Thank you very much for attending today despite your busy schedules. We will now start the briefing of NTT's financial results for the first quarter. I am Fujiki from the IR office and will be serving as today's facilitator. First, I would like to introduce today's attending members. Mr. Sawada, Representative Member of the Board, President. Mr. Shimada, Representative Member of the Board, Senior Executive Vice President. Mr. Kimura, Executive Officer, Senior VP, Head of Corporate Strategy Planning. Mr. Nakayama, Executive Officer, Senior VP, Head of Finance and Accounting. Today's briefing is conducted in the web streaming format. Please refer to the presentation materials posted on our company IR website. On the first page of the presentation materials, points to be considered is stated, so we kindly ask you to please go through them.
Today's briefing will be streamed live via our company's IR website and planned to be streamed on our website later. We seek your understanding. After this, President Mr. Sawada will explain the financial results, outline, and others. We will open the floor for questions. Mr. Sawada, please.
Good afternoon, ladies and gentlemen. Thank you for joining us despite your busy schedule. We appreciate your kind attendance, our participation. Before I start the explanation, may I offer my sincere sympathies to those who are affected by COVID-19, as well as to those people who are affected by the heavy rainfall that took place in July of 2020. I would now like to take the floor and briefly talk about the consolidated financial results, as well as the forecast for this fiscal year. Please turn to page four of the material. Page four, please. This talks about the status of consolidated results for the first quarter. We experienced a decline in both operating revenue and operating income. Operating revenue dropped by 5.1% year-on-year. The decline in overseas was quite large, standing at 8% decline. Domestic revenues dropped by 3.8% year-on-year.
As for operating income, we were able to cover the drop in revenue through various cost reduction, so operating income dropped by 1.5% year-on-year. We were able to keep the decline in operating income to 1.5%. As for impact of COVID-19 on our first quarter results, the negative impact on revenue was JPY 70 billion, and negative impact on operating income was JPY 10 billion. Let me now talk about the contributing factors by segment. Please take a look at this chart. Let's start with the mobile communication business. This was already announced by DOCOMO previously. Operating revenue dropped and operating income grew year-on-year. The reduction in handset sales revenue, as well as in global roaming revenue, and drop in mobile communication service revenue due to expanded impact from the new rate plan was offset by cost reduction, so operating income increased year-on-year.
Turning now to Regional Communications business on the right-hand side. The top shows operating revenue, the bottom shows operating income. Voice service revenue, as well as hospital-related revenue, dropped due to the impact of COVID-19. There was also loss from retirement of unnecessary fixed asset. There was cost for developing environment to respond to COVID-19, so operating income in this segment dropped year-on-year. Long distance and international communication business, while there is decline in operating revenue due to COVID-19 and foreign currency, operating income grew year-on-year due to freezing of measures, as well as cost reduction from structural reform, which was undertaken overseas last year. Data communication segment, this was already announced earlier by NTT DATA. There is increase in operating revenue, but decline in operating income. This is primarily due to the impact of COVID-19, so a decline in operating income year-on-year.
As for the other business, NTT Urban Solutions, there is impact from COVID-19. Due to expanded consolidation, operating revenue increased year-on-year. Operating income remained more or less at the same level as that of the previous year. Let me now turn to the overview of fiscal year 2020 financial forecasts. Please take a look at the overview, which is indicated on this page. Let me talk about the impact from COVID-19. On operating revenue, there's going to be decrease of JPY 350 billion and decrease of JPY 70 billion in operating income as a result of COVID-19. What are the causes of this impact? What is the backdrop? We are assuming that in Japan, there will not be any reissuance of state of emergency declaration. Economic activity is expected to gradually recover following the lifting of the state of emergency in May.
We are anticipating gradual recovery in the domestic economy. That is the assumption for this forecast. For overseas, while we see a similar trend per se, there are variances from country to country. While recovery is expected to gradually occur overseas as well, the recovery is expected to be slower than in Japan, particularly in places such as Europe and in the United States As a result, operating revenue expected to decrease significantly by approximately JPY 400 billion compared to fiscal year 2019. Operating income, operating profit will increase compared to fiscal year 2019, covered by approximately JPY 80 billion of reduction in CapEx and JPY 100 billion reduction in cost. We are anticipating an increase in operating income, as well as in profit year-on-year this fiscal year.
Let me talk about some concrete numbers, which are indicated on the following page. Please take a look at this list. Operating revenue JPY 11.5 trillion, a decline of roughly JPY 400 billion year-on-year. Of the JPY 350 billion impact of COVID-19, domestic impact is roughly JPY 180 billion, and overseas impact is roughly JPY 170 billion. Domestic and overseas contribute 50% roughly in terms of the impact on operating revenue. Turning to operating income, we are anticipating increase of close to JPY 30 billion, and we are anticipating JPY 1.59 trillion. The impact on operating income from COVID-19 is larger on domestic business. As for net profit, slight increase. EPS is expected to increase very slightly. Next page, please. This is the financial forecast summary by company. How would each company fare in terms of the forecast summary? This is the list.
Please take a look at the horizontal line. Operating revenue, operating income. DOCOMO number has shown, operating revenue decline, but operating income will increase. As for NTT East and West, both will experience increases in both operating revenue and operating income. That is the plan that is in place for NTT East and West. For NTT West, they will achieve increase in both operating revenue and operating income for the first time since the establishment of the company. As for NTT East, this is an increase in both operating revenue and operating income for the first time since 2010. For one thing, this is due to increase in revenue from expanded net increase in the fiber sales, and also due to contributions from cost reduction, and also increase in activities from the subsidiaries. That is the situation.
For long distance and international communication segment, we carried out restructuring and reorganization last year. We cannot do year-over-year comparison. That is why we're showing you the performance of the segment. We're anticipating a decline in operating revenue, but increase in operating income. Impact from Structural Reform will play into this picture. NTT DATA, as was already announced previously, decline in operating revenue as well as in operating income. Due to COVID-19, and also due to the Structural Reform that has taken place in the United States In terms of operating revenue, it is expected to decline for the first time since the company was first established in 1988. That is the forecast at this juncture for NTT DATA. NTT Urban Solutions, they're expecting increase in revenue, but decline in operating income.
Real estate revenue will expand due to consolidation, but operating income is expected to decline. Next page, please. By segment summary. I already explained at the individual operating company explanation before, so I would like to skip this. Now I'd like to move on to topics. Over here, too, I would like to take up enough time to receive your questions. I would just briefly like to explain about that we will be shifting our focus on the remote work, and we'll be having a system to support that in October. The remote world is that what we are seeking for to realize. We would like to provide services that will support realizing such a remote world. We are thinking of providing seven services, especially a safe service, and also function-wise, that has a competitive superiority against the competitors.
For the online conferences or the local government work processes, automation tools. A service providing that conversation will be realized through glass panels or acrylic panels called Window Talk. Next page. I would like to touch upon the overview of the medium-term management strategy initiative progress. The 5G technology, at least one antenna has been installed in all of the prefectures in Japan at the end of June. The first attempt at a group NTT, group green bond, has been issued in June also. For the rest of the information, I would like you to take a look later. That is all from my side. Thank you very much.
Thank you. We would now like to take your questions. We'll take questions from those who have registered beforehand and who are already connected to the internet conference system, as we have already informed you in advance. As for the ways in which we will take your questions, the operator will explain how we will take your questions. Thank you.
We would now like to start the Q&A session. If you have questions, please push the raising of the hand mark on the bottom of the screen. When you ask your question, please state your name, affiliation, and then go on to your question. Before you speak, please make sure that you push the microphone button to unmute your terminal, your handset. We would now like to go on to the Q&A session. From Nomura Securities, Mr. Masuno. You have a question, sir? Mr. Masuno, please. Thank you. Yes, please go ahead, Masuno-san.
Can you hear my voice? I have several questions. The impact of COVID-19 on our operating income. The domestic impact was quite significant. That is my frank impression. Can you explain how negatively COVID-19 can have impact? I know that overseas is probably the slowdown in sales, but what about domestic, break between domestic and overseas? What is the breakdown of the JPY 70 billion in impact on operating income between domestic and overseas? Can you elaborate, please? That's my first question.
Thank you. In terms of operating income, yes, we anticipate JPY 45 billion in impact on domestic operating income. The most significant factor would be probably handset, the gross profit for DOCOMO, and also the international roaming service revenue decline. That would be the two major factors on decline in operating income. That will come close to JPY 30 billion total.
As for NTT DATA and as for NTT Urban Solutions and other business, for NTT DATA, the domestic impact is not that large. In other business, we believe that because they're building centric businesses, they're affected by COVID-19. That's the situation for the domestic business. There are several tens of billions of JPY, or several billions of JPY impact on the Regional Communications system integration and other services are expressing a slowdown in sales. That has translated into a slowdown in operating income. As for overseas, so JPY 25 billion impact on operating income. That's primarily, as you pointed out, from system integration-related decline. In other words, decline in pipeline translated into decline in operating income.
Thank you very much. On the other hand, you talk about JPY 100 billion in cost reduction going forward. At DOCOMO's financial presentation the other day, DOCOMO said that they're also going to do the JPY 100 billion cost reduction. Can you give us a breakdown by market or by business?
The JPY 100 billion said by DOCOMO and our JPY 100 billion, they are not based on the same definition, although we talk about cost reduction. We talked about JPY 100 billion cost reduction in this presentation this time around. This aggregation of impact of COVID-19 on a net basis, yes, there's the negative impact, as well as the positive impact from COVID-19, so that's been netted out. The net impact is JPY 70 billion. Net impact is negative JPY 70 billion on operating income. Also, there's a JPY 30 billion positive impact. JPY 100 billion cost reduction will come into play. Certain percentage of DOCOMO's cost reduction is reflected in JPY 100 billion, but that is not actually straightforward, I think.
You believe JPY 100 billion is cost reduction?
That JPY 100 billion is offsetting the loss in income. Yes, that's the case.
Okay. As Regional Communications, you actually increased in operating revenue. Operating revenue increased in Regional Communications, that is historic. At the first quarter, I think the operating revenue declined in the first quarter. Are you saying that from the second, third quarter, and fourth quarter, you're anticipating increase in operating revenue despite the decline in operating income in the first quarter? As for NTT East, NTT BP, the equity portion was 50% NTT, which means that there was expansion in the consolidation of NTT East.
As you know, telecom service revenue was on a downward trend in East, that is now being offset. That positive impact is accepted in second quarter onwards. That is the impact. That is the situation rather for NTT East. As for NTT West, one noteworthy aspect is that NTT Marketing Act and NTT SmartConnect, the subsidiary firms for NTT West, they're actually experiencing positive impact from COVID-19. On a full year basis, that is going to contribute. That's one noteworthy aspect for NTT West. There is one common element for both NTT East and West, is that in the first quarter, there is 80,000 net increase for fiber. In the first quarter? Yes. Net increase was 80,000 for fiber for NTT East and West.
If we take a look at this on a full year basis, we believe that there is going to be the possibility of increase in operating revenue for NTT East and West. Yes, things were somewhat difficult for the first quarter because of the front loading of costs. Going forward, we believe that the situation will ease and that they will transition to increase in network revenue increase. There was a reference to NTT Smart Connect. The name should be NTT Solmare. It's not Smart Connect. It should be NTT Solmare. I just want to make that correction. Thank you.
Thank you very much. My last question is about the long distance internet communication. On a full year basis, you're anticipating JPY 20 billion increase in operating income. The positive impact from Structural Reform for those carried out in 2019, I think that should be a positive driver. What is the contribution for the social reform for those carried out in 2019?
That would be roughly JPY 30 billion, I think.
What about NTT DATA? Is JPY 30 billion including NTT DATA and all the companies?
No, it's just NTT Ltd., JPY 30 billion for NTT Ltd. As for NTT DATA, they're anticipating JPY 4 billion in further structural reform cost, and also as well as in the United States. On a net basis, I think the impact will be negative for NTT DATA as far as the structural reform cost is concerned.
I see.
Yes, NTT DATA explained that. As for NTT DATA, they spent a lot of cost for structural reform last year. If you compare this year and the previous year, I don't think there's going to be any additional negative impact from structural reform at NTT DATA. Yes, that's the case. They're adding impact from COVID-19 and structural reform, and that comes to JPY 19 billion.
Thank you very much. That's all for me. Thank you.
Mr. Masuno, thank you very much. I'd like to take the next question. SMBC Nikko Securities, Mr. Kikuchi, please go ahead.
This is Kikuchi speaking. I have two questions. The first question is related to Mr. Masuno's question. It's regarding NTT Ltd. structural reform effect. How much and what kind of effect have been generated? Is it on the cost side? The top line is declining, so improving and strengthening the top line. Are you seeing effects that have improved the competitiveness? Because of that, is there a large increase in profit? Due to COVID-19, there's a large impact of declining revenue. What is the impact of COVID-19? What is going to happen to that impact moving forward? That's my first question.
Thank you very much for your question. Regarding NTT Ltd., the structural reform, it was JPY 30 billion. Out of that, JPY 20 billion is personnel expenses. We have conducted quite a bit of streamlining, the remaining JPY 10 billion will be other expenses related. We are seeing an effect in terms of cash. In the top line increase, there is about JPY 10 billion of foreign exchange impact included in that number. Furthermore, this time, we had accounting system changes in the NTT Ltd. Product selling that does not have a high additive value, we are just going to record the commission fee, and that's about JPY 10 billion, and the remaining COVID-19 impact is also there. Top line wise, the decline, other than the COVID-19 impact, is not that large.
The high added value services is about 30% of the overall revenue composition, and that has increased up to 36%. In that sense, the revenue structure is shifting over to a higher margin. In 2023, we would like to increase that portion up to 50%. We are on that track towards that target, and we are seeing a positive impact of going through that track this fiscal year.
Understood. The COVID-19 impact for NTT DATA, they have announced their results last week, and we have heard their explanation, and NTT DATA has more impact from it. The reason behind that is probably because for NTT Ltd., they have a positive effect too. Is that the reason?
Yes. In the same way, the COVID-19 impact is on the profit in the same way. NTT Ltd. has a more positive effect from the streamlining initiatives.
Okay, understood. My second question. Well, if it's just about COVID-19, it seems that it's not enough. The other day, you have announced an alliance with NEC. It's only been about a month since you made that announcement. However, are there any progress made? Is it being highly received by other people? Maybe people are asking you to explain about it more? Within the last month, is there something that you can share as an update with us?
Okay, thank you very much. We had a working team created amongst both countries. We have restarted the working team to discuss what kind of alliance can be realized and how it is perceived or received within this industry, amongst our peers or from the political arena and also the international arena. We are receiving positive feedback. Furthermore, NEC, I think that will include Fujitsu also. Towards these Japanese vendors from Australia and also from the U.K., there are offers already made, as you know. On a total basis, the external environment, we are having positive feedback. The R&D co-development, co- R&D with NEC, we would like to strengthen it, and we would like to think of front-loading that process. Shimada-san, Mr. Shimada, if you have anything to add?
This is Shimada speaking. The working team with NEC, currently, first of all, is discussing which market should we aggressively focus on. The overseas sales strategy included is also discussed. What we will be selling, of course, we need to think of that also. IP the entity has and the technology, and NEC's IP and technology, they will be combined together. Not just for Japan, but how can we roll out that globally is going to be the key discussion. We will be having that discussion. Thank you very much. We wanted to say that we will be selling also. Our subsidiary companies overseas have a keen interest in this, so we have them participate in this working team, and we have started this process.
Okay, thank you very much.
Thank you very much, Mr. Kikuchi. Next, from Merrill Lynch Japan Securities, Kinoshita-san, the floor is yours.
Mr. Kinoshita, please. Thank you. This is Kinoshita. Hope you can hear my voice.
Yes, we hear you.
Thank you. I would like to ask two questions, if I may. My first question, a point of clarification or confirmation. As for overseas, it seems that you're freezing some of the measures. That's what you alluded to, especially at NTT Ltd. For this period as well, due to reorganization, you're anticipating JPY 10 billion cost. I think that's what you mentioned or indicated in the beginning of the year. On this point, now that the first quarter is over, did you implement these actions? In terms of the full-year plan, restructuring costs, have they been reflected and factored in, or are you going to defer this? That's my first question.
Thank you. As you pointed out, for this fiscal year, we do anticipate some restructuring-related costs as well. In the first quarter, the pace was quite slow. At the end of the day, we've been able to actually narrow down on such cost. In mid-May, to all the subsidiary firms, with regard to measures, we have asked that they practice self-restraint. I believe that has been understood well by various companies, including those outside Japan. As for PMI, we have been considering two-year PMI and response to regulators. That has been significantly affected by COVID-19. That type of cost will probably be deferred to a certain extent. Although this company, three months today, will be changing the name of the companies, but also IT system-related actions might be somewhat delayed as well. That cost is also likely to be pushed back.
Thank you. Point of clarification. For this fiscal year, you don't anticipate that significant cost? Is that your plan? '
Well, we believe that this will decrease against the plan that we announced. This is not going to be declined. It depends on the situation related to COVID-19. Actually, we want to bring forward the implementation timing of the measures. We cannot give you a clear response at this juncture.
Against the plan that you have pointed out, is this going to put pressure on your performance?
No, we want to avoid any pressure on our performance.
It's not factored in in your current plan, right?
No, it is factored in in our plan.
Oh, I see. It's factored in your plan. I see. Thank you. That's clear now. My second question, in relation to COVID-19, for this fiscal year, in terms of revenue, JPY 30 billion-JPY 50 billion and JPY 70 billion impact on operating income, and also JPY 80 billion impact on CapEx and JPY 100 billion in cost reduction. That's what you mentioned. Let's say that COVID-19 were to actually wind down this fiscal year. Will such actions be carried over into the following year, or do you believe that these are simply temporary impacts? How should we see this? In terms of CapEx and cost reduction included, how should we see these numbers? To what extent is it emergency-related actions? What part of these numbers will be carried over into the following year? I would appreciate some insight from you. Thank you.
JPY 30 billion-JPY 50 billion impact on operating revenue from COVID-19. Overseas, JPY 170 billion.
Domestic, system integration included, is roughly 50%. Actually, we are anticipating possibility of system integration business that relate to social distancing. If we're going to live with COVID-19 going forward, then I believe system integration related to social distancing type of activities can be sustained. On the other hand, travel and mobility of people is really cut back, which means that roaming and handset related to purchases will probably not revert to the previous levels. Impact from COVID-19 will really be a patchwork, if you will, aggregation of various different factors. Against this backdrop, the positive aspect is the new solutions and network services will be launched. The positive impact from COVID-19 will probably come into play down the road. JPY 70 billion in reduction in CapEx will probably come back to a certain extent going forward.
In terms of cost, yes, some costs may have to be expended down the road. I think it's still a work in process. Depending on COVID-19, we really cannot predict what will happen.
I see. Thank you. It's JPY 80 billion, right?
Yes. Close to JPY 80 billion in reduction in CapEx.
That will probably revert to the previous level down the road.
Yes, I think we'll see recovery in CapEx eventually. Maybe for cost, maybe 50% to pick up in cost going forward, maybe.
I realize it's work in process, so I do understand. Thank you for your response, sir. That's all.
Mr. Kinoshita, thank you very much. I would like to take the next question. Daiwa Securities, Mr. Ando, I would like to take your question. Please go ahead.
This is Ando speaking. Can you hear me?
Yes, we can hear you.
I also have two questions. First of all, next fiscal year, while I'm talking about the COVID-19 impact, JPY 800 billion revenue forecast is JPY 170 billion. In a quarterly basis, how is it allocated? Regarding the operating income, what is the image you have of it going forward?
First of all, thank you very much for your question. This JPY 800 billion, what you mentioned, this is what I've mentioned before. This is the company-wide, and JPY 170 billion is for overseas.
Oh, yes. Sorry about that.
For the JPY 800 billion, when I mentioned about that number, about half of it is we expected from coming from system integration, and that ended up being JPY 170 billion. That is because we had quite a high expectation. After that, there was a very strict lockdown, and the assumption was that we will have no more new pipeline coming in. Compared to that, in reality, we had the order backlog up till now, and also new solutions are being launched. For example, Arkadin, which is a conference system selling company, their profit has increased about 60%, several JPY 10 billion increase in just one quarter. We are seeing such a result. There is some reshuffling. When I said about the operating income, it's a net, so it goes down, but something will go up.
As a total, it's about 50% is where it's going to settle at, is what we expect. If we look at NTT Ltd. situation, at the first quarter, there's no impact on the profit in terms of COVID-19, because there's still remaining business on the order backlog. Moving forward in the next three quarters, they expect about JPY 10 billion. That is because in the first quarter, the pipeline they were expected to have, they weren't able to have it. Because of that, from second quarter onwards, there will be an impact on the remaining quarters. The system integration will have a large impact in the second half, and the profit will also increase larger in the second half.
Okay. Thank you very much. This is a kind of a similar question, or maybe you have already answered to this question. The margin for overseas business is at 1.6%, and that has improved to 2.2%. What kind of content of improvement is this? If you can give me the large picture on the improvement. The value added product percentage, why did it increase during this quarter and has improved? Did you receive a large project? Are there any unique reasons to it? Can you please elaborate more?
Thank you very much for your question. Regarding the operating income margin for the overseas businesses, last time it was not very good. The main reason is that last year, we conducted the structural reform in July, so it's up to that when we compare the quarter-to-quarter basis. After the structural reform, various people, including back office people, we had a sufficient amount in terms of number of people. We streamlined that. Through the cost streamlining processes, they were able to reduce by JPY 30 billion, and that actually pushed up the profitability of the business. For NTT DATA's side, the situation has not largely changed. Therefore, NTT Ltd.'s improvement has largely contributed to the improvement of margin. That's the large picture. Regarding the high value-added services, managed services company Secure-24, or the web service company Arkadin.
They are increasing the profitability. Both of them are related to remote working or solutions that can respond to COVID-19. In that sense, the reason why the high value-added products are increasing is because there is increasing demand for those type of new solutions.
Okay, understood it very well. Thank you very much.
Mr. Ando, thank you very much for your question.
Next question. If you have a question, please push the question mark. Please push the hand mark, correction, on the bottom screen. Next question from Macquarie Capital Securities, Yamashina-san. The floor is yours. Please go ahead.
Thank you. My name is Yamashina from Macquarie. Thank you very much for this opportunity. No, thank you. I would like to ask about NTT West. You're talking about the increase in operating income. Based on the presentation, it seems the system integration and others are contributing to the increase in operating income. You talked about Marketing Act and Solmare. You introduced those subsidiary firms earlier. For Solmare and Marketing Act, which of these companies are involved in this increase in operating revenue, operating income? Marketing Act, what type of demand is picking up for Marketing Act? That's my question. Thank you.
I would like to ask my colleague to respond.
Kitamura here. With regard to Solmare, they're included in the other business segment. As for Marketing Act, likewise, they're also accounted for in the other business segment. They're not reflected in the system integration business segment. Have we answered your question? With regard to Marketing Act, yes. They'll be counted under the operating revenue in the other business. How much?
As for Marketing Act, what type of business are they carrying out? In principle, it's a company that outsources marketing from NTT West. Corporate sales activities are being outsourced from NTT West. It's a company that carries out corporate marketing, so it's more or less a call center. I think increase in demand is primarily due to subcontracting of call center operations. Local governments and municipalities, their call centers are also being carried out by Marketing Act. I think they're increasing that capacity. That's probably translating into increasing demand. I see. Thank you very much for that. If that is the case, bearing in mind the impact from COVID-19, such as the impact that you talked about. Solmare, maybe it's a temporary demand. That's my impression.
Going forward, not just this fiscal year, but when you consider next fiscal year onwards, do you believe that these two companies can continue to enjoy an increase in operating income? Will they contribute to the increase in revenues and income at NTT West? As for Solmare, they're distributing manga animation through the web. People are staying home, and they want to enjoy these contents in a desirable environment, and I think this can be sustainable. For Solmare, I believe that increase in profit will continue. This trend will continue for Solmare. As for Marketing Act, well, from the perspective of impact of COVID-19, maybe that is a temporary windfall. Right now, under the brand name of One Contact, we're offering integration of various call centers and offering them to various companies.
We want to offer call center operations on a work from home basis, and that is being carried out by NTT Marketing Act. I believe there will be this factor that can support their business down the road.
I see. Thank you very much.
Mr. Yamashina, thank you very much. We would like to take the next question. Nomura Securities, Mr. Masuno, please go ahead.
I have additional questions. Sorry about that. We were talking about the most recent situation regarding the results, but regarding the midterm management strategy in order to achieve the goals, the telecommunications business in Japan, the overseas business, and you have a renewable energy business, various things are incorporated. Energy and real estate businesses as more longer span businesses, is what I think. Towards achieving this midterm management strategy, strategic profit increase, what is the progress of that? Also, I believe it's going to be after COVID-19, but what is going to happen after that world, and what kind of measures and initiatives are you thinking of implementing in that time period? Can you share that with us? Thank you very much.
Basically, the midterm's major indicator is EPS. We would like to mainly focus on increasing the profit for achieving this EPS KPI.
Not just for our industry, IT, but for the overall other industries. For the IT industry, the impact can be taken positively. The content is the services strategy, meaning that after COVID-19, it will be a remote world more, the services and solutions for the remote world can be generated more from us. Us strongly promoting the usage of such services and solutions is what's going to happen. Not just us, but globally, all of the companies will be putting their efforts in this. Another point is DX, digital transformation, especially the Japanese corporations, including ourselves, in many ways, have the master techniques utilized in our work. We need to aggressively promote DX, and through the B2B2X model, we want our technologies and solutions used by them. We would like to accelerate that process more than now.
This will lead to my first point, enhancing and strengthening the solutions that we provide. During the midterm period, we are not going to deviate from that. We will be conducting DX, at the same time expanding new services, IT services.
Thank you very much.
Mr. Masuno, thank you very much. Next question, please.
If you have a question, please push the raising of the hand mark on the bottom of the screen. We will now go on to the next question. From Merrill Lynch Japan Securities, Kinoshita-san, the floor is yours. Mr. Kinoshita, please.
Thank you. This is my second time around as well. I would like to ask this question, if I may. My first question. You talked about very robust sales of fiber. How should we see the situation? How should we assess this? Is it due to the tailwind from COVID-19, or is there something else at play? What is the reason that is driving the increase in fiber sales? I have a sense that the sales is accelerating. How do you see the backdrop?
Yes, thank you for the question. Due to the impact of COVID-19, I think people really want to hang on to their fiber because they want quality services, so churn is coming down. Yes, impact from COVID-19. That is the reason.
You're saying that the churn rate has been coming down. Down the road, do you think people will be happy that they have fiber? Do you think that you'll be able to hang on to a very low churn rate, or do you believe that after time, the churn rate will revert to the previous level? What is your sense?
Well, actually, this applies to ourselves, our company is going to be accelerating working from home. Depending on COVID-19, all the companies may actually discuss the possibility of reverting to working from home. That is going to happen. I think this can be a sustainable trend. Actually, it might actually accelerate. I believe this is a very positive trend.
I see. With the lower churn rate, you're able to maintain this trend?
Yes. That is, I believe, the basic trend. Churn rate is actually flat. Cancellation is coming down. That has had an impact on that increase.
I see. Another question about NTT Ltd. JPY 10 billion impact from revenue and JPY 20 billion due to change in system. This is a quarterly figure, right? Is that how we should see this number?
Yes, Nakayama here. Yes, due to change in system, that's JPY 20 billion for the first quarter. On a full year basis, it will just be JPY 90 billion, if you will, in terms of the impact from changing the system.
Thank you. That's what I wanted to hear. Thank you very much.
Thank you, Kinoshita-san.
We would like to take the next question. For those of you who have questions, please press the hand-raising mark on the bottom of the screen. Are there anyone else who would like to ask a question? No more questions? It seems that there are no questions, so with this, we would like to conclude today's briefing session. Thank you very much for your participation today. Thank you.