Ladies and gentlemen, thank you for waiting. Thank you very much for attending today despite your busy schedules. We would now like to start the briefing of NTT Financial Results for the six months ended September 3039. I'm Fujiki from the IR office and I will be serving as today's facilitator. First, I would like to introduce today's attending members.
President and CEO, Member of the Board, Mr. Sabada. This is Sabada. Very nice to meet you. Senior Executive VP, Member of the Board, Mr.
Shimada. Senior Vice President, Head of Finance and Accounting Department, Member of the Board, Mr. Hiroyi Senior Vice President, Head of Corporate Strategy Planning, Member of the Board, Mr. Kitamura. Before we start, there's about three housekeeping announcements.
First of all, regarding the distributed materials, up till now, we have been distributing the presentation material and results briefing materials on your seats. However, as announced beforehand, in order to promote a paperless, from today onwards, they will be stopped to be distributed. You'll be able to confirm the content and the materials at our company's IR website. I seek your understanding. Furthermore, today's presentation will be streamed live on our company's IR website and also will be streamed on demand on later dates also.
Lastly, within the content of the presentation materials and the forecast numbers and the future outlook that will be included in the explanations and the Q and A, there were points to be noted for within the material, so please read through them. Now Mr. Sawada, the President and CEO, will be explaining the results outlined and receive questions later on. Mr. Sawada, please.
Good afternoon, ladies and gentlemen. Thank you for joining us despite your busy schedule. We appreciate your kind attendance. So we now like to start by presenting to you the financial results for the first half for fiscal year twenty nineteen for NTT. Let's start with Page four.
In a nutshell, we experienced increase in operating revenue but decline in operating income. As far as operating revenue is concerned, we recorded second quarter levels for three years in a row. As far as operating income is concerned, there was decline in operating income due to drop in mobile service revenue at DOCOMO as well as costs related to reorganization of our global business. So that being the case, we realized we experienced rather a drop in operating income on a year on year basis. But although we have not disclosed our internal guidance, both operating revenue and operating income actually exceed our internal business plan, and so we are making very positive stride.
In terms of net profit or profit, there's a decline year on year. There's valuation gain from consolidation of Ennet as a subsidiary firm in the first quarter. However, because of the impact of the decline in operating income, we saw a declining profit net profit on a year on year basis. As far as overseas sales and income margin is concerned, Since this coincides with the timing of the reorganization and operating correction, overseas sales remain very strong. And the impact of foreign exchange is about 30,000,000,000 yen We've been able to absorb the foreign currency impact and still realize an increase in operating revenue.
However, as far as operating income is concerned and focusing on income margin per se, it's negative 9,000,000,000 for one thing. We are making investment for expanding our digital offering. And also, as we have consistently been pointing out, we want to shift to high value, high margin services such as managed services, but there is a delay in such a shift. And also, we require cost for rebranding. So that being the case, operating income margin declined by 0.9 percentage points.
Let me now focus on the consumer factors by segment. Top shows operating income and the bottom right shows increase in operating revenue operating revenue per se correction, on the top. Long distance, international communication data and other business, in particular, business the other business, because of the consolidation of Enel X as a subsidiary firm, we saw increase in operating revenue. So as a result so the drop in regional and mobile communication was offset by increase in those aforementioned sectors segments. As for the bottom part, this relates to the operating income.
In the case of DOCOMO, there was already announcement by DOCOMO, there's decline in operating income. As for Regional Communications segment, it seems as though there's a slight decline in operating income. However, on a full year basis, we anticipate an increase on a full year basis. So this is in line with our plan. As far as long distance and international communications segment is concerned, if we focus on this particular segment, yes, there is about JPY 10,000,000,000 related costs for integration purposes.
So that impact is there. And furthermore, as I mentioned earlier, we are spending money on branding, but these are all one off costs as far as we're concerned. Going forward, we would like to further pursue structural reform in this segment. So next page. If you could focus on next page.
This is the financial results forecast for fiscal year twenty nineteen. As far as DOCOMO is concerned, there's impact of better than expected net increase in mobile in the first half. And then also, there's increase in handset sales. Although the absolute sales is lower than the previous year, however, the actual sales is stronger than our initial expectations. So that being the case, we are going to revise the forecast for operating revenue by 60,000,000,000 yen On the other hand, as far as operating income is concerned, yes, there is increase in handset sales.
However, net however, the the gross profit from handset sales is not that high. So therefore, the increase in handset sales does not contribute too much to increase in operating income. And also, there is expenses related to disaster countermeasures. And also at the same time, we have to consider the possible measures that Rakuten will take when they enter the market. So we need to be prepared for that.
So that being the case, as far as operating income is concerned and as far as the profit is concerned, we are not going to revise our forecast, full year forecast at this juncture. Naturally, we're going to make efforts so that we will be able to exceed our annual guidance. Let me now turn to topics. There are many items. So I would just highlight some of the major points, if I may.
I would appreciate your understanding. First relates to digital, support our customers' digital transformation, B2B2X Mod projects. I mentioned that in three years, we will have 100 projects. In full, this year, we've been able to achieve more 54 such projects. So therefore, in terms of the number of projects, we are making very strong strides.
We've been expanding the we've expanding such projects. For example, support the offering of new lending service for financial institutions and also supporting VOC, voice of customer data analysis for contact center industry. So we've begun to offer such services. Next relates to the five gs services. I think this is familiar.
From September 20, we've begun the five gs precommercial services. And as far as investment is concerned, we are talking about 10,000 stations deployed by the June, which means there's more than 8,000 stations increase. Let's turn to the following page. Accelerate our own digital transformation first relates to global. As you're aware, in June, we launched NTT Limited, and we intend to complete the whole process by December.
But in relation to the company in terms of the company names in each region, we want to make sure that we'll be able to change all the names so that they will include NTT. And all the logos of the services firms will be changed to NTT logo. And the company names will also be changed to include NTT. So this is the stage characterized as Day two. And we will sorry, Day one, Day two, Day three.
So by Day three, we'll complete this whole process. Also, as I mentioned earlier, we want to change from product sales to managed sales. We want to accelerate transformation to such managed sales services. And also, we want to realize implementation of unified ERP, a cloud version of unified ERP. We want to introduce a unified ERP based on cloud within two year period.
And next, with regard to extended partnerships to strengthen our branding, Please look at the following page. In September, we signed a we rather entered into a technology partnership with Major League Baseball in September year. This represents a technology partnership. So it's not just about straightforward sponsorship. We'll also be providing technology, which means that this is a bilateral relationship.
And we've already had that for IndyCar series and Tour de France and also J League here in Japan. And also for Major League Baseball, we are going to be expanding such a partnership. So we want to leverage NTT's technology and make sure that we'll be able to experience new type of experience for the brands. We want to support that. So as a result, we believe that the brand awareness will be enhanced as a result of this initiative.
In
terms of the digital transformation of our own, the IT systems that were not integrated need it to be integrated. The first part is the operation or the service operation side from accepting the subscription, providing the service to the billing of the service, we're making inter cloud based IT service. And we'd like to automate the process. We're scheduled to complete it by 2024. So excluding DOCOMO's consumer service, for DOCOMO, only going to be corporate customers, but excluding certain services, we are going to integrate all of the services, and we have started the initiative already.
The second is the unified ERP. On the global side, we would like to complete that within the next two years. But for the domestic side, it is going to take longer. In the global side, as for Hana, a platform that will be implemented overseas, we're going to implement it in Japan, too. But we would like to spend the next four years to create this unified integrated ERP.
As for RPA, 17,000 robots already have been implemented for the business processes. Last year was 500, and it tripled to 1,500. And more than 4,000 customers, we are providing the WinActor, which is the RPA service. We are providing it for the group, too. Next is utilizing the people, technology and assets.
ION, a global forum, has been established in partnership with Intel and Sony. We would like to bring in the photonics structure within the platforms. And we have started this forum. And ION W, which is W, we have announced it today, the wireless side. Together with JAXA, We are working on the research and development of ultra high speed large capacity communications infrastructures between the ground and space, which is going to be a seamless link.
And also in Chiba City, we are planning to have a field demonstration test of the DC power transmission. Chiba actually was impacted by the typhoon and they want NTT Anode Energy to provide the disaster power source as soon as possible, so we are accelerating this initiative. Next page is regarding the SMART infrastructure platform we are building. We have created NTT Geospace Corporation to come under the NTT Infranet. And we would like to reorganize it and complete it December 2019.
And the Real Madrid, as written here, the Real Madrid Foundation, which is the foundation for the football school, Japan. We are going to participate in this as an executive sponsor. And within the community building that will be going on nationwide, we are going to participate with them so that we can utilize this as part of the community building. Next is regarding the community and economy. One is towards food and manufacturing business or school or local government that will be using that network.
We would like to create a system or cloud based system to develop the community. And also in Vatican, they have the archives created. But in Japan, with NTT East, we would like to utilize this technology to preserve and succeed the local culture and art resources utilizing this digital art archives technology. And next is regarding disaster countermeasures. The impact of Typhoon No.
Fifteen and nineteen was large and quite serious. I'm sorry it's in small letters, but Typhoon No. Fifteen, thirty five thousand And in typhoon nineteen, forty 5,000 subscribed networks went down. And for base stations, nineteen hundred and sixteen hundred specifically for each typhoon has gone down, and we have been largely impacted by the typhoon. So regarding these countermeasures for disasters, as is shown in the next page, we would like to strengthen the equipment and facility.
And also, we would like to accelerate the recovery process. From the government perspective, all the base stations should operate twenty four hours, seven days a week. But it's actually better to incorporate this medium zone base stations. One is 1,000,000. If we have 660,000, it's 1,000,000 times 160,000 base stations, so think about the large amount.
So we would like to actually utilize the EVs. The 8,000, we were going to renew it every seven years. Actually, the electric vehicles cost wise is going to be lower compared to the conventional gasoline running vehicles. And actually, these electric vehicles can be used as a power source. Therefore, we would like to accelerate or front load the implementation of it.
And regarding the mobile power generation vehicles, currently we have a 400, but we would like to manage it in a centralized manner and utilize it more. And also regarding the cables, we would like to bring it underground to count as countermeasures for natural disasters, but it does is costly, so we would like to prioritize the areas. And also acceleration of the recovery support through the typhoons that we have just experienced, Miyakojima or Miyako Island, there was we found out based on the big data communication that if they Miyako Island was going to be impacted by the typhoon. So we have implemented recovery countermeasures beforehand with full preparation. So we have done that.
So we would like to utilize AI to generate damage forecast. And also, we would like to further enforce the recovery system and secure personnel, and we would like to strengthen support to the customers. In the public phone booth, we would like to have a WiFi station or the storage batteries so that we will be able to cover the communications in these areas and enhance the cash countermeasures. And next is regarding share return to shareholders. And the first part is regarding the share buyback.
For the shares buyback, we would like to strategically and flexibly conduct it. But what I would like to explain today are the two measures written on the next page. This will be mainly for the individual shareholders, But the first one is according to the original guideline. The share price has gone up to 5,500 yen So in the investment unit, it will be 550,000 yen So we would like to split the stocks. And through this, we would like to expand the number of younger investors that will become our shareholders.
And the other thing is the distribution of d POINT. Right
before two years,
many shareholders seem to be selling their shares. So we would like to retain these shareholders. So in two years, we would like to provide 1,500 points and second year onwards, 3,000 points. Of course, all the shareholders will be subjected to this. So up to two years is of 1,500 and two years or more will be 4,500 points.
So this will also lead to the expansion of the d POINT members by distributing this. And the record date of The U. Cost will be twenty nineteen December thirty one. And through these measures, we believe it is going to be quite effective countermeasures to secure shareholders. It's been long, but that will be all for my explanation.
Thank you very much for your kind attention. The first question, please. UNIDENTIFIED
you very much. Masuno from Nomura Securities. I have two questions. The first question relates to the short term performance. The second question relates to your outlook for the coming year.
Earlier, you talked about structural reforming global business. Also, you talked about strengthening your brand in the overseas business and JPY 10,000,000,000 for reorganization, also additional extra for rebranding. Going forward, you mentioned that this will continue until December, meaning that how much will this be? How much branding and structural reform related costs will be expanded for the full year? And also based on that spending, what positive impact do you see on your operation?
If you could talk about the outline of your structural reform, I would appreciate your elaboration. Well, thank you for the question. I mentioned JPY 10,000,000,000 for structural reform. I think in the second half, we anticipate JPY 8,000,000,000 further for structural reform. Now in the immediate sense, I mentioned that there's delay in the transition to managed services.
So therefore, 2,000,000,000 impact from lack of sales in security and other sectors. So in the second half, it is likely that similar impact will be felt. So for the full year, I would mention I would believe that there's still further yen 10,000,000,000 impact in the second half. But then we'll be pursuing streamlining and rationalization. We're talking about JPY 60,000,000,000 over a three year period.
We anticipate JPY 30,000,000,000 sorry, correction, JPY 60,000,000,000 for a three year period. We're talking about the figures three years from now. So I think it will be heavily skewed toward the second half, if you will, in terms of three year plan. But the impact of the streamlining, I think, and structural reform will be that level. And also, as a result, 60,000,000,000 impact from shifting to Managed Services.
That will be profit and revenue impact, if you will, as a result of transitioning to higher margin Managed Services. Now this will take five years, roughly five years, but the target for 2023 will be margin of 7%. So that will be JPY 190,000,000,000. That will be JPY 190,000,000,000 thereabout. So JPY 130,000,000,000, the gap from now will have to be covered by the two aforementioned pillars.
So that is the plan we have. Let me confirm. So in three year period, 60,000,000,000 for three year period, you're talking about cost reduction is 60,000,000,000 yen right? Okay. And the remaining 60,000,000,000 that's a profit increase due to increase in revenues.
Yes, that's right. So impact on profit, you're talking about the impact on profit. Okay. Thank you for that clarification. My second question, you had impairment loss in the previous first second half last year.
You were able to cover that. And also structural reform is underway. So for this fiscal year, as a result, I think you're in the process of those initiatives, the medium to long term and three years or five years from now. Well, what about next fiscal year? What will be the situation, if you will, for next fiscal year?
If you could talk about each segment and your outlook for the next fiscal year, DOCOMO will be recovering into the profit territory I mean, the positive profit territory. But what other segments, what will 2020 be like for each segment? So in the context of three years, five years from now, what will be the positioning of the next fiscal year? Thank you for the question. With regard to DOCOMO, as you mentioned, Mr.
Masuno, next year will be the bottoming out year. We are anticipating recovery for DOCOMO starting for next fiscal year. So we want to make sure that we'll be projecting our profit in DOCOMO. As for NTT East and West, The first optical fiber back end system, integrated system will begin its operation toward the second half of this fiscal year. And the impact of the unified network will be roughly 10,000,000,000 yen perhaps, that positive impact that is good to be felt.
And aside from that, with regard to digitalization, we are trying to change processes to enable digitalization. So as a result of those activities, NTT East and West will likely be able to have be in the positive territory in relation to their operating income. Now turning to Global Business, we want to separate it into two, NTT Limited and NTT Data. We want to separate it into two. As for NTT Data, very strong performance right now.
I'll be very frank. Order taking is very, very substantial. We anticipate further in the pipeline for the third quarter, very large contracts. So for next fiscal year, Entity Data will be very, very strong performance in terms of the global performance. That potential is very high.
Now as for Entity Limited, there's they have just begun their streamlining and rationalization efforts. So in two year period, they will be carrying out its migration process. So also not as much as this fiscal year, but the expenses will be much lower next year. But they will, of course, they will be expanding their operating income but facing a lot of challenges. That's the type of year it will be.
As far as operating revenue is concerned, as I mentioned earlier, it's not dropping. It is increasing. So that being the case, what they need to do is to further make sure that they translate the marketing activities into actual profits. Now as for other business, be it power business or be it urban solutions, building real estate are concerned, it is not yet in here who will still be able to reap benefits from the various initial activities. So we'll not likely see substantial profit from the other business segment next fiscal year.
Thank you for that. Next question, the second round from the front. SMBC Nikko Securities, my name is Kikuchi. The global business is my question. For NTT Limited, I have a question.
The structural reforms, you're spending 10,000,000,000 yen and you're in the process of doing so is what I think. The first quarter and second quarter profit, when I look at it, is it costing more? Or if you exclude the structural reforms, it's not performing as planned? And during the structural reform period, it seems that there's a downsizing or the business worsening. We don't have to think about that those factors, meaning that it doesn't seem like it is doing very well.
And the global NDT Limited business environment or the operations current situation, can you share that with us? Yes. First of all, United States at the center, the market itself is rapidly moving towards digitalization. The NTT DATA Group and for NTT Limited, both will be impacted by this. And NTT DATA Group, they provide they have to provide the solution by industry.
That's their mission. And NTT Limited, they will have to provide a managed service. That is the mission. So the missions are separated. But both sides, the consulting to do the digital offering or hiring talent or preparing, in total, they are using the 4,000,000,000 yen That is a fact.
It's about 2,000,000,000 yen 2,000,000,000 yen each. In addition to that, NTT DATA, the recent order receiving situation is good, but limited side. The security or the managed service, it is not selling us what we have originally planned. It is they're continuing the product sales. And with just that, we're not able to gain much of gross profit.
Therefore, that impact is about JPY 2,000,000,000. Therefore, as a growth investment is JPY 2,000,000,000 and the struggling part is JPY 2,000,000,000, so that are those are the expenses other than the structural reform. And the previous 2,000,000,000 yen that I mentioned, I did say that it's going to continue on to the second half. So as Mr. Kikuchi will say, if you look at the end numbers, you may think that there's a structural reforms, but the numbers may be larger.
I think that's where you want to ask about. But in reality, well, the management of the business is done and doing it together with Jason. And we think that we'll be able to clear that. My second question is a simple question, maybe. The regional communications, I believe, the West Side, seems that the expenses is increasing.
Is that a onetime temporary increase within the regional communications? It seems that well, the West especially is declining in profit. So can you explain about that? Well, this the first half, from that point, it seems you can it looks like the expenses are accumulating. That is because the disasters from last year and the response and countermeasures of those disasters are included.
And also, till now, we changed the depreciation method. The ones that were in the floating profit that we had, there were various depreciations or amortizations or there's a special amortization and loss that we have recorded and there's some removal of the or disposal of assets. But this time, the cable depreciation, we have the reverse return from last year. So that is done last year. So overall, this year, it is going to turn into positive.
Thank you. I have the third question. In order to have a more advanced group management, as for SAP for HANA, you're going to integrate those systems. Can you share with us what the meaning of doing so? Meaning that right now in the existing business, that part, you're using SAP and there are some conversion migration, but there are some new areas too.
So you've changed the database to HANA and everybody goes to S4HANA, will be integrated into S4HANA. I believe that there is going to be quite of a cost. Yes. As you have mentioned, currently, the global side subsidiary companies, they're on SAP. But they're all stand alone SAP systems.
So there is a connecting system. So for the consolidated connected type of work, there's no problem. But the codes that they're using is not consistent. So we are making it into one consistent one this time. And also, by implementing S4HANA, the Conquer or Arriba or SuccessFactors, which were the external system, all of that is going to be commonized.
And based on that, the database is going to be integrated into one. And through that, we're going to seek higher efficiency. The existing license, when those are replaced, whether it's going to be higher or lower, it's going to be maintained the same. That's depending on the negotiation. But basically, we think it's going to be the same.
So it is going to impact efficiency. And also, it will become more visible. So the Japan side too, you're going to integrate all that too, right? Yes. So to what extent are you going to do that integration?
The financial accounting, the managed accounting, all of that is going to be consolidated to the holding company and you can look over it. Are you going to go that far? Or if you're not going to that far, but is it you're doing it to make the group structural reform easier in the future? If you do have an integrated system, you'll be able to freely do things. Well, but it's a holding company, all the domestic subsidiary companies and overseas companies and the general accounting and the managed accounting, all of that, you're going to integrate that into one, and you want to manage that under the holding company.
Is that what you're thinking of? Well, in a consolidated basis, well, it's all integrated. But we like to make it the codes that are used for the system. The employee IDs were all integrated, two into one. So we're starting it.
But there's a system, accounting system called inactive. That's communications data documents are not included. And for the subsidiaries, they have a different system. So we want to replace all those system because we have to renew the system at some point. So at that time, we'd like to replace them with the cloud based IT system.
I think that's a better way of looking at this. And with this, we'll be able to see all the KPI performances at real time basis. So VI will be realized. Thank you very much.
You very much. We'd like to go on to the following question. The gentleman in the front row, please. Thank you. Tsuro from Citigroup.
I'd like to follow-up on Mr. Kikuchi's present question. So the medium term, how much investment will this require if you want to change GDSSA before both domestic and overseas operations? I know that you have counterparts you have to discuss. Maybe you will be able to respond to all.
But over the medium term, how much investment do you think this will require in relation to using SAP? Or will this have a major impact? Well, thank you for the question. First of all, NTT when was the President of NTT Security, S. O.
HANA was introduced in one years. Point That took about 3,000,000,000 yen So we're talking about 1,500 people. So the basic functions were the same, but the IDs, because of the licensing question, well, let's say, are anticipating tenfold increase, JPY 600,000,000,000 for twentyfold. So I think we're talking about tens of billions of yen for global operations, so tens of billions of yen for the global side of the operation. But then that's not all.
I think we need to finalize the details. So that's the overseas operation. As for domestic operation, it's more complicated. To be quite candid, we don't have clear set of numbers for CapEx for domestic side. But as far as the outline is concerned, annually, we spend about JPY 300,000,000,000 for IT for the NTT Group as a whole.
So if you exclude overseas business, it will be above JPY 200,000,000,000. So ERP, CRM and other processes included well, onethree is ERP, let's assume. So we're talking about JPY 100,000,000,000 yen max. So this includes P and L. So as far as initial investment is concerned, the maximum, we have already had maximum number.
So it should be the actual number should be lower than the ceiling. My second question relates to the medium term outlook. At the Tsukuba Expo the other day, you talked about the common usage of towers. I understand that there are discussions underway. So you're investing in J Tower.
So can you give us an update as to the common usage and sharing of towers? What are your thoughts at NTT? I would appreciate your response. Well, we have consistently been involved in various initiatives, for example, within tunnels or within buildings, introducing common antennas for those areas. This was already being carried out without any forceful move on our part.
Now the second part, four gs and existing telecom specs such as four gs, where J Tower already had common usage. So placing antennas outside the common usage parts for four gs, that's what we want to accelerate. We have three operators. And with Rakuten coming into the marketplace, there will be four parties involved. And hopefully, we will be able to accommodate those four parties.
So this requires engineering, and also we need to come up with prototypes. So that's what we are discussing right now. The discussions have already begun. And the final part relates to five gs per se. We have to do this on an antenna by antenna basis.
So it's not just when we say it's five gs, but we need more cognitive type of antennas. We need to consider the possibility of more, cognitive antennas. So it's not so much NTT per se. The initiative is with J Tower. Well, if there's an idea, let's say, in the case of five gs, how many towers do you think this will require?
Or how much towers can be commonly used for five gs? Any ideas? REPRESENTATIVE:] Well, we can't have in the case of signaling, you can't place four antennas at the same time. So but even J Tower were to cover all that, we're talking about 200,000 towers? No, 100,000 towers?
Sorry, I don't I forgot the actual number. I think it was 200,000 towers. Yes, 200,000 towers. That will be the basis. I understand.
And if you can achieve such antennas, it means it will be on utility poles. So 20,000,000 yen for power and 12,000,000 yen for NTT. So how much of the towers do we have can be accommodated? But if it's 10%, 3,030,000, correction. So that's the scale we're talking about if the point of reference, but it's not yet visible, sorry.
You don't have to respond to this, but I appreciate this number. But primarily, we're talking about CapEx for fixed line business, right? So CapEx will be in the fixed line business. In the case of how will base station related CapEx be allocated? Well, fixed for base stations, it will be J Tower.
But then the network to connect that will be in the Gatsuvic line business. So that's going to be quite large.
UNIDENTIFIED Third row from the front. Please go ahead. SBI Securities, my name is Moriyuki. On Slide number nine, you have the current status of the midterm management plan. You did explain part of it, but this 54, the B2B2 projects and making that capitalizing on that, what is the percentage of that?
And also the two points, the second and third point you see on this page, when are they going to contribute to the profit? Sorry, it's a very vague question. Well, I cannot tell what percentage is being monetized. And at the PLC proof of concept stage, I don't know how what percentage that is yet. But I'm told that there's no numbers to be disclosed.
Several 10,000,000,000 yen is in the end level, I think. At profit level, no, no, no, no. Revenue levels, sales level. At profit, still, there's the struggling level still. These are 54 projects.
It's not before companies but partners. The managing cows, that's a one project. We would like to expand that to 10 several hundreds. So even though the project is the same, by as the time passes, many of them, the number increases. And by repeating those, the margin is probably going to increase.
Therefore, the numbers that I can share with you right now, I don't have it on hand. But in terms of revenue, that is steadily going up is how you can understand that. For example, the first line, the first two. In the second and third point, the lending platform has already started, so the money is already coming in. That is Shinsei Bank.
That is our partner. Well, it will depend on the bank's business plan, so I cannot share with you solid numbers. However, it is going to increase more. And the third one, the center, NTT West has already implemented this service to their customers. So this also, through sales activities, this model is going to be implemented and increased.
So for both two, they're not at an experimental stage. They are already implemented. The same one, the DOCOMOSA bus, AI bus. Those buses in areas in Japan has already been implemented. So even though it's one project, but it has been deployed in various locations and increasing.
Understood. And my second question is regarding disaster countermeasures. You said you're going to increase your efforts in that area. You will wait for the revenue coming in, but this is like an insurance for contingency. But what is going to be the ending expenses that you will be looking at?
You're going to expand gradually, right? Well, this all depends on how you think about this. For us, how are we going to respond during the disaster moments is what we have been thinking because we cannot cover everything. So the breakdown maintenance, meaning meaning that even though it breaks down and we repair it, in terms of economies when you compare it, which is better? Depending on that, we decided the formulation.
The past experiences up to now, for example, to bringing in the cables underground, it's about €100,000,000 per kilometer. And that's not going to pay off. But if it breaks down once a year in a certain zone, it's 10,000,000, 20,000,000. If it breaks down or cuts off every year, it's going to be 100,000,000 in ten years. In the past, it wasn't as so.
But we have to compare the economies based on the probability because meaning that the probability is going up. And that is what we are targeting at is that the scope that we can manage within the current cost. And that cost itself, we would like to reduce that through digitalization. So the question you asked, meaning that the additional investments for disaster countermeasures, how much is that investment going to be a burden on us, we don't look at it from that angle. We are looking at it from the angle to not increase the cost but be able to manage within the current situation and how we're going to compare the economies and make the decision as how we are looking at this.
I just want to confirm once again. So this fiscal year, the expense is going to go out in advance, and that's going to flatten out throughout the years. We have a vast number of equipment and facilities. And to make them all resilient and robust, Looking at the Chiba Prefecture and looking at the Typhoon number nineteen, they're still at the level that they will be damaged. And we cannot make it all strong, all of them.
So it's going to go out as a maintenance and repair expense. And this year, we have already spent EUR 8,000,000,000. And next year, it may be EUR 8,000,000,000 again. So those that amount, in a sense, is the additional spending. But in the next several years, we would like to make the core equipment and facilities robust and resilient so that we will not have this additional expense.
We have so much of equipment and facilities, so I cannot give you all specifics because we also have batteries too. So it will all depending on the wise decisions based on which will be the core. Thank you very much.
You very much. Next question, please. The gentleman in the second row from the front. I just have one question, sir. It's about the medium term outlook related question.
Earlier, Mr. Tsuru asked on his question as well. So as you head toward five gs, with regard to cap you mentioned the CapEx for fixed facilities will not increase that much to accommodate five gs. But aside from DOCOMO, be it NTT East West or NTT Communications, in relation to fiber, how much CapEx will be required for five gs? And also, With increase in five gs traffic, do you think there'll be increased in revenue for fixed line portion?
And also with regard to local five gs, I think, Entities and Western Communications, how do you how will Entity Group companies be involved in local five gs so they will be able to realize increase in profit? That's my question. Thank you very much. Thank you. Yes, I'd like to go back to the question raised by Mr.
Tsuruo earlier. It's not so much five gs specific. In relation to common antennas, CapEx for common five gs antennas, I think that was the question. So if you're talking about five gs specific investment, starting for next fiscal year, NTD, Sunwest, we will be offering backbone as a service to accommodate five gs. So that investment, yes, will be required.
But with regard to fiber per se, considering utilization rate for fiber, this can be covered from the macro perspective. But then on macro level, there are some shortfalls, so we'll have to address that. We're talking about 800,000 base stations, five gs, among the four parties. So we 800,000 subscription fiber. Yes, we have we already have fiber to accommodate that.
So that being the case, on the fiber side, we don't expect the need for substantial need for investment into fiber to support five gs. But as I mentioned earlier, in order to deliver backbone service, we need to invest in certain level of nodes. That is the situation. But if there's further congestion going forward, if, for example, people begin to download video at a very rapid pace, if that is going to be recorded on the mobile phone side, then it's not just fiber course, but the transmission efficiency will have to be improved. So that will involve and entail additional investment down the road.
That is a possibility. But for the current circumstance, we do not believe there's a need for some chance of increased investment. Actually, we're trying to cut back on the investment per annum, and we believe that we'll be able to accommodate this even in a decline in CapEx. In local five gs, we have a lot of expectation for local five gs. And today, some of us, if they are connected, integrated, then it would it would be like DOCOMO, the second DOCOMO, so that's not allowed.
But if it's a closed circumstance, that's alright. I know that the accommodation is making a lot of noise, but we're able to be involved in certain elements. For example, in the Yamanashi Prefecture, we created a joint venture. It's an agriculture related house. LFPWG or four gs was used, but we want to introduce five gs and connect that from connect with the network.
If that's the case, then the image data and more detailed data can be accessed on a real time basis, which means that the system for the farms will be able to deliver and sell such farm related systems much easily. So how much scale are we talking about? We have to formulate the business plan, but we have a lot of expectation for the local five gs. Thank you.
Thank you very much. The person in the third row from the front, Ando from Daiwa Securities. This is a question for confirmation. Just before, you said that overseas business or global business, you said 7% and 190,000,000,000 yen What is the calculation formula for that? So I just wanted to confirm with under what calculation you have reached those numbers?
$2,000,000,000 revenue. Profit margin, 3%. That is fiscal year twenty eighteen's current situation. Yen 2,500,000,000.0 revenue target, 7% margin. 2020 fiscal year 2023, that's the target.
When you compare those two years, fiscal year twenty eighteen is JPY60 billion approximately. 2023, I can't calculate right away, but it's about JPY190 billion, I think. And that difference is about JPY130 billion. That is what I have said. On the profit base, in five years, billion, when we want to generate that, half is going to be cost.
The other half is going to be increase in revenue and profit. That's how we would like to compile this number. That's what I mean. Okay. Thank you very much because I wasn't able to calculate.
That was very helpful. Thank you. Sorry about that. And related to that, the increase in revenue. This is after you shift over to managed service is what you've explained.
So you're going to increase your revenue through mainly managed service. Is that the correct understanding? No. There's about four key points. The first is the digital solution of NTT data.
And on the NTT limited side is the managed service. In addition to the managed service, they have data centers, which are performing very strongly. And moving forward, there will be continuous increase of data. We have GAFAs as our customers. Therefore, in each area, we believe that the data amount is going to increase in various areas.
And the next will be security, including equipment and devices. There are a lot of factors that can experience growth. So digital solution, managed service, data centers and security. With these four, those will be the drivers for the increase. So the order that you mentioned, is that the order of your priority or expectations?
Or you just did it at random, you just set it at random order? It's not in the magnitude, but it is the order of expectations. The highest expectation will be digital solution. And next, maybe data center. The third is managed service.
And the fourth will be security. Well, that may change, interchange. The magnitude in the profit is at 20% for data solutions. The data center is about the same. Security right now is not doing that well, so we have to improve that point.
So if that is so, the effect positive effect of the structural reform, if that is generated, so those points are going to be easier to increase. Or through hiring new talent and others, you think that that's going to bring in more addition and you have expectations towards that through efforts? Of course, we need to put it in our efforts, including recruiting people. But for the security side, we have acquired Secure24 last year, and they are performing quite strongly, and their capabilities is quite high. So how are we going to expand that in the same managed service, the NTT Global Network?
This is the former Vertella. They have a 20% margin, and they have they're scalable, they're SDN, and they still have room to expand. So in the conventional thinking, we have people hired in the front side. But in the special company, having a special sales and special special SEs, I think it's more important, so we're going to hire those type of people. So on the other hand, on the front side, like NTT comms, local subsidiaries and the DDs, each region's people, the people who are selling the products and the people who want to do security.
And there's those people, we will have them shift over to that side. But on the other hand, if their productivity does not go up, so that needs the improved the efficiency in those areas need to be improved. Is that what we are thinking of? Okay, understood very well. Thank you.
You very much. Question, please. You. Q Research. Soichi Mai is my name.
Thank you for this opportunity. I just have one question. It's about B2B tax. You provided us with an update. It seems much stronger than initially expected.
But just one thing I would appreciate. You talked about Las Vegas. So there are case or you have already introduced the cases in Las Vegas, for example. But right now, here in Japan, what about the models for B2B2X model? Do you think they can be transplanted outside Japan?
Do you have models for B2B2X model here in Japan that can be applied directly outside Japan? I would appreciate your insight. Thank you. Well, thank you. As far as the current situation is concerned, we don't have any firm orders per se, but the trial is underway.
On this page is the contact center, a VOC offering VOC data analysis support. Foresight mining, this is the basis of this model. Entity Tecnocross is selling an R and D technology. This is a contact center solution, and we're trying to apply that outside Japan. We're in the trial phase.
NTT Limited will be the one marketing and selling this particular technology. But as far as the product is concerned, we believe that it will be more than viable in European markets as well as in the North American market. So that's one possibility. But this is something down the road. Well, up until now, this was not this wasn't the case for your company.
But now this type of model is becoming viable. What is the backdrop? What has led to you what has led to a situation where it is possible for you to market this type of technology? What change took place in your company? What is the change that took place in your company?
And what has enabled you to take this technology outside Japan? Or is this simply the case that this particular model is a very outstanding one, so NTT Limited is trying to expand that? So do you have a system in place whereby you'll be able to extract viable models from Japan and then transplant that outside Japan? Well, I can't say anything I can't say anything with great confidence, but we're trying to create such a system. And the driver will be anti delimited anti data's overseas companies.
They want to sell whatever products that are viable outside of Japan. And when they do benchmarking in the marketplace, call center solutions that we just talked about and also multilingual translation services and engines, this is already being delivered by Kotoha. We get the sense that these are properly viable outside Japan. Actually, our global side, the non Japanese marketing reps take a look at are very focused on such technology. So this is a very natural outcome.
So there is a request on the part of the sales team. So it's important so we don't have a systematic delivery. That is because the vendor related functions are still weak. So be it Japanese products or non Japanese products, it's important that we need to deliver those products to customers throughout the world. When the customers place orders, do their invoice and their delivery and they do the fine tuning.
This type of systematic pipeline is not yet fully established, which means that the same applies when we want to introduce non Japanese products from outside Japan into Japan. So I think we've just begun this process to create the system. But I think, structurally, I think it's very positive that we now have the will to address this. There is an intention emerging. Thank you very much for the response.
You very much. Any other questions from the floor? UNIDENTIFIED No more questions from the floor. With this, we would like to conclude the briefing session for today. Thank you very much for attending despite your busy schedule.
Thank you very much. I had a cold today, so it may be difficult to hear my voice. I'm very sorry about that. Thank you.