thank you
very much.
Next question is from Macquarie Capital, Mr. Yamashina. Yes. This is Yamashina from Macquarie. I have a question on the long term view on R and D.
So DOCOMO, after becoming a wholly owned subsidiary, the Yokosuka and Musashino R and D roles and responsibility in Aion, are there changes in the roles and responsibilities? Do you have any thinking there? And in ION and the positioning of NTT Data was just asked earlier, NTT Data's positioning in ION, how should we understand that? Thank you. So first, including DOCOMO, the holding company's R and D and DOCOMO's R and D, will mission and assignment change?
We have not decided on anything. We need to discuss that going forward. It's one of the important agenda items. But I think we need to change. In other words, the basic research will be holding company, R and D and DOCOMO combined, a new organization or holding company done by itself.
So the fixed line and mobile need to be covered both. So the basic research need to cover both. On the other hand, DOCOMO will develop service and application and develop areas that are close to our customers. That will be done by Dokomo R and D in a more enhanced manner. So ComWear and Calm R and D members will support that.
So I think it will be polarized. In ION, ION is very broad based. NTT DOCOMO is focusing on wireless format next to six gs, but wireless software platform that is integrated behind the scenes. So Shibutani san talked about the integration. There's this integrated part.
So we want to work on that together, and so the mission will change in that direction. In NTT DATA's role, the system construction capability and the know how and capability and expertise. DATA has strong expertise there. So NTT Data does not do basic research. Rather, with customers, with partners, the system will be built.
And the seeds in the R and D will be captured by data in the downstream. Different from the past, the elemental technology developed in R and D will be developed into a solution, into data by data. For example, the system to detect abnormalities. NTT Data is developing the solutions and sell them. So data can be captured in upstream and downstream.
Does this answer your question? Yes, I understand. Thank you.
Thank you very much, Mr. Yamashina. Ando. Mr.
Ando, you have the floor. You very much. Ando here. I have a question about R and D and ION in particular. It's a very large, very lofty vision.
In order to have global talent to commit to this, how do you intend to communicate this? Your ability to provide a narrative, what do you intend to do about it? For example, NVIDIA, do you believe that if they do, if they work well, then you'll be able to get the global talent? Or are you going to create a resource center so they will be able to capture global talent? So can you share with us your thoughts, if you will, and your policy about how to capture global talent?
Well, in terms of development, I think there's a need to consolidate those centers. That is true. But before we get to that stage, NTT Labs and NTT DOCOMO need to collaborate. And maybe we could create such a center organization for NTT DOCOMO and labs can cooperate. So center for development and working with partners, that type of organization will be required.
And as a precursor to that, ION Development Center, ION Development Office, ION Development Office is now established with the entity holding company, and that needs to translate into concrete centers going forward. But as I mentioned to Mr. Ando, to promote that and to provide a narrative so that people can understand what we're doing, that is an area where it is who we have not done sufficiently. Are we going to do this? Are we going to do this based on our own team or not?
Quite recently, I hope that we'll be able to make some sort of announcement about what we're going to do. And there's a third element. Right now, domestically, we have enormous amount of facilities. But all photonics networks that will be developed through ION, how will this be introduced? When we sell this outside Japan, what type of migration plan can we present and propose?
It's important that we set a very concrete implementation plan, and we need a team to promote implementation. So development, promotion and introduction and delivery. So I think we need three types of organization as we go forward. I hope I've answered your question. Well, in the case of NTT, I know that we can express a lot from efforts to be made on the part of NTT Holding Company.
But your ability to communicate globally based on English language, how do you see your capacity to provide such a narrative in English? Well, we have teams such as NTT Limited and NTT DATA team outside Japan that are already out there. And also the ability to promote iON. I think there's a distance between the two. So are we going to grow such an organization or team together with our partners on a joint venture basis?
I think we're not yet at that stage. So for the next year or two, it's important that we pursue opportunities for whereby opportunities whereby we make joint announcements. By the way, in the case of ION Global Forum, everything is conducted in English. All the participants must communicate based on English language. So I believe the members who are participating in the ION probably will not feel any stress about communication about communicating in English.
My second question relates to the first question. In the case of optical chips, when it comes to chips, technologically speaking, what type of chips need to be developed? It's very difficult to see from people outside the group. But when we look back in history, behind the development of semiconductor, there's a large contribution from the development of SPEs. So in the case of photonics, in terms of cost reduction and mass production, the factor technology needs to be developed and needs industries to support this initiative.
But what are some of the challenges you see as you try to further spread and develop the required chips down the road? Well, it is as you pointed out. When we take a look at the current semiconductor chips, there are a lot of complicated long process involved in semiconductors and chips. And the etching component, the etching part will be done through electronic form, But no, that's not the case. We want to add photonics component on top of the chip's etching.
We don't want to use photonics electronics, rather. So it's a so in principle, it's a semiconductor type of process. But how do we implement the photonics electronics convergence component? And the device related technology needs to be developed in parallel. NTT Laboratories and NTT Electronics, that's a subsidiary firm.
They're already creating semiconductors. So although the possibility to develop and produce photonics electronics convergence, although not on a massive scale. So how do we introduce such a line? We have a very small scale line already. So how can we expand that in the future?
Naturally, Intel and NVIDIA, both companies are now shifting to fabless production. So how do we identify production technology and with whom? That's going to be a major issue. So yes, I think your question is very much on the mark.
Next question is UBS Securities. Mr. Takahashi, please. Yes. This is Takahashi from UBS.
I have two questions. First, in the first R and D presentation, the virtualization and ION were explained. As business, I think virtualization will be launched sooner as the business. So once again, including your global vendors, we are all moving in the similar direction. So NTT, NEC collaboration, where is your strength, your competitive advantage?
And what time line do you have to have a positive impact on your financial results? First of all, the point I would like to communicate is this collaboration with NEC. And we are also in discussion with Fujitsu, too. So Japanese vendors in four gs and five gs device, we are still small. As Shibutani san said today, in the vertical integration structure, we had little room to enter because of lack of the sales and engineering.
On a global basis, we lack in sales and engineering capability, and we cannot extend this overnight. But O RAN equipment, there are not so many O RAN equipment around the world. So O RAN if the O RAN is discussed, many formats will come into play. I cannot name the carriers, but NTT, LEC equipment is one suggestion. In that case, NTT will support as an SI year, and NEC will become the manufacturer and the software will be combined and the carrier will be used.
So there are no other comparators, if you will. So if the carriers say we want to introduce O RAN, NEC and Fujitsu have the advantage to begin with. AltioStar, VRAN may be the competitor. So the RU or DUCU, the interface, the interoperability is not insured yet on a software base. So we are still equal on equal footing.
Time line will be one to two years. We think this will expand in one or two years. My second question is so core virtualization. So PSTN and IT network will be integrated, you said. So East and West network will be included here.
They will also be part of this virtualization. Any legal impediments or obstacles? East and West are now we are thinking of them as wholesaler. So the basic node wholesale part that East and West uses and the service part that the mobile carriers will use on top of that, the core software, I think, will be divided into two. So as has been informed, in 2024, PSTN will be migrated to IP, the flex optical side.
But we are talking about that beyond that. So will we use the optical phone forever? No, not really. The communications line phone and Skype phone are already changing. And so the critical voice communication still remains.
That's also a fact. So the node, the core net, what kind of combination will be needed? Maybe it will be mobile centered with fixed line critical. But as I said earlier, East and West will have some part and the operating companies will have the other parts. We think there will be a division.
Next question from Merrill Lynch, Mr. Kinoshita. Kinoshita, you have the floor. You very much. Kinoshita here.
I hope you can hear my voice. Yes, we hear you clearly. I would like to ask several questions, if I may. I know that there have been repeated questions, but it's about O RAN and VRAM. Let me ask a question about your philosophy or thoughts.
In principle, NTT DOCOMO will be positive in addressing O RAN and VRAM. But at the same time, though, Nokia and Ericsson, they are not earnest about this. So at the end of the day, we are we see the situation being stalled. I think that is the prevailing situation or that's the image that I have. But in the case of incumbents, they have a certain scale of cooperation.
Nokia is very reluctant to come on board and Ericsson, who still have no intentions. Can you really introduce ORAN with the presence of those carriers? I have I am somewhat skeptical about the possibility of ORAN and VRAM. So if you could talk about that. I suppose that's one way of putting it.
When we take a look at the various trends in places like U. S, U. S. Government authorities understand that O RAN is beginning to move. At the same time, though, they understand the presence of VRAM.
So players like Nokia and Ericsson, they already have vertical integrated model, and they're trying to recommend that. And Samsung in the case of Samsung, Veroscience wants to use Samsung. That also represents a bit of vertical integration as well. So I think it's going to really be a competition between these camps. In the case of Dish, it's a combination of RTU.
So will it be ORAN? Will it be VRAM? Will it be a combination? Will it be vertical integration? I think carriers will continue to lead the situation.
It's a combination of which models offer the greatest advantage. In the case of NTT, as a carrier, we one of the reasons why we believe ORAN is most positive is because you're able to have control over your software. You're able to strengthen your competitiveness under the ORAN model. And going forward, the hardware will be white box, but value added can be captured. So offering inexpensive hardware dedicated system, that's our intention.
So carriers that are in line with this thought probably will come on board for O RAN. Or maybe they'll skip ahead to Viren eventually perhaps. But I know that this is not a direct response to your question. You mentioned that you're skeptical. This will be all determined by the market.
It will be determined by the competition, and we have to make sure that we don't lose out in this competition. Let me go back to what's your comment. DOCOMO has the technological capacity. But non Japanese carriers, do they have sufficient ability to control softwares? Well, the carriers in developed countries, they want to be able to exercise control over their software.
That seems to be the situation. But outside Japan, carriers and vendors are very close, and the management team actually hop between the two. So there's a different factor at play. In the case of developing economies, they probably have a preference for full term keen. That's a possibility.
But at the end of the day, it's all about cost performance. So security, whereby you're able to exercise your own control or a free hand, whereby you'll be able to drive growth. But it's a trade off between the two, control and growth. So right now, a very limited number of developed economies perhaps are involved in this whole discussion. I see.
Point taken. Second question, let me confirm. This goes back to Mr. Ando's question earlier. In the case of optical chips, photonic chips, as far as the chips are concerned, you mentioned that competition is primarily with existing systems who are able to extend their limitation.
Is that the case? Is that the only competition that you have? Also, you produce optical or photonics chips, are there other potential production methodologies? And is there a possibility that a different type of production methodology could emerge as a competition to the current photonics chips? Is there a possibility that you'll not be able to take the lead and that you'll lose out from benefiting from mass scale production.
If you could clarify the situation for us. Thank you for that. In the case of photonics electronics converged chips, NTT was covered by Nature's article last year. And the reason why Nature, the journal, covered this is because this has already been implemented. And IBM, Huawei, these players in relation to digital signal processing wanted to adopt photonics electronics convergence.
I understand that they actually produced this, but then they were not able to spread the technology. So technological breakthrough needs to make sure that on top of silicon, photonics were introduced. How do you place photonics on top of the silicon? So NTT has that edge. So the competition in terms of competition within photonics electronics convergence, NTT is one step ahead, without a doubt.
Also, as was mentioned by Mr. Shibutani earlier, we're talking about six nano to seven nano universe. We're talking about the edging. But this could probably come down to two nano eventually. So the level of concentration could actually improve.
However, the situation with regard to temperature will still remain. So energy consumption, power consumption is the key. So after photonics electronics convergence is deliberate, it's a matter of power consumption. It's a trade off. So within photonics electronics convergence, we are ahead.
In terms of convergence with existing chips, it's a discrepancy between the performance. But the limit will come. So eventually, photonics electronics conversions will probably go ahead compared to the existing chips. In terms of your technology, particularly photonics electronics conversions, I know that you have not disclosed this. But unless you have a third party manufacturer and involve industries, this the base for this technology probably will not spread.
Are you going to consider licensing for this technology? Is that the case? Yes, I take your point. But we're not yet that at that stage. And also, we talked about photonics and electronics converged chips, the first usage will probably be in the digital signal processing, but the interposer needs to be converted into photonics.
And then later on, we need multilayer for the ships. That model is already visible. So placing photonics electronics converged material on top of the silicon, it will come later. So what type of value chain will be created for the industry? That needs to be organized beforehand.
So let me rephrase this. So interposer connecting chips, interposer will probably be developed within the next couple of years. Are we going we have to consider whether or not we're going to produce this and see this as an industry. So it's important that with players like Intel and Lvidia, we discuss that. My personal view is that maybe, hopefully, we'll have the ability to produce that eventually.
It's not yet determined. Can it is the possibility that you will become a fab? Well, as I mentioned earlier, we already have a fab that's carried out one of our subsidiary firms. But this is limited to chips for the it's only limited to. We already delivered that to Huawei.
But because of the National Defense Authorization, I question we stopped delivering that to Huawei last year. But we are manufacturers, so we have that ability. Please bear that in mind.
Next question is from Citigroup Securities, Mr. Tsuruo. This may digress from today's topic, but I want to ask you a question about the power. In the resource, you will do the offshore wind power generation, you said. So as of now, including J Power in the power generation, what kind of investment are you thinking of in the next ten years?
So J Power, what kind of return are you thinking of? Or the power source development? So the regional grid, we want to do this direct current. Anode, this is the one terminal on direct current, so that is the basis. So in power generation, there was some miscommunication.
So power distribution was how the mass media understood and wrote the articles on. But we will work on the power generation of renewable energy, and that will be 600,000,000,000 yen in ten years. But this is not 600,000,000,000 yen is not just our own cash. We will work with partners and do take this off balance and go up to 600,000,000,000 yen Right now, it's a little less than JPY 300,000,000,000 profit. But in it with it's in its resale, so by having the power source, we can improve the operating margin.
But because of the nature of the power, this will not go up that significantly. So in the next ten years, we will use renewable energy. We only use 4%, So we will rise this to 30% and through deliver this through anode and so use that as a base load. And when the oil supply stops, we can generate power on our own. So that is the energy vision along with the environment vision, and this has started.
Understood. Another different theme. If you cannot answer, that's fine because it's during TOB. But NTT DOCOMO on the subscriber base is largest, but third player in terms of profit. So there's a structural problem in price.
So that was the price if you align yourself with other parties. So Sawada san and NTT executives, what do you think is the opportunity in your cost structure? So first, others have the long distance and international and wireless together. In case of DOCOMO, when it separated in 1992, the facilities had to be owned by themselves. That was ordered by the rule.
But this time, this discussion on DOCOMO was judged that it is not a legal judgment. And therefore, COM's backbone is the largest in long distance. And DOCOMO backbone want to be combined, integrated. And buildings DOCOMO is newer. So DOCOMO's building will be used as node, and COM will be integrated into that.
So the first point is the total cost of facility. Group can work to reduce the cost there. Second is IT system. This is also a discussion centering on cost reduction. We have company called Dokomo Systems, and the ERP that is developed there is used within the group.
In the next few years, SAP we are trying to shift to SAP Cloud, and ComWare will drive this. DOCOMO Systems and ComWare need to be discussed. So collaborate or merge or combine. By combining them, we can reduce more cost. And we want to start studying that.
At this point, I just have this in my brain. We have not discussed it yet, but these facilities and IT cost reduction can be possible. Understand. Thank you very much, UNIDENTIFIED
Mr. Tsuru. I'm afraid that the time to conclude the session has come. Our apologies, but this will be the final question for the session. We apologize.
Next question from Nomura Securities, Mr. Masuno. Masuno, you have the floor. Mr. Masuno, I think you're on mute.
Yes, my apologies. I know that this is the final question. My question is this. It's not so much about MTT, but inclusive of well, I want to talk about the future of the IT industry, telecom industry, inclusive of your competition. Well, with fixed line broadband spreading with smartphones having 80% penetration, and there is a price related pressure.
But in the case of open Internet, new smartphone based payment is now emerging, and we see enormous payment business emerging, and they're converging. And Retail Power contents are now being integrated in the form of super applications. So in terms of this consumer related trend, what how should telecom industry change going forward? That's my first question. My second is about business.
We're not in the five gs, six gs era. And I think it's only natural that fixed and mobile network be converged. And if you put on top of that data center, then network value added value will increase. And also, large data cloud data service operators are now beginning to come into this area. So against this business environment, how should the telecom industry change?
How should they address this ongoing trend? I would appreciate your thoughts about the industry as a whole. Let me talk about the retail individual users. DOCOMO is pushing, of course, the Smart Life business. In the case of fixed line business, in the case of mobile as well, they try to generate profit.
And now the rate the prices is based on flat rate, not so much usage page. It's not so much based on usage rate system. Once the market becomes mature, you shift to flat rate system. But the upper layer contents and payment business naturally is emerging on the other hand. In the case of payment, it's all about finance and money, and there's going to be a lot of demand.
In the case of health care, it's about life. This is also going to be a very major segment. And also the emotion and the mental universe. In other words, how do you deepen communication? And the other is about comfort, a sense of comfort.
Then we come to robotics. So this also involves mobility as well. So in order to make individuals' lives more severe, safe and secure and even richer from that perspective, Up until now, elements that were outside the telecom industry has now begun to be part of this university. So that, I believe, is the situation of the discussion pertaining to the consumer side of the business. So telecommunication is simply one of the elements.
In the case of health care, medical is very large. Wearable devices are very now increasing. And if implantable devices are to be incorporated, the situation will really change. On the other hand, when it comes to business, as you pointed out, What we're offering is cloud. It's primarily private cloud, and it's very customized.
In the case of public cloud, we were involved in public cloud. But AWS, Google and Azure, we cannot be victorious against those players. So we shifted our thinking, and we decided to offer them as a hybrid fashion. And we decided to deliver solutions that offer at hybrid, but that alone would not be sufficient to compete against these giants. But these are players in the application front that really have global dominance.
In the case of ORA and VRAM, who comes after ORA and VRAM? They're beginning to engage in the software side of the equation. So I believe that people so I'm saying that we should compete against these players because they are now entering the telecom field. Why do we need to compete with them? Because I think the telecom industry's weight in the business community will increase going forward.
For example, all things will be connected. And this applies to autonomous drive as well. Applies to the functions in the cities and urban settings. It also applies to implantable devices and all aspects of individuals' lives. So offering connection and platforms.
These players are trying to make platforms their own. So as far as telecom carriers are concerned and so forth, that we offer those platforms on our own to the world. So therefore, that is going to be the competition going forward. So communication for the business, this is going to be essential. This is the most essential component as we try to deliver value.
I hope we're on the same page. Yes. In terms of consumers, it's a very detailed question, I apologize. But in terms of consumers, when it comes to the new approach, I think health care and life is going to be very important, especially in course of COVID-nineteen universe. And also in terms of business dealings with business, as you pointed out right now, we have no idea who is controlling the software.
Is it the vendors or is it the service operators? So I think that's the universe that we're headed to. So how you get the how you dominate the market is going to be very critical. Yes, thank you very much. I take your point.
So yes, trying to take the piece of the market. Is it going to be the manufacturers? Or is it going to be the likes of GAFA? Or is it going to be the conventional, traditional carriers? Or is it going to be even customers?
Or is it going to be devices like Apple? I think all possible scenarios are out there. And this applies to both the business market and to the mass market. So as you pointed out, Mr. Masuno, I think we are beginning to see a global competition that is transcending various boundaries.
And the focus is going to be on this type of global competition that transcends various boundaries. Thank you very much for that.
With that, we will close the Q and A session. President, Sawada, thank you very much. Thank you.