I'd like to start NTT's fiscal year 2019 results announcement. Thank you very much for participating today despite your busy schedules. 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. President and CEO, member of the Board, Sawada. Senior Executive Vice President, member of the Board, Shimada. Senior Vice President, Head of Finance and Accounting Department, member of the Board, Hiroi. Senior Vice President, Head of Corporate Strategy Planning, member of the Board, Kitamura. Today's briefing will be conducted through audio live streaming in order to prevent the spreading of the novel coronavirus. The material that we use for the explanation, please refer to the presentation material that is posted on our company's IR website.
On the first page of the presentation material, the items to be noted is listed, so we kindly ask you to read through them. Regarding today's schedule, first of all, from President and CEO Sawada, there will be an explanation of the outline of the results, followed by the questions from the floor. Mr. Sawada, please.
Thank you for your kind introduction. My name is Sawada. Thank you for joining us despite your busy schedule. Before I share with you the financial results, I want to offer my sincere sympathies to those who were inflicted by COVID-19 and also whose lives were affected by the spread of this infection. Just to have them with the NTT Group, many employees were inflicted. I hope that we'll be able to see early recovery as soon as possible. It is our earnest wish that COVID-19 epidemic will be contained as soon as possible around the world. Without further ado, based on the presentation materials, I would like to start my explanation. Let me start with page four. This shows you the fiscal year 2019 consolidated results highlights. As for operating revenue, it increased. Operating income declined, profit increased.
Against the guidance, we have all achieved the guidance. In particular, when it comes to operating revenue, we have recorded the increase in 3 years in a row, and we've reached record level as far as operating revenue is concerned. As for operating income, it fell due to drop in NTT DOCOMO mobile communication service revenue, and also increased costs from reorganization of our global business. As far as profit is concerned, well, there was drop in operating income. Profit increased year-over-year from profit from valuation related to integration of Ennet as a subsidiary firm. It is right, but we were still able to record increase in our profit. As for EPS, we had share repurchase, so it increased JPY 11 year-over-year. As for overseas sales, it increased 2.9%. We had JPY 77 billion impact from foreign exchange. It's dollar based, so it's not affected.
As far as revenue is concerned, it was very robust and very strong as far as income is concerned. At NTT DATA in Brazil, because of the change in external environment, we had a review of the business in Brazil. In order to minimize future costs, we've had impairment loss. We have seen some delay in the shift to more high-value and profitable service. As a result, we have seen a decline of roughly JPY 16.5 billion on this front. Now, as far as the impact of COVID-19 in fiscal year 2019 is concerned, already in North America and in Asia, new orders for system integration has dropped. There has been already slight impact in terms of profit. On the other hand, there's also positive element, such as decline in our marketing cost domestically.
Overall impact on a consolidated basis is quite slight. That is the current situation. Please turn to page five, the following page, please. On the top, you will find the contributing factors by segment for operating revenue. At first glance, data communication business and other businesses have recorded increase in their operating revenues. Other businesses, they represent integration of Ennet as a subsidiary firm, and also data is because of very strong order taking. On the bottom, you find operating income. With regard to mobile communication segment, because of the new rate plans, there was the impact from that, and also handset sales also declined. It recorded a drop on a year-on-year basis. Regional communication business, two years ago, back in fiscal year 2018, we had the loss from copper wire, but that is no longer the case.
Therefore, operating income increased year-on-year in this segment. Long distance and international communication business segment, as for domestic NTT Communications business, it's very strong. On the overseas side, we have seen increase in costs related to global business reorganization. That's a negative, on a year-on-year basis, we have seen increase of JPY 3.4 billion, increase year-on-year in this segment. Turning to data communication segment, I believe that NTT DATA had already announced their financial results. Revenues were strong, their business size is expanding. There is now cost related to restructuring of business in EMEA and Latin America, and also review of business operations in Brazil. As a result, in this segment, we have seen a drop in operating income on a year-on-year basis.
Let's now turn to page six, which reflects the forecast summary of fiscal year 2020, as well as shareholder return. For fiscal year 2020, which will end March 2021, we are likely to see some impact in relation to new system integration orders, primarily outside Japan. Also we see various types of services, including handsets sales, will also be affected by the impact of COVID-19. At the end of May, there's a possibility that the declaration of state of emergency could be lifted. There is that possibility at the end of May, still, we cannot predict the potential arrival of the second wave. How long will this current situation last? This will affect our level of revenues. Therefore, we have to base ourselves on this premise, and we really cannot reasonably estimate the amount of the impact of COVID-19.
We decided to postpone making financial forecasts for FY 2020 at this time. When it becomes possible to reasonably estimate the amount of the impact, we would like to promptly announce the financial forecast. As for dividend, in response to COVID-19, we have provided free of charge services to our customers. We have also extended the payment due date. We've taken various measures as well as customer return programs. We have to bear in mind basic policy of steady dividend increase in our efforts to take into consideration various stakeholders. Correction. Amidst the COVID-19, we have to make sure that we are mindful of various stakeholders. Bearing in mind the basic policy of steady dividend increase in our medium-term strategy, we decided to increase our dividend by JPY 5 per share from prior year to JPY 100 per share.
This represents increase in dividend for 10 periods in a row. As far as the business plan is concerned, that is the current situation. Let me briefly cover some of the topics. We have prepared some materials that covers the relevant topics. Let's go on to page eight.
On page eight and page nine, we listed the primary initiatives in response to COVID-19. If I may summarize it, communications service, that we are ensuring the stable services, and we're doing that. We have started the measures to support customers. Starting this month, the special fixed benefit payment, which is given out by the local governments, we are providing RPA automated solution free of charge. We have received a request that 128 local governments would like to use it. We have some educational supporting measures. Towards the students, subscribers under the age of 25, we have implemented the measures to provide the data communications certain services free of charge. The school's online maintaining fees, we have implemented measures to provide that free to a certain time period. Page 10, please. The previous two pages with corona, and page 10 is after corona.
The first is to respond to ongoing maintenance of social distancing and initiatives for establishment of a remote society. We would like to provide various supports. We have support online administrative procedures and protect that through security solutions. The second is the digital transformation, especially in the agriculture, construction, and manufacturing industries. Probably, they will require remotization. Therefore, we would like to focus on this and also contribute to supporting the lack of manpower. We believe that there is going to be an environment that is going to increase the rise of block economies, and value chain is going to become more important. With Mitsubishi Corporation, we are working on these changes to support the reshoring of industries and accelerate the 5G supply chain. We would like to be able to use the renewable energies on our own.
On page 11, is showing the overview of medium-term management strategy initiatives. I would like to skip the detailed explanation of each one of them, but I would like to point out two, and on the next page, I would like to point out one. Total of three points I would like to highlight. First is the B2B2X project. There were only 13 projects when the medium strategy has started, and now that is 66. Our target is achieve 100 by fiscal year 2021, and it is steadily progressing. The second point is listed on the very bottom, which is the ratio of outside independent members of the board. We would like to increase it to 50%. By implementing the executive officers system, we would like to vitalize the board of directors meeting, and we wanted to have an efficient number of board members.
Next is regarding the environment and energy vision. There are four points that are listed here. The target is zero environmental impact. Promotion of renewable energy. Currently, we're using 4.5%, but 10 years from now, we would like to increase the portion of our renewable energy usage to 30% or higher by 2030. Currently, we would like to have 30% of all the energy we use as renewable energy, and also the science-based targets and the Task Force on Climate-related Financial Disclosures, we would like to support it. Also, we will be considering issuing the green bonds. The way of thinking is that ICT, which is our core business, we believe that this can reduce the social environmental impact.
With the COVID-19 pandemic, we are actually in the midst of the actual social experiment. We would like to have these as new measures to digitalization initiatives and we would like to digitalize as much as possible and also plastic, and also reduce promotion of thermal insulation power generation glass using photovoltaic technologies. This is a venture technology. The major third point is we will be establishing an environmental-related laboratories, which was announced today. This will be done in July. Photosynthesis or lighting, various things will be researched there. It says here, ITER, which is International Thermonuclear Experimental Reactor, 25 countries are in the member. By 2025, they will be using the first plasma. The experimental chamber management, maintenance control by using the ion technology. We have entered the comprehensive alliance agreement.
For ITER, it is the first time that they entered such an agreement with a private company. We are the first private Japanese company to have such an agreement. Together with the establishment of infrastructure, we will be working towards the zero environmental impact. Lastly, we would like to explain the numbers of the progress on medium-term financial targets. This is difficult to read, but it is actually in line with what we have expected. That is all for my explanation. Thank you.
Thank you very much. We would now like to take your questions. For those of you with questions, as we've already announced beforehand, you have to be registered beforehand, and you have to be connected to the phone system. We would like to have the operator explain how we will be accepting questions. Thank you. We would like to start the Q&A session. If you have questions, please push zero followed by one. If you wish to cancel your question, please push zero followed by two. If you have questions, please push zero followed by one. If you wish to cancel your question, please push zero followed by two. Mr. Masuno from Nomura Securities. Thank you. Masuno from Nomura Securities. Can you hear me? Yes, we hear you. Thank you. My first question is about the fiscal year 2020, the plan already at DOCOMO and NTT DATA.
With regard to the business plan, they have not been able to determine that for this fiscal year. I understand that it's a situation for the group as a whole. As far as dividend is concerned, at DOCOMO, DATA, their dividend remains flat. NTT Holding Company, I thought you would also have your dividend at flat, you announced an increase in dividend, that's very positive for us. Within the NTT Group, NTT Holding Company was able to demonstrate increase in dividend, that was not the case for DOCOMO and NTT DATA. What is the reason behind the difference between the positions taken with regard to dividend policy among the group companies? Is it due to the difference in the outlook of each of the operations? Can you talk about the reason for the difference?
Thank you for your question. In principle, NTT Holding Company is not a business operating company. We emphasize our net profit as a result. As for the other two companies, their operating income was in the negative territory on a year-on-year basis as they completed the previous fiscal year. They cannot even come up with estimates for the coming year. It was very difficult for them to commit to an increase in dividend. Unlike business operating companies, NTT Holding Company was in a position to return profit to the customers. That is the difference, I believe.
I see. Thank you. My next question. Impact of COVID-19. Outside Japan, there has been some significant impact. On the domestic front, the sales costing decreased. Therefore, it's likely that the impact will be slight in the Japanese domestic market. Against the backdrop, with regard to the medium-term management strategy, you have set the EPS target. Based on the actual track record and based on the annual growth, you're talking about 9% growth. That would be the plan. As things are the way they are right now, what additional measures do you think would be necessary to achieve your medium-term target? Do you see such a need to take additional measures at this juncture?
Well, first of all, with regard to FY 2020 business plan is concerned, we did gather the information and had discussions, we were not very clear-cut when it comes to the prediction and estimate. Yesterday, NTT DATA, Mr. Honma talked about this, as far as NTT DATA is concerned, some JPY 500 billion of variables still remained. As for NTT Ltd., about its half the scale compared to NTT DATA. We'll be talking about JPY 200 billion-JPY 300 billion in variables. In terms of system integration, at maximum, JPY 700 billion could be the potential impact, although it does depend on the pipeline. In recent, it seems the various countries are now beginning to reopen their economy after the period of lockdown and so forth. There are concerns about the second wave and the potential third wave.
The customers are now trusting to the solutions for digital transformation and to promote remote work and so forth. If that is the case, then in a positive fashion, we can explore possible pipeline and projects. That's the first point. Secondly, at NTT Holding Company, back in April, has also instructed that various costs for fiscal year 2020 should be contained. Investments and costs should be contained for fiscal year 2020. That notification was provided for NTT Holding Company to the business operating companies. Towards June, we have provided instructions for the operating companies to contain their costs. Third thing, capital investment, as a natural progression, will likely to be slow. That is indeed the case. Also for those areas where we have seen drop in revenue, we also have to consider containing the level of our CapEx.
When we announce our projection for fiscal year 2020, we want to make sure that we can take efforts to improve our profit. That is our thinking at the structure. Thank you. That is all from my side. Thank you.
Thank you very much. We'd like to take the next question. Next will be Merrill Lynch Japan Securities, Mr. Kinoshita. Hello, this is Kinoshita. Can you hear me? Yes, thank you very much. Please go ahead. I also have two questions. First, for the COVID-19 pandemic of the recent situation, you showed it on page eight for the fixed communication service, the nighttime peak. Well, during the daytime, it's maybe from the beginning, it's not used that much, but the nighttime peak was at 10%, and daytime was 50%-60% increase. Under this situation, you may be enhancing the facility and network, but due to that, what is going to happen to the CapEx? Also what you have mentioned before, depending on the revenue, that you are going to control the CapEx.
Through that control, for the enhancement, is that going to be insufficient, is my first question?
Yes. Well, basically, as I have explained, the internet traffic backbone or the network, the way we think about those is we are conscious of the load. We set the nighttime as the peak. Towards the regular traffic, we do have quite a high level of capacity. Because of the situation, there's not many major events. There's no burst that is occurring. Even during the daytime, there's no impact. On the other hand, if there's an increase at the nighttime, we will face trouble. Right now, it's only 10% increase. We are thinking about JPY 1 billion of investment increase for the enhancement. If this continues, depending on the region or the location, if there are differences or variances, we may have to increase the level by a notch.
From an overall perspective, it is within the amount that we can control.
You said JPY 1 billion investment. What are you going to invest towards?
The connection point, VPN devices that will connect with each customer server equipment. It will require those types of devices and equipment.
Oh, okay. If you increase it by JPY 1 billion, you'll be able to cover the whole situation?
Yes. Looking at the current situation.
Okay. Understood.
What we're concerned is that the second wave and the third wave comes, and if there is a major spread as such, then we will have to respond. That area is going to be larger. Another point is that within alliance with Toyota.
This time, you will be cross-holding the shares with each other. Depending on the way of thinking, it seems that what you're doing is going against the trend. What is the meaning of this cross-shareholding? By holding each other's shares, what kind of benefit return do both companies have from each other?
Well, as you say, the cross-shareholding has become such a way. Basically, the project that we are trying to do together is not just at the Higashi-Fuji project, but it is something for the global arena. Together with Toyota and NTT, we'll provide smart city or provide support for creating smart cities, and we'd like to make that into a business. It's for a long term, and also the scope of it is very large, too. In a way, it is to show commitment to each other. Another point is that Toyota themselves actually take that pattern for alliance. In a way, they invest in KDDI, and with SoftBank, they have a joint venture. Within that situation, we are showing each other that we are both a more strategic partner than others to each other.
Through this, it's not that we are going to put a stop on the liquidity of the shares or try to cover each other on the liquidity of each other's shares.
Okay, understood. Thank you.
Thank you very much. Next question, please. Next, from Daiwa Securities, Mr. Ando. The floor is yours. Thank you. Hello, can you hear my voice? Yes, we hear you. Thank you. Thank you for this opportunity. I would like to ask two questions as well. My first question, it's on page four. You explained page four, you talked about the overseas operating income margin. You explained that there was review of business environment in Brazil. You talked about impairment loss, also delay in shift to high-value services. Impairment loss and delay in shift to high-value services. Can it be more concrete? What specifically are you talking about? I would appreciate your comments on that point. Also, next, with regard to NTT Limited. I believe you are trying to pursue transformation, streamlining, as well as integration.
In the past three months, what has been the update of those efforts? Also, inclusive of the impact of COVID-19, what about the outlook for cost? I think you'll be able to control the cost to a certain degree, what changes are you noting in the recent on this front? I would appreciate your explanation on those points. Thank you for your question, [Dan]. I talked about the change in the external environment for Brazil. That was already probably addressed by NTT DATA as well. This relates to the so-called simulator. We procured equipment, and they were held as assets. The law in Brazil changed, and that device could no longer be used. We have to take that off this inventory. As a result, around JPY 5 billion had to be incurred to review the business.
There was a ¥5 billion loss. I talked about minimizing future costs. NTT Security is a wholesale company, already the goodwill has been depreciated at NTT Security. The sales is not all that robust at this moment. We want to reduce the assets. That was the instruction put forward by our accountants. ¥4 billion shrinking of our assets, that took place. In terms of a shift to high value-added services and more profitable business, I talked about the delay in the shift. In terms of NTT Ltd. and their business environment, North America and Africa, they are not all that positive at this moment. As for North America, already in North America, just selling Cisco type of systems per se is no longer all that profitable.
It's important that we migrate to managed services and security services, which can be even more profitable. The thing is, though, we are not there yet. That's why I described the so-called delay in the shift to those services. The impact is roughly JPY 3 billion. Also, we had JPY 3 billion negative impact from a currency, foreign exchange. Roughly JPY 16 billion is the negative impact in terms of the global business. JPY 5 billion, JPY 4 billion, JPY 3 billion foreign exchange. If you add that all together, that's the situation. As for NTT Limited, you asked about the integration at NTT Limited. In principle, there are many different elements, but we are trying to introduce IT within two years, and that's on track as far as this particular item is concerned.
Because of the impact of COVID-19, there has been some delay, especially in terms of changing the signage. For example, the original companies, they have to change their name to NTT. Since there are several hundred such companies, roughly maybe dozens or close to 20 such companies, they're changing the title or the name of the company has been deferred. The regulators in those places are not yet all that active. That is the reason for the delay in the change in the name and the title of the company. Now, as for the cost, this was covered in the first question. Since profit is going down, we are accelerating our streamlining efforts. There is an incurred cost to pursue and accelerate streamlining. That has been the positive.
In fiscal year 2020, which will end March 2021, JPY 20 billion decline in both facilities and human personnel are expected. Therefore, we are controlling development expenses. Thank you very much for that. Let me go on to my second question. Again, I apologize for asking a COVID-19 related question. NTT East, West, and NTT Communications. What has been the impact of COVID-19 in those three companies, aside from traffic? What has been the impact of COVID-19 for those three aforementioned group companies? I would appreciate your explanation. Data, DOCOMO, they've already explained the impact of COVID-19 on their experience, on their performance. NTT East, West, and NTT Communications, what has been the net effect of COVID-19 for those three companies? Thank you. Thank you for that question. Let me respond.
As for NTT East, West, and NTT Communications, data traffic and phone traffic, it hasn't been that affected because of the fact that most of the systems involve flat rate charges. When it comes to networks, in April, there was a pickup in the demand for fiber. Up until March, we really did not note much change. We haven't really seen much movements there. The expectation is that maybe due to telework and working from home, hopefully the demand for fiber could increase. In April, indicated slight increase, but it's not exponential growth at this juncture. The issue is system integration. NTT East, West, and NTT Communications, they have system integration business. New orders for system integration, we don't see very active pipeline at this juncture. That is one source of concern.
When we look ahead, various companies are now trying to reduce their costs and also they're trying to reduce their budget and are pursuing streamlining. Communication services provided by NTT East, West, and Communications, it could be that those companies would be coming to those companies to reduce the cost. That's a possibility. We're not yet able to estimate the potentiality of the scenario at this juncture. Thank you. Thank you.
Thank you very much. We'd like to take the next question. Next will be Citigroup Securities. Mr. Tsuruo, please go ahead with your question. Hello, or good evening. This is Tsuruo from Citigroup Securities. My first question is additional question related to Mr. Ando’s first question. The overseas ICT business environment, when we think about NTT Limited and also NTT DATA , the structural reform, what is the possibility of doing that? Meaning that in Japan, teleworking is not progressing that much. This COVID-19 to the ICT business, maybe we don't have to be that pessimistic, but for the overseas or international business, it's not that the ICT business was not going behind. It seems that the BPO type of business will decline, so I'm concerned.
This may be part of the forecast of this fiscal year, but the possibility of structural reform, can you answer as much as you can?
Thank you very much. In NTT DATA Japan business, recurring business is about 70%. For overseas, it's about 60%, is what I hear. Basically, the orders that we have received up to this point is going to continue. That's the structure. With an overseas SI business, the question is what happens to the new orders? As I have mentioned before, including the Japan's new orders, recently, I have not split up NTT DATA and explained it, but the annual sales is about JPY 500 billion, when we look at the tradition. There is the backlog of orders for NTT DATA. For the first half and second half, that is going to turn into cash as we move along. In that sense, for the NTT DATA functions of the changes is unlimited. For the limited side, about half of it is selling products.
Of course, there's a lot of recurring on that side of the business too, but that sometimes will not reorder the product or they wanted to streamline the order or they will not place new orders. There's a possibility of such. That is a bit dangerous. In the subsidiary company, we have a company called Arkadin, which provides a service of a teleconference and web conference, and they are having a very strong performance. March, April performance compared to the previous year, they're achieving large numbers. It's a plus and minus in factors that can offset each other for the overseas NTT Limited business too. When we look at the overall picture, of course, they're in a tougher situation than the Japan situation.
Okay, understood. Thank you very much. That was a good reference. The second is regarding free cash flow. From two years ago, when you compare two years ago and last year, and looking at the cash statement, it seems that the free cash flow has improved by large. I would like to know the background of it. Maybe there's accounting characteristics to it. I would like that briefly explained, and regarding this fiscal year. I'd like to hear about your basic way of thinking or outlook, as much as possible. This is Hiroi speaking. Tsuruo-san, are you looking at the consolidated cash flow material and asking your question? Yes, I'm looking at the B/S balance sheet. The free cash flow. Yes, there are a lot that is improving. However, the one thing, or the one major reason is that if you look at the DOCOMO numbers, you will understand it.
The working capital, the inventory assets has improved by and large. That's one point. Another point is that the handset compared to the previous year is not selling large, so the receivables have been downsized. Because of those impacts, the final free cash flow, the working capital improvement compared to last fiscal year, this fiscal year, fiscal year 2019, it's actually working on an improvement. If you look at the financial statement to cash flow, there's the share buyback, a little bit of impact on share buyback, and also DOCOMO's share buyback has an impact, quite a bit. We are financing that through borrowing. The interest-bearing borrowing on the right-hand side, you'll see it increasing.
For the actuals, I understand. There's no special reason. I mean, basically, the overall cash flow has improved, is my understanding.
One reason is that the handset sales is not doing so well.
For this year, how should we look at it? This fiscal year, we are not announcing any forecast. It's difficult to answer that question. Within the just ended fiscal year, something that I have to answer is that within the cash flow, if you look at the EBITDA numbers, it's worsening. The other areas other than EBITDA, the operating cash flow is improving. The base, this is a qualitative way of explaining, but DOCOMO and also regional telecommunications at the center are taking the lead. We would like to improve it so that they'll be able to generate a satisfactory level of cash. Because of COVID-19, we don't have a clear vision of the future that much.
As the President CEO explained, we would like to have good control, and we just have to see the impact of COVID-19. It's very difficult for me to give you a solid answer. Can you forgive me with this? Just one more thing. NTT East and West, the business plan has been submitted recently or submitted last fiscal year? The effort is to lower it? The business plan for approval, the CapEx level that's written in there regarding the COVID-19 impact, we are looking at in a flexible manner and respond in a flexible manner regarding that. Okay, understood. Thank you very much.
Thank you very much. Next question, please. Next, from Mitsubishi UFJ Morgan Stanley, Mr. Tanaka. The floor is yours, Mr. Tanaka. Thank you. Tanaka here. Can you hear my voice? Yes. Please go ahead with your question. Thank you. I would like to return to the topic of NTT Limited once again. Right. I'm looking at the supplementary data on page six. I'm looking at the Group-specific summaries. When we take a look at NTT Limited Group for the period just ended, I'm taking a look at the operating revenue from second quarter onwards. On a year-to-date basis, we see a quarterly drop on a quarter-on-quarter basis. You mentioned the delay in the shift to high-value services. In real terms, is sales at a phase where you're showing decline on a year-on-year basis? Is that not problematic? How do you see the quarter-on-quarter sales trend?
Thank you for the question. Well, on a quarterly basis, I think it's more heavily skewed toward the second half. That is because business structural reform costs are more expanded towards the second half. We talked about the cost for streamlining. We've had to bring forward the voluntary retirement programs in certain cases. That has also added some cost. I mentioned earlier, in the U.S. and in Africa, we're seeing areas whereby sales are not expanding. That has some creeping effect. That is why it seems as though there is a drop in sales, especially towards the second half.
You're talking about profit, but what about operating revenue? I'm talking about sales. On a quarter-on-quarter basis, it seems that the operating revenues are coming down. Does that represent the fact that sales are struggling? Is that the reason? Is that the only reason? Do you think that this is par for the course? Thank you, Hiroi, for finance and accounting. Let me respond to your question. Yes, on a quarterly basis, especially for the fourth quarter, it seems as though that the operating revenue sales are decelerating. I know it looks that way. In the case of the fourth quarter, I think we have significant impact from the stronger yen. That impact was there in the fourth quarter to begin with. As Mr. Sawada already explained, in places like North America and in other regions as well, system integration-related revenues were slowing down.
I think that accounts for the 50% of the impact, roughly speaking. That is how we look at the situation. As far as the currency is concerned, emerging economy currencies, in the case of former Dimension Data, they were very active and had sales in emerging markets. Those emerging economies currencies, because of COVID-19, had become much weaker against the U.S. dollar. I think that was also a significant factor when we do a quarter-over-quarter comparison. I see. Thank you very much. Also, just one more point, if I could ask one more thing. In the past, or even now, you are trying to pursue expand cloud services for NTT outside Japan. In the U.S., you have the likes of Google and Amazon. These companies are still growing.
Against the backdrop, NTT Group's cloud service, can they really be on par and compete with the likes of Amazon and Google? How confident are you? If you can share with us your confidence. Thank you for the question. As far as the cloud is concerned, as Mr. Tanaka mentioned, a couple of years ago, various players were trying to tackle the cloud service. Back then, we had the public cloud. There were many parties that were involved. Therefore, we were emphasizing this area. In the case of public cloud, I think we have consolidated down to Amazon AWS and Google, I think, and Microsoft Azure. There's a consolidation in the marketplace. Technical power, financing power, and sales power, and financial strength. All these factors came together.
In the case of the public cloud market, we see three major powerhouses. We have to consider whether or not we should take on these players straight on. Rather, we should engage our customers and offer a hybrid cloud, a combination of public, private, and on-premise clouds, depending on the request of the customers. That's what we're selling. The private cloud part, we have the ECL that is being provided by NTT Communications. Sometimes customers want AWS, Azure, naturally. We make sure that we're able to accept those inquiries and the requirements. We also have the software to connect them to our system. That being the case, we are seeing progress in our cloud business, but we have seen shift in our directionality and our course.
It's not so much that we're brushing up our own cloud and trying to sell our own cloud service only. Also, in relation to Microsoft, we have already begun alliance and cooperation with Microsoft. The public cloud is now being accessible to Azure. We want to make sure that we're able to offer more higher value-added services. Thank you. Thank you for the response.
Thank you very much. We would like to take the next question. Next will be J.P. Morgan Securities. Mr. Tanabe, please go ahead. This is Tanabe from J.P. Morgan Securities. I have two questions also. Please go ahead. Regarding share buyback, there's no announcement regarding that. Without the forecast, maybe it might be difficult, but in the material, it says to be decided. As usual, you're just saying that you're not saying that you're not going to do it. From last year, you have been planning, and within that process, what are you thinking about the share buyback and this COVID-19 situation? Has that changed your plan for share buyback, is what I would like to know.
Also, given that the COVID-19 situation, once it becomes clear and you will be able to establish a forecast, and let's say the performance is not doing so well and it's going towards deterioration against the forecast, are you going to not do a share buyback? It does contribute to the increase of EPS, so are you still going to conduct a share buyback? Can you please share your thoughts?
Thank you very much. Basically, even though with the COVID-19, the way we think has not changed. Globally, it seems that the share buyback has been actively conducted. As I have been explaining from before, for us, our basic shareholder return is the continuing increase in dividend. In order to continue that.
The number of shares we purchasing it and are canceling them. That is also linked to the shareholder return. This share buyback and dividend is implemented as a set, is how we look at it, and that way of thinking has not changed. But as you, Mr. Tanabe, mentioned, at this point, our business plan itself, we need to look at it at a higher probability and in a more rational sense. Once we get a clear picture and be able to do that, then we would like to make the announcement. If we're asked whether we're going to conduct a share buyback this year, we will probably like to respond it as we have been doing up to this point.
Okay, understood. Thank you very much. My second question is regarding the way of thinking of CapEx.
You were saying that for the fixed-line services within Japan, it is within the control. At the ended term, it seems that there's about a JPY 100 billion increase and even a consolidated basis too. There's about JPY 100 billion increase. This fiscal year's way of thinking, the other businesses, if that is going to continue to increase or is it going to maintain as it is? Probably DOCOMO, they'll be able to control their CapEx, meaning that they won't be spending. Basically, the way of thinking is flat, is what I think. Depending on if the situation recovers, maybe you may want to accelerate your plans. Including this factor, is there going to be an increase in CapEx somewhere else, or is it going to decrease? If there are any plans, please share that with me. Thank you very much.
As I have explained to you, the network investment, NTT East, West, and NTT DOCOMO's network investment, we look at it and set a target as a CapEx to sale number and controlling that number. For this fiscal year, it's not that high, and it's almost flat, and next year it will be under 13.5%. That is the target. As you have pointed out right now, whether there's others that are increasing or decreasing, the major point is real estate, including overseas. We created NTT Urban Solutions. If there's a good residence or property or office property, we like them to move actively. Another major point is the data centers. Depending on the demand, well, with the COVID-19, the deals are falling behind schedule. For the other areas, SPC, we like to make it into a special purpose company or off-balance the assets.
I'd like to use other companies attached to and treat these assets. For fiscal year 2019, urban development is increasing and NTT DOCOMO, in order to start the commercial service of 5G, they have developed base stations, large number of base stations. They are spending a bit more. That is the fact. As the overall outlook, maybe there's some things that will fall behind due to COVID-19, but your intention is to making it flat in terms of CapEx. Network investment, we would like to suppress it, but the total amount for NTT DOCOMO and 5G, they're saying they'll spend JPY 1 trillion in five years, but we would like to lower than what it is, what they're spending currently. Real estate and data centers, we have other large assets, and if we include that, it will go up and down.
We would rather utilize other people's capital or cash and treat these assets. Okay. Thank you very much. Understood.
Thank you very much. Next question, please. Next from SMBC Nikko Securities, Mr. Kikuchi, the floor is yours. Thank you. Kikuchi here. I would like to ask the questions as well. The first part of my question, this might actually overlap with some of the earlier questions. Please bear with me. The impact of COVID-19, your global business, do you think that this requires further resilience-related measures? I suppose there's some potentially vulnerable areas of your business. Has that become visible as a result of COVID-19? If that is the case, what can NTT Holding Company do against that situation? If possible, in the past, there's reports about the former management of Dimension Data. If you have any thoughts about that, I would appreciate it. That's my first question.
Thank you for the question. First of all, with regard to the impact of COVID-19, is there any need to review the business operations as a result of COVID-19? It's not so much that this was triggered by COVID-19. Originally, NTT Ltd. has been shifting, or has been aspiring to shift to more higher value-added services. Remote and online solutions, this is very much amenable to what happened as a result of COVID-19. That being the case
The external environment was actually improved as a result of COVID-19. As far as NTT DATA is concerned, they prioritize engagement and digitalization. That has been the policy which I have been requesting they take, and that's the policy which they are following. Here again, digitalization of customers. This was also very much in sync with what is taking place as a result of COVID-19. It's not so much that we're changing because of COVID-19. With regard to the buyout, this is about Africa. This is not yet determined. She asked about the buyout of this option where various options are being considered. In Africa, there are some difficulties on a country-by-country basis, we need to carefully give this matter consideration. I see. As far as Europe and U.S. are concerned, North America is concerned, you're not considering any change to the teams split?
No, I have no such intentions. In the case of Africa, the name of Dimension Data still remains in Africa. Aside from Africa, it's all been changed to NTT Limited or NTT America and so forth. The name has been changed. That is the situation. Thank you. My second question. Today, you announced the personnel with regard to various NTT groups. Also, I know that you are delegating many of the decisions to the operating companies. As far as NTT holding company is concerned, is there an intention behind the recently announced personnel changes within the Group companies? Also, I think during March 11th, there was a delay in the personnel management. What about this time around? Did you give special considerations for the personnel management this time around, as far as personnel is concerned? Is there any intention?
It is very difficult. Is there a clear intention? Very difficult to say. Mr. Ii, the Senior Executive Vice President, has now been shifted to Senior Executive Vice President for DOCOMO. Of course, I think we need greater coordination between NTT holding company. That being the case, Mr. Ii, Senior Executive Vice President, was responsible for global procurement, and he is very skillful in various discussions with outside parties. I think he is appropriate. As for the rest, you are probably familiar, but at a certain timing, because of the age consideration and so forth, we might seek to bring on a younger team. That trend was properly considered by the various group companies. Thank you. Thank you.
Thank you very much. I'd like to take the next question. UBS Securities. Mr. Takahashi, please go ahead. This is Takahashi speaking. I have one question. Regarding the COVID-19 impact for the major operating companies, we did receive an explanation of the impact for them. For the other businesses segment, subsidiary companies, for example, is there a company that will be impacted largely? The companies other than the major operating companies, businesses, can you give an explanation?
For the others segment, what we are most concerned and what we review all the time is NTT Urban Solutions, which is real estate related, especially making urban development. We believe that moving forward that the real estate situation is going to change. Before that, this March till April in Kyoto, we were scheduled to open three hotels. However, due to this COVID-19 situation, we had to postpone the opening. Originally, these hotels were going to be luxurious hotels with a higher room rate. Even though the size is small, but it was going to be such a hotel, meaning that this is not targeting a large audience. From the city of Kyoto, we received comments that if it is such a hotel, we'll definitely like you to construct such a hotel. As you know, the hotel industry, due to this situation, they are struggling.
Also the tenants, for example, there are many restaurants, and they are struggling. In addition to that, they are receiving requests to lower the rent. With that, several billion JPY will be impacted, is what we think. Other than real estate business, we don't have to be that worried. Power business will not be impacted that much. Comware finance. Comware, they do a little bit of external SI business, but it's not going to be largely impacted. InfraNet, there is some delay of the construction work. It's a company about 50 billion JPY size, so I don't think they will be impacted largely. Also, that's about it.
Okay, understood. Thank you. Thank you very much.
Thank you very much.
Next question, please. Next, Morgan Stanley MUFG Securities, Mr. Tsusaka, the floor is yours.
Thank you. Tsusaka here. Thank you. I just have one question. Turning to your global business, we had the mid-term management strategy. In order to achieve the targets thereof, I think you need to maybe bold the change in your strategy. That's my question. Do you think that there's a need for bold change in your strategy? As a result of COVID-19, maybe you could use COVID-19 to bring about structural change against this environment. What are your thoughts about leveraging COVID-19 to bring about structural change? To be more specific, right now you have about JPY 20 billion sales, and the profit is about JPY half billion. It is less than JPY half billion at this juncture. In order to achieve the plan then going forward, you need to increment to JPY 5 billion in sales.
You also need to improve your profit by JPY 1 billion in order to achieve the target. Right now, you're at JPY 20 billion, very little profit. From this point onwards, in order to achieve the financial targets in the mid-term management strategy, how do you intend to achieve JPY 5 billion sales and also JPY 1 billion increase in profit? It seems to be quite inconceivable as a scenario, as far as I'm concerned. Do you intend to undertake bold strategy going forward? Thank you for your question. I'm not sure whether or not this would be equivalent to a so-called bold strategy, but high value-added service security data centers, they account for roughly 30% of our revenues. By 2023, we want to increase this up to 50%. They include services with high margins, such as 15%-20%.
How far can we include such higher profitable services? The remaining 70%-80% of the sales don't have much margin. I'm talking about NTT Ltd. here. The 70% of the sales I'm talking about, this probably is more or less to sales of physical products. How can we shift to high-value services? It comes down to the issue of personnel. Of course, we have to consider the issue from the management side question as well. Now, turning to NTT DATA, we have seen increase in personnel and outsourcing type of business. In the case of Everis, the margin is going down in these services. How do we further reinforce governance? That's what we have to consider. As for NTT DATA, Senior Executive Vice President, Mr. Nishihata, is going to return to the team.
I think that's, in a sense, very bold, something unprecedented for NTT DATA. The key word is management, governance, and shift to higher value-added services.
Does that represent a bold business model? I'm not sure whether or not that is a direct answer to your question, but that is the mentality that we have.
I see. Thank you. I know that these things are not very visible right now, and maybe it's a very strange question for me to ask. You're talking about lower margin business. It seems that you're involved in more or less lower margin business. If the business environment is dampened as a result of COVID-19, then costs will come down. Sales might come down, but also costs might also come down. Maybe it doesn't have significant impact on bottom line. Is that the way you see things?
Do you believe that since you have JPY 20 billion sales overseas, should we consider the risk that this could be a ceiling factor for the bottom line going forward? How should we see the situation? Which of the scenario is more likely?
As far as the operation is concerned, we're not just selling physical products. We are providing maintenance, and we're also offering management services, although maybe not for early advance, but still we're offering management services. Just because of COVID-19, it doesn't mean that what we're doing is going to be disrupted. That is not the case. As you pointed out, there could be decline in revenues. At the same time, though, costs could also be coming down. Is that the case? I'm not sure whether or not we can be all that optimistic. We have parts that are recurring.
We are also selling physical products. That may remain steady, but it could be that we may not see increase in demand going forward. That might be the case. Have I responded to your question?
No, that's fine. Thank you very much. Thank you.
Thank you very much. I'd like to take the next question. Are there anyone else who would like to ask a question? For those of you who have a question, please press zero and one. For those of you who have a question, please press zero and one. It seems that there are no other questions. With this, we would like to conclude the fiscal year 2019 results briefing session. Thank you very much.