As filed with the Securities and Exchange Commission on June 27, 201426, 2015

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 20-F

 

 

 

¨REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 20142015

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

¨SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 1-31221

 

 

Kabushiki KaishaNTTDOCOMO

(Exact name of registrant as specified in its charter)

NTT DOCOMO, INC.

(Translation of registrant’s name into English)

 

 

 

Japan 

Sanno Park Tower

11-1, Nagata-cho 2-chome

Chiyoda-ku, Tokyo 100-6150

Japan

(Jurisdiction of incorporation or organization) (Address of principal executive offices)

 

 

Shintaro AkimotoKenji Higashigaito, Ayano Tamada or Ayano Tamada,Yu Kunita, Investor Relations

TEL: +81-3-5156-1111 / FAX: +81-3-5156-0271

Sanno Park Tower, 2-11-1 Nagata-cho, Chiyoda-ku, Tokyo 100-6150 Japan

(Name, Telephone, E-mail and /or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

 

Name of each exchange on which registered

Common Stock* New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

 

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

 

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of March 31, 2014, 4,146,760,1002015, 3,881,483,855 shares of common stock were outstanding, comprised of 4,122,090,5513,859,718,543 shares and 24,669,54921,765,312 ADSs.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer    x            Accelerated filer    ¨            Non-accelerated filer    ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  x    International Financial Reporting Standards as issued by the International Accounting Standards Board    ¨    Other    ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  ¨             Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

 

*Not for trading, but only in connection with the listing of the American Depositary Shares.

 

 

 


TABLE OF CONTENTS

 

     Page 
 PART I  

Item 1.

 Identity of Directors, Senior Management and Advisers   34  

Item 2.

 Offer Statistics and Expected Timetable   34  

Item 3.

 Key Information   34  

Item 4.

 Information on the Company   18  

Item 4A.

 Unresolved Staff Comments   3639  

Item 5.

 Operating and Financial Review and Prospects   3639  

Item 6.

 Directors, Senior Management and Employees   6472  

Item 7.

 Major Shareholders and Related Party Transactions   7482  

Item 8.

 Financial Information   7583  

Item 9.

 The Offer and Listing   7684  

Item 10.

 Additional Information   7886  

Item 11.

 Quantitative and Qualitative Disclosures about Market Risk   9199  

Item 12.

 Description of Securities Other Thanthan Equity Securities   93101  
 

PART II

  

Item 13.

 Defaults, Dividend Arrearages and Delinquencies   94102  

Item 14.

 Material Modifications to the Rights of Security Holders and Use of Proceeds   94102  

Item 15.

 Controls and Procedures   94102  

Item 16A.

 Audit Committee Financial Expert   94102  

Item 16B.

 Code of Ethics   95103  

Item 16C.

 Principal Accountant Fees and Services   95103  

Item 16D.

 Exemptions from the Listing Standards for Audit CommitteesCommittees.   95103  

Item 16E.

 Purchases of Equity Securities by Issuer and Affiliated Purchasers   96105  

Item 16F.

 Change in Registrant’s Certifying Accountant   96105  

Item 16G.

 Corporate Governance   97105  

Item 16H.

 Mine Safety Disclosure   98108  
 

PART III

  

Item 17.

 Financial Statements   99109  

Item 18.

 Financial Statements   99109  

Item 19.

 Exhibits   99109  


As used in this annual report, references to “DOCOMO,” “the Company,” “we,” “our,” “our group” and “us” are to NTT DOCOMO, INC. and its subsidiaries except as the context otherwise requires.

As used in this annual report, reference to “NTT” is to our parent company, NIPPON TELEGRAPH AND TELEPHONE CORPORATION.

As used in this annual report, “Xi” refers to our LTE network service and “FOMA” refers to our W-CDMA network service.

Fiscal year 2014 refers to our fiscal year ended March 31, 2015, and other fiscal years are referred to in a corresponding manner.

Special Note Regarding Forward-looking Statements

This annual report contains forward-looking statements such as forecasts of results of operations, management strategies, objectives and plans, forecasts of operational data such as the expected number of subscriptions, and the expected dividend payments. All forward-looking statements that are not historical facts are based on management’s current plans, expectations, assumptions and estimates based on the information currently available. Some of the projected numbers in this report were derived using certain assumptions that were indispensable for making such projections in addition to historical facts. These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those contained in or suggested by any forward-looking statement. Potential risks and uncertainties include, without limitation, the following:

 

1.Changes in the market environment in the telecommunications industry, such as intensifying competition from other businesses or other technologies caused by Mobile Number Portability, development of appealing new handsets, new market entrants, mergers among other service providers and other factors, or the expansion of the areas of competition could limit the acquisition of new subscriptions and retention of existing subscriptions by our corporate group, or it may lead to ARPU diminishing at a greater than expected rate, an increase in our costs, or an inability to reduce expensesoptimize costs as expected.

 

2.If current and new services, usage patterns, and sales schemes proposed and introduced by our corporate group cannot be developed as planned, or if unanticipated expenses arise the financial condition of our corporate group could be affected and our growth could be limited.

 

3.The introduction or change of various laws or regulations inside and outside of Japan, or the application of such laws and regulations to our corporate group, could restrict our business operations, which may adversely affect our financial condition and results of operations.

 

4.Limitations in the amount of frequency spectrum or facilities made available to us could negatively affect our ability to maintain and improve our service quality and level of customer satisfaction and could increase our costs.

 

5.Other mobile service providers in the world may not adopt the technologies and the frequency bands that are compatible with those used by our corporate group’s mobile communications system on a continuing basis, which could affect our ability to sufficiently offer international services.

 

6.Our domestic and international investments, alliances and collaborations, as well as investments in new business fields, may not produce the returns or provide the opportunities we expect.

 

7.Malfunctions, defects or imperfections in our products and services or those of other parties may give rise to problems.

 

8.Social problems that could be caused by misuse or misunderstanding of our products and services may adversely affect our credibility or corporate image.

 

9.Inadequate handling of confidential business information including personal information by our corporate group, contractors and others may adversely affect our credibility or corporate image.

 

10.Owners of intellectual property rights that are essential for our business execution may not grant us a license or other use of such intellectual property rights, which may result in our inability to offer certain technologies, products and/or services, and our corporate group may also be held liable for damage compensation if we infringe the intellectual property rights of others. In addition, the illicit use by a third party of the intellectual property rights owned by our corporate group could reduce our license revenues actually obtained and may inhibit our competitive superiority.

 

11.

Events and incidents caused by natural disasters, social infrastructure paralysis such as power shortages, the proliferation of harmful substances, terror or other destructive acts, the malfunctioning of equipment, software bugs, deliberate incidents induced by computer viruses, cyber-attacks, equipment misconfiguration, hacking, unauthorized access and other problems could cause failure in our networks,

 distribution channels, and/or other factors necessary for the provision of service, disrupting our ability to offer services to our subscribers and such incidents may adversely affect our credibility or corporate image, or lead to a reduction of revenues and/or increase of costs.

 

12.Concerns about adverse health effects arising from wireless telecommunications may spread and consequently adversely affect our financial condition and results of operations.

 

13.Our parent company, NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT),NTT, could exercise influence that may not be in the interests of our other shareholders.

Our actual results could be materially different from and worse than as described in the forward-looking statements. Important risks and factors that could have a material impact on our actual results are set forth in “D. Risk Factors” in Item 3.D.3 and elsewhere in this annual report.

PART I

As used in this annual report, references to “DOCOMO,” “the Company,” “we,” “our,” “our group” and “us” are to NTT DOCOMO, INC. and its subsidiaries except as the context otherwise requires.

Fiscal year 2013 refers to our fiscal year ended March 31, 2014, and other fiscal years are referred to in a corresponding manner.

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

 

A.Selected Financial Data

The following tables include selected historical financial data as of and for each of the years ended March 31, 20102011 through 2014.2015. The data in the table is derived from our audited consolidated financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The consolidated balance sheets for the years ended March 31, 20132014 and 2014,2015, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years ended March 31, 20122013 through 2014,2015, and notes thereto appear elsewhere in this annual report.

Selected Financial Data

 

 Millions of yen, except per share data  Millions of yen, except per share data 
 As of and for the year ended March 31,  As of and for the year ended March 31, 
 2010 2011 2012 2013 2014  2011 2012 2013 2014 2015 

Income Statement Data

          

Operating revenues:

          

Mobile communications services (1)

 ¥3,456,544   ¥3,354,634   ¥3,326,493   ¥3, 168,478   ¥2,955,788  

Telecommunications services *1

 ¥3,361,235   ¥3,334,036   ¥3,176,931   ¥2,963,980   ¥2,747,155  

Equipment sales

  507,495    477,404    498,889    758,093    872,000    477,404    498,889    758,093    872,000    904,089  
 

 

  

 

  

 

  

 

  

 

 

Other operating revenues

  320,365    392,235    414,621    543,551    633,415    385,634    407,078    535,098    625,223    732,153  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total

  4,284,404    4,224,273    4,240,003    4,470,122    4,461,203    4,224,273    4,240,003    4,470,122    4,461,203    4,383,397  

Operating expenses

  3,450,159    3,379,544    3,365,543    3,632,942    3,642,004    3,379,544    3,365,543    3,632,942    3,642,004    3,744,326  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Operating income

  834,245    844,729    874,460    837,180    819,199    844,729    874,460    837,180    819,199    639,071  

Other income (expense) (2)

  1,912    (9,391  2,498    (3,838  13,850  

Other income (expense)*2

  (9,391  2,498    (3,838  13,850    4,812  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Income before income taxes and equity in net income of affiliates (2)

  836,157    835,338    876,958    833,342    833,049  

Income taxes (2)

  336,927    332,806    391,798    323,059    307,979  

Income before income taxes and equity in net income of affiliates*2

  835,338    876,958    833,342    833,049    643,883  

Income taxes*2

  332,806    391,798    323,059    307,979    238,067  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Income before equity in net income of affiliates (2)

  499,230    502,532    485,160    510,283    525,070  

Equity in net income (losses) of affiliates
(including impairment charges of investments in affiliates)(2) (3)

  (2,122  (10,539  (24,208  (29,570  (69,117

Net Income (2)

  497,108    491,993    460,952    480,713    455,953  

Income before equity in net income of affiliates*2

  502,532    485,160    510,283    525,070    405,816  

Equity in net income (losses) of affiliates
(including impairment charges of investments in affiliates) *2*3

  (10,539  (24,208  (29,570  (69,117  (7,782

Net Income *2

  491,993    460,952    480,713    455,953    398,034  

Less: Net (income) loss attributable to noncontrolling interests

  (2,327  (1,508  2,960    10,313    8,776    (1,508  2,960    10,313    8,776    12,059  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net income attributable to NTT DOCOMO,
INC
. (2)

 ¥494,781   ¥490,485   ¥463,912   ¥491,026   ¥464,729  

Net income attributable to NTT DOCOMO,INC. *2

 ¥490,485   ¥463,912   ¥491,026   ¥464,729   ¥410,093  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Per Share Data

          

Basic and diluted earnings per share attributable to NTT DOCOMO, INC. (4)

 ¥118.64   ¥117.97   ¥111.87   ¥118.41   ¥112.07  

Dividends declared and paid per share (4)

 ¥50   ¥52   ¥54   ¥58   ¥60  

Dividends declared and paid per share (4)(5)

 $0. 5353   $0.6283   $0.6553   $0. 6160   $0. 5826  

Weighted average common shares Outstanding—Basic and Diluted (shares) (4)

  4,170,573,800    4,157,685,900    4,146,760,100    4,146,760,100    4,146,760,100  

Basic and diluted earnings per share attributable to NTT DOCOMO, INC. *4

 ¥117.97   ¥111.87   ¥118.41   ¥112.07   ¥101.55  

Dividends declared and paid per share *4

 ¥52   ¥54   ¥58   ¥60   ¥65  

Dividends declared and paid per share *4*5

 $0.6283   $0.6553   $0. 6160   $0. 5826   $0.5418  

Weighted average common shares Outstanding—Basic and Diluted (shares) *4

  4,157,685,900    4,146,760,100    4,146,760,100    4,146,760,100    4,038,191,678  

Balance Sheet Data

          

Working capital (6)

 ¥872,816   ¥1,032,131   ¥1,204,258   ¥1,105,642   ¥1,320,776  

Working capital *6

 ¥1,032,131   ¥1,204,258   ¥1,105,642   ¥1,320,776   ¥1,301,074  

Total property, plant and equipment, net

  2,607,590    2,523,319    2,536,297    2,560,284    2,557,766    2,523,319    2,536,297    2,560,284    2,557,766    2,511,067  

Total assets (2)

  6,756,775    6,791,593    6,948,082    7,169,725    7,508,030  

Total debt(7)

  610,347    428,378    256,680    253,766    230,346  

Total assets *2

  6,791,593    6,948,082    7,169,725    7,508,030    7,146,340  

Total debt *7

  428,378    256,680    253,766    230,346    222,651  

Total liabilities

  2,094,329    1,913,999    1,839,311    1,759,160    1,814,517    1,913,999    1,839,311    1,759,160    1,814,517    1,728,135  

Common stock

  949,680    949,680    949,680    949,680    949,680    949,680    949,680    949,680    949,680    949,680  

Total NTT DOCOMO, INC. shareholders’ equity (2)

  4,635,877    4,850,436    5,062,527    5,368,475    5,643,366  

Total Equity (2)

  4,662,446    4,877,594    5,108,771    5,410,565    5,678,644  

Total NTT DOCOMO, INC. shareholders’ equity *2

  4,850,436    5,062,527    5,368,475    5,643,366    5,380,072  

Total Equity *2

  4,877,594    5,108,771    5,410,565    5,678,644    5,402,616  

Other Financial Data

          

Depreciation and amortization expenses and loss on sale or disposal of property, plant and equipment

  733,881    720,999    708,838    732,084    752,997    720,999    708,838    731,632    752,997    699,860  

Net cash provided by operating activities

  1,182,818    1,287,037    1,110,559    932,405    1,000,642    1,287,037    1,110,559    932,405    1,000,642    962,977  

Net cash used in investing activities

  (1,163,926  (455,370  (974,585  (701,934  (703,580  (455,370  (974,585  (701,934  (703,580  (651,194

Net cash used in financing activities

  (260,945  (421,969  (378,616  (260,967  (269,793  (421,969  (378,616  (260,967  (269,793  (734,257

Margins (percent of operating revenues):

          

Operating income margin

  19.5  20.0  20.6  18.7  18.4  20.0  20.6  18.7  18.4  14.6

Margin of net income attributable to NTT DOCOMO, INC. (2)

  11.5  11.6  10.9  11.0  10.4

Margin of net income attributable to NTT DOCOMO, INC. *2

  11.6  10.9  11.0  10.4  9.4

 

(1)*1With the introductionAs a result of “Other operating revenues”reclassification in the fiscal year ended March 31, 2013,2015, some elements (revenues from contentsatellite mobile communications, cable television of overseas and other services) included in conventional “Packet communications“Other operating revenues” in the financial statements for the fiscal yearyears ended March 31,2010 to31, 2011, 2012, 2013 and 2014 have been retroactively reclassified into “Other operating revenues.“Telecommunications services.” The amounts of the reclassification are ¥6.6 billion, ¥7.5 billion, ¥8.5 billion and ¥8.2 billion for thesethe fiscal years are 42.9 billion yen, 52.5 billion yenended March 31, 2011, 2012, 2013 and 59.2 billion, respectively.2014.
(2)*2The consolidated financial statements for the fiscal year ended March 31, 2013 have been revised due to the reinstatement of the equity method for an investee.
(3)*3Includes impairment of investments in affiliates. See Note 56 of Notes to Consolidated Financial Statements.

(4)*4As we conducted a 1:100 stock split with an effective date of October 1, 2013, “Per Share Data” for the fiscal years ended March 31, 20102011 to 2014 are based on the number of shares after the stock split, respectively.
(5)*5The dividends per share were translated into U.S. dollars at the relevant record date.
(6)*6Working capital was computed by subtracting total current liabilities from total current assets.
(7)*7Total debt includes total short-term debt (including commercial paper and current portion of long-term debt) and long-term debt.

Exchange Rate Data

The following table shows the exchange rates for Japanese yen per $1.00 based upon the noon buying rate in New York City for cash transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York:

 

Fiscal Year ended March 31,

  High *   Low *   Average **   Period-end   High*1   Low*1   Average *2   Period-end 

2010

   98.76     86.12     92.49     93.40  

2011

   94.24     80.48     85.00     82.76     94.24     80.48     85.00     82.76  

2012

   82.41     76.34     78.86     82.41     82.41     76.34     78.86     82.41  

2013

   94.16     77.92     83.26     94.16     94.16     77.92     83.26     94.16  

2014

   105.25     97.52     100.46     102.98     105.25     97.52     100.46     102.98  

2015

   119.96     101.28     110.78     119.96  

Calendar Year 2013

                

Calendar Year 2014

                

December

   105.25     101.82     103.46     105.25     121.38     117.28     119.32     119.85  

Calendar Year 2014

                

Calendar Year 2015

                

January

   104.87     102.20     103.76     102.28     120.20     116.78     118.25     117.44  

February

   102.71     101.11     102.13     102.08     120.38     117.33     118.76     119.72  

March

   103.38     101.36     102.34     102.98     121.50     119.01     120.39     119.96  

April

   103.94     101.43     102.46     102.14     120.36     118.80     119.51     119.86  

May

   102.34     101.26     101.77     101.77     124.18     119.09     120.80     123.98  

June (through June 6, 2014)

   102.69     102.30     102.47     102.50  

June (through June 5, 2015)

   125.58     124.06     124.61     125.58  

 

*1For fiscal years, calculated from the highest and lowest of the exchange rates on the last business day of each month during the relevant year.
**2For fiscal years, calculated from the average of the exchange rates on the last business day of each month during the relevant year. For calendar year months, calculated based on the average of daily closing exchange rates.

 

B.Capitalization and Indebtedness

Not applicable.

 

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

Risks Relating to Our Business

This annual report contains forward-looking statements such as forecasts of operating results of operations, management strategies, objectives and plans, forecasts of operational data such as the expected number of subscription, and the expected dividend payments. All forward-looking statements that are not historical facts are based on management’s current plans, expectations, assumptions and estimates based on the information currently available. Some of the projected numbers in this report were derived using certain assumptions that are indispensable for making such projections in addition to historical facts. These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those contained in or suggested by any forward-looking statement. Potential risks and uncertainties include, without limitation, the following:

Changes in the market environment in the telecommunications industry, such as intensifying competition from other businesses or other technologies caused by Mobile Number Portability, development of appealing new handsets, new market entrants, mergers among other service providers and other factors, or the expansion of the areas of competition could limit the acquisition of new subscriptions and retention of existing subscriptions by our corporate group, or it may lead to ARPU diminishing at a greater than expected rate, an increase in our costs, or an inability to reduce expensesoptimize costs as expected.

Mobile Number Portability (“MNP”), the development of appealing handsets, the entry of new service providers, mergers among other service providers and other factors are intensifying competition for our corporate group from other service providers in the telecommunications industry. For example, other mobile service providers have introduced handsets that keep up with the needs and desires of customers, including handsets that support high-speed services and music/video playback, new services such as music and video distribution services, and flat-rate services for voice communications and e-mail, as well as installment sales methods for devices. There are alsoIf, in the future, other providers that offer services related to the convergence of fixed and mobile services, such as aggregated point programs, services offering free calls between fixed-line and mobile phones and discounts for combining fixed line and mobile services, and if services that are highlymore convenient for customers are offered in the future, the Company, which is subject to regulatory constraints, may be limited in its ability to respond in a timely and suitable manner. Furthermore, if other providers offeror handsets that are more appealing than our own handset lineup,to customers in the future, we may be unable to respond in a timely and suitable manner. If we are unable to build a network having a certain area and quality within the anticipated period of time, while other service providers build mobile communications networks with an area and quality that exceeds ours, customer satisfaction with our network may decline.

At the same time, competition is intensifying as a result of the introduction of other new services and technologies, especially low-priced and flat-rate services, such as fixed-line or mobile IP phones (including services that use applications that run on our smartphones and tablets), high-speed broadband Internet service, digital broadcasting, public wireless LAN using Wi-Fi, other free or low-priced services of OTT*OTT*1 service providers, and so on,the provision of SIM*2 cards, or a combination of these services.

In addition to competition from other service providers and technologies in the telecommunications industry, there are other factors increasing competition among mobile network operators, such as saturation in the Japanese mobile communications market, changes to business and market structures and the environment due to the expansion of the areas of competition arising from the entry of competitors in the market, including MVNOs*MVNOs2*3 and competitors from other industries, changes in the regulatory environment, and increased rate competition.industries. With the use of open platform devices like smartphones and tablets becoming increasingly widespread, many businesses and others have entered the competition in service offerings on mobile phones, and in addition, NTT East and NTT West started a wholesale optical-fiber access service which enables a diverse group of market participants to provide services utilizing optical-fiber connections and set discounts for fixed and mobile network services, so it is possible that thosesuch businesses etc.and others may eventually launch services that are more convenient for customers, and further intensify rate competition.

In this market environment, the decline in the number of net new subscriptions we acquire may accelerate in the future and the number of net new subscriptions we acquire may not reach the number we expect. Also, we

may not be able to maintain existing subscriptions as customers migrate to other service providers due to increased competition. Furthermore, in order to capture new subscriptions and maintain existing subscriptions, there could be a greater-than-expected decline in ARPU and/or greater-than-expected costs. In this fierce market environment, in order to provide advanced services and increase convenience to our customers, we have made various revisions, such as in rates and the provision of discounted services. For example, we introduced theflat-rate domestic voice service to our subscribers and the packet flat-rate services for XiLTE (Xi) subscribers. We also introduced “monthly support,” which is a fixed amount discounteddiscount from monthly usage rates set for each equipment type. As additional new fee plans for flat-rate domestic voice services, on June 1, 2014 we also introduced “Kake-hodai & Pake-aeru,” which allows for the sharing of packet telecommunications data volume among family members or the same company or organization, “Zutto DOCOMO Discount,Wari,” a discount service for long-term customers, and “U25 Ouen Discount”Wari” a discount plan for customers 25 up to years of age. In addition, in connection with the commencement of our provision of the “docomo Hikari” optical-fiber broadband service, we launched “docomo Hikari Pack”, which provides the “docomo Hikari” optical-fiber broadband service together with smartphones or mobile phones, on March 1, 2015.

However, we cannot be certain that these rate revisions and discounted services will enable us to acquire new and maintain existing subscriptions. Also, the subscription ratio for various discount services or the trend in migration to flat-rate services may not be in line with the expectations of our corporate group, and our ARPU may decrease more than projected. Furthermore, if market growth slows or the market shrinks, ARPU may decrease even more than our forecast and we may not be able to capture new subscriptions or maintain the existing number of subscriptions at the level we expect. In addition, in order to reinforce our managerial structure, we are promoting increased efficiency related to our network, sales and services, research and development and narrowing our product line-up to concentrate resources. The push toward greater efficiency, however, may not proceed as expected, and costs may not be reducedoptimized as anticipated due to intense competition from other service providers and changes in the market environment.

These foregoing factors may have a material adverse effect on our financial condition and operating results.

 

*1Abbreviation of Over The Top. A business that does not own the communications infrastructure required for delivering its services and that delivers content services using the communication infrastructure of other companies.
*2Abbreviation of Subscriber Identity Module. An IC card inserted into a handset on which subscriber information is recorded, used to identify user.
*3Abbreviation of Mobile Virtual Network Operator. A business that borrows the wireless communication infrastructure of other companies to provide services.

If current and new services, usage patterns, and sales schemes proposed and introduced by our corporate group cannot be developed as planned, or if unanticipated expenses arise the financial condition of our corporate group could be affected and our growth could be limited.

We view increases in revenue as an important factor in our future growth. We aim to increase revenue by, for instance, promoting the more widespread use of i-mode services, of smartphone services such as sp-mode, dmenu“dmenu” and dmarket,“dmarket,” and of XiLTE (Xi) services, as well as the expansion of the use of packet communications and other data communications in relation to such services and crowdcloud services like “Shabette-Concier” and the like. Moreover, we look to increase returns through initiatives in new business areas based on the convergence of various businesses and services, such as media/content, finance/payment, commerce, medical/healthcare, Machine-to-Machine (“M2M”)/IoT*1, environment/ecologyenergy and education/learning with the aim of “realizing a smart life” as another important factor in future growth. However, a number of uncertainties may arise to prevent the development of these services and constrain our growth.

Furthermore, if market growth slows or the market shrinks, the services, forms of usage, and sales methods provided by us may not develop sufficiently which could affect our financial conditions and limit our growth. In particular, we cannot be certain as to whether or not the following can be achieved:

 

To develop the cooperative relationships as anticipated by our corporate group with the partners needed to provide the services and/or forms of usage that we offer, with the software vendors that provide the operating systems and applications necessary to promote the use of smartphone and other services, with handset manufacturers, content providers, and with stores that have installed equipment capable of handling e-wallet transactions;

operating systems and applications necessary to promote the use of smartphone and other services, with handset manufacturers, content providers, and with stores that have installed equipment capable of handling e-wallet transactions;

To provide planned new services and forms of usage as scheduled and keep costs needed for the deployment and expansion of such services within budget;

 

The services, forms of usage, and installment sales and other methods that we offer and plan to offer will be attractive to current and potential subscribers and there will be sufficient demand for such services;

 

Manufacturers and content providers will steadily create and offer products including FOMA(W-CDMA) and XiLTE (Xi) handsets, handsets compatible with services we provide, software such as the operating systems and applications necessary to encourage the use of smartphone services, as well as content in a timely fashion and at appropriate prices;

 

Demand in the market for mobile handsets will be as we envision and, as a result, our handset procurement costs will be reduced, we will be able to offer our handsets at appropriate prices, and we will not incurhold excess inventory;

 

Our current and future services, including ISP services such as i-mode, sp-mode, fee plans and discounted services for use of voice and packet communications, intelligent services like Shabette-Concier,“Shabette-Concier,” the storage services like photo collection, the services on dmarket“dmarket” such as dgame, dvideo“dTV,” “dhits” and dshopping,“dmagazine,” and initiatives for new market creation through the convergence with various businesses, including financial and payment services like DCMX, media/content services like NOTTV,“DCMX,” commerce businesses run by OAK LAWN MARKETING, INC. and Radishbo-ya Co., Ltd. and medical/healthcare services run by docomo Health Care, Inc. and Nihon Ultmarc Inc. will be attractive to existing and potential subscribers and achieve continued or new growth;

 

As the foundation of our company’s strategy and services, the increase in the number of smartphone users and the larger customer base resulting from docomo ID will grow according to our business plans;

 

The services provided by our corporate group, based on an open platform system, will not be surpassed by more competitive and sought after services provided by other service providers;

 

  

To expand services with improved data communication speed enabled by LTE*LTE1*2/LTE-Advanced*LTE-Advanced2*3 and other technology as planned; and

If the development of our corporate group’s new services or forms of use is limited or if development costs are more than anticipated, it may have a material adverse effect on our financial condition and results of operations.

 

*1Abbreviation for Internet of Things. A concept that describes a world in which everything is connected to the Internet, enabling remote control and management of devices, etc.
*2Abbreviation for Long Term Evolution. A mobile communications protocol with specifications formulated by the 3rd Generation Partnership Project.
*23While maintaining technical compatibility with LTE, standardization to 3GPP, aA more sophisticated mobile communication system, whose standardization to 3GPP, is progressing.progressing while maintaining technical compatibility with LTE.

The introduction or change of various laws or regulations inside and outside of Japan, or the application of such laws and regulations to our corporate group, could restrict our business operations, which may adversely affect our financial condition and results of operations.

The Japanese telecommunications industry has been undergoing regulatory reform in many areas, including rate regulation. Because we operate on radio spectrum allocated by the Japanese government, the mobile telecommunications industry in which we operate is particularly affected by the regulatory environment. Furthermore, in some cases, our group is subject to special regulations that are not imposed on other providers.

Various governmental bodies have been recommending or considering changes that could affect the mobile telecommunications industry, and there may be continued reforms, including the introduction or revision of laws, regulations, or systems that could have an adverse effect on us. These include:

 

Regulations to accelerate competition in the handset area, such as SIM*1 unlocking regulations;

Regulations to accelerate competition in the handset area, such as SIM unlocking regulations;

 

Revision of the spectrum allocation system, such as reallocation of spectrum and introduction of an auction system;

Measures to open up some segments of telecommunication platform functions such as authentication and payment collection to other corporations;

 

Rules that could require us to open functions regarding our services, such as i-mode and sp-mode services, to platform providers, Internet service providers, content providers, etc.;

 

Regulations to prohibit or restrict certain content, transactions or mobile Internet services such asi-mode or sp-mode;

 

Regulations that would prohibit or restrict the provision of discounted services by our corporate group premised on continuous usage term agreements, including cancellation charges like that for the “Type Xi Ninen” and the like;

 

Introduction of a system allowing for the cancellation of mobile phone subscriptions early in the contract period;

Measures which would introduce new costs such as the designation of mobile phone communication as a universal service and other changes to the current universal service fund system;

Regulations on the sale, promotion, pricing and others for “docomo Hikari” and other optical-fiber services realized by the wholesale services of NTT East and NTT West;

 

Fair competition measures to promote new entry by MVNOs;

 

Introduction of new measures to promote competition based on a review of the designated telecommunications facilities system (dominant carrier regulation);

 

Review of the structure of the NIPPON TELEGRAPH AND TELEPHONE CORPORATION (“NTT”)NTT group, which includes our group; and

 

Other measures, including the fair competition review system for promoting broadband dissemination directed toward us, NTT East and NTT West or the revision of the rules of access charge between operators to enhance competition that would restrict our business operations in the telecommunications industry.

In addition to the above proposed changes that may impact the mobile communications business, we may be impacted by a variety of laws, regulations, and systems inside and outside of Japan. For example, in response to an increase in the number of subscriptions or in the traffic volume*2traffic* per subscriber, we have proceeded with the enhancement of our telecommunications facilities in order to ensure and improve our service quality. As a result, we are using an increasing amount of electricity. Moreover, we are implementing measures directed towards reducing greenhouse gas emissions, including deployment of low-power consumption devices and efficient power generators. However, with the implementation of regulations and other measures aimed at reducing greenhouse gas emissions, our cost burdens may increase, and this may have an adverse effect on our financial condition and results of operations. Also, the financial condition and operating results of our corporate group may be adversely affected by the increased cost of maintaining and operating the facilities we require for providing our services on account of electricity cost increases due to high fuel prices. In July 2010 the Dodd–“Dodd–Frank Wall Street Reform and Consumer Protection ActAct” was signed into law in the U.S.United States. Based on this, the USU.S. Securities and Exchange Commission established rules in August 2012 requiring listed companies that use designated minerals in their products to disclose whether such minerals come from the Democratic Republic of the Congo and adjoining countries. The implementation of these rules could have an adverse effect on our financial condition and operating results in the form of higher costs arising from expense of conducting the research needed for regulatory compliance or from an increase in the prices of materials that use such minerals.

Further still, in order to ensure new sources of revenue, we are pursuing initiatives to create new value through the convergence of mobile services with various services and industries, including media/content, finance/payment, commerce, medical/healthcare, M2M,M2M/IoT, environment/ecology, energy, education/learning and other fields through equity participation and partnerships. Therefore, we are vulnerable to the impact of laws, regulations and systems specific to new services, operations and areas of business, in addition to the laws, regulations and systems applicable to the mobile communications business. If such laws, regulations, or systems are implemented, they may work as constraints on our group’s business operations, and this may have an adverse effect on our group’s financial condition and corporate performance.

It is difficult to predict with certainty if any proposed changes impacting the mobile telecommunications business, or if any other relevant laws, regulations or systems will be drafted, and if they are implemented, the extent to which our business will be affected. However, if any one or more of the above proposed changes impacting the mobile telecommunications business occurs, or if laws, regulations or systems are introduced, reformed, or become applicable to us, we may experience constraints on the provision of our mobile communication services, which may have an adverse effect on our financial condition and results of operations.

 

*1Abbreviation of Subscriber Identity Module. An IC card inserted into a handset on which subscriber information is recorded, used to identify user.
*2The total volume of transmissions.

Limitations in the amount of frequency spectrum or facilities made available to us could negatively affect our ability to maintain and improve our service quality and level of customer satisfaction and could increase our costs.

One of the principal limitations on a mobile communication network’s capacity is the available radio frequency spectrum we can use. There are limitations in the spectrum and facilities available to us to provide our services. As a result, in certain parts of metropolitan Tokyo and Osaka, such as areas near major train stations, our mobile communication network operates at or near the maximum capacity of its available spectrum during peak usage periods, which may cause reduced service quality.

Furthermore, with the number of subscriptions and traffic volume per subscriber increasing, our service quality may decline if we cannot obtain the necessary allocation of spectrum from the Japanese government for the smooth operation of our business.

Even though our corporate group plans to establish specified base stations to use the allocated 700MHz band as soon as the operating conditions are met, if measures for acceleration (acceleration measures for termination) of the transfer of existing FPU*FPU* and specified radio microphones that are currently using this spectrum do not proceed as anticipated, our corporate group may not be able to operate the mobile communication network smoothly, service quality may decline, and additional expenses may arise.

Although we are working to improve the efficiency of our spectrum use through technology such as LTE/LTE-Advanced, including migration to LTE and other measures and to acquire additional spectrum, we may be unable to avoid a reduced quality of services.

In addition, due to the limited processing capacity of our base stations, switching facilities, and other equipment necessary for providing services, the quality of the services we provide may also decrease during peak usage periods if our subscription base dramatically increases or the volume of content such as images and music provided through our networks significantly expands. Also, in relation to our FOMA and XiLTE (Xi) services, the growth in the number of service subscribers and traffic volume per subscriber could significantly exceed our expectations due to the proliferation of smartphones and tablets as well as data communication devices for PCs. Furthermore, some of the software that runs on smartphones and tablets could result in greater use of control signals (the signals exchanged between devices and the network) in order to establish and terminate communications, and could therefore put a greater-than-anticipated burden on our facilities. If it becomes impossible to process such traffic using our existing equipment, service quality may deteriorate, communication interruptions may arise and the cost of investing in equipment to address these issues could increase.

We are endeavoring to reinforce the network foundation in order to cope with future increases in smartphone traffic. If unforeseen circumstances should arise, such as communication interruptions due to an increase in the number of subscribers and traffic volume and/or control signals per subscriber, and we are not able to address such problems sufficiently and in a timely manner, our ability to provide mobile communication services could be constrained or we could lose customers’ trust, and as a result, we could lose subscribers to our competitors. At the same time, the cost of investing in equipment to address these issues could increase, and this could materially affect our financial condition and results of operations.

 

*Abbreviation for Field Pickup Unit. A wireless relay system used for TV broadcasting of sports, news, and the like.

Other mobile service providers in the world may not adopt the technologies and the frequency bands that are compatible with those used by our corporate group’s mobile communications system on a continuing basis, which could affect our ability to sufficiently offer international services.

We are able to offer global roaming services on a worldwide basis on the condition that a sufficient number of other mobile service providers have adopted technologies and frequency bands that are compatible with those we use on our mobile communications systems. We expect that our overseas affiliates, strategic partners and many other mobile service providers will continue to use the technologies and the frequency bands that are compatible with ours, but there is no guarantee of this in the future.

If a sufficient number of mobile service providers do not adopt the technologies and the frequency bands that are compatible with ours, if mobile service providers switch to other technologies or frequency bands, or if there is a delay in the introduction and expansion of compatible technologies and frequency bands, we may not be able to offer international roaming or other services as expected, and we may not be able to offer our subscribers the convenience of overseas services.

Also, we cannot be sure that handset manufacturers or manufacturers of network equipment will be able to appropriately and promptly adjust their products if we need to change the handsets or network we currently use due to a change in the standard technology we adopt, resulting from the activities of standards organizations.

If such technologies and frequency bands compatible with those we have adopted do not develop as we expect and if we are not able to maintain or improve the quality of our overseas services, our financial condition and results of operations may be adversely affected.

Our domestic and international investments, alliances and collaborations, as well as investments in new business fields, may not produce the returns or provide the opportunities we expect.

One of the major components of our strategy is to increase our corporate value through domestic and overseas investments, alliances and collaborations. We have entered into alliances and collaborations with other companies and organizations overseas which we believe can assist us in achieving this objective. We are also promoting this strategy by investing in, entering into alliances with, and collaborating with domestic companies and investing in new business fields.

However, there can be no assurance that we will be able to maintain or enhance the value or performance of the past or future investments or joint ventures established, or that we will receive the returns or benefits we expect from these investments, alliances and collaborations. In our investments in new business fields outside of the mobile telecommunication business, such as media/content, finance/payment, commerce, medical/healthcare, M2M,M2M/IoT, environment/ecology, energy, education/learning and the like, anticipated synergies may not be realized due to uncertain and unforeseeable ancillary factors, as we have little experience in such new fields of business, and these factors may have an impact on our strategy. Furthermore, losses may arise due to dissolution or divestiture of investments, alliances and collaborations.

In recent years, the companies in which we have invested have experienced a variety of negative impacts, including severe competition, increased debt burdens, significant change in share prices and financial difficulties.

To the extent that these investments are accounted for by the equity method and to the extent that the investee companies have net losses, our financial results will be adversely affected by ourpro rata portion of these losses. If there is a loss in the value of our investment in any investee company and it is not regarded as a temporary decline, our corporate group may be required to adjust the book value and recognize an impairment loss for such investment. Also, a business combination or other similar transaction involving any of our investee companies could require us to realize impairment loss for any decline in the value of investment in such investee company. In either event, our financial condition or results of operations could be materially adversely affected.

Malfunctions, defects or imperfections in our products and services or those of other parties may give rise to problems.

Various functions are mounted on the mobile handsets we provide. Additionally, a large number of vendors, including our partners and other companies, provide services via the mobile handsets that we provide. If any problems arise due to the imperfection in a product or service provided by the Company or by another vendor such as technological problems in the handsets provided by us or by outside vendors or in software or systems, or if any other failures, defects, or losses arise, such problems could diminish our credibility or corporate image, lead to an increase in cancellations of subscriptions, or result in an increase in expenses for indemnity payments to subscribers, and our financial condition or results of operations may be affected. Furthermore in an effort to ensure new sources of revenue, we are pursuing initiatives toward the expansion of new businesses through the convergence of mobile service with various other services and industries, including media/content, finance/payment, commerce, medical/healthcare, M2M,M2M/IoT, environment/ecologyenergy and education/learning. Should problems arise due to the imperfection in such products or services, they could diminish our credibility or corporate image and our financial condition or results of operations may be affected. Certain events may lead to a decrease in our credibility and corporate image, an increase in cancellations of subscriptions or increased costs. The following are possible examples of such events:

 

Malfunctions, defects or breakdowns in any of the various functions built into our handsets;

 

Malfunctions, defects or failures in the software and systems necessary for the services we provide;

 

Malfunctions, defects or failures in handsets or services originating from imperfection in services of other parties;

 

Leaks or losses of information, e-money, reward points, or content due to malfunctions, defects or failures in handsets, software, or systems or imperfection in services of other parties;

 

Improper use of information, e-money, credit functions and reward points by third parties due to a loss or theft of handsets;

 

Improper access or misuse of customer information/data stored on handsets or servers, such as usage histories and balances, by a third party;

 

Inadequate and inappropriate management of e-money, credit functions, reward points, or other data by companies with which we make alliances or collaborate; or

 

Harm or losses to customers due to defects in products or services offered through an e-commerce business such as a home shopping service, or products and services offered on one of our platforms, such as dmenu“dmenu” or dmarket.“dmarket”; or

 

Harm or loss to customers due to imperfections in products and services in the new fields such as finance/payment, commerce, medical/healthcare, M2M,M2M/IoT, environment/ecologyenergy and education/learning that we provide as part of our effort to expand the new business fields.

Social problems that could be caused by misuse or misunderstanding of our products and services may adversely affect our credibility or corporate image.

We may face an increase in cancellations of subscriber contracts and difficulty in acquiring new subscriptions due to decreased credibility of our products and services and damaged corporate image caused by inappropriate use of our products and services by subscribers.

For example, there are cases of unsolicited bulk e-mails being sent through our e-mail services, including docomo mail, sp-mode mail, i-mode mail and SMS. Despite our extensive efforts to address this issue caused by unsolicited bulk e-mails, including notifying our subscribers via various brochures, providing unsolicited bulke-mail filtering functions with our handsets and suspending our services to companies which distribute large

amounts of such unsolicited bulk e-mails, the problem has not yet been rooted out. If our subscribers receive a large amount of unsolicited e-mail, it may cause a decrease in customer satisfaction and may damage our corporate image, leading to a reduction in the number of sp-mode or i-mode subscriptions.

The mobile phones used in connection with crimes such as billing fraud are most often rental mobile phones. To combat these misuses of our services, we have introduced various measures such as refusing to provide services to unscrupulous mobile phone rental companies that violate the Mobile Phone Improper Use Prevention Act, such as by not confirming the identity of the individual at the time of rental. However, in the event that criminal usage increases, mobile phones may be regarded as a societal problem, which may lead to an increase in the cancellation of contracts.

In addition, problems have arisen from the fact that subscribers were charged fees for packet communication at higher levels than they anticipated as a result of using mobile phones without fully recognizing the increased volume and frequency of the use of packet communications as our handsets and services became more sophisticated. There have also been problems with high charges due to excessive use of paid content services, and problems due to an increasing amount of trouble and number of accidents caused by the use of mobile phones while driving, riding a bicycles or walking. Further, there are currently a variety of discussions concerning such issues as the pros and cons of elementary and junior high schools students having mobile phones, the sufficiency and accuracy of our access restriction service to screen harmful web sites (“filtering service”), which applies generally to subscribers under 20 years of age in accordance with the enactment of the Act on Establishment of Enhanced Environment for Youth’s Safe and Secure Internet Use, and the increase in harm caused by the use of CGM* by young people, as they increasingly have access to the Internet from their mobile phones. These issues may similarly damage our corporate image.

We believe that we have properly addressed the social issues involving mobile phones by providing various services such as a filtering service and access restriction services with user age authentication and cell phones specifically designed for young people. However, it is uncertain whether we will be able to continue to respond appropriately to those issues in the future. Should we fail to do so, we may experience an increase in the cancellation of existing subscriber contracts or fail to acquire new subscribers as expected, and this may affect our financial condition and results of operations.

 

*Abbreviation for Consumer Generated Media. Media which is created by consumers over the Internet, such as Social Networking Services (SNS)(“SNS”).

Inadequate handling of confidential business information including personal information by our corporate group, contractors and others, may adversely affect our credibility or corporate image.

We possess information on numerous subscribers in telecommunications, credit, catalog sales and other businesses, and to appropriately and promptly address the Law Concerning the Protection of Personal Information, we have put in place comprehensive company-wide security management that includes thorough management of confidential information such as personal information, employee education, supervision of subcontractors and the strengthening technological security.

However, in the event an information leak occurs despite these security measures, our credibility and corporate image may be significantly damaged and we may experience an increase in cancellation of subscriber contracts, an increase in indemnity costs and slower increase in additional subscriptions, and our financial condition and results of operations may be adversely affected.

Owners of intellectual property rights that are essential for our business execution may not grant us a license or other use of such intellectual property rights, which may result in our inability to offer certain technologies, products and/or services, and our corporate group may also be held liable for damage compensation if we infringe the intellectual property rights of others. In addition, the illicit use by a third party of the intellectual property rights owned by our corporate group could reduce our license revenues actually obtained and may inhibit our competitive superiority.

For us and our business partners to carry out our business, it is necessary to obtain licenses and other rights to use the intellectual property rights of third parties. Currently, we are obtaining licenses from the holders of the rights concerned by concluding license agreements. We will obtain the licenses from the holders of the rights concerned if others have the rights to intellectual property necessary for us to operate our business in the future. However, if we cannot come to an agreement with the holders of the rights concerned or a mutual agreement concerning the granted rights cannot be maintained afterwards, there is a possibility that we or our business partners might not be able to provide our specific technologies, products or services. Also, if we receive claims of violation of intellectual property rights from others, we may be required to expend considerable time and expense to reach a resolution. If such claims are acknowledged, we may be liable to pay damages for infringement of the rights concerned, which may adversely affect our financial condition and results of operations.

Furthermore, the illicit use by a third party of the intellectual property rights owned by our corporate group could reduce our license revenues actually obtained and may inhibit our competitive superiority.

Events and incidents caused by natural disasters, social infrastructure paralysis such as power shortages, the proliferation of harmful substances, terror or other destructive acts, the malfunctioning of equipment, software bugs, deliberate incidents induced by computer viruses, cyberattacks, equipment misconfiguration, hacking, unauthorized access and other problems could cause failure in our networks, distribution channels, and/or other factors necessary for the provision of service, disrupting our ability to offer services to our subscribers, and such incidents may adversely affect our credibility or corporate image, or lead to a reduction of revenues and/or increase of costs.

We have built a nationwide network, including base stations, antennas, switching centers and transmission lines, and provide mobile communication service using this network. In order to operate our network systems in a safe and stable manner, we have various measures in place, such as duplicative systems. However, despite these measures, our system could fail for various reasons, including malfunctioning of system hardware and software, natural disasters such as earthquakes, tsunamis, typhoons and floods, paralysis of social infrastructure, such as power shortages, terrorism, and similar events and incidents, and the inability to sufficiently operate and maintain network facilities due to, for example, the proliferation of harmful substances or the spread of an epidemic. These system failures can require an extended time for repair and, as a result, may lead to decreased revenues and significant cost burdens, and our financial condition and results of operations may be adversely affected.

There have been instances in which tens of millions of computers worldwide were infected by viruses through fixed line Internet connections. As smartphones become more widespread, however, a growing number of viruses are also targeting mobile handsets. Similar incidents could occur on our networks, handsets, or other equipment. If such a virus entered our network or handsets or other equipment through such means as hacking, unauthorized access, or otherwise, or if there was a cyber -attack, our system could fail, the services we provide could become unusable service quality could be impacted and/or confidential information could be leaked. In such an instance, the credibility of our network, handsets and other equipment and customer satisfaction could decrease significantly. Although we have enhanced security measures including systems to block unauthorized access, remote downloading for mobile phones, and the provision of “Anshin Net Security,” an antivirus solution for smartphones in order to provide for unexpected events, such precautions may not make our system fully prepared for every contingency. Moreover, software bugs, incorrect equipment settings, and human errors that are not the result of malfeasance could also result in system failures, diminished service quality, or leaks of confidential information.

In addition, events or incidents caused by natural disasters, social infrastructure paralysis, the proliferation of harmful substances, the spread of an epidemic, or any other event could force our offices or critical business partners, including sales agencies, to suffer constraints on business operations or to temporarily close their offices or stores. In such a case, we would lose the opportunity to sell or provide goods and services and also may not be able to respond appropriately to subscription applications and requests from subscribers, such asafter-sales service requests.

If we are unable to properly respond to any such events, our credibility or corporate image may decrease, and we may experience a decrease in revenues as well as significant cost burdens, and if market growth slows or the market shrinks due to any such event, ARPU may decrease below our forecast, or we may not be able to gain new subscriptions or maintain the existing number of subscriptions at the level we expect. All of these factors may affect our financial condition and results of operations.

Concerns about adverse health effects arising from wireless telecommunications may spread and consequently adversely affect our financial condition and results of operations.

Reports by the World Health Organization (WHO), other organizations andThrough various media sources have suggestedand the internet, information has been disseminated indicating that there is concern about whether radio wave emissions from mobile handsets and other wireless telecommunications devices may adversely affect people’s health or may interfere with various electronic medical devices including hearing aids and pacemakers or may adversely affect the health of their users and others by causing cancer or other diseases. Concernscardiac pacemakers. Such concerns about the risk ofpossible risks associated with wireless telecommunication devices adversely affecting the health of users could adversely affect our corporate image, financial condition, and results of operations through increased cancellations by existing cellular subscribers, reduced subscriber growth, reduced usage per subscriber, and the introduction of new regulations or restrictions or litigation. The radio emissions from our cellular handsets and base stations comply with the electromagnetic safety guidelines of Japan andestablished by the Japanese government, which are equivalent to the international guidelines byof the International Commission on Non-Ionizing Radiation Protection, which are endorsed by the WHO.World Health Organization “WHO.” The WHO has also stated that if the level of the radio emissionemissions from mobile devices is lower than the international guidelines, it wouldwill not affect the health of their users and others. Research and studies on the effect of radio wave emissions on people’s health are ongoingbeing conducted by foreign research institutes such as the WHO and we are actively attempting to confirm the safetyMinistry of wireless telecommunication, butInternal Affairs and Communication, or the MIC. While no evidence of an adverse effect on people’s health has been found as of yet, there can be no assurance that, further research and studies will demonstrate that there is no interrelationgoing forward a link between radio wave emissions and health problems.problems will not be identified in the results of future research or studies.

Furthermore, the Ministry of Internal Affairs and CommunicationsMIC and the Electromagnetic Compatibility Conference Japan have confirmed that some electronic medical devices aresuch as cardiac pacemakers can be affected by the electromagnetic interference from cellular phones as well asand other portable radio transmitters.wireless equipment, and has created guidelines on safe usage to provide information to the general public. We are working to provide information to ensure that our subscribers are sufficiently aware of these precautions when using cellular phones. There is a possibility that modifications to regulations and new regulations or restrictions could limit our ability to expand our market or our subscription base or otherwise adversely affect us.

Our parent company, NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT),NTT, could exercise influence that may not be in the interests of our other shareholders.

As of March 31, 2014,2015, NTT owned 66.65% of our outstanding voting shares. While being subject to the conditions for fair competition established by the Ministry of Posts and Telecommunications (“MPT,” currently(currently the Ministry of Internal Affairs and Communications, or “MIC”)MIC) in April 1992, NTT retains the right to control our management as a majority shareholder, including the right to appoint directors. Currently, although we conduct our day-to-day operations independently of NTT and its other subsidiaries, certain important matters are discussed with, or reported to, NTT. As such, NTT could take actions that are in its best interests but may not be in the interests of our other shareholders.

Risks Relating to the Shares and the ADSs

Future sales of our shares by NTT or by us may adversely affect the trading price of our shares and ADSs.

As of March 31, 2014,2015, NTT owned 66.65% of our outstanding voting shares. Under Japanese law, NTT, like any other shareholder, generally is able to dispose of our shares freely on the Tokyo Stock Exchange or otherwise. Additionally, our boardBoard of directorsDirectors is authorized to issue 13,095,000,00013,374,228,000 additional shares generally without any shareholder approval. The sale or issuance or the potential for sale or issuance of such shares could have an adverse impact on the market price of our shares.

There are restrictions on your ability to withdraw shares from the depositary receipt facility.

Each ADS represents the right to receive one share of common stock. Therefore, pursuant to the terms of the deposit agreement with our depositary, The Bank of New York Mellon, in order to withdraw any shares, a holder of ADSs must surrender for cancellation and withdrawal of shares using ADRs (each of which evidences 1ADSs). As a result, holders of ADSs will be unable to withdraw fractions of shares from the depositary or receive any cash settlement in lieu of withdrawal of fractions of shares. In addition, although the ADSs themselves may be transferred in any lots pursuant to the deposit agreement, the ability to trade the underlying shares may be limited.

Holders of ADRs have fewer rights than shareholders and have to act through the depositary to exercise those rights.

Holders of ADRs do not have the same rights as shareholders and accordingly cannot exercise rights of shareholders against us. The Bank of New York Mellon, as depositary, through its custodian agent, is the registered shareholder of the deposited shares underlying the ADSs, and therefore only it can exercise the rights of shareholders in connection with the deposited shares. In certain cases, we may not ask The Bank of New York Mellon to ask holders of ADSs for instructions as to how they wish their shares voted. Even if we ask The Bank of New York Mellon to ask holders of ADSs for such instructions, it may not be possible for The Bank of New York Mellon to obtain these instructions from ADS holders in time for The Bank of New York Mellon to vote in accordance with such instructions. The Bank of New York Mellon is only obliged to try, as far as practical, and subject to Japanese law and our Articles of Incorporation, to vote or have its agents vote the deposited shares as holders of ADSs instruct. In your capacity as an ADS holder, you will not be able to bring a derivative action, examine the accounting books and records of the Company, or exercise appraisal rights.

U.S. investors may have difficulty in serving process or enforcing a judgment against us or our members of the board of directors, executive officers or audit & supervisory board members.

We are a limited liability, joint stock corporation incorporated under the laws of Japan. Most of our members of the board of directors, executive officers and audit & supervisory board members reside in Japan. All or substantially all of our assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon us or these persons or to enforce against us or these persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the Federal securities laws of the United States. There is doubt as to the enforceability in Japan, in original actions or in actions for enforcement of judgment of U.S. courts, of liabilities predicated solely upon the federal securities laws of the United States.

Rights of shareholders under Japanese law may be different from rights of shareholders in jurisdictions within the United States.

Our Articles of Incorporation, Regulations of the Board of Directors and the Companies Act of Japan (Kaishaho), or Companies Act) govern our corporate affairs. Legal principles relating to such matters as the validity of corporate procedures, directors’ and officers’ fiduciary duties and liabilities, and shareholders’ rights under Japanese law

may be different from those that would apply to a company incorporated in a jurisdiction

within the United States. You may have more difficulty in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in a jurisdiction within the United States.

Our shareholders of record on a record date may not receive the dividend they anticipate.

The customary dividend payout practice and relevant regulatory regime of publicly listed companies in Japan may differ from that followed in foreign markets. While we may announce forecasts of year-end and interim dividends prior to the record date, these forecasts are not legally binding. The actual payment of year-end dividends requires a resolution of our shareholders. If the shareholders adopt such a resolution, the year-end dividend payment is made to shareholders as of the applicable record date, which is currently specified as March 31 by our Articles of Incorporation. However, such a resolution of our shareholders is usually made at an ordinary general meeting of shareholders held in June. The payment of interim dividends requires a resolution of our boardBoard of directors.Directors. If the board adopts such a resolution, the dividend payment is made to shareholders as of the applicable record date, which is currently specified as September 30 by our Articles of Incorporation. However, the board usually does not adopt a resolution with respect to an interim dividend until September 30.

Shareholders of record as of an applicable record date may sell shares after the record date in anticipation of receiving a certain dividend payment based on the previously announced forecasts. However, since these forecasts are not legally binding and resolutions to pay dividends are usually not adopted until after the record date, our shareholders of record on record dates for year-end or interim dividends may not receive the dividend they anticipate.

Item 4. Information on the Company

 

A.History and Development of the Company

We are a joint stock corporation organized under the Companies Act of Japan.Act. We were incorporated and registered in August 1991 under the name of NTT Mobile Communications Planning Co., Ltd., and, in April 1992, we were renamed NTT Mobile Communications Network, Inc. We changed our name to NTT DoCoMo, Inc. on April 1, 2000 (NTT DOCOMO, INC. since June 2010). Our corporate head office is at Sanno Park Tower,11-1, Nagata-cho2-chome,Chiyoda-ku, Tokyo100-6150, Japan. Our telephone number is81-3-5156-1111. We have no agent in the United States in connection with this annual report.

Our parent company is NIPPON TELEGRAPH AND TELEPHONE CORPORATION (“NTT”), the holding company of NTT group. NTT group is one of the world’s leading telecommunications operators. We were incorporated as a subsidiary of NTT in August 1991 and took over NTT’s wireless telecommunication operations in July 1992. In July 1993, in accordance with the agreement between NTT and the Ministry of Posts and Telecommunications (“MPT”) (currently the Ministry of Internal Affairs and Communications, “MIC,”)MIC), we transferred wireless telecommunication operations (other than those in theKanto-Koshinetsu region which remained with us) to our 8 regional subsidiaries. However, the other 8 regional subsidiaries were merged into our company as the surviving company in July 2008.

For a discussion of recent and current capital expenditures, please see “Capital“B. Liquidity and Capital Resources—Capital Expenditures” in Item 5.B. We have had no recent significant divestitures or any significant divestitures currently being made.5.

 

B.Business Overview

1. Business Overview

We are a mobile telecommunications carrier belonging to the NTT group, for which NIPPON TELEGRAPH AND TELEPHONE CORPORATION (“NTT”)NTT serves as the holding company. We currently provide mobile telephone services over our LTE and W-CDMA networks. We have approximately 63,10566,595 thousand subscribers and a domestic market share* of 43.8%43.6%.

*Domestic PHS services subscriptions are not included in the market share calculations.

Together with our 194173 subsidiaries and 3531 affiliates, we conduct business as the NTT DOCOMO group. Our major subsidiaries and affiliates as of March 31, 20142015 are listed below.

 

Name

  Percentage
Voting
Interest
 

Service Subsidiaries(1) (2)*1*2: 2512

  

DOCOMO Business Net Inc.

100%

DOCOMO EngineeringCS Chugoku, Inc.

   100%  

DOCOMO EngineeringCS Hokkaido, Inc.

   100%  

DOCOMO EngineeringCS Hokuriku, Inc.

   100%  

DOCOMO EngineeringCS, Inc.

   100%  

DOCOMO EngineeringCS Kansai, Inc.

   100%  

DOCOMO EngineeringCS Kyushu, Inc.

   100%  

DOCOMO EngineeringCS Shikoku, Inc.

   100%  

DOCOMO EngineeringCS Tohoku, Inc.

   100%  

DOCOMO Engineering Tokai Inc.

100%

DOCOMO I Kyushu Inc.

100%

DOCOMO Mobile Inc.

100%

DOCOMO Mobile Media Kansai Inc.

100%

DOCOMO Service Chugoku Inc.

100%

DOCOMO Service Hokkaido Inc.

100%

DOCOMO Service Hokuriku Inc.

100%

DOCOMO Service Inc.

100%

DOCOMO Service Kansai Inc.

100%

DOCOMO Service Kyushu Inc.

100%

DOCOMO Service Shikoku Inc.

100%

DOCOMO Service Tohoku Inc.

100%

DOCOMO ServiceCS Tokai, Inc.

   100%  

DOCOMO Support, Inc.

   100%  

DOCOMO Systems, Inc.

   100%  

DOCOMO Technology, Inc.

   100%  

Other Subsidiaries: 169161

  

ABC HOLDINGSCooking Studio Co.,Ltd.

   51.0%  

Buongiorno S.p.A.

   100%  

DOCOMO ANIME STORE, INC.

   60.0%  

DOCOMO Capital, Inc.

   100%  

DOCOMO.COM, INC.DOCOMO Communications Laboratories Europe GmbH

   100%  

DOCOMO Communications Laboratories EuropeDatacom, Inc.

66.2%

DOCOMO Deutschland GmbH

   100%  

docomo Healthcare, Inc.

   66.0%

DOCOMO Innovations, Inc.

100%  

DOCOMO interTouch Pte. Ltd.

   100%  

DOCOMO PACIFIC, INC.

   100%  

D2C Inc.

   51.0%

e Engineering, Inc.

100%  

MAGASeek Corporation

   75.0%  

MCV Guam Holding Corp.

   100%  

mmbi, Inc.

   60.5%  

net mobile AG

   87.4%  

Nihon Ultmarc Inc.

   77.5%  

NTT DOCOMO USA, Inc.

   100%  

OAK LAWN MARKETING, INC.

   51.0%  

PacketVideo Corporation

   81.8%  

Name

Percentage
Voting
Interest

Radishbo-ya Co., Ltd.

   90.0%  

Tower Records Japan Inc.

   50.3%  

and other subsidiaries

  

Affiliates: 3531

  

Avex Broadcasting & Communications Inc.

   30.0%  

FeliCa Networks, Inc.

   38.0%  

Hutchison Telephone Company Limited.

   24.1%  

Nippon Telecommunications Network Co., Ltd.

   37.4%  

NTT Broadband Platform, Inc.

22.0%

NTT Resonant Inc.

   33.3%  

Philippine Long Distance Telephone Company

   8.6%  

Robi Axiata Limited

   8.4%  

Name

Percentage
Voting
Interest

Sumitomo Mitsui Card Company, Limited.

   34.0%  

Tata Teleservices Limited (3)*3

   26.5%  

ZENRIN DataCom Co., Ltd.

   18.1%  

and other affiliates

  

 

(1)*1These service subsidiaries provide operational services such as engineeringcall center and agency support servicesoperations, communication network construction, maintenance operations and corporate sales to NTT DOCOMO, INC.
(2)*2In efforts to further improve customer services provided locally, operational services which until now were provided by25 business-entrustedsubsidiaries with specific functions across Japan will be concentratedreorganized in 12 subsidiaries including DOCOMO CS, Inc. as of July 1, 2014.
(3)*3On April 25, 2014, DOCOMO’s boardBoard of directorsDirectors resolved to exercise its option to sell DOCOMO’s entire stake (1,248,974,378 shares, or about 26.5% of outstanding shares) in Tata Teleservices Limited (TTSL)(“TTSL”) as soon as the conditions for such exercise are met.met, and the options were exercised on July 7, 2014. Although repeatedly discussed, the failure to perform obligations according to the shareholder agreement led to a petition for arbitration based on an inter-shareholder agreement with Tata Sons Limited, which is the holding company of the Tata Group, as the respondent on January 3, 2015. For more details, please see “D. Trend Information” in Item 5.

Our reportable business segment isDuring the “mobile phone business” andfiscal year ended March 31, 2015, we also disclose result for “all other businesses,” realigned our five operating segments—which combines quantitatively insignificant operating segments together for disclosure. Operating revenues from theconsisted of a mobile phone business, includecredit services business, home shopping services business, internet connection services business for hotel facilities, and miscellaneous businesses—into three operating segments, which consist of telecommunications business, smart life business and other businesses in order to clearly define our business management of telecommunications domains, where we are taking steps to reinforce our competitiveness, and the smart life domains where we are striving for further expansion of revenue sources by making “Smart Life” a reality toward the establishment of a new path to grow.

The telecommunications business includes those from mobile phone services (LTE (Xi) services and FOMA services), optical-fiber broadband service, satellite mobile communications services, those frominternational services and equipment sales for mobile devices and other operating revenues.related to these services. Combined, this accounted for the greater part of our operating revenues for the fiscal year ended March 31, 2014. With regard to all2015.

The smart life business includes video and music distribution, electronic books and other businesses, major examples of operating revenues sources are credit services offered through DOCOMO’s “dmarket” portal, as well as sales by our subsidiaries, including homefinance/payment services, shopping services music software sales, Internet accessand various other services for hotel facilities,to support our customers’ daily lives.

The other businesses primarily includes “Mobile Device Protection Service,” as well as the development, sale and mobile advertising. maintenance of IT systems.

We operate our business mainly in Japan, and do not generally experience significant seasonality.

Breakdown of Operating Revenues

 

   Millions of yen 
   Year ended March 31, 
   2012   2013   2014 

Mobile phone business

  ¥  4,110,585    ¥  4,275,172    ¥  4,235,897  

All other businesses

   129,418     194,950     225,306  
   Millions of yen 
   Year ended March 31, 
   2013*   2014*   2015 

Telecommunications business

  ¥  3,923,754    ¥  3,827,328    ¥  3,654,565  

Smart life business

   294,156     356,783     436,997  

Other businesses

   272,440     302,224     319,815  

*The figures for 2013 and 2014 reflect the realignment of business segments effectuated during the fiscal year ended March 31, 2015.

For more details of our business segment information, please see “Operating and Financial Review and Prospects”“A. Operating Results—Segment Information” in Item 5.

 

Competitive Environment

In the Japanese mobile telecommunicationscommunications market, besidesin addition to the intense competition that we engagerapid proliferation and expansion in withuse of smartphones, tablets and other Japanese telecommunications carriersfunction-rich mobile devices, due to active movementthe government’s policy of subscribers usingpromoting of the spread of Mobile Number Portability (MNP) system, weVirtual Network Operators (“MVNOs”) and other factors, various new market participants are also facing competition withexpected to continue to enter the market and many new players offering a wide variety ofInternet-basedservices that transcend the scope of traditional telecommunications businesses.are expected to continue to be invented.

There are presently 3three mobile network operators in Japan: DOCOMO, KDDI CORPORATION and its subsidiaries (“KDDI group”) and SoftBank Corp. and its subsidiaries (“SOFTBANK group”). As of March 31, 2014,2015, we had a market share of 43.8%43.6%, KDDI group had a market share of 28.1%28.5% and SOFTBANK group had a market share of 28.1%27.9%.

As of March 31, 20142015 we had approximately 63,10566,595 thousand cellular subscribers, an increase of 1,5693,490 thousand from the end of the previous fiscal year. Also, our cellular churn rate for March 20142015 was 0.87%0.71%.

Although future growth of new subscribers for conventional voice use is expected to be limited as the penetration rate rises and the population declines, in recent years, the development of new markets for products such as smartphones,demand for second devices such as tablets data cards and mobile Wi-Fi routers, in addition to embedded communication modules, and rising numbers of subscribers due to an increase in corporate subscriptions, have helped drive growth in new subscriptions.

The number of cellular subscriptions for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 are as follows:

 

   Thousands 
   Year ended March 31, 
       2012          2013          2014     

Cellular subscriptions (1)

   60,129    61,536    63,105  

Xi (LTE) subscriptions

   2,225    11,566    21,965  

FOMA (W-CDMA) subscriptions (1)

   57,905    49,970    41,140  

sp-mode subscriptions

   9,586    18,285    23,781  

i-mode subscriptions

   42,321    32,688    26,415  

Estimated market share of total subscriptions

   46.9  45.2  43.8

Subscription growth rate

   3.7  2.3  2.6

Average monthly churn rate (1) (2)

   0.60  0.82  0.87
   Thousands 
   Year ended March 31, 
       2013          2014          2015     

Cellular subscriptions*1

   61,536    63,105    66,595  

LTE (Xi) subscriptions

   11,566    21,965    30,744  

FOMA subscriptions*1

   49,970    41,140    35,851  

Estimated market share of total subscriptions

   45.2  43.8  43.6

Subscription growth rate

   2.3  2.6  5.5

Average monthly churn rate*1*2

   0.82  0.87  0.71

 

(1)*1The number of cellular subscriptions and FOMA subscriptions includes communication module services subscriptions.
(2)*2

In general, the term “churn rate” is defined as the percentage of customers who disconnect their service relative to the total subscription base. Our measurement of churn rates includes voluntary terminations in connection with handset upgrades or changes. The average monthly churn rate for each fiscal year is calculated by adding the number of cellular subscriber contract terminations in each month of that fiscal year and dividing that number by sum of the active cellular subscriptions* from April to March.

*active cellular subscriptions = (number of subscriptions at the end of previous month + number of subscriptions at the end of current month) / 2

In the Japanese mobile communicationFurthermore, Japan’s telecommunications sector has seen a dramatic change in its market new market opportunities, such as content and applications for mobile phones, are emerging while the usage of data communications is increasing in line with the increased use of smartphones and penetration of high-speed data communication services. Mobile network operators, including DOCOMO, are competing to maintain and obtain subscribers and to create new revenue sources, endeavoring to expand area coverage and increase the speed of their LTE networks, provide devices with special features such as various user interfaces and functions, implementing new billing measures, promoting handset sales, and provide added-value services.structure.

In recent years, as smartphonesMay 2014, NTT unveiled its “Hikari Collaboration Model”—a new wholesale business model for its fiber access services. As this enables telecommunications operators and tablets have become more popular, there has been a growing movement among competitorswide range of other market participants to bundle mobile phoneprovide services with fixed-line communication services andutilizing fiber connections, the competition in the market is expected to discount those charges. However, dueintensify even further, transcending the traditional boundaries of the telecommunications business.

Due to government regulations, we are prohibited from partnering exclusively within the NTT group, and similarwe have been unable to partner with NTT group companies to provide packages of mobile phone and fixed communication services cannot be implemented. or offer discount services such as those which have become popular among rival companies in recent years.

Meanwhile, we also plan to move ahead to offer attractive services combining fixed-line services and our mobile communications services in response toby accepting the announcementwholesaling of “Hikari Collaboration Model”, which provides wholesaling fiber access services provided by NTT East and NTT West, it has become possible to other companiesprovide optical-fiber broadband service ourselves from NIPPON TELEGRAPH AND TELEPHONE EAST CORPORATIONMarch 2015, we launched the “docomo Hikari” service (DOCOMO’s optical-fiber broadband service) and NIPPON TELEGRAPH AND TELEPHONE WEST CORPORATION“docomo Hikari Pack,” making the first step in our journey for offering new added value through the future. Moreover, currently, the Ministryconvergence of Internal Affairsfixed-line and Communications is undertaking a review of the government’s datamobile communications policy with a view to considering reform in competition policy, and intends to prepare a report by the end of 2014.

services.

Furthermore, competition in the network layer has intensified due to the increasing number of new MVNOs, with foreign companies also among them, in addition to existing mobile phone network operators. The arrival of global players, including Apple Inc., Google Inc., Amazon.com, Inc., and Facebook, Inc. has also accelerated the shift from the vertical integration model led by existing mobile phone network operators to a model of horizontal division and has given vigor to a new vertical integration model in which the key is the platform as well as operation system, terminal, content, application, and other upper layers.

As stated above, althoughAlthough our business environment is severe, as stated above, due to the market environment, regulations and changes in our business model, we are endeavoring to strengthen our competitiveness based on the business strategy described below.

 

 

Business Strategy

We have been taking steps to reinforcedeveloped our competitiveness in the mobile business by thoroughly improving our offerings and developing attractive services in our new business fields, based on our medium-term business plan: “Medium-Term Vision 2015: Shaping acorporate vision for 2020, “HEART: Pursuing Smart Life.”

In the fiscal year ended March 31, 2014, we strived to boost our comprehensive strengths by focusing on the four key areas of “devices (handsets),” “network,” “services” and “billing plans and sales channel,” with the goal of being chosen by a large number of customers and garnering their usage over a long period of time.

Furthermore, in orderInnovation” to propel the expansion of ourfurther growth and propose new businesses going forward, we pursued collaboration and alliances with external partners to provide new services in various sectors such as “healthcare” and “learning.”

Meanwhile, to add momentum to the initiatives mentioned above, we strived to strengthen our managerial foundation through structural reforms, stepping up cost-cutting efforts and shifting management resources to new business fields.

Furthermore, in April 2014, we unveiled a new billing plan called “Kake-hodai & Pake-aeru” which offers unlimited domestic voice calls for a flat monthly rate and enables users to share their packet-data quota among family members, and introduced a new discount for young customers up to the age of 25 and discounts according to the number of years of use, with the goal of enabling customers to utilize our services at affordable rates for a long period of time by selecting a plan appropriate for their individual needs in different stages of life.

Going forward, we will continue our efforts to bring greater happiness to the lives of our customers and their families, andvalues to society within anticipation of future social changes.

Also, under the goalbanner of becoming a “Partner for smart life” of our customers, we tackled the challenge of “reinforcing our competitiveness in telecommunications business” and “stepped up our efforts in the smart life business and other businesses.”

In April 28, 2015, we announced our medium-term initiatives and the Business Management Policies for FY2015 (year ending March 31, 2016).

Initiatives for the medium-term

To respond to customer needs on an ongoing basis, we will implement initiatives for “co-creation”—an effort to create new added value together with various external partners by constantly evolving the format of collaboration.

1)Roll-out of “+d”

As presented in “Medium-Term Vision 2015,” we have hitherto worked on new value creation centered on mobile communications by pursuing convergence with other industries and services. Going forward, we will further advance these undertakings and embark on a Smart Life,new initiative dubbed “+d”—a joint value creation initiative that we plan to promote together with partners, making available to our partners our own business assets, such as our payment platform and point program, etc. To further accelerate this initiative, we will standardize the names of the various services that we offer. In the new arrangement, our services will begin with the letter “d,chosenso customers can easily appreciate the various DOCOMO services that they can utilize.

2)Co-Creation of Social Values

We will also work to offer new values to various partners, further evolving the forms of collaboration, which have so far been centered on value creation for consumers. Specifically, in the areas of “IoT,” “Regional Revitalization,” “2020*,” and patronized“Solution of Social Issues,” we will strive to create new services and businesses in collaboration with partners utilizing the assets of both parties, with the goal of capturing new revenue opportunities in new domains that transcend the confines of our current industries or business formats.

Through the abovementioned initiatives, we will aim to expand the smart life business and other businesses while accommodating customer requirements.

*“2020” refers to the anticipated increase in tourism and general economic activity, between now and 2020 and the opportunity develop various new products and services to capture this anticipated increase in demand.

FY2015 Business Management Policies

We developed our FY2015 Business Management Policies, positioning FY2015 as the year of making a solid step toward the achievement of our medium-term growth. Considering the attainment of operating income target a matter of utmost importance, we will take actions aimed at increasing our telecommunications services revenues, expanding the smart life business and other businesses and improving our cost efficiency.

1)Actions Aimed at Increasing Telecommunications Services Revenues

-Facilitate subscriptions to new billing plan and “docomo Hikari” service, and strengthen retention measures

-Boost packet revenues by encouraging subscriber migration to larger data buckets

2)Actions Aimed at Expansion of Smart Life Business and Other Businesses

-Accelerate measures aimed at expanding the adoption of “dmarket” and other services, and expand our sphere of service by adding home offerings

-

Cultivate new demand by stepping up enterprise sales, and step up B2B2C* offerings

3)Cost Efficiency Improvement

-Reinforcement of “PREMIUM 4G” service and more efficient use of capital expenditures

-Rigorous cost efficiency improvements through structural reforms

We will continue to engage ourselves in co-creation of added value for customers in collaboration with partners, so that what is perceived as new today can be taken for a long period of time.granted in the future.

*Abbreviation for Business to Business to Consumer: a business arrangement in which an entity supports the consumer business of another company.

2. Networks

We currently provide our services mainly on LTE and W-CDMA networks.

 

 

LTE Development

In December 2010, we launched LTE (Long Term Evolution) service for data communications devices. In November 2011, we expanded the service to smartphones. We are utilizingcontinue our efforts to take advantage of our experience and expertise as a LTE service pioneer to build a robust network pursuing “breadth,” “speed” and expanding “Quad-Band LTE*1,“convenience. which makes maximum use of the four different spectrum bands we own. We are endeavoring to provide a high quality communications environment offering faster speeds and broader reach in future.

In termsthe fiscal year ended March 31, 2015, the total number of expanding our service area, we had increased ourLTE base stations was increased to 97,400 stations from 55,300 nationwidestations as of March 31,2014 (an increase of 30,900 stations compared31, 2014 to the number a year ago) surpassing our initial target of 50,000.

In addition, tofurther improve the communication quality in urban centers and other areasarea coverage of high usage, we moved ahead with the installation of “6-sector base stations*2” that can handle the same capacity as six regular base stations with a single site.our LTE service.

We commencedoffer high-speed LTE service that offersrealizes a maximum download speed of 150Mbps*3150Mbps in the Tokyo, Nagoya and Osaka metropolitan areas, while expandingareas. Also, in pursuit of further enhancement of transmission speeds, we increased the service areasnumber of our maximum 112.5Mbps downlink speed service to all 47 prefectures of Japan.

During fiscal 2014, we also intend to provide high speed transmission servicesLTE base stations compatible with a maximum receptiondownload speed of 100Mbps or higher to 57,700 stations from 3,500 stations as of March 31, 2014.

In March 2015, we launched the “PREMIUM 4G” service that delivers downlink speeds of up to 225Mbps using the LTE-Advanced carrier aggregation.system, which incorporates “carrier aggregation *1,” “advanced C-RAN *2” and other technologies that realize further speed/capacity enhancements over LTE service.

 

*1:1The four spectrum bandsTechnology that achieves improvement of 800MHz, 1.5GHz, 1.7GHz and 2GHz are used for the provision of service. Service areas are constructed utilizing 2GHz and 800MHz bands for building coverage, the 1.5GHz band for delivering “speed” and the 1.7GHz for even fasterdata transmission speeds in metropolitan areas.speed by aggregating multiple carriers
*2:2BaseTechnology for increasing the utilization efficiency of frequencies by simultaneously controlling base stations equipped with a technology that divides an area ordinarily covered by a singlecovering broad areas and base station into six smaller sectors. This technology enables meticulous tuning based on the varying characteristics of each area.stations covering localized areas.
*3:A communications speed measurement unit that represents what volume of data can be transmitted in one second. The bigger the number, the faster the communications speed.

 

Spectrum Use Status

The Ministry of Internal Affairs and Communications (“MIC”)MIC has allocated a total bandwidth of approximately 400MHz530MHz as radio frequencies available for use for LTE/W-CDMA networks (2GHz,(3.5GHz, 2GHz, 1.7GHz, 1.5GHz, 900MHz, 800MHz, 700MHz and 2GHzTDD). Of this, we use 4have been allocated 6 frequency bands—3.5GHz, 2GHz, 1.7GHz, 1.5GHz, 800MHz and 800MHz—700MHz—to operate our networks.

2GHz Band:

The 20MHz x 2 allocated in the 2GHz band is jointly used by our LTE and W-CDMA networks. A maximum 15MHz x 2 is used for our LTE network.

1.7GHx Band:

The 20MHz x 2 in the 1.7GHz band is jointly used by our LTE and W-CDMA networks in the Kanto, Kansai and Tokai areas. We also intend to expand use for the LTE network in the future.

1.5GHz Band:

The 15MHz x 2 allocated in the 1.5GHz band is used by our LTE network.

800MHz Band:

The 15MHz x 2 allocated in the 800MHz band is jointly used by our LTE and W-CDMA networks. The maximum 15MHz x 2 is used for our LTE network.

700MHz Band:

With regard to our plan to open specified base stations to be used for the 700MHz band, approval was received from the Minister of MIC in MayJune 2012. In addition, the Association of 700MHz Frequency Promotion was established by 4 operators (NTT DOCOMO, Inc., KDDI Corporation, eAccess Ltd. (currently SoftBank Mobile Corp.) and Okinawa Cellular Telephone Company) that were approved at the same time. Together with the appropriate transfer of new frequency bands to existing licensees currently using the frequencies, receiver measures for overland digital TV broadcasts are being implemented. We plan to start providing LTE services as of Januarythe first quarter of fiscal year 2015 for the 10MHz x 2 allocated in the 700MHz band.

In addition, in order3.5GHz Band:

With regard to respondour plan to increased traffic we are seekingopen specified base stations to allocate additional bands of spectrum such as 3.5GHz and 1.7GHz. Asbe used for the 3.5GHz band, at the public hearings on fourth-generation mobile communications systems that started in January 2014, besides explaining the usage methods for 3.5GHz if the band is allocated for us, we expressed the opinion that as many frequency bands as possible should be allocated to our companyapproval was received from the perspectiveMinister of ensuring an equitable competitive environment.

MIC in December 2014. We intend to commence the provision of TDD-format LTE services in the 40MHz (TDD) block allocated in the 3.5GHz band from October 2016.

 

Strengthening ofEffort to Assure Stable Network FoundationQuality

For providing customers with a stable and comfortable communication environment, we moved ahead with the reinforcement of our network facilities to respond to the increase in data traffic resulting from the expanded adoption of smartphones. For example, we expanded the LTE network capacity, utilized transmission speed controls for data communication by especially heavy users for data communications and offloaded data to “docomo Wi-Fi.”

In addition, to prepare for possible large-scale disasters, such as an earthquake directly striking the Tokyo metropolitan area, we have taken various measures such as the dispersion of important communications facilities previously concentrated in the metropolitan area, securing emergency power sources, and making it possible to switch to power saving mode via remote control.

Furthermore, in order to establish and maintain our high-quality network economically and efficiently, we provide fair competitive opportunities, foster mutual understanding and build trusting relationships with suppliers, and purchase high-quality network equipment at low cost from suppliers inside and outside Japan in accordance with our procurement policies, which emphasize compliance with CSR and various laws.

3. Products

We purchase products from vendors and then sell them to mainly our sales agency who sell these products to our subscribers.

AsTo expand our smartphone user base and to facilitate the adoption of multiple devices by a single user in order to meet the diverse needs of our customers, increase further with the spreading popularity of smartphones, we have listenedstrived to enrich our customers and steadily improved operability and convenience.product lineup. In the fiscal year ended March 31, 2014,2015, we introduced 2717 smartphone models, 29 tablet models, 38 feature phone models and 23 data communication device models, and sold approximately 22,51423,751 thousand units. Sales of each type of device are discussed below.

 

 

Smartphones/Tablets

In the fiscal year ended March 31,Our 2014 we aggressively worked to improve operability and convenience by expanding our lineup of handsets installed with quad core CPU and large capacity batteries. This was in addition to offering features especially popular with Japanese consumers, such as Osaifu-Keitai (Mobile Wallet),Full-Seg, One-Seg, waterproof and infrared capabilities, mainly for our Xi (LTE) compatible smartphone handsets and tablets.

As for smartphone handsets, in addition to global models popular overseas, such as the XperiaTM series and GALAXY series, where we focused on promoting a lineup of handsets with the catch phrases “easy to use and easy to choose,” we offered a range of attractive handsets with special features, such as the AQUOS series and ARROWS series. Along with handsets thatsummer collection smartphones are easy to operate, we also offered a diverse lineup of handsets that can be used with confidence, safety and convenience by a broad spectrum of customers. These include the “Raku-Raku SMARTPHONE 2,” a smartphone for seniors that supports applications like dmarket, the “Smartphone for Junior 2,” a smartphone for youngstersequipped with various built-in functions that offer safety for childrenDOCOMO-specific features including voice calls using “VoLTE*1” technology and peace of mind for their guardians, such as filters that block harmful sites and restrict late night use and excessive use. We also offered businessan emergency power-saving mode. The Android smartphones in our 2014-2015 winter/spring collection are all equipped with advanced security features for corporate use.“VoLTE” compatibility. All handset models carry “high-resolution audio*2” featuring sound quality exceeding music CDs. In addition, to handsets that are convenient to use, we expanded the lineup of handsetsdevices to meet the diverse needs of customers, including commencement of sales of the latest model of popular iPhone and iPad in September 2013.

As for tablets, we made efforts to expand this new market through sales of the 7-inch lightweight waterproof AQUOS PAD and the ARROWS Tab capable of a 150Mbps maximum download speed. In addition, we began to offer the iPad from June 2014.October 2014 respectively.

As a result of the above, the number of smartphones and tablets sold was 13.7814.6 million units, an increase of 0.490.81 million units over the number sold last term, reaching approximately 60% of total sales for the fiscal year ended March 31, 2014, significantly contributing to the expansion of the smartphone user base.

2015.

*1Abbreviation for Voice over LTE
*2A generic term to describe music data and music player equipment that realize audio quality superior to general music CD.

 

Data Communications Devices

We offer a wide range of data communication devices for selection, depending on usage, including mobile Wi-Fi routers, USB data cards, and the like.

We introduced a USB data card as a part of our 2014 summer collection and also introduced two mobileWi-Fi routers, as a part of our 2014-2015 winter/spring collection, that have built-in LTE Advanced capability, a technology that supports download speeds of up to 225 Mbps.

In addition, besides data communication devices, our communication modules can be used in various situations in everyday life and business situations, such as for managing taxi and bus operations, monitoring and controlling power and gas facility devices, distributing contentcontents to information posting systems, managing inventory for vending machines and managing payment with mobile devices.

Other Communications Devices

As a “Partner for a Smart Life” for each and every customer, we offer a diverse range of communications devices to make customers’ lives more secure, safe, convenient and comfortable.

In December 2014, we launched a transmitter able to send the user’s heart rate to a smartphone by linking with a wearable training data measurement device utilizing a new material called “hitoe.”

In addition, in April 2015, we released the “Docotch,” a wearable device in the form of a wristwatch, enabling the condition of children and their surroundings to be checked. We have also released special devices for pets, etc.

4. Services

In order to secure medium term growth in earnings by increasingBy providing superior sound quality voice services through “VoLTE” and introducing the revenues from packet communications,“docomo Hikari” optical-fiber broadband service, we are endeavoring to further increase the convenience of Xi (LTE) service, which iscommunication services and create value through the basic service for smartphone users,provision of new services combining “docomo Hikari” with smartphones and mobile phones. We also enriched our “dmarket” portal that offers a wide variety of convenient content, and pursued collaboration and alliances with external partners to provide new services in various sectors such as “healthcare” and “learning.”sectors.

 

 

MobileTelecommunications Services

Mobile Phone Services

We currently offer voice, data, and other value-added services through our Xi (LTE)LTE (Xi) and FOMA (W-CDMA) services.

As a result of our efforts to improve the contents and services for smartphones as well as expand the smartphone market, XiLTE (Xi) service subscriptions rose to approximately 21,96530,744 thousand as of March 31, 2014.2015.

In addition, other main services among cellmobile phone services include international services such as international calling service and international roaming service, public wireless LAN service “docomo Wi-Fi,” services for corporate customers such as “Office Link,” a service that allows mobile phones to be used as internal lines, “Business Mopera Anshin Manager,” which enables the unified control of corporate mobile phones, and a satellite cell phone service. A summary of the principal initiatives in other main services among cellmobile phone services implemented during the fiscal year ended March 31, 2014,2015, is provided below:

 

We started offeringIn June 2014, we were the first telecommunication carrier in Japan to commence a new one-day (24-hour) flat-rate dataLTE-based voice communications billing plan for customers traveling overseas, the “Global 1day Pake” service, “VoLTE” which provides users withdelivers more inexpensive packet access defined for each country/region.stable and superior sound quality compared to conventional voice calling service.

 

We commenced LTE-based international roamingthe trial service that can be applied with “Global 1day Pake” and other billing plans,of “docomo Wi-Fi for visitor” which enables foreign travelers visiting Japan to enable high-speed data access using LTE connections even when traveling abroad.utilize “docomo Wi-Fi” service.

 

To enable overseas travelers to utilize LTE service even more comfortably, we worked on LTE international roaming coverage expansion and increased the number of LTE roaming destinations to 43 countries and regions as of March 31, 2015.

Optical-fiber Broadband Service

In order to provide broadband communications environment to allow users to enjoy high-speed service both indoors and outdoors, in March 2015, we commenced “docomo Hikari” service—our optical-fiber broadband service that enables high-speed access at speeds of up to 1Gbps, and simultaneously launched “docomo Hikari Pack”—a bundle package that allows users to use “docomo Hikari” broadband service and smartphones/docomo feature phones at affordable rates.

We started offering “Business Plus,” a packageprovide one-stop service for the full range of cloud-based enterprise services including groupware*, network address bookoptical-fiber broadband, Internet access and attendance managementmobile phone services. Hence, we serve as a customer’s single point of contact for every need, from service-related inquiries to after-sales support, thereby enhancing customers’ convenience and other features.comfort using high-speed communications services.

We concluded a sales partnership agreementFurthermore, with Google Inc. and Densan System Co., Ltd., and have startedthe provision of “docomo Hikari,” we also began to provide Google AppsInternet access service “docomo net,” and support services “Hikari Remote Support,” “Hikari On-site Support” which enables “docomo Hikari” to be used with a greater sense of security.

For more information, see Item 4.B-5 “Tariffs,” which contains the details of charges for Business™“docomo Hikari” and Google Apps for Education™ for corporations and educational institutions.“docomo Hikari Pack.”

*:Software designed to help improve the productivity of business operations. Groupware generally comes with email/schedule-sharing and other capabilities.

 

New Initiatives to Expand in New Business FieldsBecome a “Partner for Smart Life”

dmarketInitiatives Aimed at “dmarket” Enrichment and Expansion of User Base

To expand the adoption of DOCOMO-operated content market, “dmarket” services among a broader range of users, we have added new content and implemented various initiatives aimed at increasing its subscriber base.

The principal actions we undertook during the fiscal year ended March 31, 2015 are summarized below:

 

We began to provide the “dcreators,launched a new home food delivery service, “ddelivery.an online market where various handmade items, such as accessories, smartphone casesWith this service, users can search restaurants/menus and interior accessories by individual creators, can be put up for sale or purchased.

We commenced the “d fashion,” a fashion e-commerce site jointly with MAGASeek Corporation, a subsidiary of DOCOMO engaged in the mail order fashion business.place orders using voice command via our “Shabette-Concier” voice agent service, and also make payments using docomo Points.

 

We introduced the “dkids,” an educational contentlaunched “dmagazine” electronic magazine service, targeting familieswhich provides users with infants, which can be accessedunlimited access to wide-ranging genres of magazines and/or individual articles from smartphone/tablets for a smartphone or tablet and which offers rich educational content that can be used safely.

In partnership with the JTB Corporation, we began to offer the “dtravel,” a travel service that offers comprehensive travel support, which covers from the support in making hotel reservations to the service provides sightseeing and gourmet dining information, to customers who are either planning a trip or already traveling.flat monthly fee.

 

We beganextended the free trial period of “dvideo,” “danime store,” “dhits,” and “dmagazine,” to offerallow customers to try out and appreciate the “ddelivery,”attractiveness of these services offered through our “dmarket” portal.

As a food delivery service that can be selected and ordered from approximately 20 different categories of menu, from over 9,500 stores nationwide, using a smartphone or tablet.

Other Initiatives

We commenced “docomo Mail” cloud-based email service, after renovating the conventional “sp-mode mail” service for smartphones in pursuit of improved ease of use. We also added a function that allows users to access their mobile phone mail address from PCs or other devices.

We enhanced the functionality of “docomo ID,” an account identification provided for user authentication, to enable the useresult of the same ID for services on multiple devices,abovementioned measures, the combined number of “dmarket” store subscriptions* reached 10 million in January 2015, and even enable customers who do not have a mobile phone subscription contract with DOCOMOgrew further to use “dmarket” and other services via various Internet-enabled devices.

Based on the concept of “affordable and worry-free use,” we introduced service packages to offer an assortment of services that enjoy good reviews by customers. As11.88 million as of March 31 2014, the “Osusume Pack,”2015. Furthermore, in May 2015, we launched “dGourmet” service, which bundles the “Sugotoku-Contents”provides basic cooking lessons, food-related information such as recipes and other recommended services that allow customers to utilize their smartphones in various convenient ways, garnered 2.92 million subscriptions,restaurant rankings, and the “Anshin Pack,” which combines the “Mobile Phone Protection & Delivery” and various other services designed to ensure worry-free use of smartphones, garnered 4.46 million subscriptions.coupons.

 

*Total number of users using “dvideo,” “danime store,” “dhits,” “dkids” and “dmagazine” services under a monthly subscription arrangement.

Lineup of “dmarket” services

Service

  

In cooperation withService Overview

danime store

Flat-rate animated video distribution service

dapple & review

Site offering review of popular apps on Google Play

dkids

Flat-rate distribution service of educational content for children

dcreators

Online market enabling the Universitysale and purchase of Tokyo, we embarked on joint studies on flipped learninghand-made items

dGourmet*1 that take advantage of Japan’s first Massive Open Online Course (MOOC).

  

As partDistribution service of our endeavorsinformation and coupons related to enrich our M2Mfoods

dgame

Site offering Web-based games*2 offerings that can provide useful solutions for customers’ everyday activities, we started a new service called “Petfit”, which allows users to check their pet dog’s health condition or location via smartphones or other devices using a tag with built-in communications capabilities.and app-based games

dshopping

  Online shopping service for food, daily necessities, electrical appliances and other goods

ddelivery

Home food delivery service

dtravel

Site for booking accommodation at hotels and Japanese inns

dhits

Flat-rate music distribution service

We announced plans to commence in 2014 a service that utilizes smartphones and wearable devices to measure biometric data using “hitoe*dvideo*3,” a functional material capable of obtaining a person’s biometric data such as heart rate and electrocardio-waveform when the person simply wears one of these devices.

Launched to strengthen expertise in service development, DOCOMO Innovation Village, a startup support program for venture companies and organizations with innovative service technologies, is now in its third year. During the third year, in addition to providing richer support content, the program will include the participation of Sony Mobile Communications as a supporting firm along with three NTT Group companies.

  *1:Flat-rate video/movie distribution service
A form

d fashion

Fashion e-commerce site

dbook

Electronic book store enabling viewing of learning in which students learn basic content that had traditionally been taught in classrooms at home using online textbooks,manga, novels and apply and practice the learning at school by going through what used to be homework with teachers.how-to books

dmagazine

Flat-rate electronic magazine distribution service

dmusic

Music download service

*1Service started on May 28, 2015.
*2*2:Abbreviation for Machine-to-Machine. A systemGames that provides automatic communication between machinescan be enjoyed anywhere with built-in communications capability such as vehicles, vending machinesan Internet connection and information appliances andwithout the server or other network equipment.need to install applications.
*3*3:Developed and commercialized by Toray Industries, Inc. and NIPPON TELEGRAPH AND TELEPHONE CORPORATIONService name was changed from “dvideo” to “dTV” on April 22, 2015.

Progress in Collaborations and Alliances

WeTo deliver “Smart Life” experience, we aim to drive innovation and create new value and new markets through the convergence of mobile devices with various industries and services by collaborating with alliance partners, especially in fields that offer great synergy with our mobile business. The principalbusiness, including “dmarket.” In the fiscal year ended March 31, 2015, we engaged in the following initiatives centered on lifestyle-related services.

We introduced a new service dubbed “Runtastic for docomo,” a training support service developed jointly with runtastic GmbH, which measures and manages user’s heart rate and other body data using the “hitoe” wearable measurement device in conjunction with a dedicated application.

DOCOMO, NTT Urban Development Corporation, NTT Data Corporation and NTT Facilities, Inc. pooled the management resources of the four companies to establish the joint venture “DOCOMO BIKESHARE, INC.,” which provides cycle sharing services, in February 2015.

We partnered with Japan Best Rescue System Co., Ltd. to launch “Home Anshin Partner,” which provides support for trouble in various aspects of everyday life such as plumbing and locks, in addition to housekeeping services, in March 2015.

The overseas version of “Hanashite Hon’yaku” automatic translation application for smartphones and tablet devices, which translates spoken Japanese into a number of foreign languages and vice versa, has been launched under the eight newservice name of “Jspeak,” targeting travelers from abroad visiting Japan.

DOCOMO, SYSTRAN INTERNATIONAL Co., Ltd. and FueTrek Co., Ltd. established Mirai Translate, Inc., a joint venture to develop and market machine translation technology and services with the highest accuracy in the industry, in October 2014.

The actions we have undertaken in our principal business fields are as described below.follows:

Finance/Payment Services

We are developing finance and payment businesses, utilizing the unique properties of mobile communications and credit functionality.

As principal initiatives, working in collaboration with affiliate Sumitomo Mitsui Card Co., Ltd., we operate the credit brand “iD” that uses a contactless chip embedded in mobile phones/credit card. Furthermore, we also provide “DCMX mini,” payment service for mobile phones “iD” users, and “DCMX,” credit card payment service that operates on the “iD” platform.

Shopping Services(Commerce)

In addition to expanding “dmarket,” our subsidiaries are developing shopping services.

Overview of business of major subsidiaries

 

Business fieldsSubsidiaries

  

Principal services (alliance partners)Business Overview

Media/ContentOAK LAWN MARKETING, INC.

  “dvideo,” “dmusic,” “dhits,” “dbook,” “danime store,” “dgame,” “NOTTV” (mmbi, Inc.), mobile advertisement (D2C Inc.) and other servicesMail order sales business using media centered on television

Finance/PaymentRadishbo-ya Co., Ltd.

  Mobile remittanceMember-based home delivery services offering organic and payment service, “docomo kouza(Account)”, One timelow-pesticide vegetables and medical insurance services, “docomo Insurance,” Mobile credit services, “iD”, “DCMX,” “Mobile Phone Protection and Delivery” service and other servicesadditive-free foods

CommerceTower Records Japan Inc.

  “dshopping,” “dcreators,” “d fashion,” “dtravel,” “ddelivery,” home shopping service (OAK LAWN MARKETING, INC., MAGASeek Corporation and Radishbo-ya Co., Ltd.),Sale of music software sales (Tower Records Japansuch as CDs and DVDs

Services to Support Our Customers’ Daily Lives

We are developing life support business related to medical/healthcare, cuisine and dining, utilizing the unique properties of mobile communications.

Overview of business of major subsidiaries

Subsidiaries

Business Overview

docomo Healthcare, Inc.)*

Proposal of lifestyles based on data obtained through smartphones and other serviceshealth equipment, and creation of business opportunities in the healthcare service market by collaborating with partner companies on products

Medical/HealthcareNihon Ultmarc Inc.

  Medical/Healthcare supportProvision of a medical database (MDB) relating to healthcare-related companies including pharmaceutical companies, authentication and information services (docomo Healthcare, Inc., Nihon Ultmarc Inc.)to medical personnel

M2MABC Cooking Studio Co., Ltd.

  “Otayori Photo Service”Operation of the ABC Cooking Studio cooking school and mail order sales of ingredients and cooking utensils

*Joint venture with OMRON HEALTHCARE Co., “docomo DriveNet Navi,” “docomo DriveNet Info”, “Petfit”Ltd.

Furthermore, to deliver “Smart Life” experience in other domain of the three above, we are operating “NOTTV,” Japan’s first broadcasting station for smartphones provided via storage-based broadcasting through our subsidiary mmbi and offer four real-time broadcasting channels (as of March 31, 2015) for interactive programs made up of 24-hour news, etc. and storage type broadcasting by combining broadcasting and communication.

Other Initiatives

As of September 2014, the combined total of subscriptions to the “Osusume Pack,” which bundles the “Sugotoku-Contents” and other recommended services that allow customers to utilize their smartphones in various convenient ways, and the “Anshin Pack,” which combines the “Mobile Device Protection Service” and various other services designed to ensure worry-free use of smartphones, broke through the 10 million mark.

We established the “gacco” site providing Japan’s first Massive Open Online Courses (MOOC*) and provided courses aimed at the development of data scientists. We also plan to offer courses enabling a broad range of learning spanning basic technology in information security to legal systems, and aim to develop human resources for fields with heightening social needs.

We are operating DOCOMO Innovation Village, a startup support program for venture companies and organizations with innovative service technologies. Additionally, in the fiscal year ended March 31, 2015, we established a new program purposed for the strengthen of the venture companies partnership, and strived to boost initiative.

*A form of open learning provided by universities, etc. in which anyone can participate at no cost via the Internet.

M2M/IoT Business

We are involved in businesses that install communication modules in cars, provide information services for car navigation and combine various types of equipment with mobile communications. A summary of the “M2M*1” services we implemented during the fiscal year ended March 31, 2015, is provided below:

We entered into an agreement with Tesla Motors, Inc. to provide the in-vehicle information/communication platform and data connectivity for its Model S electric vehicles marketed in Japan. In addition, we hosted “DOCOMO Automobile Business Solution Summit” and implemented other servicesmeasures aimed at fostering and expanding new businesses through the convergence of automobiles and “IoT*2.”

We entered into a basic agreement for business alliance with Vodafone Group Plc to address the delivery of M2M services with the aim of strengthening corporate marketing to global accounts.

As a SIM card to be embedded in M2M-enabled machines, we started offering Japan’s first eSIM*3that can store not only DOCOMO’s phone number but also the phone number of overseas carriers.

The principal actions we have undertaken are as follows:

Through an alliance with Pioneer Corporation, which is a leading company in car electronics, we provide “Docomo DriveNet Navi,” a car navigation service for smartphone users, and “Docomo DriveNet Info,” a service for supporting car life.

Utilizing the platform of Jasper Technologies, we provide companies operating businesses inside and outside Japan with the “docomo M2M Platform,” which enables centralized management of docomo lines and overseas telecommunications carriers’ lines for communication modules embedded in vehicles, construction equipment and information devices.

*1Abbreviation for Machine-to-Machine. A system that automatically handles the communication between servers or other equipment and various devices installed with communications capability such as vehicles, vending machines, and information appliances, etc.
*2Abbreviation for Internet of Things. A concept that describes a world in which everything is connected to the Internet, enabling remote control and management of devices, etc.
*3Abbreviation for Embedded Subscriber Identity Module.

Global Expansion

We make investments in and form partnerships with overseas mobile operators and various market participants in different business domains with the long-term aim of strengthening our global competitiveness.

In regards to investments in mobile operators, we aim to achieve financial returns by strengthening the business foundations of our investment partners through supporting their businesses and to achieve synergies with our partners. In addition, through investment in various overseas companies in recent years, we have been making efforts to build a global open platform and promote various services that fully take into consideration the special characteristics of countries and regions. Our recent efforts in the application layer are shown below.

Recent Investment in the application layer

Aggregation/PlatformInvestment Target

  DigitalInvestment Date

Business Overview

net mobile AG

November 2009Mobile content delivery financialplatform business and settlement platform servicesbilling/payment business for telecommunications carriers mainly in Europe (net mobile AG, Buongiorno S.p.A., fine trade gmbh ) and other services

Environment/EcologyVMG Media Joint Stock Company

  Environment sensor network, bicycle sharingAugust 2011Provision of content and other servicescontent management platform in Vietnam

Safety/Security/LearningBuongiorno S.p.A.

  “Smartphone Anshin Remote Support,” “Anshin Network Security,” “dkids,” cooking schoolAugust 2012Provision and operation of mobile content delivery and platform service

MCV Guam Holding Corp.

May 2013Cable television business, (ABC HOLDINGS Co., Ltd.)Internet access business and other servicesfixed telephone business in Guam

fine trade gmbh

October 2013Payment service for online sales

In addition, please refer to Item 4.B-7 “Investments and Alliances,” which contains details of investments in new business fields.

5. Tariffs

Mobile Communications Charge

Our cellular services revenues are generated primarily from fixed basic monthly charges, voice usagecommunication charges for outgoing calls (in Japan the caller is usually charged), revenues from incoming calls, charges for data communication services and charges for optional value-added services and features. We set our own rates in accordance with the Telecommunications Business Act and guidelines set by the Japanese government, which currently allow mobile network operators to set their own tariffs without government’s approval.

Currently, monthly charges paid by our cellular subscribers who use our handsets with voice communication subscriptions consist mainly of (i) a basic monthly charge, for telephone service, (ii) voice callcommunication charges (iii) data communication charges, (iv) a mobile ISP charge, and (v) other additional monthly service charges for miscellaneous value-added services. Monthly charges paid by our subscribers who use data communication dedicated plans, including tablets users, consist mainly of (iii) data communication charges, (iv) a mobile ISP charge, and (v) other additional monthly service charges for miscellaneous value-added services.

The details of the charges in connection with items (i) to (iii) are discusseddescribed below.

 

 

Basic Monthly Charge for Voice Communication Service and Voice Communication Charges

Since we introduced smartphones that handled Xi (LTE) service in November 2011, we have offered an optional service that allows our Xi subscribers to make unlimited domestic telephone calls to DOCOMO subscription lines in addition to the ordinary fee plans that combine a monthly basic rate and telephone usage fee. In addition, since June 2014, we have offered a new billing plan, “Kake-hodai,”“Kake-hodai” for the LTE (Xi) service and FOMA service, which enables all Kake-hodai plan subscribers to make nationwide voice calls for a flat monthly rate.rate regardless of the number or length of calls.

In addition, we continue to offer existing monthly pay-as-you-go rate plans to FOMA (W-CDMA) service subscribers, contract for basic monthly rate plans, most of which include a certain amount of free communications. The telephone pay-as-you-go chargerate differs depending on the rate plan selected by the customer. In addition, as with Xi, we began to offer a new billing plan, “Kake-hodai.”

 

 

Data Communication Charges

We have two typesIn June 2014, we began to offer a new billing plan for data services called “Pake-aeru,” which enables LTE (Xi) and FOMA customers to share monthly data quotas among the same group of ratefamily members or corporate users. By choosing “Pake-aeru” plan that corresponds to the estimated monthly data quantity to be used by a family or the corporate users, the service enables the division of the data usage among multiple contract lines.

The billing plan consists mainly of three plans for single users (2GB, 5GB and 8GB) and four plans for families (10GB, 15GB, 20GB and 30GB).

If the data usage in a month exceeds the monthly data quota, users can pay an additional set fee for each 1GB of data or transmission speed is lowered to 128kbps until the end of that month.

On the other hand, our previous LTE (Xi) flat-rate data services: pay-as-you-go services with no maximum charges and flat-rate services. As of March 31, 2014, 75.8% of total subscribers (excluding prepaid data plans) were on flat-rate plans.

Our Xi flat-rate plans, are fixed limit data communications services andfor which we already ceased to accept a new subscription, have data usage thresholds of 3GB or 7GB. If the threshold for data usage is exceeded,in a month exceeds the thresholds, users can either pay an additional set fee for each 2GB of data or transmission speed is lowered to 128kbps until the end of that month.

Furthermore,The new billing plan has enjoyed favorable reviews from early on, with its total subscriptions topping 20 million in a year after its launch.

Optical-fiber Broadband Service Charge

In March 2015, we started an optical-fiber broadband service called “docomo Hikari,” which offers individuals and companies unlimited Internet connections through optical-fiber cables at speeds of up to 1Gbps.

Currently, monthly charges paid by our optical-fiber broadband service subscribers consist mainly of (i) a basic monthly charge for optical-fiber broadband service, (ii) monthly ISP charges, and (iii) other additional monthly service charges for miscellaneous value-added services.

The details of the charges in connection with items (i) and (ii) are described below.

Two types of billing packages are available—ISP Charge-inclusive Package and Standalone Package. ISP Charge-inclusive Package includes Internet connection service of partner ISPs for selection by the subscriber. Customers also can select Standalone Package that only covers the “docomo Hikari,” optical-fiber broadband service, which requires an additional contract with any ISP for Internet access. In each plan, charges differ by residential type—either detached house or apartment.

We also introduced flat-rate plansa new discount plan, called “docomo Hikari Pack,” which is bundled with lower than usual rates exclusively for smartphones used by seniorsexisting mobile basic monthly charges, called “Kake-hodai Plan” and youngsters, and in September 2013 we began“Data Plan,” to provide flat-rate data plans exclusively for the iPhone, thereby creating an environment where smartphones can be used by a broadermobile subscribers and subscribers of “docomo Hikari” with further discounts.

A wide range of customers.discounts based on DOCOMO mobile users’ data quotas will be available, with especially attractive offers for those with higher data quotas.

In addition, we launched the “Hikari Sumaho Wari,” an additional discount offered to these plans,smartphones or tablets subscribers to the “Hikari Share Pack” in the “docomo Hikari Pack” in case they are new subscribers or subscribers switching from June 2014, we beganother carriers with the same number using mobile number portability (MNP). The discount is applied to offer a new flat-rate data service called “Pake-aeru,” that enables Xi and FOMA customers to set and sharethe mobile basic monthly data quotascharge.

Furthermore, “Zutto DOCOMO Wari” discounts for subscribers who have been with family members and corporate users. By choosing one type of basic plans corresponding to “Pake-aeru” based on an estimate of monthly data quantity to be used by a family or the corporate users, the service enables division of the total data quantity among multiple contract lines.

Besides this, we are offering “Zutto docomo Discount,” a usage fee discountDOCOMO for long-term customers,at least five years and “U25 Ouen Discount,” a discount aimed atWari” discounts for customers ofup to age 25 or younger.can be applied to “docomo Hikari Pack” for further discounts.

6. Sales and Marketing

 

 

Sales Channels

We sell our products and services through a vast sales network covering the entire country of Japan. The shops that deal with our products and services are operated by various distributors, and as of March 31, 2014,2015, there were 2,4062,399 docomo Shops nationwide. In addition to docomo Shops, there are general distributors that handle the products and services of multiple operators such as mass merchandisers of consumer electronics and other stores that also sell our products. As of March 31, 2014,2015, the number of such shops was approximately 4,300 (excluding docomo Shops). In addition to the face-to-face channel, we have established online shopping and 10 call centerscall-centers nationwide (as of March 31, 2015) and consider these channels to be important to improving convenience for our customers. For smartphones which have gained in popularity,and “docomo Hikari,” we have established exclusive call centers in three cities—Tokyo, Osaka and Sendai—and are enhancing the support system for customer care.

 

 

Sales Methods

We purchase mobile devices from manufacturers and then wholesale these to our sales agents. With the aims of gaining and keeping customers and encouraging the spread of our services through new contracts and handset upgrades, we pay these sales agents commissions that are linked to their sales.

We offer a “Monthly Support” program under which monthly usage charges are discounted by a fixed amount which is established for each device, if a smartphone or tablet is purchased. This is in addition to the discounted price of the device for customers that sign a new contract or when customers migrate from other companies. In addition, besides a lump sum payment of the price of the device, it is possible to make installment payments over 12 months or 24 months. Providing measures that hold down the initial expense or usage charge allows us to expeditiously create an environment in which customers can easily obtain smartphones.

 

Customer Support

Customer Loyalty Program

As part of our efforts to provide enhanced customer services, we offer a customer loyalty program called “docomo Premier Club.” This reward program consists of a point accumulation service, complimentary services and after-sales services; depending on their monthly mobile phone usage, subscribers earn points, which can be applied to purchasing handsets, or exchanged for travel tickets, restaurant vouchers, etc.

By joining this program, members are entitled to services such as:

a discount on a battery pack or charger adapter with the use of the same FOMA handset for at least one year

After-sales supportSupport

As described below, we have continually worked to strengthen our after-sales support with the aim of further improving customer satisfaction:

 

Smartphone Anshin Remote Support” service to provide customers with professional assistance concerning the operation or settings of smartphones or tablet devices from our call center staff who can monitor the handset operations from a remote location.

 

“Hikari Remote Support” providing support for operation and configuration of PCs, PC peripherals and software through dedicated operators and dedicated tools.

“Hikari On-site Support” in which dedicated staff visit the customer’s home to provide support for operation and configuration of PCs, PC peripherals and software.

Area quality improvements based on proposals and methods for improvement tailored to circumstances, in response to specific requests for area improvement from customers.

 

“Mobile PhoneDevice Protection & Delivery Service” and “Mobile PhoneDevice Protection & Delivery Service for iPhones”iPhone & iPad” provide comprehensive coverage for problems related to handsets, as follows.

-Direct delivery of the same model and same color mobile phone when a handset sustains water damage or is lost, simply by telephoning DOCOMO.
-Repairs at no charge for three years from the date of purchase when a malfunction covered under the warranty occurs (excluding iPhones).
-Repairs up to 5,000 yen for three years from the date of purchase when a breakage or malfunction not covered under the warranty occurs (excluding iPhones).

7. Investments and Alliances

We are making strategic investments in which we basically hold a majority share mainly in business fields with synergistic effects in the mobile business where we can anticipate further growth and an increase inadded-value by taking advantage of the strengths and know-how of our company. In the fiscal year ended March 31, 2014, we made investments to increase operating revenues from new business fields to ¥1,000 billion by fiscal year 2015. In the fiscal year ended March 31, 2014, our main investments were as follows.

In addition, please refer the list in Item 4.B-1 “Business Overview,” which contains the name and voting interest of our subsidiaries and affiliates as of March 31, 2014.

In May 2013, we acquired an approximately 77.5% share of Nihon Ultmarc Inc., which operates the biggest medical database business in Japan, for approximately ¥2.6 billion, making it our subsidiary with the aim of creating new services that link consumers with medical care.

In order to make a full-scale entry into the ITS/telematics* business, we have invested approximately ¥5 billion and formed an alliance with Pioneer Corporation, which is a leading company in car electronics, in May 2013. In December 2013, we began a new service called “Docomo DriveNet Info,” an information delivery service for drivers which provides useful information to users,handsets such as traffic information and informationwater exposure, loss or malfunction.

The number of surrounding areas. By combining voice synthesizing technology and voice intent interpretation technology applied by our “Shabette Concier” and cloud-based navigation system developed for next-generation cars by Pioneer Corporation, information is generated “in the cloud” by just speaking into a smartphone.

In August 2013, we agreedsubscribers to a business and capital alliance with Tokyo Broadcasting System Holdings, Inc. to provide entertainment events and movie content that can be more conveniently enjoyed using a smartphone. We acquired about 3.0% of the company’s shares for approximately ¥7 billion.

In January 2014, we acquired a 51% interest“Anshin Remote Support” topped 10 million in ABC HOLDINGS Co., Ltd., the holding company for ABC Cooking Studio Co., Ltd., and made it a subsidiary. ABC Cooking Studio is a company with which we have built up a cooperative relationship to date providing lifestyle guidance to customers in areas such as dining and cooking. We will further strengthen the cooperative relationship through convergence of the assets of ABC, which owns cookery schools and other cooking-related content, with our expertise in mobile, cloud and other technologies. This will promote the development of new services that connect the real with the digital world and link up the DOCOMO and ABC customer bases.February 2015.

In March 2014, we established the “mobidoors” joint venture company (with DOCOMO investing: ¥220 million for a 55% stake) with RSUPPORT Co., Ltd. and OrangeOne Corporation to propose and sell remote support solutions to mobile network operators and mobile phone manufacturers outside Japan. The joint venture aims to develop the remote solutions market outside of Japan by leveraging RSUPPORT’s technical expertise in development and remote support solutions, OrangeOne’sknow-how in system construction and maintenance, and DOCOMO’s experience in providing remote customer support for smartphone users and its relationship with overseas mobile network operators and mobile phone manufacturers.

*ITS: Intelligent Transport System Telematics:
The provision of services to mobile objects such as vehicles utilizing communications.

Global Expansion

We make investments in and form partnerships with mobile operators and various players in different business domains with the long-term aim of strengthening our global competitiveness.

In regards to investments in mobile operators, we aim to achieve financial returns by strengthening the business foundations of our investment partners through supporting their businesses and to achieve synergies with our partners, such as through the joint deployment of new services and the joint development and procurement of handsets. In addition, through investment in various overseas companies in recent years, we have been making efforts to build a global open platform and promote various services that fully take into consideration the special characteristics of countries and regions. In the fiscal year ended March 2014, our main overseas investment projects were as follows.

In May 2013, we acquired all of the stock of MCV Guam Holding Corp., the largest cable television and Internet service provider in Guam and the Northern Mariana Islands, through a wholly owned holding company established in Guam by DOCOMO, for approximately ¥13.3 billion, with the purpose of strengthening the business foundations of DOCOMO PACIFIC, INC. by improving its competitiveness in the market.

In October 2013, through our subsidiary DOCOMO Deutschland GmbH, we acquired all shares in fine trade gmbh, a settlement service business for online product sales in Austria and made it a wholly owned subsidiary. With this acquisition, in addition to credit card and debit card settlement and

settlement of operator charges for digital content provided by net mobile and Buongiorno S.p.A., we will expand our financing and settlement platform business in Europe by providing settlement services in fine trade’s online product sales market.

8.7. Research and Development

In our base located in the Yokosuka Research Park, we engage in research and development of basic technology, mobile communication systems and a wide variety of new products and services. As part of our ongoing research and development and in order to continue to improve our products,devices, networks and services, each of our research and development departments collaborates with product development staff at other operating divisions. We are also working with major manufacturers of our products and network equipment.

In order to address technology innovations overseas, we have established research centers in the U.S.,United States, Germany and China. Together with DOCOMO Capital, Inc. and DOCOMO Innovations, Inc., we are also aligned with venture companies in North America for the purpose of investing in ventures that develop advanced and innovative technologies that can be applied to mobile communication services.

Furthermore, we also conduct collaborative research with various universities withininside and outside Japan. In the collaborative research field, we have been involved in technological exchanges in connection with 4G and 5G mobile communication systems and other advanced research.

RecentThe results of our recent development resultsin addition to the development of “VoLTE,” and major technologies used in LTE-Advanced such as “carrier aggregation” and “Advanced C-RAN,” are as follows:

 

 

Development of Handsets and ServicesTechnology Put to Practical Use During the Fiscal Year Ended March 31, 2015

 

WithFor “i-concier” and “Shabette-Concier,” we developed new functions such as a function to enable those applications to display more accurate information to a user by studying the Xi service, we beganuser’s preferences, usage history and others or a function that allows to offer smartphones and mobile Wi-Fi routers compatiblehave uninterrupted smooth chat with“Quad-Band LTE” that supports downlink transmission at 150Mbps. “Shabette-Chara.”

We began to offer a service that uses the cloud for “docomo mail” and the like. We developed and began to offer a “docomo ID” compatible service base and server management technology that shortens up to 50% the cloud service response time, with the aim of improving service usability.

While providing our own technologies used in our smartphones, including technologies such as text recognition and voice recognition as API*1, we also established “docomo Developer support,” an API providing site that widely supports service developers, including development support tools like SDK*2.

*1An abbreviation for Application Programming Interface. An interface required for calling up a function or database when applications are developed.
*2An abbreviation for Software Development Kit. It facilitates easier programming by developers.

 

Technical Developments to be Implemented

 

We are engagedthe first mobile telecommunications carrier in Japan to succeed in substantiation experiments of VoLTE international roaming connections between Japan and Korea, and Japan and the United States.

To aim for commercial implementation by March 2016, we have begun experimentation and development of “VoLTE*,” a voice service on the LTE network which is 3GPP standardized.virtualization technology, with six major global vendors, to improve network connection during peak times of network communication traffic.

 

We developed “Smart Vertical MIMO,a small authentication device, the “portable SIM,which connects to the network simply by being held over a wireless transmission technology aimed at LTE-Advanced, which is a 4th generation mobile communications standard. We conducted a successful outdoor traveling transmission test at an excess of 1.2Gbps with one base station antenna.smartphone or tablet.

 

We initiated the development of “intelligent glass,” an applicationdeveloped “Double Power Control” technology that controls power usage giving priority to surplus solar power and night-time power, and introduced it to green base stations used for eyeglass-type terminals which displays counterpart information stored in the Internet and allows users to move virtual icons displayed in their field of vision as if they are moving actual physical objects.testing.

 

*An abbreviation for Voice over LTE. This is a voice IP service which leverages LTE technology.

 

Future Technology Initiatives

 

WithIn order to provide the goal of realizing ultra-high speed data transmissions at more than 10Gbps and 1,000-fold the capacity of existing LTE networks,most advanced communications network by 2020, we conducted research and development related to “next generation mobile communications (5G).”

We are engaged in 5G research in cooperation with the major global vendors with the aim of achieving mobile communications speed exceeding 10Gbps, an enhancement of LTE service to have about 1,000 times greater capacity, and development related to network virtualization that aims tohandling of an increase in terminals with the efficiencypermeation of network structureIoT communications and operations. We have confirmed by experimentation that this technology can handle the complexity of large scale traffic concentration both economically and rapidly.

As a result of the above, the total research and development costs fordiverse services. During the fiscal year ended March 31, 2014, decreased2015, we succeeded in data communications of at least 5Gbps when receiving in indoor tests and at least 4.5Gbps when receiving in outdoor test.

In order to offer advice to our customers on the prevention and treatment of lifestyle-related diseases on an individual basis, we developed a wearable device for measuring the biological gas component (acetone) that is naturally emitted by 8.3% from the previous fiscal yearskin and serves as an indicator of combustion of body fat. Furthermore, in order to ¥102.0 billion.establish a method for the prevention and early detection of certain illnesses, we have begun joint research, with Tohoku University, which is the first of its kind to utilize our company’s mobile healthcare technology and analytic technology for genomes and the like owned by Tohoku University.

We have established a joint venture company, Mirai Translate, Inc., with SYSTRAN INTERNATIONAL Co., Ltd. and FueTrek Co., Ltd. We are proceeding with research with the aim of developing translation technology that has the world’s highest level of machine translation accuracy and the provision of software and services using this technology in order to realize a world free of language barriers to respond to the further increase in foreign visitors to Japan, overseas travel by Japanese and overseas expansion by Japanese companies expected to occur by 2020.

9.8. Regulations

The MIC is the primary regulatory body with responsibility for the telecommunications industry in Japan. We and other mobile telecommunication service providers are regulated by the MIC primarily under the Telecommunications Business Act. We and other mobile telecommunication service providers are also subject to the Radio Act. We, however, are not subject to regulation under the Act on Nippon Telegraph and Telephone Corporation. etc. (“NTT Act”).

 

 

The Telecommunications Business Act

Under the Telecommunications Business Act, we are subject to a registration requirement as telecommunications operators.

The following table summarizes some of the major current regulatory requirements applicable to telecommunications carriers under the Telecommunications Business Act:

 

   

Regulation

a. Tariff settings, service offerings, etc.

  

Unregulated in principle (excluding universal service and certain designated telecommunication services).

 

Accountability to users concerning outline of terms and conditions of telecommunications service and proper and swift processing of complaints and inquiries from the users are required.

b. Business improvement order

  The Minister of MIC may order a telecommunications carrier to improve business activities to protect the interests of the public and users with regard to the secrecy of communications, unreasonably discriminatory treatment, ensuring important communications, tariff and other service conditions, etc.

c. Interconnection

  

Obligation, in principle, for interconnection with other telecommunications carriers that propose interconnection.

 

In the event a telecommunications carrier does not accept entering into a consultation despite the other carrier’s proposal to enter into an agreement to interconnect telecommunications facilities or if said consultation fails to come to an agreement, except for certain cases, the Minister of MIC may order such telecommunications carrier to start or resume consultation.

 

The Radio Act

The Radio Act was established to promote public welfare by ensuring the equitable and efficient utilization of radio waves. There are certain important provisions of the Radio Act applicable to us and other mobile phone service providers.

The Act states that the MIC must, in order to ensure convenience for those planning to build base station equipment, draw up and make available to the public a list of the frequencies that are available for allocation. Anyone who wishes to build base station equipment must submit an application form to the Minister of MIC together with documents in which required matters are stated, including the purpose of and reason for building base station equipment, the location of the facilities and its frequencies, and acquire a license. The Act also states that any telecommunications carrier who has obtained a license should obtain approval from the Minister of MIC in advance of any operational changes, such as a change in recipients of communications or the location of the facilities, or the intention to start any construction to modify the facilities.

 

 

Major Regulations and Guidelines

Category II-designated telecommunications facility system

Our telecommunications facilities have been designated as Category II-designated telecommunications facilities. Consequently, in interconnection with other telecommunications carriers, we are obligated to specify in advance fees to be obtained and terms of connection, etc. in the form of articles of agreement, and report these to the Minister of MIC and make them public. No agreements pertaining to the interconnection between Category II-designated telecommunications facilities and other telecommunications carriers may be entered into or amended without complying with those articles of agreement.

In June 2012,

By the revision of the Ordinance for Enforcement of the Telecommunications Business was revised. By this revision,in 2012, the criteria for designating Category II telecommunications facilities were expanded to include those of carriers with a share of more than 10% (formerly 25%), and as a result SOFTBANK MOBILE was designated by the public notice of the MIC as a carrier of awho installs Category II telecommunications facilityfacilities in addition to KDDI and Okinawa Cellular in December 2012. In April 2015, SOFTBANK MOBILE, Softbank Telecom, Softbank BB and Y! Mobile merged into one entity called new “Softbank Mobile.” The new “Softbank Mobile” was designated as a carrier who installs Category II telecommunications facilities, resulting in all MNO*s currently providing services (excluding Broad band Wireless Access or Personal Handy-phone System operators) being designated as carriers who install Category II telecommunications facilities.

*MNO (Mobile Network Operator) refers to a business operator providing mobile telecommunications services by locating or operating radio stations for such services by themselves.

Method of Connection Charges Calculation

Regarding fees charged to the connecting carrier as a result of interconnection (connection charges), we are obligated to charge an amount consisting of appropriate costs plus a reasonable margin and accordingly need to calculate such an amount by the method specified in the “Guideline relating to operation of theCategoryII-designated telecommunications facility system” issued by the MIC, and submit the basis of the calculation to the MIC. We are also under an obligation to assemble and make public accounting information about the connection in accordance with the MIC Ordinance. The aforementioned Guideline was amended in March 2014, under which it is recommended to determine a provisional amount for packet connection charges payable by MVNOs by reference to reasonable and provisional amounts in lieu of the connection charges applicable in the previous year for the purpose of the improvement of MVNOs’ cash flows in the case where a substantial decrease in such amount is expected.

Regulations on the Prohibition of Anti-competitive Behavior

We are designated as a telecommunications carrier subject to the prohibition of anti-competitive behavior on the grounds that it is necessary to do so in consideration of the fact that our market share in terms of profits exceeds 25 percent, changes in this market share and other circumstances; and also, for the purpose of ensuring a fair environment of competition with other telecommunications carriers, we are accordingly prohibited from engaging in anti-competitive behavior such as:

 

Use of information of other mobile network operators obtained from such other mobile operators through interconnection for other purposes;

Unduly favorable treatment of specific telecommunication carriers; and

 

Undue discipline imposed on or interference with other carriers, manufacturers or suppliers of telecommunications equipment.

Currently, a discussion is open atIn December 2014, the Information and Communications Council of the MIC issued a report in respectwhich the Council concluded the regulation of prohibited activity on mobile telecommunication industry should be relaxed. In response to the modalityreport, an amendment to the Telecommunications Business Act was enacted and promulgated in May 2015. The amendment will become effective from a date to be designated within one year from the promulgation. Once the amendment comes into force, we believe we will be able to collaborate exclusively with specific business partners (excluding some of our group companies specified by the telecommunications policiesMIC separately) and to create diverse services through the utilization of information and communications technologies by coordinating with a viewvariety of companies inside and outside Japan, which we expect will contribute to the “reformimprovement of the competition policies”. Where appropriate, the reform of the prohibition ofanti-competitive behavior will be consideredconvenience for customers and the report will be submitted by or around the endimprovement of 2014.our international competitiveness.

Obligation to provide MVNOs with telecommunications services

With a view toward a more dynamic mobile telecommunication market achieved by promoting new entry by MVNOs, the MIC has formulated “Guidelines regarding the application of the Telecommunications Business Act

and the Radio Act to MVNO.” Under the Guidelines, whether wholesale telecommunications services are to be provided by a Mobile Network Operator (“MNO”)an MNO to an MVNO, or whether there will be an interconnection between an MNO and MVNO are matters, in principle, to be decided by consultations between the parties, and when an MNO has had a request for connection from an MVNO, unless it has grounds to refuse, it must comply with such request.

Introduction of BodySAR regulations

Bearing in mind the penetration of wireless devices used for purposes other than voice communications, such as smart phones, among others, and the penetration of devices with multiple forms of wireless mechanisms that transmit radio waves at the same time, the MIC introduced a system that provides for expansion of the permissible limit of the Specific Absorption Rate (SAR), which had previously been set mainly for the head area, to include almost the entire body in order to ensure the safety of these devices according to standardized international assessment methods (effective as of April 2014).methods.

10.9. Relationship with NTT

NTT is our parent company and owned 66.65% of our voting rights as of March 31, 2014.2015. The government of Japan, in the name of the Minister of Finance, owned 36.56%34.91% of the voting rights of NTT as of the same date. The government of Japan, acting through the MIC, also regulates the activities of NTT.

The NTT group is the largest provider of fixed-line and wireless voice, data, Internet and related telecommunications services in Japan and operates one of the largest telecommunications networks in the world. The NTT group’s main business is providing nationwide telecommunications services including voice communication services, data communication services, leased circuit services, system integration services and other services. As a holding company, NTT is directly responsible for the overall strategy of the NTT group. NTT is also responsible for basic research and development for its group companies.

Although NTT owned 66.65% of our voting rights as of March 31, 2014,2015, we conduct our day-to-day business operations independently of NTT and its other subsidiaries. All transactions between us and each of NTT and its subsidiaries and affiliates are conducted with fair and appropriate distance. In the year ended March 31, 2014,2015, we had sales of ¥43,872¥47,129 million to NTT and its subsidiaries and had cost of services, selling, general and administrative expenses and capital expenditures of ¥215,968¥221,906 million, ¥198,288¥201,829 million and ¥75,768¥59,925 million, respectively, to NTT and its other subsidiaries, compared to sales of ¥42,777¥43,872 million and cost of services, selling, general and administrative expenses and capital expenditures of ¥211,137¥215,968 million, ¥198,935¥198,288 million and ¥93,207¥75,768 million, respectively, in the year ended March 31, 2013.2014. We also had accounts receivable of ¥5,058¥5,735 million from NTT and its subsidiaries and payables of ¥79,077¥75,197 million to NTT and its subsidiaries as of March 31, 2014,2015, compared to ¥9,164 ¥5,058��million and ¥78,073¥79,077 million as of March 31, 2013.2014.

In order to ensure fair competition in the mobile telecommunication business, the MPTMinistry of Posts and Telecommunications (currently the MIC) in April 1992 established the following conditions of separation on NTT, which was then operating fixed line telephone services, and us, which remain applicable:

 

To the extent possible, we must establish transmission lines for our network independent of NTT. In the event that we use NTT transmission lines, the terms and conditions for such use shall be the same as those for our competitors.

 

NTT must not favor us in any transactions between NTT and us. The terms and conditions for our use of NTT utility poles, access to NTT’s network, access to NTT research and development and similar matters should be the same as for our competitors.

 

All former NTT employees transferred to us were required to be permanent employees, rather than being seconded from NTT.

We were to plan to have our shares listed and NTT’s ownership in us reduced approximately 5 years after incorporation.

 

We must not engage in joint procurement with NTT so as not to use NTT’s purchasing power with the objective of obtaining favorable treatment or pricing from its suppliers and manufacturers.

At the time of separation from NTT, all trademarks and service marks for our products developed by NTT, other than the “NTT DoCoMo” trademark, the “DoCoMo” trademark and the “NTT DoCoMo” service mark, were assigned to us. If NTT’s ownership of our shares is substantially reduced, we may not be able to continue to use the trademarks and service marks that include “NTT.” Patents, utility model rights and design rights are shared equally with NTT. While certain rights to programs concerning wireless telecommunication systems were assigned by NTT to us, NTT owns the rights to other programs concerning wireless telecommunication systems and grants us licenses to use such rights. Since the separation, NTT and we have each retained rights resulting from our own research and development. When we desire to use NTT’s technology, we are required to pay royalties equal to those other wireless telecommunication companies would pay for the use of such technology, and such technology is available equally to us and our competitors. We are also required to pay NTT certain basic research and development fees.

Although we operate independently of NTT, the following matters, among other things, relating to us are discussed directly with or reported to NTT: matters that are required to be voted on at shareholders’ meetings, including amendments to the Articles of Incorporation, mergers and consolidations, assignments and transfers of business, election and removal of member of the board of directors and audit & supervisory board members, and appropriation of dividends from retained earnings; increases in share capital; investments, including international investments; loans and guarantees; and establishment of businesses plans. In addition, Mr. Takashi Nakamura, a full-time employee of NTT, serves part-time on our board of directors.

To date, with respect to the stake in us held by NTT, such documents as the Deregulation Committee 1998 report, the 2000 opinion of the Regulatory Reform Committee, and the government’s “Three-year Program for Promoting Regulatory Reform” of 2001 have concluded that, from the perspective of promoting completion among NTT group companies, efforts should be made to further lower the stake. NTT has declared its view that its ownership of our shares does not have any adverse effects on fair competition and that it intends to maintain its ownership stake in us at 51% or above. Further, the Japanese government has not decided what action, if any, it will take with respect to NTT’s ownership of our shares.

NTT has entered into agreements with each of DOCOMO, NTT East and NTT West and certain other subsidiaries that provide for NTT to receive compensation for performing basic research and development and for providing management and administrative services. NTT also receives dividends when dividends are declared by its subsidiaries, including DOCOMO.

For information regarding certain transactions with NTT FINANCE CORPORATION (“NTT FINANCE”), in which NTT and its subsidiaries collectively own 99.9% of the voting interest, see Item 7.B. “Related Party Transactions” and Note 1315 of “Notes to Consolidated Financial Statements—Related Party Transactions.”

11.10. Legal Proceedings

We have initiated normal actions relating to the collection of telecommunications charges and other legal proceedings in the ordinary course of business and are not involved in any litigation and have not been involved in other legal proceedings in the preceding 12 months from the date of this document that, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our financial position or profitability.

A.C.    Organizational Structure

As of March 31, 2014,2015, NTT, our parent company, was our largest shareholder and owned 66.65% of our outstanding voting shares. We are the largest wireless telecommunication services provider in Japan based on the number of subscriptions.

There are no subsidiaries that are considered to be significant as of March 31, 2014.2015.

B.D.    Property, Plant and Equipment

Our property includes buildings which contain wireless telecommunication equipment. As of March 31, 2014,2015, we and our regional offices owned 3,731,0323,741,558 square meters of land and 1,555,3901,702,668 square meters of office space, buildings containing switching centers, company dormitories and warehouses throughout Japan. In addition, as of March 31, 2014,2015, we leased 9,564,3679,573,101 square meters of land mainly for base stations and transmission facilities.

We do not, directly or indirectly through a subsidiary, operate a coal or other mine subject to the U.S.  Federal Mine Safety and Health Act of 1977.

Item 4A. Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

You should read the following discussion of our financial condition, results of operations and cash flow conditions together with our consolidated financial statements and the notes thereto included in this annual report.

This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this report.

We will discuss the following matters in this Item 5:

A. Operating Results

 

Overview

 

Trends inMarket Trend

Operating Results for the Mobile Communications Industry in Japanfiscal year ended March 31, 2015

 

Operating Results for the fiscal year ended March 31, 2014

Operating Results for the fiscal year ended March 31, 2013

 

Segment Information

 

Operating Trends and Prospects for the fiscal year ending March 31, 20152016

B. Liquidity and Capital Resources

 

Cash Requirements

 

Sources of Cash

C. Research and Development

D. Trend Information

E. Off-Balance Sheet Arrangements

F. Tabular Disclosure of Contractual Obligations

G. Critical Accounting Policies and Estimates, and Recently issued Accounting Standards

A. Operating Results

Overview

We are the largest cellular network operator in Japan with a total subscription of 63.1166.60 million, which represented 43.8%43.6% of all cellular subscriptions in Japan as of March 31, 2014.2015. We earn revenues and generate cash primarily by offering mobile communications services and mobile handset sales. In mobile communications services, which account for the majority of our revenues, we provide voice communication services as well as data communication services via our packet communications network. In addition to mobile communications services and mobile handset sales, we provide telecommunications services such as optical-fiber broadband service, satellite communications services and international services. To make “Smart Life” a reality, we provide smart life services such as video and music distribution, electronic books and other services offered through our present business activities are credit“dmarket” portal, finance/payment services, home shopping services music software sales, internet access services for hotels, mobile advertisement business and various other services.services to support our customers’ daily lives. We also provide “Mobile Device Protection Service,” development, sales and maintenance of IT systems and others.

Japan’s telecommunications sector has seen dramatic change in its market structure.

In May 2014, NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT) unveiled its “Hikari Collaboration Model”—a new wholesale business model for its fiber access service. As this enables telecommunications operators and a wide range of other players to provide services utilizing fiber connections, competition transcending the traditional boundaries of telecommunications market is starting.

Within the mobile communications market, besides the intense competition that we engage in with other Japanese telecommunications carrierstrend towards market entry by various players and the emergence of new services is expected to gather momentum due to active movementthe rapid proliferation and expanded use of subscribers usingsmartphones, tablets and other function-rich mobile devices as well as the Mobile Number Portability (MNP) system, we are also facing competition with new players offering a wide variety ofinternet-based services that transcend the scope of traditional telecommunications business.government’s pro-competition policy and other factors.

In this new competitive landscape, we have been taking steps to reinforce our competitivenessAmid these changes in the mobile business by thoroughly improving our offerings and developing attractive servicesmarket environment, in our new business fields based on our medium-term business plan: “Medium-Term Vision 2015: Shaping a Smart Life.”

In the fiscal year ended March 31, 2014,2015, to strengthen our competitiveness in the mobile communications domains, we launched a new billing plan, “Kake-hodai & Pake-aeru,” while continuing to enhance our network through LTE services and introducing highly functional and attractive devices (handsets). With respect to our efforts in the smart life business and other businesses, we strived to boostfurther enrich our comprehensive strengths by focusing on the four key areas of “devices (handsets),” “network,” “services” and “billing plans and sales channels,” with the goal of being chosen by a large number of customers and garnering their usage over a long period of time.

Further, in order to propel the expansion of our new businesses, we pursued“dmarket” portal, facilitated collaboration and alliances with externalvarious partners to provideand expanded new services in such fields as “healthcare”that are expected to sustain customers’ “smart life.” Meanwhile, we reorganized our corporate group and “learning.”

Meanwhile,internal organizations to accelerate the initiatives mentioned above, we endeavored to strengthen our managerial foundation through structural reforms, stepping up cost-cutting effortsestablish a structure that can deliver enhanced customer services, and shifting managementof human resources to newhigh-priority areas (the smart life and enterprise businesses) in an effort to solidify our business fields.foundation. As a result of these endeavors, we were awarded high scores for both our consumer and enterprise offerings in the customer satisfaction surveys conducted by external institutions, and improved our performance in the acquisition of net additions, churn rate and other indicators in mobile communications services.

Furthermore, in April 2014,March 2015, toward the goals of “delivering one-stop service for both mobile and fixed-line communications,” “realizing smart home services” and “boosting the competitiveness of our core mobile business,” we unveiledlaunched the “docomo Hikari” service (our optical-fiber broadband service) and “docomo Hikari Pack,” a new billing structurebundle package that offers unlimited domestic voice calls for a flat monthly rate and enablesallows users to share packet-data quota among family members,use “docomo Hikari” and introduced new discount packages that offer privileges to long-term users and young users of up to age 25, with the goal of allowing customers to utilize our servicesmobile phone service at affordable rates, for a long periodmaking the first step in our journey to offering new added value through the convergence of time by selecting a plan appropriate for their individual needs in different stages of life.fixed-line and mobile communications services.

For the fiscal year ended March 31, 2014,2015, operating revenues decreased by ¥8.9¥77.8 billion from the previousprior fiscal year to ¥4,461.2¥4,383.4 billion due mainly to a decrease in mobile communications services revenues of ¥212.7 billion as a result of the impacts of penetrationexpanded impact from the broadened uptake of the “Monthly Support” discount program despite increasesand the negative impact caused by the “Kake-hodai & Pake-aeru” new billing plan in the initial phase following its launch, which more than offset the increase in revenues from equipment sales, smart life business and other operating revenues of ¥113.9 billion and ¥89.9 billion, respectively, driven by our active sales promotion of smartphones and the expansion of profit in our new business fields.businesses.

Operating expenses increased by ¥9.1¥102.3 billion from the previousprior fiscal year to ¥3,642.0¥3,744.3 billion, due mainly to an increasea rise in depreciation and amortization expense related to the upgraderevenue-linked expenses such as cost of equipment for the Xi LTE(Long-Term Evolution) networksold and an increase in cost related to the expansion of new business revenues,other factors despite our efforts to promoteongoing cost reduction with the goal of further strengthening our management structure.efforts.

As a consequence,result of the foregoing we recorded operating income for the fiscal year ended March 31, 2014 was ¥819.2of ¥639.1 billion, decreasing by ¥18.0a decrease of ¥180.1 billion from the previousprior fiscal yearyear.

Income before income taxes and falling shortequity in net income (losses) of our earnings forecast of ¥840.0 billion. Netaffiliates was ¥643.9 billion, and net income attributable to NTT DOCOMO, INC. was ¥464.7¥410.1 billion, postingrecording a decrease of ¥26.3¥54.6 billion from the previousprior fiscal year due to a ¥39.5 billion-decline of equity in net income (losses) of affiliates.year.

Going forward, weWe will continue to take measuresengage ourselves in co-creation of added value for customers in collaboration with partners, so that will further enrich the lives of our customers so wewhat is perceived as new today can be chosen by customers as their “Partnertaken for a Smart Life” and receive their patronage for a long period of time.

Trendsgranted in the Mobile Communications Industry in Japanfuture.

Market Trend

In the section below, trends in the mobile communication industry in JapanJapan’s telecommunications sector are analyzed from the perspectives of the trends in the market, technical developments/services and regulatory environment.

Market

According to an announcement by the Telecommunications Carriers Association and cellular network operators, the mobile communications market in Japan saw a 7.978.68 million net increase in cellular subscriptions for the fiscal year ended March 31, 2014.2015. The total number of cellular subscriptions in Japan grew to 144.02152.70 million as of March 31, 2014,2015, which represented a market penetration rate of approximately 113%120%. The growth prospect of new subscriptions to voice-enabled devices is expected to be limited given the rise in the penetration rate and decrease in future population. The recent increase in the total number of new subscriptions has been driven mainly by thean increase ofin subscriptions achieved through stimulation of demand for secondary devices such as tablet devices and mobile Wi-Fi routers, the development of new markets such as smartphones, tablet devices, portable gaming consoles and embedded communication modules.modules, and an increase in corporate subscriptions. Consequently, the annual growth rate of cellular subscriptions was 7.3%6.1%, 6.1%5.9% and 5.9%6.0% for the years ended March 31, 2012, 2013, 2014 and 2014,2015, respectively.

As of March 31, 2014,2015, cellular services were provided in Japan by three network operators, including us, and their group companies. In addition to providing cellular services, the network operators also procure mobile phones and other communications devices compatible with their communications services from manufacturers, and subsequently sell them to agent resellers and other retailers for sale to subscribers. As for cellular services, all network operators in Japan have introduced the LTE*1 system, a mobile communications standard developed as an extension to the third-generation mobile communications (3G) system and LTE subscribers including users shifting from 3G have been increasing rapidly. The total number of subscriptions to our LTELTE(Xi) service which is provided under a service brand called “Xi”, reached 30.74 million as of March 31, 2015, increasing sharply from 21.97 million as of March 31, 2014, increasing sharply from 11.57 million as of March 31, 2013.2014. In addition, driven by an increase in subscribers to XiLTE(Xi) services, the sales of smartphones have recorded a remarkable increase in recent years. During the fiscal year ended March 31, 2014,2015, we sold a total of 13.7814.60 million smartphone units, which accounted for over 60% of the total number of our annual device sales and approximately 80%90% of smartphone users enjoy XiLTE(Xi) services. We expect this trend of expanded subscriptions to our LTE(Xi) service and smartphone sales willto continue going forward.

While the growth prospects for Japan’s mobile phone market may be limited in terms of the number of subscriptions to devices used primarily for voice communication, data usage has been increasing owing to the expanded uptake of smartphones and growing adoption of flat-rateoffering various billing plans for packet access to meet customers’ diverse requirement and high-speed data services, andservices. Furthermore, new market opportunities are beginning to emerge in such areas as content and applications for mobile devices.smartphones. Meanwhile, competition among network operators has intensified in recent years due to an increase in the numberpromotion of subscriptions topenetration of MVNO*12 services is being advocated under government policies and we expect a diverse range of players to have plans to enter the increasemarket in the number offuture as well. Mobile phone users are actively switching operators using MNPthe Mobile Number Portability (MNP) system commenced in 2006. In addition, with the use of open platform devices like smartphones and tablets becoming increasingly widespread, OTT*23 players, offer competitive services and thus the competition in the Japan’s mobile communications market is expected to remain fierce. On the other hand, the societal demands

Demands on network operators to secure sufficient network capacity to accommodate the growing data traffic and construct a reliable network capabledue to increasing use of providing stable communication services even in disasterssmartphones have been mounting. As one way of addressing rising data traffic, it is expected that adoption of LTE-Advanced*4 technology enabling even higher speeds and capacities for LTE services will increase among network operators. We began providing LTE-Advanced services in March 2015 under the service name “PREMIUM 4G.”

 

*1Abbreviation of Long Term Evolution. A mobile communications protocol with specifications formulated by the 3rd Generation Partnership Project (“3GPP”).
*2Abbreviation of Mobile Virtual Network Operator. A business that borrows the wireless communication infrastructure of other companies to provide services.
*23Abbreviation of Over The Top. A business that does not own the communications infrastructure required for delivering their services and that delivers content services using the communication infrastructure of other companies,companies.
*4A more sophisticated mobile communication system, whose standardization to 3GPP, is progressing while maintaining technical compatibility with LTE.

Technical developments/Services

In June 2014, amid challenging market conditions, to deliver a diverse range of advanced services and to improve the convenience of our subscribers, we began offering a new billing plan, “Kake-hodai & Pake-aeru,” to our subscribers. This new billing plan consists of the four principal services of a flat-rate domestic voice calling plan, a plan to enable sharing of the packet data quota among family members, a discount service favoring long-term users with graduated discounts based on length of subscription, and a service providing discounts to users age 25 or younger. Price competition is expected to continue in the future, as other operators have introduced similar flat-rate domestic voice calling plans.

Innovations in internet technology may have a material impact on the mobile communications industry including ourselves. IP (Internet Protocol) telephony, which is a form of voice communications based on IP technology, has already become a popular means of communications in fixed-line services as a result of the broad penetration of local broadband access, and the use of applications that enable voice communication over IP technology on smartphones has also become prevalent. In addition, there are moves by some cellular operators to introduce voice IP service over LTE networks (VoLTE)(“VoLTE”) that enable voice communication over LTE technology and IP technology and we also launchedstarted offering Japan’s first VoLTE service and released VoLTE convertible handsets for the fiscal year ending March 31, 2015.in June 2014. Because VoLTE offers greater spectral efficiency and superior voice communications quality, the adoption of VoLTE may expand into full scale in the mobile communications industry in the future.

Meanwhile, progress has been made in the development of convergence services, combining fixed-line and mobile communications with rise in the penetration of mobile phones and broadband services. This concept of fixed-mobile convergence was previously limited only to the provision of single-bill service for both fixed and mobile services or content/e-mail address sharing between the two networks. In recent years, however, our competitors have been stepping up their efforts to offer converged fixed and mobile services as smartphone penetration rises. We also plan to move ahead to offer attractive services combining fixed-line services and our mobile communications servicesaddition, in response to the announcementstart of “Hikari Collaboration Model”, which provides wholesaling of fiber access services to other companies fromby NIPPON TELEGRAPH AND TELEPHONE EAST CORPORATION and NIPPON TELEGRAPH AND TELEPHONE WEST CORPORATION, we launched the “docomo Hikari” service (our optical-fiber broadband service) and “docomo Hikari Pack,” a bundle package that allows users to use “docomo Hikari” and our mobile phone service at affordable rates in March 2015. However, since it is possible for a diverse range of players, not just network operators, to provide similar services using optical-fiber and to offer discounts on bundles with mobile communications and fixed-line communications, the future. The usebusiness environment could grow more competitive beyond the existing boundaries of such convergence services may accelerate more extensively in line with further proliferation of smartphones.the telecommunications market.

Regulatory environment

We and other cellular network operators in Japan receive the allocation of radio spectrum from government entities and are subject to regulations under the Japanese Telecommunications Business Act, Radio Act and other applicable laws. While Japan’s mobile communications industry, in recent years, has seen significant progress in deregulation on many fronts including tariff-related regulations, furtherregulations. An amendment to the Telecommunications Business Act was enacted in May 2015. Once implemented, that amendment of the act would greatly ease the prohibitions that apply to NTT DOCOMO, INC. and it is expected that it would permit NTT DOCOMO, INC. to cooperate freely with various partners in the same way that other mobile network operators can. The amendments also would introduce rules intended to protect consumers. The consumer protection policies would apply to all communication businesses, not just us, and each company would be required to interact with consumers in accordance with those regulations. Further changes in the regulatory environment could significantly affect the revenue structures and business models of incumbent cellular network operators including ourselves.

Thus, fromWhile, as outlined above, the perspectivebusiness environment in which we operate is a tough one in terms of a saturated mobile communication market conditions, regulations, changes in business models, and change of business/market structureother factors, we continue to strive to improve our competitive strength and regulatory environment caused by the expansion of a layer of competition including MVNO and new entrants from outside our industry, we expect that the competitive environment for the mobile communications market will remain intense.increase earnings.

Operating Results for the fiscal year ended March 31, 20142015 

The following discussion includes analysis of our operating results for the fiscal year ended March 31, 2015. The tables below describe selected data from our consolidated statements of income for the fiscal years ended March 31, 2015 and 2014:

Breakdown of Financial Information

   Millions of yen 
   Years ended March 31 
   2014  2015  Increase
(Decrease)
  Change (%) 

Operating revenues:

     

Telecommunications services

  ¥  2,963,980   ¥  2,747,155   ¥  (216,825  (7.3)%  

Mobile communications services revenues

   2,955,788    2,736,649    (219,139  (7.4)%  

–Voice revenues(1)

   1,065,196    883,844    (181,352  (17.0)%  

–Packet communications revenues

   1,890,592    1,852,805    (37,787  (2.0)%  

Optical-fiber broadband service and other telecommunications services revenues (2)

   8,192    10,506    2,314    28.2 %  

Equipment sales

   872,000    904,089    32,089    3.7 %  

Other operating revenues (2)

   625,223    732,153    106,930    17.1 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating revenues

   4,461,203    4,383,397    (77,806  (1.7)%  
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

     

Cost of services

   1,059,619    1,159,514    99,895    9.4 %  

Cost of equipment sold

   785,209    853,062    67,853    8.6 %  

Depreciation and amortization

   718,694    659,787    (58,907  (8.2)%  

Impairment loss

       30,161    30,161      

Selling, general and administrative

   1,078,482    1,041,802    (36,680  (3.4)%  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

   3,642,004    3,744,326    102,322    2.8 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   819,199    639,071    (180,128  (22.0)%  

Other income (expense), net

   13,850    4,812    (9,038  (65.3)%  
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

   833,049    643,883    (189,166  (22.7)%  

Income taxes

   307,979    238,067    (69,912  (22.7)%  
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before equity in net income (losses) of affiliates

   525,070    405,816    (119,254  (22.7)%  

Equity in net income (losses) of affiliates (including impairment charges of investments in affiliates)

   (69,117  (7,782  61,335    88.7 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

   455,953    398,034    (57,919  (12.7)%  

Less: Net (income) loss attributable to noncontrolling interests

   8,776    12,059    3,283    37.4 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income attributable to NTT DOCOMO, INC.

  ¥464,729   ¥410,093   ¥(54,636  (11.8)%  
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Inclusive of circuit switched data communications
(2)With the introduction of “Optical-fiber service and other telecommunications service revenues” in the fiscal year ended March 31, 2015, some elements (revenues from satellite mobile communications, cable television of overseas and other services) included in conventional “Other operating revenues” in the financial statements for the fiscal year ended March 31, 2014 have been retroactively reclassified into “Optical-fiber broadband service and other telecommunications services revenues.” The amount of the reclassification is ¥8,192 million for the fiscal year ended March 31, 2014.

Analysis of operating results for the fiscal year ended March 31, 2015 and comparison with the prior fiscal year

Operating revenues for the fiscal year ended March 31, 2015, were ¥4,383.4 billion, a decrease of ¥77.8 billion or 1.7% from ¥4,461.2 billion for the prior fiscal year. Telecommunications services revenues were ¥2,747.2 billion, decreasing by ¥216.8 billion or 7.3% compared to ¥2,964.0 billion for the prior fiscal year. Of these, mobile communications services revenues decreased by ¥219.1 billion or 7.4%, from the previous year’s figure of ¥2,955.8 billion, to ¥2,736.6 billion. Voice revenues decreased by ¥181.4 billion or 17.0% year on year to ¥883.8 billion from ¥1,065.2 billion for the prior fiscal year. The decline in voice revenues includes the expanded impact of the “Monthly Support” discounts of ¥73.1 billion and the impact of the shift of some FOMA users to lower-rate plans. “Monthly Support” is a service that provides up to 24 months of discounts from monthly service charges, in fixed amounts depending on device purchased, to subscribers using devices such as smartphones and tablets whose subscriptions satisfy certain conditions. Packet communications revenues recorded a decrease of ¥37.8 billion or 2.0% to ¥1,852.8 billion from ¥1,890.6 billion for the prior fiscal year. This decrease was due to the fact that the positive effects on revenues from the increase in LTE(Xi) service subscribers and aggressive sales promotion of smartphones and other devices were outweighed by the negative effects on revenues of the expanded impact of “Monthly Support” discounts and the negative impact caused by our new billing plan in the initial phase following its launch because the migration of our customers to the plan grew faster than expected. The negative impact on revenue due to the expanded “Monthly Support” discounts was ¥43.9 billion. The total number of LTE(Xi) service subscriptions as of March 31, 2015 grew to 30.74 million, and the total number of smartphones sold during the 12-month period through March 31, 2015 reached 14.60 million. As a result, the voice ARPU for the fiscal year ended March 31, 2015 dropped ¥230 or 16.3% to ¥1,180 from ¥1,410 for the prior fiscal year. The packet ARPU for the fiscal year ended March 31, 2015 was ¥2,600, down ¥100 or 3.7% from ¥2,700 for the prior fiscal year. Optical-fiber broadband service and other telecommunications services revenues increased by ¥2.3 billion or 28.2% from ¥8.2 billion in the prior fiscal year to ¥10.5 billion in the fiscal year ended March 31, 2015.

Equipment sales revenues increased by ¥32.1 billion or 3.7% to ¥904.1 billion for the fiscal year ended March 31, 2015 from ¥872.0 billion for the prior fiscal year, due to increased sales resulting from addition of new subscribers of devices, including smartphones, stimulation of demand for second devices through enhancement of the lineup of tablet devices and introduction of the new billing plan.

Other operating revenues increased by ¥106.9 billion or 17.1% from ¥625.2 billion for the prior fiscal year to ¥732.2 billion for the fiscal year ended March 31, 2015. The primary items comprising other operating revenues include revenues derived from shopping service, services to support our customers’ daily lives, “Mobile Device Protection Service,” services offered through “dmarket” portal, and credit services. The increase was driven mainly by the full-year consolidation of sales revenues from ABC Cooking Studio Co., Ltd., a subsidiary that we acquired in January, 2014 in order to expand the smart life business, increased revenues from “Mobile Device Protection Service” due to growth in the number of protection contracts, and increased revenues from “dmarket” resulting from an increase in subscribers of monthly subscription services in “dmarket” and an increase in sales of pay-per-view or -use content services of “dmarket.”

Operating expenses increased by ¥102.3 billion or 2.8% from ¥3,642.0 billion for the prior fiscal year to ¥3,744.3 billion for the fiscal year ended March 31, 2015.

Cost of services, which represents the expenses we incur directly in connection with providing our customers with mobile communications services and/or other services offered by our subsidiaries, increased by ¥99.9 billion or 9.4% from ¥1,059.6 billion for the prior fiscal year to ¥1,159.5 billion for the fiscal year ended March 31, 2015, resulting from increased cost of services associated with increased revenues in the smart life business and other businesses, including the full-year consolidation of sales revenue from ABC Cooking Studio Co., Ltd., and an increase in charges for use of other companies’ telecommunications equipment in connection with a significant increase in the number of installations of LTE base stations in order to build a robust network.

Cost of equipment sold, which arises mainly from our procurement of handsets for sale to our new or current subscribers through agent resellers, increased by ¥67.9 billion or 8.6% to ¥853.1 billion from ¥785.2 billion for the prior fiscal year primarily as a result of strong sales of smartphones and tablets, whose procurement costs per unit are higher than for feature phone.

Depreciation and amortization expenses decreased by ¥58.9 billion or 8.2% to ¥659.8 billion from ¥718.7 billion for the prior fiscal year, resulting from the effects of a revision in the estimate of the expected useful life of certain software for telecommunications network and internal-use software as well as the effects of reduction in capital expenditures as a result of cost efficiency improvements.

Selling, general and administrative expenses decreased by ¥36.7 billion or 3.4% to ¥1,041.8 billion from ¥1,078.5 billion for prior fiscal year. The primary components included in our selling, general and administrative expenses are expenses related to the acquisition of new subscribers and retention of current subscribers, which includes commissions paid to agent resellers and the expenses incurred in relation to “docomo Points Service” customer loyalty program. The decline of selling, general and administrative expenses was due mainly to a decrease of ¥41.9 billion in commissions paid to agent resellers, offsetting an increase in advertising expenses of ¥3.6 billion in connection with the introduction of the new billing plan.

Impairment loss totaled ¥30.2 billion, due to reduction of the carrying value of multimedia broadcasting business for mobile devices assets to their fair value during the fiscal year ended March 31, 2015.

As described above, the increases in operating expenses other than selling, general and administrative expenses, and depreciation and amortization expenses exceeded the decreases in selling, general and administrative expenses, and depreciation and amortization expenses, which resulted in an increase in operating expenses.

As a result of the foregoing, operating income for the fiscal year ended March 31, 2015 decreased by ¥180.1 billion or 22.0% from ¥819.2 billion for the prior fiscal year to ¥639.1 billion. Accordingly, the operating income margin dropped from 18.4% for the prior fiscal year to 14.6%.

Other income (expense) includes items such as interest expense, interest income, dividend income, foreign exchange gains and losses and other-than-temporary impairment losses and net realized gains (losses) on dispositions of marketable securities and other investments. We recognized ¥4.8 billion as other income, net for the fiscal year ended March 31, 2015, reflecting a decrease of ¥9.0 billion, or 65.3% from the figure of ¥13.9 billion in the prior fiscal year. This was due mainly to the fact that net realized gains (losses) on dispositions of investments in affiliates and of marketable securities and other investments decreased from net realized gains of ¥3.7 billion to net realized losses of ¥0.2 billion from the prior fiscal year and the fact that foreign exchange gains, net, which totaled ¥4.4 billion in the prior fiscal year, fell to foreign exchange losses, net, of ¥0.4 billion in the fiscal year ended March 31, 2015.

As a result, income before income taxes and equity in net income (losses) of affiliates decreased by ¥189.2 billion or 22.7% to ¥643.9 billion for the fiscal year ended March 31, 2015 from ¥833.0 billion for the prior fiscal year.

Income taxes decreased by ¥69.9 billion or 22.7% from ¥308.0 billion for the fiscal year ended March 31, 2014 to ¥238.1 billion for the fiscal year ended March 31, 2015, resulting from a decrease in income before income taxes and equity in net income (losses) of affiliates. An effective income tax rate in both fiscal years is 37.0%.

For equity in net income (losses) of affiliates, our equity in the net losses of our affiliates decreased by ¥61.3 billion or 88.7% to ¥7.8 billion for the fiscal year ended March 31, 2015 from ¥69.1 billion for the prior fiscal year. For both the fiscal years, the equity in losses of certain affiliates including Tata Teleservices Limited

(“TTSL”) was offsetting against the equity in income of other affiliates including Sumitomo Mitsui Card Co., Ltd. and Philippine Long Distance Telephone Company (“PLDT”). For the fiscal year ended March 31, 2015, the equity loss of TTSL decreased from the previous year due mainly to the fact that an additional impairment charge on TTSL amounting to ¥51.2 billion had been recorded in the prior fiscal year but was not recorded for the fiscal year ended March 31, 2015. See Note 6 concerning financial information for TTSL.

As a result of the foregoing, we reported ¥410.1 billion in net income attributable to NTT DOCOMO, INC., representing a decrease of ¥54.6 billion or 11.8% from ¥464.7 billion for the prior fiscal year.

Key Performance Indicators

The underlying operational data for the above-mentioned financial results for the fiscal years ended March 31, 2015 and 2014 are provided below:

   Years ended March 31 
   2014   2015   Increase
(Decrease)
  Change (%) 

Cellular

       

Subscriptions (thousands)

   63,105     66,595     3,490    5.5 %  

LTE(Xi) services

   21,965     30,744     8,779    40.0 %  

FOMA services

   41,140     35,851     (5,289  (12.9)%  

New Billing Plan

        17,827     17,827      

Market Share (%) (1)(2)

   43.8     43.6     (0.2    

Aggregate ARPU (yen/month/subscription)(3)(6)

   4,610     4,370     (240  (5.2)%  

Voice ARPU(4)

   1,410     1,180     (230  (16.3)%  

Packet ARPU

   2,700     2,600     (100  (3.7)%  

Smart ARPU

   500     590     90    18.0 %  

MOU (minutes/month/subscription)(3)(5)(6)

   109     112     3    2.8 %  

Churn Rate (%) (2)

   0.87     0.71     (0.16    

(1)Source for other cellular telecommunications operators: Data announced by Telecommunications Carriers Association and cellular network operators
(2)Data calculated including Communication Module Services subscriptions
(3)Data are calculated excluding revenues and subscriptions from communication module services, “Phone Number Storage,” “Mail Address Storage,” “docomo Business Transceiver,” and wholesale telecommunications services and interconnecting telecommunications facilities that are provided to MVNOs.
(4)Inclusive of circuit switched data communications
(5)MOU (Minutes of Use): Average communication time per month per subscription
(6)Calculation Methods has been changed from the Fiscal Year Ended March 31, 2015. (Accordingly, ARPU and MOU of the Fiscal Year Ended March 31, 2014 have also been changed.)

Definition of ARPU

Aggregate ARPU: 

Voice ARPU + Packet ARPU + Smart ARPU

Voice ARPU:

Voice ARPU Related Revenues (basic monthly usage charges, voice communication charges) / number of active subscriptions

Packet ARPU:

Packet ARPU Related Revenues (basic monthly usage charges, packet communication charges) / number of active subscriptions

Smart ARPU:

A part of other operating revenues (revenues from content, collection of charges, mobile phone insurance service, advertising and others) / number of active subscriptions

Number of active subscriptions used in ARPU calculations is as follows:

Sum of number of active subscriptions for each month* during the relevant period from April to March

*  Active subscriptions for each month = (number of subscriptions at the end of previous month + number of subscriptions at the end of current month) / 2

Operating Results for the fiscal year ended March 31, 2014

The following discussion includes analysis of our operating results for the fiscal year ended March 31, 2014. The tables below describe selected data from our consolidated statementsstatement of income for the fiscal years ended March 31, 2014 and 2013:

Breakdown of Financial Information

 

  Millions of yen   Millions of yen 
  Years ended March 31   Years ended March 31 
  2013 2014 Increase
(Decrease)
 Change (%)   2013 2014 Increase
(Decrease)
 Change
(%)
 

Operating revenues:

          

Mobile communications services

  ¥  3,168,478   ¥  2,955,788   ¥  (212,690  (6.7)%  

Telecommunications services

  ¥  3,176,931   ¥  2,963,980   ¥  (212,951  (6.7)%  

Mobile communications services revenues

   3,168,478    2,955,788    (212,690  (6.7)%  

–Voice revenues(1)

   1,274,584    1,065,196    (209,388  (16.4)%     1,274,584    1,065,196    (209,388  (16.4)%  

–Packet communications revenues

   1,893,894    1,890,592    (3,302  (0.2)%     1,893,894    1,890,592    (3,302  (0.2)%  

Optical-fiber broadband service and other telecommunications services revenues (2)

   8,453    8,192    (261  (3.1)%  

Equipment sales

   758,093    872,000    113,907    15.0 %     758,093    872,000    113,907    15.0 %  

Other operating revenues

   543,551    633,415    89,864    16.5 %  

Other operating revenues (2)

   535,098    625,223    90,125    16.8 %  
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Total operating revenues

   4,470,122    4,461,203    (8,919  (0.2)%     4,470,122    4,461,203    (8,919  (0.2)%  
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Operating expenses:

          

Cost of services

   1,003,497    1,059,619    56,122    5.6 %     1,003,497    1,059,619    56,122    5.6 %  

Cost of equipment sold

   767,536    785,209    17,673    2.3 %     767,536    785,209    17,673    2.3 %  

Depreciation and amortization

   700,206    718,694    18,488    2.6 %     699,754    718,694    18,940    2.7 %  

Impairment loss

   452        (452    

Selling, general and administrative

   1,161,703    1,078,482    (83,221  (7.2)%     1,161,703    1,078,482    (83,221  (7.2)%  
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Total operating expenses

   3,632,942    3,642,004    9,062    0.2 %     3,632,942    3,642,004    9,062    0.2 %  
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Operating income

   837,180    819,199    (17,981  (2.1)%     837,180    819,199    (17,981  (2.1)%  

Other income (expense), net

   (3,838  13,850    17,688         (3,838  13,850    17,688      
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Income before income taxes and equity in net income (losses) of affiliates

   833,342    833,049    (293  (0.0)%     833,342    833,049    (293  (0.0)%  

Income taxes

   323,059    307,979    (15,080  (4.7)%     323,059    307,979    (15,080  (4.7)%  
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Income before equity in net income (losses) of affiliates

   510,283    525,070    14,787    2.9 %     510,283    525,070    14,787    2.9 %  

Equity in net income (losses) of affiliates (including impairment charges of investments in affiliates)

   (29,570  (69,117  (39,547  (133.7)%     (29,570  (69,117  (39,547  (133.7)%  
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net income

   480,713    455,953    (24,760  (5.2)%     480,713    455,953    (24,760  (5.2)%  

Less: Net (income) loss attributable to noncontrolling interests

   10,313    8,776    (1,537  (14.9)%     10,313    8,776    (1,537  (14.9)%  
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net income attributable to NTT DOCOMO, INC.

  ¥491,026   ¥464,729   ¥(26,297  (5.4)%    ¥491,026   ¥464,729   ¥(26,297  (5.4)%  
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

 

(1)Inclusive of circuit switched data communications
(2)With the introduction of “Optical-fiber service and other telecommunications service revenues” in the fiscal year ended March 31, 2015, some elements (revenues from satellite mobile communications, cable television of overseas and other services) included in conventional “Other operating revenues” in the financial statements for the fiscal year ended March 31, 2013 and 2014 have been retroactively reclassified into “Optical-fiber broadband service and other telecommunications services revenues.” The amounts of the reclassification are ¥8,453 million and ¥8,192 million for the fiscal year ended March 31, 2013 and 2014.

Analysis of operating results for the fiscal year ended March 31, 2014 and comparison with the prior fiscal year

Operating revenues for the fiscal year ended March 31, 2014, were ¥4,461.2 billion, a decrease of ¥8.9 billion or 0.2% from ¥4,470.1 billion for the prior fiscal year. MobileTelecommunications services revenues were ¥2,964.0 billion, decreasing by ¥213.0 billion or 6.7% compared to ¥3,176.9 billion for the prior fiscal year. Of these, mobile communications services revenues were ¥2,955.8 billion, decreasing by ¥212.7 billion or 6.7% compared to ¥3,168.5 billion for the prior fiscal year. Consequently, the contribution of mobile communications services revenues to our total operating revenues for the fiscal year ended March 31, 2014 decreased to 66.3% from 70.9% for the prior fiscal year. The year-on-year decrease in mobile communications services revenues was primarily attributable to the impact from the “Monthly

Support” discount program. Voice revenues decreased by ¥209.4 billion or 16.4% year on year to ¥1,065.2 billion from ¥1,274.6 billion for the prior fiscal year. The decline in voice revenues excluding the impact of the “Monthly Support” discounts was ¥80.3 billion. Packet communications revenues recorded a decrease of ¥3.3 billion or 0.2% to ¥1,890.6 billion from ¥1,893.9 billion for the previousprior fiscal year. When calculated without the “Monthly Support” discount impact, packet communications revenues posted a growth of ¥121.2 billion. The growth of packet communications revenues (excluding the impact of “Monthly Support” discounts) was driven mainly by the increase in Xi LTELTE(Xi) service subscriptions and expanded data usage resulting from aggressive sales promotion of smartphones and other devices. The total number of Xi LTELTE(Xi) service subscriptions as of March 31, 2014 grew to 21.97 million, and the total number of smartphones sold during the 12-month period through March 31, 2014 reached 13.78 million. However, because the increase in packet communications revenues was not sufficient to completely offset the negative revenue impact of the ��Monthly“Monthly Support” discount program, which expanded by ¥253.6 billion over the prior fiscal year, the mobile communications services revenues recorded a year-on-year decrease. As a result, the voice ARPU for the fiscal year ended March 31, 2014 dropped ¥360¥350 or 20.8%19.9% to ¥1,370¥1,410 from ¥1,730¥1,760 for the prior fiscal year. The packet ARPU for the fiscal year ended March 31, 2014 was ¥2,640,¥2,700, down ¥50¥20 or 1.9%0.7% from ¥2,690¥2,720 for the prior fiscal year. Optical-fiber broadband service and other telecommunications services revenues decreased by ¥0.3 billion or 3.1% from ¥8.5 billion in the prior fiscal year to ¥8.2 billion in the fiscal year ended March 31, 2014.

Equipment sales revenues increased by ¥113.9 billion or 15.0% to ¥872.0 billion for the fiscal year ended March 31, 2014 from ¥758.1 billion for the prior fiscal year, primarily due primarily to a rise in sales price per-unitper- unit to resellers resulting from an increase in the ratio of the sales number of smartphones to the total as a result of commencement of sales of the popular iPhone*1 in September 2013 in addition to the Android Smartphones that we already sold.

Other operating revenues increased by ¥89.9¥90.1 billion or 16.5%16.8% from ¥543.6¥535.1 billion for the prior fiscal year to ¥633.4¥625.2 billion for the fiscal year ended March 31, 2014. The primary items comprising other operating revenues include sales revenues of consolidated subsidiaries, revenues derived from mobile phone protection-related services, from “dmarket” and credit services business revenues. The increase in other operating revenues was mainly driven by an increase in revenues derived from the growth of subscriptions to various “dmarket” services which resulted in a significant increase in revenues from “dmarket” when compared to the previousprior fiscal year. Full-year consolidations of sales revenues from Tower Records Japan Inc., and Buongiorno S.p.A. in Italy, subsidiaries that we acquired in July 2012 in order to expand the newsmart life business fields,and other businesses, also contributed to this increase.

Operating expenses increased by ¥9.1 billion or 0.2% from ¥3,632.9 billion for the prior fiscal year to ¥3,642.0 billion for the fiscal year ended March 31, 2014.

Selling, general and administrative expenses decreased by ¥83.2 billion or 7.2% to ¥1,078.5 billion from ¥1,161.7 billion for prior fiscal year. The primary components included in our selling, general and administrative expenses are expenses related to the acquisitionCost of new subscribers and retention of current subscribers, which includes commissions paid to agent resellers and the expenses incurred in relation to “docomo Points Service” customer loyalty program. Selling, general and administrative expenses decreased overall as a result of cost efficiency improvement efforts aimed at further strengthening our management structure. In addition, “docomo Points Service”-related expenses, decreased by ¥9.2 billion as a result of the changes made to the terms of the “docomo Points Service”, commissions paid to agent resellers decreased by ¥11.3 billion and an advertise expenses decreased by ¥8.9 billion, offsetting an increase of selling, general and administrative expenses which was driven primarily by consolidating full-year selling, general, and administrative expenses of Tower Records Japan Inc. and Buongiorno S.p.A. in Italy acquired in July 2012.

On the other hand, cost of services which represents the expenses we incur directly in connection with providing our customers with mobile communications services and/or other services offered by our subsidiaries, increased by ¥56.1 billion or 5.6% from ¥1,003.5 billion for the prior fiscal year to ¥1,059.6 billion for the fiscal

year ended March 31, 2014 resulting from the rise in expenses for the expansion of new businesses fields.smart life business and other businesses. Cost of equipment sold which arises mainly from our procurement of handsets for sale to our new or current subscribers through agent resellers, increased by ¥17.7 billion or 2.3% to ¥785.2 billion from ¥767.5 billion for the prior fiscal year primarily as a result of an increase in procurement cost per unit and the increase in the number of smartphones sold.

Depreciation and amortization expenses increased by ¥18.5¥18.9 billion or 2.6%2.7% to ¥718.7 billion from ¥700.2¥699.8 billion for the prior fiscal year resulting from a significant increase in the number of installations of base stations to improve the coverage of our Xi LTE network and to reinforce our network facilities to accommodate the growth in data traffic.

Selling, general and administrative expenses decreased by ¥83.2 billion or 7.2% to ¥1,078.5 billion from ¥1,161.7 billion for the prior fiscal year. Selling, general and administrative expenses decreased overall as a result of cost efficiency improvement efforts aimed at further strengthening our management structure. In addition, “docomo Points Service”-related expenses, decreased by ¥9.2 billion as a result of the changes made to the terms of the “docomo Points Service,” commissions paid to agent resellers decreased by ¥11.3 billion and advertising expenses decreased by ¥8.9 billion, offsetting an increase in selling, general and administrative expenses which was driven primarily by consolidating full-year selling, general, and administrative expenses of Tower Records Japan Inc., and Buongiorno S.p.A. in Italy, subsidiaries that we acquired in July 2012.

Impairment losses decreased by ¥0.5 billion since none were recorded in the fiscal year ended March 31, 2014.

As described above, the increases in cost of services, cost of equipment sold and depreciation and amortization expenses exceeded the decrease ofdecreases in selling, general and administrative expenses, and impairment loss, which result in an increase of operating expenses.

As a result of the foregoing, operating income for the fiscal year ended March 31, 2014 decreased by ¥18.0 billion or 2.1% from ¥837.2 billion for the prior fiscal year to ¥819.2 billion. Accordingly, the operating income margin dropped from 18.7% for the prior fiscal year to 18.4%.

Other income (expense) includes items such as interest expense, interest income, dividend income, foreign exchange gains and losses and other-than-temporary impairment losses and net realized gains (losses) on dispositions of marketable securities and other investments. We recognized ¥13.9 billion as other income, net for the fiscal year ended March 31, 2014, achieving an increase after recognizing other expense, net of ¥3.8 billion in the prior fiscal year. This was because other-than-temporary impairment loss on marketable securities and other investments decreased to ¥3.1 billion from ¥10.9 billion and foreign exchange losses, net of ¥0.9 billion changed to foreign exchange gains, net of ¥4.4 billion.

Income before income taxes and equity in net income (losses) of affiliates decreased by ¥0.3 billion to ¥833.0 billion for the fiscal year ended March 31, 2014 from ¥833.3 billion for the prior fiscal year.

Income taxes weredecreased by ¥15.1 billion to ¥308.0 billion for the fiscal year ended March 31, 2014, andfrom ¥323.1 billion for the prior fiscal year, ended March 31, 2013, representing effective income tax rates of 37.0% and 38.8% for the fiscal years ended March 31, 2014 and March 31, 2013, respectively.

For equity in net income (losses) of affiliates, our equity in the net losses of our affiliates increased by ¥39.5 billion or 133.7% to ¥69.1 billion for the fiscal year ended March 31, 2014 from ¥29.6 billion for the fiscal year ended March 31, 2013. For both the fiscal years, the equity in losses of somecertain affiliates including TTSL was offsettingoffset against the equity in income of other affiliates including PLDT. For the fiscal year ended March 31, 2014, the equity loss of TTSL increased from the previous year due mainly to an additional impairment charge of TTSL amounting to ¥51.2 billion as a result of the growing business risk of mobile network operators including an increase in cost to maintain or acquire frequency spectrum due to a steep rise of anthe auction price of frequency spectrum in India, whichIndia. This resulted in thata further downward revision of our estimate ofestimated future cash flows of TTSL were further revised downward and we concluded that thethis further decline in value was other than temporary. Its decline in value was ¥6.8 billion in the previous year. The other reason for the increase in the equity loss of TTSL was attributable to an increase in the net loss of TTSL due mainly to an increase in its financial burden which was partially offset by the decrease in operating losses resulting from TTSL’s rationalization of the operation. See “Critical Accounting Policies and Estimates – Impairment of investments” for further discussion and analysis of the impairment of TTSL and see “summarized financial information of Investment in affiliates” in the Note5.Note 6. For the fiscal year ended March 31, 2014, the equity income of PLDT increased from the previous year resulting primarily from the appreciation of the Philippine Peso which was the local currency of PLDT, against Japanese Yen in weighted average used for the conversion of income statement items into Japanese Yen throughoutduring the fiscal year ended March 31, 2014 as compared with the previousprior fiscal year.

As a result of the foregoing, we reported ¥464.7 billion in net income attributable to NTT DOCOMO, INC., representing a decrease of ¥26.3 billion or 5.4% from ¥491.0 billion for the prior fiscal year.

*1:

TM and© 20142015 Apple Inc. All rights reserved. iPhone is a trademark of Apple Inc. The iPhone trademark is used under a license from AIPHONE CO., LTD.

Key Performance Indicators

The underlying operational data for the above-mentioned financial results for the fiscal years ended March 31, 2014 and 2013 are provided below:

 

   Years ended March 31 
   2013   2014   Increase
(Decrease)
  Change (%) 

Cellular

       

Subscriptions (thousands)

   61,536     63,105     1,569    2.6 %  

Xi services

   11,566     21,965     10,399    89.9 %  

FOMA services

   49,970     41,140     (8,830  (17.7)%  

packet flat-rate services

   38,704     40,148     1,444    3.7 %  

sp-mode services

   18,285     23,781     5,497    30.1 %  

i-mode services

   32,688     26,415     (6,273  (19.2)%  

Market Share (%) (1)(2)

   45.2     43.8     (1.4   

Aggregate ARPU (yen/month/subscription)(3) 

   4,840     4,500     (340  (7.0)%  

Voice ARPU(4)

   1,730     1,370   �� (360  (20.8)%  

Packet ARPU

   2,690     2,640     (50  (1.9)%  

Smart ARPU

   420     490     70    16.7 %  

MOU (minutes/month/subscription)(3)(5)

   117     106     (11  (9.4)%  

Churn Rate (%) (2)

   0.82     0.87     0.05     

(1)Source for other cellular telecommunications operators: Data announced by Telecommunications Carriers Association and cellular network operators
(2)Data calculated including Communication Module Services subscriptions
(3)Data are calculated excluding revenues and subscriptions to communication module services, “Phone Number Storage,” “Mail Address Storage” and “docomo Business Transceiver”
(4)Inclusive of circuit switched data communications
(5)MOU (Minutes of Use): Average communication time per month per subscription

Definition of ARPU

Aggregate ARPU: 

Voice ARPU + Packet ARPU + Smart ARPU

Voice ARPU:

Voice ARPU Related Revenues (basic monthly usage charges, voice communication charges) / number��of active subscriptions

Packet ARPU:

Packet ARPU Related Revenues (basic monthly usage charges, packet communication charges) / number of active subscriptions

Smart ARPU:

A part of other operating revenues (revenues from content, collection of charges, mobile phone insurance service, advertising and others) / number of active subscriptions

Number of active subscriptions used in ARPU calculations is as follows:

Sum of number of active subscriptions for each month* during the relevant period from April to March

*  Active subscriptions for each month = (number of subscriptions at the end of previous month + number of subscriptions at the end of current month) / 2

Operating Results for the fiscal year ended March 31, 2013

The following discussion includes analysis of our operating results for the fiscal year ended March 31, 2013. The tables below describe selected data from our consolidated statement of income for the fiscal years ended March 31, 2013 and 2012:

   Millions of yen 
   Years ended March 31 
   2012  2013  Increase
(Decrease)
  Change
(%)
 

Operating revenues:

     

Mobile communications services

  ¥3,326,493   ¥3,168,478   ¥(158,015  (4.8)%  

–Voice revenues(1)

   1,541,884    1,274,584    (267,300  (17.3)%  

–Packet communications revenues

   1,784,609    1,893,894    109,285    6.1 %  

Equipment sales

   498,889    758,093    259,204    52.0 %  

Other operating revenues

   414,621    543,551    128,930    31.1 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating revenues

   4,240,003    4,470,122    230,119    5.4 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

     

Cost of services

   893,943    1,003,497    109,554    12.3 %  

Cost of equipment sold

   695,008    767,536    72,528    10.4 %  

Depreciation and amortization

   684,783    700,206    15,423    2.3 %  

Selling, general and administrative

   1,091,809    1,161,703    69,894    6.4 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

   3,365,543    3,632,942    267,399    7.9 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   874,460    837,180    (37,280  (4.3)%  

Other income (expense), net

   2,498    (3,838  (6,336    
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

   876,958    833,342    (43,616  (5.0)%  

Income taxes

   391,798    323,059    (68,739  (17.5)%  
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before equity in net income (losses) of affiliates

   485,160    510,283    25,123    5.2 %  

Equity in net income (losses) of affiliates (including impairment charges of investments in affiliates)

   (24,208  (29,570  (5,362  (22.1)%  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

   460,952    480,713    19,761    4.3 %  

Less: Net (income) loss attributable to noncontrolling interests

   2,960    10,313    7,353    248.4 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income attributable to NTT DOCOMO, INC.

  ¥463,912   ¥491,026   ¥27,114    5.8 %  
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Inclusive of circuit switched data communications

Analysis of operating results for the fiscal year ended March 31, 2013 and comparison with the prior fiscal year

Our operating revenues for the fiscal year ended March 31, 2013 were ¥4,470.1 billion, an increase of ¥230.1 billion or 5.4% from ¥4,240.0 billion for the prior fiscal year. Mobile communications services revenues were ¥3,168.5 billion, decreasing by ¥158.0 billion or 4.8% compared to ¥3,326.5 billion for the prior fiscal year. Consequently, the contribution of mobile communications services revenues to our total operating revenues for the fiscal year ended March 31, 2013 decreased to 70.9% from 78.5% for the prior fiscal year. The year-on-year decrease in mobile communications services revenues was primarily attributable to the drop of voice revenues. The decline in mobile communications services revenues was the net result of the decrease in voice revenues (which dropped by ¥267.3 billion or 17.3% to ¥1,274.6 billion from ¥1,541.9 billion for the prior fiscal year), which was partially offset by the increase in packet communications revenues (which grew by ¥109.3 billion or 6.1% from ¥1,784.6 billion in the prior fiscal year to ¥1,893.9 billion). The primary factors behind the decline in voice revenues were the increase in the number of users subscribing to the “Monthly Support” discount services and decline in billable MOU. This resulted in a decrease in voice ARPU of ¥470 or 21.4% from ¥2,200 for the

prior fiscal year to ¥1,730. The main reasons for the increase in packet ARPU included the impact of expanded data usage resulting from an increase of Xi LTE subscriptions and aggressive sales of smartphones. Because the data usage of Xi LTE and smartphone users is generally higher compared to that of conventional FOMA (3G) and i-mode handset users, the increase in the number of subscribers switching to a Xi LTE handset or a smartphone from a FOMA (3G) or i-mode handset tends to result in an expansion of packet revenues. The total number of Xi LTE subscriptions as of March 31, 2013 was 11.57 million, and the number of smartphones sold during the 12 months through March 31, 2013 was 13.29 million units. Consequently, packet ARPU for the fiscal year ended March 31, 2013 grew by ¥100 or 3.9% to ¥2,690 from ¥2,590 for the prior fiscal year.

Equipment sales revenues increased by ¥259.2 billion or 52.0% to ¥758.1 billion for the fiscal year ended March 31, 2013 from ¥498.9 billion for the prior fiscal year due to an increase in the number of handsets sold to agent resellers as a result of the aforementioned rise in total smartphone sales.

Other operating revenues increased by ¥128.9 billion or 31.1% from ¥414.6 billion for the prior fiscal year to ¥543.6 billion for the fiscal year ended March 31, 2013. The increase in other operating revenues was mainly driven by the increase in sales revenues of consolidated subsidiaries newly acquired for the purpose of the expansion of new business fields such as Radishbo-ya Co., Ltd in March 2012, Tower Records Japan Inc. and Buongiorno S.p.A. in July 2012 for the fiscal year ended March 31, 2013, and the growth of revenues from “Mobile Phone Protection & Delivery service” with increasing number of its subscriptions, which reached 37.48 million as of March 31, 2013.

Operating expenses increased by ¥267.4 billion or 7.9% from ¥3,365.5 billion for the prior fiscal year to ¥3,632.9 billion for the fiscal year ended March 31, 2013, despite our ongoing cost efficiency improvement efforts aimed at further strengthening our management structure. Cost of services increased by ¥109.6 billion or 12.3% from ¥893.9 billion for the prior fiscal year to ¥1,003.5 billion for the fiscal year ended March 31, 2013 resulting from the rise in expenses for the expansion of new businesses fields and a rise in insurance costs resulting from an increase of subscriptions to “Mobile Phone Protection & Delivery Service.” Cost of equipment sold also increased by ¥72.5 billion or 10.4% to ¥767.5 billion from ¥695.0 billion for the prior fiscal year primarily as a result of an increase in procurement cost per unit and the number of handsets sold to agent resellers. Depreciation and amortization expenses increased by ¥15.4 billion or 2.3% to ¥700.2 billion from ¥684.8 billion for the prior fiscal year resulting from capital investment primarily in network construction to improve Xi coverage and as a measure to enhance disaster preparedness. Selling, general and administrative expenses increased by ¥69.9 billion or 6.4% to ¥1,161.7 billion from ¥1,091.8 billion from the prior fiscal year mainly due to an increase in commissions paid to agent resellers caused by an increase in the number of purchase orders processed resulting from expanded smartphone sales and an increase of expenses attributed to the subsidiaries newly acquired during the year ended March 31, 2013, offsetting a decrease in “docomo Points Service”-related expenses resulting from the revisions made to the loyalty program in April 2011.

As a result of the foregoing, operating income for the fiscal year ended March 31, 2013 decreased by ¥37.3 billion or 4.3% from ¥874.5 billion for the prior fiscal year to ¥837.2 billion. Accordingly, the operating income margin dropped from 20.6% for the prior fiscal year to 18.7%.

Other income (expense) includes items such as interest expense, interest income, dividend income, foreign exchange gains and losses and other-than-temporary impairment losses and net realized gains (losses) on dispositions of marketable securities and other investments. We recognized ¥3.8 billion as other expense, net for the fiscal year ended March 31, 2013, compared to other income, net of ¥2.5 billion in the prior fiscal year due mainly to an increase in other-than-temporary impairment loss on marketable securities and other investments to ¥10.9 billion from ¥4.0 billion.

Income before income taxes and equity in net losses of affiliates decreased by ¥43.6 billion or 5.0% to ¥833.3 billion for the fiscal year ended March 31, 2013, from ¥877.0 billion for the prior fiscal year.

Income taxes were ¥323.1 billion for the fiscal year ended March 31, 2013 and ¥391.8 billion for the fiscal year ended March 31, 2012, representing effective income tax rates of 38.8% and 44.7% for the fiscal years

ended March 31, 2013 and March 31, 2012, respectively. Income taxes decreased by ¥68.7 billion or 17.5% owing to the impact from the decrease in net deferred tax assets due to a decrease in enacted future corporate income tax rates, which was included in net income taxes for the prior fiscal year, and had no significant impact for the fiscal year ended March 31, 2013 resulting in a decrease in the actual effective income tax rate for the fiscal year ended March 31, 2013.

For equity in net losses of affiliates, we recognized our equity in the net losses of our affiliates of ¥29.6 billion for the fiscal year ended March 31, 2013 and ¥24.2 billion for the fiscal year ended March 31, 2012. This was due mainly to the recognition of impairment losses of some affiliates including TTSL, while the equity in losses of some affiliates including TTSL was offsetting against the equity in income of other affiliates including PLDT. For the fiscal year ended March 31, 2013, the equity loss of TTSL increased slightly from the previous year. While net loss of TTSL decreased resulting from an increase in operating revenues of TTSL from the previous year, which resulting in the decrease in the equity loss of TTSL, we recognized an impairment charge of ¥6.8 billion. Our estimated future cash flows of TTSL were adjusted downward as a result of the intensifying tariff competition among mobile network operators in India and our views of our long term outlook at that time and we concluded that the recoverable amount was significant below carrying value and this impairment was other than temporary. See “Critical Accounting Policies and Estimates—Impairment of Investments” for further discussion and analysis of the impairment of TTSL and see “summarized financial information of investment in affiliates” in the Note 5. For the fiscal year ended March 31, 2013, the equity in income of PLDT increased from the previous year due mainly to the effect of a subsidiary newly acquired by PLDT in the fiscal year ended March 31, 2013.

As a result of the foregoing, we reported ¥491.0 billion in net income attributable to NTT DOCOMO, INC. for the fiscal year ended March 31, 2013, representing an increase of ¥27.1 billion or 5.8% from ¥463.9 billion for the prior fiscal year.

Key Performance Indicators

The underlying operational data for the above-mentioned financial results for the fiscal years ended March 31, 2013 and 2012 are provided below:

  Years ended March 31   Years ended March 31 
  2012   2013   Increase
(Decrease)
 Change (%)   2013   2014   Increase
(Decrease)
 Change (%) 

Cellular

              

Subscriptions (thousands)

   60,129     61,536     1,407    2.3 %     61,536     63,105     1,569    2.6 %  

Xi services

   2,225     11,566     9,341    419.8 % 

LTE(Xi) services

   11,566     21,965     10,399    89.9 %  

FOMA services

   57,905     49,970     (7,935  (13.7)%     49,970     41,140     (8,830  (17.7)%  

packet flat-rate services

   36,295     38,704     2,409    6.6 %  

sp-mode services

   9,586     18,285     8,698    90.7 % 

i-mode services

   42,321     32,688     (9,634  (22.8)%  

Market Share (%) (1)(2)

   46.9     45.2     (1.7       45.2     43.8     (1.4    

Aggregate ARPU (yen/month/subscription)(3)

   5,140     4,840     (300  (5.8)%  

Aggregate ARPU (yen/month/subscription)(3)(6)

   4,900     4,610     (290  (5.9)%  

Voice ARPU(4)

   2,200     1,730     (470  (21.4)%     1,760     1,410     (350  (19.9)%  

Packet ARPU

   2,590     2,690     100    3.9 %     2,720     2,700     (20  (0.7)%  

Smart ARPU

   350     420     70    20.0 %     420     500     80    19.0 %  

MOU (minutes/month/subscription)(3)(5)

   126     117     (9  (7.1)%  

MOU (minutes/month/subscription)(3)(5)(6)

   118     109     (9  (7.6)%  

Churn Rate (%) (2)

   0.60     0.82     0.22        0.82     0.87     0.05      

 

(1)Source for other cellular telecommunications operators: Data announced by Telecommunications Carriers Association and cellular network operators.
(2)Data calculated including Communication Module Services subscriptions
(3)Data are calculated excluding revenues and subscriptions tofrom communication module services, “Phone Number Storage,” “Mail Address Storage” andStorage,” “docomo Business Transceiver”.Transceiver,” and wholesale telecommunications services and interconnecting telecommunications facilities that are provided to MVNOs.
(4)Inclusive of circuit switched data communications
(5)MOU (Minutes of Use): Average communication time per month per subscription

(6)Calculation Methods has been changed from the Fiscal Year Ended March 31, 2015. (Accordingly, ARPU and MOU of the Fiscal Year Ended March 31, 2013 and 2014 have also been changed.)

Definition of ARPU

 

Aggregate ARPU:

 Voice ARPU + Packet ARPU + Smart ARPU

Voice ARPU:

 Voice ARPU Related Revenues (basic monthly usage charges, voice communication charges) / number of active subscriptions

Packet ARPU:

 Packet ARPU Related Revenues (basic monthly usage charges, packet communication charges) / number of active subscriptions

Smart ARPU:

 A part of other operating revenues (revenues from content, collection of charges, mobile phone insurance service, advertising and others) / number of active subscriptions

Number of active subscriptions used in ARPU calculations is as follows:

 Sum of number of active subscriptions for each month* during the relevant period from April to March

*Active subscriptions for each month = (number of subscriptions at the end of previous month + number of subscriptions at the end of current month) / 2

Segment Information

General

Our chief operating decision maker (“CODM”) is the board of directors. The CODM evaluates the performance and makes resource allocations of our segments based on the information derived from our internal management reports. We haverealigned its conventional five operating segments, which consist of mobile phone business, credit services business, home shopping services business, internet connection services business for hotel facilities, and miscellaneous businesses. Duebusinesses into three operating segments, which consist of telecommunications business, smart life

business and other businesses from the fiscal year ended March 31, 2015 in order to clarify the responsibilities of management of the telecommunications business where we are taking steps to reinforce its quantitative significance, onlycompetitiveness, and the smart life business where we are striving for creating new revenue sources through convergence of our telecommunications businesses with various industries and services for making customers’ lifestyle and businesses more secure, safe, convenient and efficient by delivering new value to society and creating new market.

The telecommunications business includes mobile phone services (LTE(Xi) services and FOMA services), optical-fiber broadband service, satellite mobile communications services, international services and equipment sales related to these services. The smart life business qualifiesincludes video and music distribution, electronic books and other services offered through our “dmarket” portal, as a reportable segmentwell as finance/payment services, shopping services and therefore is disclosedvarious other services to support our customers’ daily lives. The other businesses primarily includes “Mobile Device Protection Service,” as such. The remaining four operating segments are each quantitatively insignificantwell as development, sales and therefore combined and disclosed as “All other businesses.”maintenance of IT systems.

Mobile phoneTelecommunications business

   Millions of yen 
   Years ended March 31 
   2013   2014   2015   Increase
(Decrease)
2014 vs 2013
  Increase
(Decrease)
2015 vs 2014
 

Segment operating revenues

  ¥3,923,754    ¥3,827,328    ¥3,654,565    ¥(96,426 ¥(172,763

Segment operating expenses

   3,086,961     3,014,592     3,018,489     (72,369  3,897  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Segment operating income (loss)

  ¥836,793    ¥812,736    ¥636,076    ¥(24,057 ¥(176,660
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Operating revenues in the telecommunications business segment are mainly derived from telecommunications services and equipment sales. For the fiscal year ended March 31, 2015, operating revenues from our telecommunications business segment decreased by ¥172.8 billion or 4.5% to ¥3,654.6 billion from ¥3,827.3 billion in the prior fiscal year. Telecommunications services revenues decreased by ¥218.0 billion or 7.4% to ¥2,714.4 billion from ¥2,932.5 billion in the prior fiscal year. Mobile communications service revenues, a part of telecommunications services revenues consisting of voice revenues and packet communications revenues, decreased by ¥220.2 or 7.5% in the fiscal year ended March 31, 2015 to ¥2,704.4 billion from ¥2,924.7 billion in the prior fiscal year. The decrease was due primarily to a greater impact of the “Monthly Support” discounts than in the prior fiscal year and the introduction of the new billing plans, which had a negative impact on revenues, due in part to a shift to new plans by subscribers who found it beneficial to switch to the new billing plans, with the anticipated positive effects of such billing plans, such as further penetration of a flat-rate domestic voice calling plan, an increase in data usage as customers purchase additional devices (such as tablets) to take advantage of data sharing plans, a reduction in churn rate and the acquisition of additional young subscribers, not yet having a significant positive impact on revenues. In addition, optical-fiber broadband service and other telecommunications services revenues, which represent revenues from optical-fiber broadband service, satellite communications services, overseas cable television services, and other sources, increased by ¥2.2 billion or 28.0% to ¥10.0 billion from ¥7.8 billion in the prior fiscal year. Since provision of optical-fiber broadband service began only recently in March 2015, these services have only a slight impact on revenues for the fiscal year ended March 31, 2015. At the same time, equipment sales revenues increased by ¥34.2 billion or 4.0% to ¥900.7 billion from ¥866.4 billion in the prior fiscal year, resulting from increasing equipment sales volume including sales of smartphones. Operating revenues of the telecommunications business segment represented 82.8% of total of segment operating revenues in the fiscal year ended March 31, 2015 and 85.3% in the prior fiscal year. Operating expenses in the telecommunications business segment increased by ¥3.9 billion or 0.1% to ¥3,018.5 billion from ¥3,014.6 billion in the prior fiscal year. This was due to an increase in cost of equipment sold in connection with an increase in strong sales of smartphones and tablets, whose procurement costs per unit are higher than for feature phones, and an increase in charges for other companies’ communications network in connection with a significant increase in the number of installations of our LTE base stations in order to build a

robust network, even though depreciation and amortization expenses decreased due to a change in estimate of the expected useful life of certain software and commissions paid to agent resellers also decreased. As a result, the operating income of the telecommunications business segment in the fiscal year ended March 31, 2015 fell by ¥176.7 billion or 21.7% to ¥636.1 billion, from ¥812.7 billion in the prior fiscal year, due largely in part to the effects of the decrease in mobile communications service revenues.

For the fiscal year ended March 31, 2014, operating revenues from our mobile phonetelecommunications business segment decreased by ¥39.3¥96.4 billion or 0.9%2.5% to ¥4,235.9¥3,827.3 billion from ¥4,275.2¥3,923.8 billion in the prior fiscal year. Telecommunications services revenues decreased by ¥127.3 billion or 4.2% to ¥2,932.5 billion from ¥3,059.8 billion in the prior fiscal year. Mobile communications services revenues, which area part of telecommunications services revenues consisting of revenues from mobile-phone voice and packet communications, of mobile phone services, decreased by ¥212.7¥129.6 billion or 6.7%4.2% to ¥2,955.8¥2,924.7 billion for the fiscal year ended March 31, 2014 from ¥3,168.5¥3,054.3 billion in the prior fiscal year. The year-on-year decrease in mobile communications services revenues was mainly attributable to a decrease in voice revenues and the impact fromof the “Monthly Support” discount program. Equipment sales revenues increased by ¥113.9¥118.9 billion or 15.0%15.9% to ¥872.0¥866.4 billion from ¥758.1¥747.5 billion forin the prior fiscal year due to a rise in the per-unit sales to resellers resulting from an increase in the ratio of the sales number of smartphones to the total. Revenuesnumber. Operating revenues from our mobile phonetelecommunications business segment represented 94.9%85.3% and 95.6%87.4% of total of segment operating revenues for the years ended March 31, 2014 and 2013, respectively. Operating expenses in our mobile phonetelecommunications business segment decreased slightly by ¥6.4¥72.4 billion or 0.2%2.3% to ¥3,400.4¥3,014.6 billion in the fiscal year ended March 31, 2014, from ¥3,406.9¥3,087.0 billion in the prior fiscal year due mainly to a decrease in selling, general and administrative expenses driven by a reduction in “docomo Points Service”-related expenses by ¥20.9 billion, as a result ofresulting from the changes made to the terms of the “docomo Points Service,” offsettingService” and other ongoing cost reduction efforts, despite an increase in depreciation and amortization expenses related to the upgrade of equipment for Xi LTEthe LTE(Xi) service network. Operating income from our mobile phone business decreased by ¥32.9 billion or 3.8% to ¥835.5 billion compared to ¥868.3 billion in the prior fiscal year, due mainly to the decline of mobile communications services revenues.

For the fiscal year ended March 31, 2013, operating revenues from our mobile phone business segment increased by ¥164.6 billion or 4.0% to ¥4,275.2 billion from ¥4,110.6 billion in the prior fiscal year. Mobile communications services revenues, which are revenues from voice and packet communications of mobile phone services, decreased by ¥158.0 billion or 4.8% to ¥3,168.5 billion for the fiscal year ended March 31, 2013 from ¥3,326.5 billion in the prior fiscal year. Equipment sales revenues increased by ¥259.2 billion or 52.0% to ¥758.1 billion for the fiscal year ended March 31, 2013 from ¥498.9 billion for the prior fiscal year due to an increase in the number of handsets sold. Revenues from our mobile phone business segment represented 95.6% and 96.9% of total operating revenues for the years ended March 31, 2013 and 2012, respectively. Operating expenses in our mobile phone business segment increased by ¥182.6 billion or 5.7% to ¥3,406.9 billion from ¥3,224.2 billion in the prior fiscal year. This was mainly due to the growth in commissions paid to agent resellers caused by an

increase in the number of purchase orders processed as a result of expanded smartphone sales and an increase of expenses in subsidiaries newly acquired including Buongiorno S.p.A. in July 2012, offsetting a reduction in “docomo Points Service”-related expenses resulting from the revisions made to the loyalty program.” As a result, operating income from our mobile phonetelecommunications business in the fiscal year ended March 31, 2014 decreased by ¥18.0¥24.1 billion or 2.0%2.9% to ¥868.3¥812.7 billion compared to ¥886.3from ¥836.8 billion in the prior fiscal year.

Analysis of the changes in revenues and expenses of our mobile phonetelecommunications business segment is also presented in “Operating Results for the fiscal year ended March 31, 2014,2015,” “Operating Results for the fiscal year ended March 31, 2013”2014” discussed above and “Operating Trends and Prospects for the fiscal year ending March 31, 2015”2016” in the following section.

All other businessesSmart life business

   Millions of yen 
   Years ended March 31 
   2013   2014   2015  Increase
(Decrease)
2014 vs 2013
  Increase
(Decrease)
2015 vs 2014
 

Segment operating revenues

  ¥294,156    ¥356,783    ¥436,997   ¥62,627   ¥80,214  

Segment operating expenses

   279,018     344,978     440,893    65,960    95,915  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Segment operating income (loss)

  ¥15,138    ¥11,805    ¥(3,896 ¥(3,333 ¥(15,701
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

For the fiscal year ended March 31, 2015, operating revenues from smart life business segment increased by ¥80.2 billion or 22.5% to ¥437.0 billion from ¥356.8 billion in the prior fiscal year. The increase is primarily due to the fact that revenues for the entire fiscal year of ABC Cooking Studio Co., Ltd., which became a subsidiary in January 2014, were recorded for the fiscal year ended March 31, 2015, increase in revenues from the “Sugotoku-Contents” services due to growth in the number of subscribers, and increase in revenues from “dmarket” resulting from an increase in subscribers of monthly subscription services in “dmarket” and an increase in sales of pay-per-view or -use content services of “dmarket.” Operating revenues from all other businessesof the smart life business segment represented 9.9% of total of segment operating revenues in the fiscal year ended March 31, 2015 and 8.0% in the prior fiscal year. Operating expenses in the smart life business segment increased by ¥30.4¥95.9 billion or 15.6%27.8% from ¥195.0¥345.0 billion in the prior fiscal year to ¥225.3¥440.9 billion in the fiscal year ended March 31, 2015, due to the full-year consolidation of operating expenses from ABC Cooking Studio Co., Ltd. for the fiscal year ended March 31,

2015, an increase in revenue-linked expenses from the “Sugotoku-Contents,” “dmarket,” and other services, and impairment losses of ¥30.2 billion recorded in connection with multimedia broadcasting business for mobile devices assets. As a result, the operating income (loss) of the smart life business segment in the fiscal year ended March 31, 2015 fell by ¥15.7 billion to an operating loss of ¥3.9 billion, from operating income of ¥11.8 billion in the prior fiscal year. When the impairment loss of multimedia broadcasting business for mobile devices assets are excluded, the operating income of the smart life business segment increased by ¥14.5 billion or 122.5% from the prior fiscal year.

For the fiscal year ended March 31, 2014, operating revenues from our smart life business segment increased by ¥62.6 billion or 21.3% to ¥356.8 billion from ¥294.2 billion in the prior fiscal year. The increase in operating revenues was primarily due to an increase in revenue from “dmarket” and the full-year consolidation of the operating revenues and operating expenses from Tower Records Japan Inc., acquired in July 2012, and other acquisitions to expand the smart life business. Operating revenues from our smart life business segment represented 8.0% and 6.6% of total of segment operating revenues for the years ended March 31, 2014 and 2013, respectively. Operating expenses in our smart life business segment increased by ¥66.0 billion or 23.6% to ¥345.0 billion in the fiscal year ended March 31, 2014 from ¥279.0 billion in the prior fiscal year. The increase in operating expenses was primarily due to increases in expenses for enriching goods and services rendered in existing stores and expenses for launching new stores for “dmarket” portal in the initial phase following their launch. As a result, the operating income of the smart life business segment in the fiscal year ended March 31, 2014 decreased by ¥3.3 billion or 22.0% to ¥11.8 billion from ¥15.1 billion in the prior fiscal year.

Other businesses

   Millions of yen 
   Years ended March 31 
   2013  2014  2015   Increase
(Decrease)
2014 vs 2013
   Increase
(Decrease)
2015 vs 2014
 

Segment operating revenues

  ¥272,440   ¥302,224   ¥319,815    ¥29,784    ¥17,591  

Segment operating expenses

   287,191    307,566    312,924     20,375     5,358  
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

Segment operating income (loss)

  ¥(14,751 ¥(5,342 ¥6,891    ¥9,409    ¥12,233  
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

Operating revenues from other businesses segment increased by ¥17.6 billion or 5.8% from ¥302.2 billion in the prior fiscal year to ¥319.8 billion for the fiscal year ended March 31, 2015. Operating revenues of the other businesses segment represented 7.2% of total of segment operating revenues in the fiscal year ended March 31, 2015 and 6.7% in the prior fiscal year. Operating expenses from other businesses segment increased by ¥5.4 billion or 1.7% from ¥307.6 billion in the prior fiscal year to ¥312.9 billion. The increases in operating revenues and operating expenses were primarily due to an increase in subscribers to “Mobile Device Protection Service.” Consequently, operating income (loss) from the other businesses segment for the fiscal year ended March 31, 2015 increased by ¥12.2 billion to an operating income of ¥6.9 billion from an operating loss of ¥5.3 billion in the prior fiscal year.

Operating revenues from other businesses increased by ¥29.8 billion or 10.9% to ¥302.2 billion for the fiscal year ended March 31, 2014, whichfrom ¥272.4 billion in the prior fiscal year. The increase in operating revenues was primarily due to an increase in subscribers to “Mobile Device Protection Service” and an increase in revenues from development, sales and maintenance of IT systems. Operating revenues from the other businesses segment represented 5.1%6.7% and 6.1% of total of segment operating revenues.revenues in the fiscal year ended March 31, 2014 and 2013. Operating expenses from all other businesses segment increased by ¥15.5¥20.4 billion or 6.8%7.1% from ¥226.1¥287.2 billion in the prior fiscal year to ¥241.6¥307.6 billion. The increase in operating revenuesexpenses was driven primarily by consolidating full-year operating revenues from consolidated subsidiaries including Tower Records Japan Inc. acquired in July, 2012 and thedue to an increase in operating expenses was also due mainly to full-year impact of the acquisitions of our subsidiaries in the prior fiscal year, for the year ended March 31, 2014. Consequently, operatingrevenue-linked expenses. Operating loss from allthe other businesses segment for the fiscal year ended March 31, 20142015 decreased to ¥16.3by ¥9.4 billion by ¥14.9 billion or 47.8% from ¥31.1 billion in the prior fiscal year.

Operating revenues from all other businesses increased by ¥65.5 billion or 50.6% from ¥129.4¥14.8 billion in the prior fiscal year to ¥195.0 billion for the fiscal year ended March 31, 2013, which represented 4.4% of total operating revenues. Operating expenses from all other businesses increased by ¥84.8 billion or 60.0% from ¥141.3 billion in the prior fiscal year to ¥226.1¥5.3 billion. The increase in operating revenues was mainly driven by the newly acquired subsidiaries including Tower Records Japan Inc. in July 2012 and consolidating full-year operating expenses of Radishbo-ya Co., Ltd acquired in March 2012. The increase in operating expenses was also mainly due to operating expenses of those newly acquired consolidated subsidiaries and full-year impact of the acquisition of our subsidiaries in the prior fiscal year. Consequently, operating loss from all other businesses for the fiscal year ended March 31, 2013 increased to ¥31.1 billion from ¥11.9 billion in the prior fiscal year.

Operating Trends and Prospects for the fiscal year ending March 31, 20152016

This section describes our operating trends from the perspectives of revenues and expenses as well as the prospects for the fiscal year ending March 31, 2015.2016.

Operating Revenues

(1) Mobile CommunicationsTelecommunications Services

Telecommunications services revenues consist of mobile communications service revenues and optical-fiber broadband service and other telecommunications services revenues. Mobile communications services revenues are earned from providing mobile phone services, and they consist of voice revenues and packet communications revenues. Voice revenues are derived from a combination of basic monthly charges for service and additional calling charges billed by connection time. Packet communications revenues are derived from a combination of basic monthly charges for service and additional usage charges billed by volume of data. Mobile communications services revenues are impacted by the changes in the total number of subscriptions, users’ usage behavior, pricing measures such as the discounts offered to customers and other factors.

Toward the goal of increasing the number of subscriptions, it is important to acquire a new subscription and retain existing customers. Although it is difficult to expect a significant increase in the number of new subscriptions given the rise inhigh cellular penetration rate, thewe need to meet demand for newvarious types of communication devices and

services, e.g., smartphones, tablettablets, wearable devices, and Wi-Fi routers and embedded communication modules, has been increasing.routers. Demand for higher transmission speeds has also been mounting in line with the expansion of data usage resulting from the proliferation of smartphones. Responding to these new demands in the market, we have worked to promote the sales of smartphones and expand the XiLTE network, with the aim of expanding the user base of our Xi LTELTE(Xi) service. As a result, the total number of Xi LTELTE(Xi) service subscriptions as of March 31, 20142015 increased by 89.9%40.0% compared to the number for the prior fiscal year.

Our subscription churn rate is an important performance indicator for us to achieve our important goal of curbing contract terminations and retaining our current subscriptions. The churn has an impact on our number of subscriptions and in particular affects our number of net additional subscriptions for a given period. Efforts to reduce our churn rate through discount services and other customer incentive programs can increase our revenues by increasing our number of net additional subscriptions, but they can also have an adverse impact on our income by decreasing the average amount of revenues we are able to collect from each subscriber or by increasing our expenses. For the fiscal year ended March 31, 2014,2015, we maintainedreduced our churn rate at a relatively low level of 0.87%, although it recorded an increaseto 0.71% compared to 0.87% in the fiscal year ended March 31, 2014 and 0.82% in the fiscal year ended March 31, 2013. The acquisition of net additions for the fiscal year ended March 31, 2013,2015 increased to 3.49 million from 1.57 million in the prior fiscal year. This resulted from the introduction of a new billing plan, “Kake-hodai & Pake-aeru,” in June 2014 as an effort to improve our competitive strength along with other factors including network improvements achieved through offering LTE services and 0.60% for the fiscal year ended March 31, 2012.attractive, high-performance devices (handsets). Going forward, we will employ measures aimed at lowering the churn rate by increasing the number of subscribers who use the new billing plan, securing subscribers through bundling with the “docomo Hikari” service, and differentiating ourselves from our competitors e.g., offering greater privileges to long-term users leveraging the introduction of a new billing plan,by expanding our network and enriching our services.

In the fiscal year ended March 31, 2014, toward the goal of acquiring and retaining subscriptions, we strived to boost our comprehensive strengths by focusing on the four key areas of “devices (handsets),” “network,” “services” and “billing plans and sales channels.” As a result of these initiatives, the total number of our subscriptions as of March 31, 2014 grew2015 had grown by 2.6%5.5% compared to the level for the prior fiscal year. We believe the total number of our subscriptions will continue to increase during the fiscal year ending March 31, 20152016 as we strive to cultivate new market demandsdemand and take proactive measures to promote the sales of smartphones and expand Xithe LTE network, aimed at expanding the user base of Xi LTEour LTE(Xi) service.

The mobile communications services revenues recorded a year-on-year decline in the fiscal year ended March 31, 20142015 due to the significant impact of the “Monthly Support” discount program.program and new billing plan. “Monthly Support” is a discount program that we introduced in 2011 to provide customers purchasing a

smartphone, tablet or other product under certain subscription conditions with prescribed amount of discounts, which vary by each model, on their monthly phone bill for up to 24 months. Because most of the customers purchasing a smartphone or tablet, etc., have opted to use “Monthly Support” discounts, the total number of “Monthly Support” discounts subscriptions has been growing in line with the spread of smartphones and other applicable devices. This has been one of the principal factors driving the decline in mobile communications revenues in recent years, and this trend will likely continue during the fiscal year ending March 31, 2016.

The new “Kake-hodai & Pake-aeru” billing plan consists of the four principal services: a flat-rate domestic voice calling plan, a plan to enable sharing of the packet data quota among family members, a discount service favoring long-term users with graduated discounts based on length of subscription, and a service providing discounts to users of age 25 or younger. We began offering this plan in June 2014. The new plan has been well received, as the number of subscribers using the plan rose to more than 10 million in the four months after its introduction and had climbed to 17.83 million by March 31, 2015. During the fiscal year ended March 31, 2015, the new billing plan had a negative effect on revenues as subscribers found it beneficial to switch to the new plan at a faster pace than anticipated. We expect to reduce these negative effects in the fiscal year ending March 31, 2016 as the decrease in voice revenues stops and packet communications revenues increase through efforts to migrate subscribers to higher-end plans with higher monthly rates.

Voice revenues of the mobile communications services revenues recorded a year-on-year decrease of 16.4%17.0% during the fiscal year ended March 31, 2014,2015, after declining by 17.3%16.4% in the previousprior fiscal year. The primary reasons behind the drop in voice revenues includedwere the negative impacts on revenues from the increase in discounts resulting from the expanded uptake of “Monthly Support” discount program an increase in the number of customers switching to billing plans with lower basic monthly charges, a decrease in billable MOU and the impactshift of reduced interconnection revenues.some FOMA users to lower-rate plans. The downtrend of voice revenues is likely to continue in the fiscal year ending March 31, 2015.2016 as the “Monthly Support” discount program continues to grow.

Packet communications revenues of the mobile communications services revenues for the fiscal year ended March 31, 20142015 decreased by 0.2%2.0% from the previousprior fiscal year in the fiscal year ended March 31, 2015 due to the expanded negative impact caused byon revenues from the widespread adoption ofincrease in discounts from the “Monthly Support” discount program and the growing migration of our customers to our new billing plan, despite the growth in packet usage resulting from the growth of Xi LTELTE(Xi) service subscriptions and the increase of smartphone/data plan users achieved through our active promotion of smartphones and other devices. On the other hand, packet communications revenues per smartphone user is high and the number of users of data dedicated equipment such as tablet devices continue to grow. Our packet revenues have expandedDespite the increasing impact of the “Monthly Support” discount program, we believe that the decrease in line with the growth in the uptake of smartphones and tablet devices. We believe our packet communications revenues will increasestop in the fiscal year ending March 31, 2016 as a result of our active endeavors to

expand the user base of Xi LTE service migrate subscriptions to higher-end plans with higher monthly rates and aggressive sales promotion of smartphones. The contribution of packet communications revenues to our mobile communications services revenues has increased every year and accounted for 64.0%67.7% of mobile communications services revenues for the fiscal year ended March 31, 2014,2015, as compared to 59.8%64.0% and 53.6%59.8% for the years ended March 31, 20132014 and 2012,2013, respectively.

We use the average monthly revenue per unit or ARPU as a performance indicator to measure average monthly revenues per subscription andsubscription. ARPU consists of Voice ARPU, Packet ARPU and Smart ARPU. We believe that our ARPU figures calculated in this way provide certain level of useful information to analyze the trend of monthly average usage of our subscribers over time and the impact of changes in our billing arrangements. The drop ofFor Voice ARPU, revenue has accelerated in recent yearsbeen decreasing recently due mainly to the aforementioned discount program, but we forecast that the rate of decrease will shrink for the fiscal year ending March 31, 2016. While the introduction of a flat-rate domestic voice calling plan, included in the new billing plan, has negatively impacted Voice ARPU for the fiscal year ended March 31 2015, as many subscribers shift to the new plans, as they found it beneficial to switch to the new plan for this period, we expect that further penetration of the new billing plan will have positive impact fromon Voice ARPU for the expanded uptakefiscal year ending March 31, 2016. For Packet ARPU, though the negative impact of the aforementioned discount programs as well aswill continue, we expect that the impact fromrate of decrease will shrink for the fiscal year ending

March 31, 2016 through our efforts to migrate subscriptions to higher-end plans with higher monthly rates. For Smart ARPU, we believe that the ARPU will continue to increase for the fiscal year ending March 31, 2016 due to the increase in revenue from smart life business including “dmarket.”

Optical-fiber broadband service and other telecommunications services revenues represent revenues from optical-fiber broadband service, satellite mobile communications services, cable television services of data-onlyoverseas and other telecommunications services.

In March 2015, we launched the “docomo Hikari” service (our optical-fiber broadband service that enables high-speed access at speeds of up to 1Gbps) and “docomo Hikari Pack,” a bundle package that allows users to use “docomo Hikari” and smartphones/docomo feature phones service at affordable rates. By offering new added value through the convergence of fixed-line and mobile communications services, we expect to not only secure revenues from monthly optical-fiber broadband service charges but also to secure new subscriptions that do not accompany voice communication services.to our mobile phone services and prevent cancellations.

(2) Equipment Sales Revenues

We purchase handsets compatible with our mobile communications services from handset manufacturers, and then sell those handsets mainly to agent resellers for sale to our subscribers.

When a subscriber purchases a handset from agent resellers, the option to pay in installments is made available to the subscriber. If a subscriber chooses to pay in installments, under the agreement entered into among the subscriber, the agent resellers and us, we provide funds by paying for the purchased handset to the agent resellers and include the installment charge for the purchased handset in the monthly bill for network usage for the installment payment term. This agreement is separate from the mobile communications service contract entered into between the subscriber and us, or the equipment sales contract concluded between the agent reseller and subscriber. Because the revenues from equipment sales are recognized upon the delivery of handsets to agent resellers, cash collection of the installments receivable for the purchased handset from subscribers does not have an impact on any of our revenues, including equipment sales revenues.

We account for a portion of the sales commissions that we pay to agent resellers and incentives offered to subscribers as a reduction in equipment sales revenues. As a result, we experienced a period where the cost of equipment sold continuously exceeded equipment sales revenues. However, because of a rise in sales price per unit to resellers and the increase in the number of smartphones sold, equipment sales revenues exceeded the cost of equipment sold for the fiscal year ended March 31, 2014. Revenues from equipment sales for the fiscal year ended March 31, 20142015 increased by 15.0%3.7% compared to the prior fiscal year due mainly to the increase in the number of devices, including smartphones, sold and a rise in the per-unit sales as a result of commencement of sales of the popular “iPhone” in September 2013 (in addition to Android Smartphones that we have dealt in so far) and the launch of “dmarket” and various other DOCOMO-proprietary services on the iPhone in an attempt to allow our users to utilize these services.sold. We expect this growth trend willto continue in the fiscal year ending March 31, 20152016 as we project further increase in the total smartphone sales.

Because impact from the trend of handset sales on our operating income is closely interrelated with the cost of handsets sold, please refer to the “Cost of Equipment Sold” section.

(3) Other Operating Revenues

The primary items comprising other operating revenues include sales revenues of consolidated subsidiaries, revenues from mobile phone protection-related services, revenues derived from “dmarket” and credit services business revenues.

Sales revenues of consolidated subsidiaries include the revenues from home shopping servicesmart life business and other services provided through our consolidated subsidiaries.businesses such as “Mobile Device Protection Service” and “dmarket.” We set a goal to expand our revenues by addressing newsmart life business fields and worked toward their expansionother businesses through investments in subsidiaries and alliances.alliances with various companies. During the

fiscal year endedending March 31, 2014,2016, we newly added Nihon Ultmarc, Inc., which operates Japan’s largest medical databasewill continue working toward the goal of expanding revenues from smart life business ABC HOLDINGS CO., Ltd., which offers cooking lessons and sells kitchen items, MCV Guam Holding Corp., the largest cable televisions and internet service provider in Guam and the Commonwealth of the Northern Mariana Islands and fine trade gmbh in Austria, which provides e-commerce trading solution with payment options to our list of wholly owned subsidiaries.other businesses.

Mobile phone protection serviceDevice Protection Service” is a service that covers handset issues such as loss and water exposure and delivers a replacement handset of the same model and color as the original one directly to the customer with

a simple telephone call. This service is available for a monthly fee prescribed for each handset model. The revenues generated from this service have been growing in line with the increase in its subscription count. We will continually strive to expand its user base in the fiscal year ending March 31, 2015.2016.

Furthermore, the revenues derived from “dmarket”—one of our cloud-based services launched in the fiscal year ended March 31, 2011—have also expanded over the years. “dmarket” is a marketplace that resides on a cloud infrastructure, through which we offer a rich variety of digital contents including videos, music and electronic books as well as a wide array of physical merchandise such as groceries and other daily necessaries. The marketplace comprises a number of stores, e.g., “dvideo” (distribution(a distribution platform for videos, dramas,movies, TV series, etc.), “dhits” (music distribution service); renamed “dTV” on April 22, 2015), “dgame” (platform for provision of games), “dhits” (music distribution service) and “dshopping” (online shopping site handling physical goods)“dmagazine” (a magazine distribution service). During the fiscal year ended March 31, 2014,2015, we worked to offer even more compelling contents through each “dmarket” store. As a consequence, the combined subscriptions to “dvideo,” “dhits,” “danime store” “dkids” and “dkids”“dmagazine” that offer contents for a prescribed monthly subscription fee grew to 7.6911.88 million, and revenues from “dmarket” increased significantly when compared to the previousprior fiscal year. “dmagazine,” introduced in June 20, 2014, is experiencing steady growth in its subscription count, rising to more than 1.9 million subscriptions as of March 31, 2015. The revenues provided through “dmarket” is projected to increase going forward.

We use Smart ARPU as a performance indicator as a performance indicator that is specifically designed to reflect revenues from new businesses fields. Smart ARPU for the fiscal year ended March 31, 2014 grew to ¥490 from ¥420 for the fiscal year ended March 31, 2013, driven by the expansion of new business fields and we expect the amount of Smart ARPU will continue to increase going forward.

As a result of the foregoing, other operating revenues for the fiscal year ended March 31, 20142015 increased by 16.5%17.1%, compared to the prior fiscal year. Other operating revenues for the fiscal year ending March 31, 20152016 are projected to record year-on-year gains resulting from an increase in revenues derived from “dmarket” and an expansion of revenues from our subsidiaries, compared to the fiscal year ended March 31, 2014.2015.

We use Smart ARPU as a performance indicator that is specifically designed to reflect revenues from certain services in the smart life business segment and other businesses segment. Smart ARPU for the fiscal year ended March 31, 2015 grew to ¥590 from ¥500 for the fiscal year ended March 31, 2014, driven by the expansion of smart life business and other businesses and we expect the amount of Smart ARPU will continue to increase going forward.

Accordingly, we expect that the operating revenues will grow in the fiscal year ending March 31, 2015.2016.

Operating Expenses

(1) Cost of Services

Cost of services represents the expenses we incur directly in connection with providing our customers with mobile communications services and/or other services offered by our subsidiaries. Cost of services includes the costs for using of other operators’ networks, maintenance of equipment or facilities, payroll for employees dedicated to the operations and maintenance of our mobile communications networks, insurance costs related to mobile phone protection-related“Mobile Device Protection Service”-related service and other service related costs of our subsidiaries. Cost of services accounted for 29.1%31.0% of our total operating expenses for the fiscal year ended March 31, 2014.2015. Major components of cost of services include facility maintenance expenses, which are incurred to maintain our network facilities, and communication network charges, which we pay for the usage of other operators’ networks or for access charges, accounting for 31.8%28.4% and 19.3%20.7% of the total cost of services, respectively, for the fiscal year ended March 31, 2014.2015. The amount of our communication network charges is dependent on the rates set by other operators. Cost of services for the fiscal year ended March 31, 20142015 increased by 5.6%9.4% from the prior fiscal year. This was primarily due to an increase in costs associated with the growth of sales revenues of our consolidated subsidiaries acquired in order to expand the smart life business segment. As we expect an increase in costs associated with the increase in revenues from new growth business fields.areas such as “dmarket” and “Mobile Device Protection Service” in the fiscal year ending March 31, 2016, cost of services is expected to continue to rise in that fiscal year.

(2) Cost of Equipment Sold

Cost of equipment sold arises mainly from our procurement of handsets for sale to our new or current subscribers through agent resellers, which is basically dependent on the number of handsets sold to agent resellers and the purchase price per handset. Cost of equipment sold represented 21.6%22.8% of our operating expenses for the fiscal year ended March 31, 2014.2015. The cost of equipment sold for the fiscal year ended March 31, 20142015 increased by 2.3%8.6% compared to the prior fiscal year, primarily due to strong sales of smartphones and tablets, whose procurement costs per unit are higher than for feature phones. While the growth in revenues from equipment sales from the fiscal year ended March 31, 2014 to the fiscal year ended March 31, 2015 was lower than the growth in cost of equipment sold over the same period, this was due to restraint on raising the per-unit sales of handsets to resellers for competitive reasons. As we expect a risefurther increase in the per-unit cost of procurement caused by the roll-out ofdue to a handset lineup comprising a wide variety of feature-rich models in response to customers’ diverse requirementsalong with further expansion of smartphone sales and the increasesimilar developments in the number of smartphones sold. As we plan to expand smartphone sales aggressively,fiscal year ending March 31, 2016, cost of equipment sold is expected to continue to rise further for thein that fiscal year ending March 31, 2015.year.

(3) Depreciation and Amortization Expenses

Depreciation and amortization expenses accounted for 19.7%17.6% of our operating expenses for the fiscal year ended March 31, 2014. In2015. Depreciation and amortization expenses for the prior fiscal year ended March 31, 2013, although we strived2015 decreased by 8.2% from the prior fiscal year. This was due to enhance ourthe effects of a revision of ¥51.3 billion in the estimate of the expected useful life of certain software for the telecommunications network and internal-use software as well as a decrease due to improved cost efficiency by streamlining our construction works,of capital expenditures, even though in the outlays requiredprior fiscal year and the fiscal year ended March 31, 2015 we increased capital expenditures to significantly increase the installations of base stations to improve the coverage of Xithe LTE service network and to reinforce our network facilities to accommodate the growth in data traffic resulted in a 2.6% year-on-year increase in depreciation and amortization expenses for the fiscal year ended March 31, 2014.traffic. In the fiscal year ending March 31, 2015,2016, depreciation and amortization expenses is expected to decrease slightly because we will continue to endeavor to enhance our cost efficiency through the integration of facilities/equipment and efficiency improvement of construction works, reduction of equipment procurement costs and other measures. For details concerning our capital expenditures, please refer to “Capital Expenditures” in the following section.

(4) Selling, General and Administrative Expenses

Selling, general and administrative expenses represented 29.6%27.8% of our total operating expenses for the fiscal year ended March 31, 2014.2015. The primary components included in our selling, general and administrative expenses are expenses related to acquisition of new subscribers and retention of current subscribers, the most significant of which is commissions paid to agent resellers. While some of these commissions are linked to sales activities such as new subscriptions and handset upgrades, others result from non-sales activities such as processing of billing plan changes and handset repairs. A portion of the sales activities linked commissions paid to agent resellers is recognized as a deduction from equipment sales while the rest of commissions, both sales activities linked and non-sales activities linked is recognized, as selling, general and administrative expenses. The expenses incurred in relation to “docomo Points Service” customer loyalty program, handset repair and other after-sales support to customers are also included in selling, general and administrative expenses. Our total selling, general and administrative expenses for the fiscal year ended March 31, 20142015 decreased by 7.2%3.4% from the prior fiscal year as a result of a reduction in “docomo Points Service”-related expenses resulting from the changes madecommissions paid to offering provision for a portion of “docomo Points Service” and our cost-cutting efforts.agent resellers. Our selling, general and administrative expenses for the fiscal year ending March 31, 20152016 are expected to see a decrease in commissions paid to agent resellers and in expenses related to the “docomo Points Service” program and an increase in expenses in new growth business areas such as a result of the introduction of a new billing structure, various structural reform programs and other initiatives. As for selling expenses, the new business expenses that are linked with the growth of revenues from “dmarket” and other new business fields are also projected to record an increase.“dmarket.”

Operating expenses for the fiscal year ending March 31, 20152016 are therefore expected to increase compared to the fiscal year ended March 31, 20142015 at a pace fasterslower than the projected growth of operating revenues.

As a result of the foregoing, we expect operating income for the fiscal year ending March 31, 20152016 to record a year-on-year decreaseincrease over the fiscal year ended March 31, 2014.

Information pertaining to the market trends other than the discussion above can also be found in other sections of this chapter, “Operating and Financial Review and Prospects.”2015.

B.    Liquidity and Capital Resources

Cash Requirements

Our cash requirements for the fiscal year ending March 31, 20152016 include cash needed to pay to the agent resellers to provide funds under the installment payment scheme, to expand our network, to invest in other facilities, to make repayments for interest bearing liabilities and other contractual obligations and to pay for strategic investments, acquisitions, joint ventures or other investments aimed forat capturing business opportunities. We believe that cash generated from our operating activities, future borrowings from banks and other financial institutions or future offerings of debt or equity securities in the capital markets will provide sufficient financial resources to meet our currently anticipated capital and other expenditure requirements and to satisfy our debt service requirements. We believe we have enough financing ability supported by our high creditworthiness resulting from our stable financial performance and strong financial standing. Also, our management is of the opinion that the working capital is sufficient for our present requirements. When we determine the necessity for external financing, we take into consideration the amount of cash demand, timing of payments, available reserves of cash and cash equivalents, and expected cash flows from operations. If we determine that demand for cash exceeds the amount of available reserves of cash and cash equivalents and expected cash flows from operations, we plan on obtaining external financing through borrowing or the issuance of debt or equity securities. Additional debt, equity or other financing may be required if we underestimate our capital or other expenditure requirements, or overestimate our future cash flows. There can be no assurance that such external financing will be available on commercially acceptable terms or in a timely manner.

Capital Expenditures

The wireless telecommunications industry in general is highly capital intensive because significant capital expenditures are required for the construction of the wireless telecommunications network. Our capital requirements for our networks are determined by the nature of facility or equipment, the timing of its installation, the nature and the area of coverage desired, the number of subscribers served in the area and the expected volume of traffic. They are also influenced by the number of base stations required in the service area, the number of radio channels in the base stations and the switching equipment required. Capital expenditures are also required for information technology and servers for internet-related services. In recent years, the usage of data communications services has expanded remarkably as a result of a steady increase in the number of Xi LTELTE(Xi) subscriptions, a rapid surge in the use of smartphones and other factors. Accordingly, we are required to respond to the rapid growth in demand for higher transmission speeds and a surge of traffic. We intend to implement a number of measures, including coverage expansion of Xi LTE services through the launch for Quad-Band LTE services that allows us to realize large capacity transmission for comfortable access through efficient utilization of four different spectrum bands. In addition, we also implement measures for traffic control against excessive network use, and data offloading through the use of Wi-Fi and other technologies.

DuringIn the fiscal year ended March 31, 2014,2015, we added 30,900 base stations to our Xi LTEmade progress on building a robust network to improve Xi LTE service coverage, growing the cumulative numberpursing “breadth,” “speed” and “convenience.” In doing so, we significantly increased installations of Xi LTE base stations to 55,300. In addition, we moved ahead with the installation of “6-sector base stations” that realize capacity effectively worth six base stations with a single site in order to further improve the communication qualityarea coverage of our LTE service. The number of indoor and outdoor LTE base stations increased by 42,100 from the end of the prior fiscal year, to a cumulative total of 97,400 base stations. Also, in urban centers and other areaspursuit of high usage. With regard to speedfurther enhancement of Xitransmission speeds, we increased the number of LTE we commenced high-speed service that offersbase stations compatible with a maximum download speed of 150Mbps in Tokyo, Nagoya100Mbps or higher to 57,700 stations from 3,500 stations as of March 31, 2014. In March 2015, we launched the “PREMIUM 4G” service that delivers downlink speeds of up to 225Mbps using the LTE-Advanced*1 system, which incorporates “carrier aggregation*2,” “advanced C-RAN*3 and Osaka metropolitan areas, while expanding the service areas of maximum 112.5Mbps download speed service to all 47 prefectures of Japan.other technologies that realize further speed/capacity enhancements over LTE service.

Total capital expenditures for the fiscal years ended March 31, 2015, 2014 and 2013 and 2012 were ¥661.8 billion, ¥703.1 billion ¥753.7 billion and ¥726.8¥753.7 billion, respectively. Our capital expenditures for the fiscal year ended March 31, 20142015 recorded a decrease of ¥50.5¥41.4 billion or 6.7%5.9% compared to the prior fiscal year. This was achieved as a resultthrough pursuit of cost efficiency of capital investment for general purpose including internal IT system during the fiscal year ended March 31, 2014. And we had an extra capital expenditure for sophistication in our network infrastructureimprovements for the prior fiscal year and had no impact forwireless telecommunications network toward the fiscal year ended March 31, 2014. We controlled to savegoal of further strengthening our capital

expendituremanagement foundation, through the integration and capacity expansion of our equipment, and facilities and our ongoing efforts toward improving capital investmentimprovements in the efficiency such as through theof construction, and reduction of equipment procurement costs and devising efficient construction processes.

streamlining of our research and development item. For the fiscal year ended March 31, 2014, 55.2%2015, 96.0% of capital expenditures

were used for construction of the Xi LTE network, 9.0% for construction of the FOMA network, 18.6%telecommunications business, 2.6% for the installation of serverssmart life business, and 1.4% for other cellular facilities and equipment and 17.2% for general capital expenditures such as an internal IT system.businesses. By comparison, in the prior fiscal year 29.0 %93.6% of capital expenditures were used for construction of the Xi LTE network, 26.8% for construction of the FOMA network, 24.6%telecommunications business, 3.9% for the installation of serverssmart life business, and 2.4% for other cellular facilities and equipment and 19.6 % for general capital expenditures including an internal IT system.businesses.

Our total capital expenditures for the fiscal year ending March 31, 20152016 are estimated to decrease to ¥690.0¥630.0 billion, as a result of our ongoing efforts to improve capital investment efficiency aimed at cost reduction even as we concentrate resources on LTE rolling out an additional 40,000 LTE base stations within the fiscal year ending March 31, 2015 for the purposeproceed with investments intended to secure competitive advantage in network quality through accommodating growth in data traffic and expanding coverage of building the strongest LTE service area coverage.our LTE-Advanced network as well as securing competitive strength through adoption of advanced technologies and other means. Of this ¥690.0 billion,figure, approximately, 67%95.4% will be appropriated for use in the Xi LTE network, 3%telecommunications business, approximately 2.9% for the FOMA network, 12%smart life business, and approximately 1.7% for servers and other cellular facilities and equipment and 18% for general capital expenditures such as an internal IT system.businesses.

Our actual level of capital expenditures may vary significantly from expected levels for a number of reasons. Capital expenditures for expansion and enhancement of our existing cellular network may be influenced by the growth in subscriptions and traffic, which is difficult to predict with certainty, the ability to identify and procure suitably located base station sites on commercially reasonable terms, competitive environments in particular regions and other factors. The nature, scale and timing of capital expenditures to reinforce our network may be materially different from our current plans due to demand for the services, delays in the construction of the network or in the introduction of services and changes in the variable cost of components for the network. We expect that these capital expenditures will be affected by market demand for data communications services, and by the state of our existing network expansion efforts that are being continued to satisfy these communication demands.

*1A more sophisticated mobile communication system, whose standardization to the 3rd Generation Partnership Project, is progressing while maintaining technical compatibility with LTE.
*2Technology that achieves improvement of data transmission speed by aggregating multiple carriers.
*3Technology for increasing the utilization efficiency of frequencies by simultaneously controlling base stations covering broad areas and base stations covering localized areas.

Long-term Debt and other Contractual Obligations

As of March 31, 2014,2015, we had ¥220.9¥220.6 billion in outstanding long-term debt including the current portion, primarily in corporate bonds and loans from financial institutions, compared to ¥241.5¥220.9 billion as of the end of the prior fiscal year.March 31, 2014. We redeemed ¥70.0 billion of unsecured corporate bonds and afresh issued ¥ 50.0an additional ¥50.0 billion of unsecured corporate bonds in order to appropriatefinance the decrease in cash due to the redemption during the fiscal year ended March 31, 2014. We redeemed ¥60.0repaid ¥0.2 billion, of unsecured corporate bonds and afresh issued ¥ 60.0 billion unsecured corporate bonds in order to appropriate the decrease in cash due to the redemption during the fiscal year ended March 31, 2013. We repaid ¥75.0 billion ¥82.2 billion and ¥171.9¥82.2 billion of long-term debt in the years ended March 31, 2015, 2014 2013 and 2012,2013, respectively. Of our long-term debt outstanding as of March 31, 2014, ¥0.92015, ¥0.6 billion, including the current portion, was indebtedness tofinanced by financial institutions, majority of which has fixed interest rates, with a weighted average interest rate of 1.0%0.9% per annum. The term of maturities is from the fiscal year ending March 31, 20142016 through 2018. As of March 31, 2014,2015, we also had ¥220.0 billion in bonds due from the fiscal year ending March 31, 2018 to 2024 with a weighted average coupon rate of 1.2% per annum. As of March 31, 2015, we and our long-term debt obligations were rated by rating agencies as shown in the table below. Such ratings were issued by the rating agencies upon our requests. Rating agencies are able to upgrade, downgrade, reserve or withdraw their credit ratings on us anytime at their discretions. The rating is not a market rating or recommendation to buy, hold or sell our shares or any financial obligations of us.

 

Rating agencies

 

Type of rating

 Rating Outlook

Moody’s

 Long-Term Obligation Rating Aa2Aa3 Stable

Standard & Poor’s

 Long-Term Issuer Credit Rating AAAA- NegativeStable

Standard & Poor’s

 Long-Term Senior Unsecured Debt Rating AAAA- 

Japan Credit Rating Agency, Ltd.

 Long-Term Senior Debt Rating AAA Stable

Rating and Investment Information, IncInc.

 Issuer Rating AA+ StableNegative

None of our debt obligations include a clause in which a downgrade of our credit rating could lead to a change in a payment term of such an obligation sosuch as to acceleratean acceleration of its maturity.

The following table summarizes our long-term debt, interest payments on long-term debt, lease obligations and other contractual obligations (including current portion) over the next several years.

 

      Millions of yen       Millions of yen 
      Payments Due by Period       Payments Due by Period 

Category of Obligations

  Total   1 year or less   1-3 years   3-5 years   After 5 years   Total   1 year or less   1-3 years   3-5 years   After 5 years 

Long-Term Debt

                    

Bonds

  ¥220,000    ¥    ¥    ¥170,000    ¥50,000    ¥220,000    ¥    ¥60,000    ¥110,000    ¥50,000  

Loans

   851     248     403     200          603     203     400            

Interest Payments on Long-Term Debt

   13,429     2,595     5,186     4,005     1,643     10,839     2,595     5,186     1,780     1,278  

Capital Leases

   4,560     1,763     2,120     662     15     3,603     1,413     1,671     506     13  

Operating Leases

   39,284     9,306     13,402     7,818     8,758     43,045     11,555     16,055     9,276     6,159  

Other Contractual Obligations(1)

   747,731     545,082     202,649               439,268     432,716     4,031     1,833     688  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  ¥  1,025,855    ¥  558,994    ¥  223,760    ¥  182,685    ¥  60,416    ¥  717,358    ¥  448,482    ¥  87,343    ¥  123,395    ¥  58,138  

 

*(1)The amount of contractual obligations which is immaterial in amount or uncertain in time of payment is not included in “Other Contractual Obligations” in the above table. We expect to contribute an amount of ¥1,166 million to the contract-type corporate pension plans and an amount of ¥2,129 million to the NTT Corporate Defined Benefit Pension Plan in the fiscal year ending March 31, 2016. Please also refer to Note 17 to our consolidated financial statements.

“Other Contractual Obligations” principally consisted of commitments to purchase property, plant and equipment for our cellular network, commitments to purchase inventories, mainly handsets, and commitments to purchase services. As of March 31, 2014,2015, we had committed ¥45.1¥26.0 billion for property, plant and equipment, ¥691.3¥386.2 billion for inventories and ¥11.3¥27.0 billion for other purchase commitments. The amounts of “Other Contractual Obligations” are estimates calculated based on given assumptions and do not represent our entire anticipated purchases in the future. Apart from the above purchase commitments, we purchase products and services as needed and we expect to make significant capital expenditures and/or inventories purchase on an ongoing basis for our XiLTE networks expansion, smartphone sales increase and for other purposes. Also, we consider potential opportunities for entry to new areas of business, merger and acquisitions, establishment of joint ventures, strategic investments or other arrangements primarily in wireless communications businessesTelecommunications business as needed. Currently, we have no contingent liabilities related to litigation or guarantees that could have a materially adverse effect on our financial position.

Sources of Cash

The following table sets forth certain information about our cash flows during the years ended March 31, 2015, 2014 2013 and 2012:2013:

 

  Millions of yen   Millions of yen 
  Years ended March 31   Years ended March 31 
  2012 2013 2014   2013 2014 2015 

Net cash provided by operating activities

  ¥    1,110,559   ¥    932,405   ¥    1,000,642    ¥    932,405   ¥    1,000,642   ¥    962,977  

Net cash used in investing activities

   (974,585  (701,934  (703,580   (701,934  (703,580  (651,194

Net cash used in financing activities

   (378,616  (260,967  (269,793   (260,967  (269,793  (734,257
  

 

  

 

  

 

   

 

  

 

  

 

 

Net increase (decrease) in cash and cash equivalents

   (243,473  (28,404  33,246     (28,404  33,246    (421,367

Cash and cash equivalents at beginning of year

   765,551    522,078    493,674     522,078    493,674    526,920  
  

 

  

 

  

 

   

 

  

 

  

 

 

Cash and cash equivalents at end of year

  ¥522,078   ¥493,674   ¥526,920    ¥493,674   ¥526,920   ¥105,553  
  

 

  

 

  

 

   

 

  

 

  

 

 

Analysis of cash flows for the fiscal year ended March 31, 2015 and comparison with the prior fiscal year

For the fiscal year ended March 31, 2015, net cash provided by operating activities was ¥963.0 billion, a decrease of ¥37.7 billion or 3.8% from the prior fiscal year. This was due mainly to a decrease in mobile communications services revenues and an increase in cash outflows resulting from an increase in the amount of accrued income taxes paid, despite an increase in cash inflows from customers in relation to collections of installment receivables for customers’ handset purchases.

Net cash used in investing activities was ¥651.2 billion, a decrease of ¥52.4 billion or 7.4% from the prior fiscal year. This was due mainly to decreases in cash outflows for purchases of property, plant and equipment as a result of efficient network construction.

Net cash used in financing activities was ¥734.3 billion, an increase of ¥464.5 billion or 172.2% from the prior fiscal year, due mainly to an increase in cash outflows resulting from an increase in payments to acquire treasury stock.

As a result of the foregoing, the balance of cash and cash equivalents was ¥105.6 billion as of March 31, 2015, a decrease of ¥421.4 billion or 80.0% from the prior fiscal year end. The balance of investments with original maturities of longer than three months, which were made to manage a part of our cash efficiently, was ¥243.8 billion as of March 31, 2015, compared to ¥259.6 billion as of March 31, 2014.

Analysis of cash flows for the fiscal year ended March 31, 2014 and comparison with the prior fiscal year

For the fiscal year ended March 31, 2014, net cash provided by operating activities was ¥1,000.6 billion, an increase of ¥68.2 billion or 7.3% from the prior fiscal year, due mainly to an increase in cash inflows from customers in relation to the collection of installment receivables for customers’ handset purchases under the installment method, a decrease of commissions paid to resellers and a decrease of corporate tax payments.

Net cash used in investing activities was ¥703.6 billion, an increase of ¥1.6 billion or 0.2% from the prior fiscal year. This was due mainly to a decrease in cash inflows resulting from the redemption of short-term investments for cash management purpose, despite a decrease in purchases of property, plant and equipment as a result of efficient network construction, a decrease in cash outflows from purchases of short-term investments and a decrease in cash outflows resulting from purchases of long-term bailment for consumption to a related party.

Net cash used in financing activities was ¥269.8 billion, an increase of ¥8.8 billion or 3.4% from the prior fiscal year, due mainly to an increase in cash outflows resulting from repayments of short-term borrowings and dividends paid.

The balance of cash and cash equivalents was ¥526.9 billion as of March 31, 2014, an increase of ¥33.2 billion or 6.7% from the prior fiscal year end. The balance of investments with original maturities of longer than three months, which were made to manage a part of our cash efficiently, was ¥259.6 billion as of March 31, 2014, compared to ¥281.8 billion as of March 31, 2013.

Analysis of cash flows for the fiscal year ended March 31, 2013 and comparison with the prior fiscal year

For the fiscal year ended March 31, 2013, net cash provided by operating activities was ¥932.4 billion, a decrease of ¥178.2 billion or 16.0% from the prior fiscal year, mainly because of an increase of cash outflows in relation to advance payments to agent resellers, which was partially offset by an increase of cash inflows from subscribers in relation to collections of installment receivables for subscribers’ handset purchases. This was the result of an increase in equipment sales as well as an increase of subscribers who purchase new handsets under the 12 months or 24 months installment payment scheme rather than making a lump sum payment. Net cash used in investing activities was ¥701.9 billion, a decrease of ¥272.7 billion or 28.0% from the prior fiscal year. This was due mainly to a decrease in purchases of short-term investments of more than three months for cash management purposes. Net cash used in financing activities was ¥261.0 billion, a decrease of ¥117.6 billion or 31.1% from the prior fiscal year. This was due mainly to a decrease of ¥89.7 billion in repayment of long-term debt. The balance of cash and cash equivalents was ¥493.7 billion as of March 31, 2013, a decrease of ¥28.4 billion or 5.4% from the prior fiscal year end. The balance of investments with original maturities of longer than three months, which were made to manage a part of our cash efficiently, was ¥281.8 billion as of March 31, 2013, compared to ¥381.5 billion as of March 31, 2012.

Prospect of cash flows for the fiscal year ending March 31, 20152016

As for our sources of cash for the fiscal year ending March 31, 2015,2016, we currently expect our net cash flows from operating activities to decreaseincrease from the prior fiscal year mainly because of the projected increase in corporate tax and other payments, despitedue to factors including an increase in cash inflows resulting from customers in relation toconnection with the collection of installment receivables for customers’ handset purchases under the installment method.method together with a projected decrease in corporate tax and other payments. Our net cash flow used in investing activities for the fiscal year ending March 31, 20152016 is expected to be approximately ¥690.0 billion.¥630.0 billion due to capital expenditures and other items. We do not include any items other than capital expenditures and other reasonably expected items in our forecast of net cash flows in investing activities, as it is difficult to estimate impacts of such items on cash flows in investing activities at this point.

C.    Research and Development

Our research and development activities include development of new products and services, research and development related to LTE, 4G mobile communications systems or LTE-Advanced and next generation mobile communications (5G) aimed at the construction of economical network and the reinforcement of our mobiletelecommunications business, the construction of infrastructure for the provision of new services toward the expansion of new businessessmart life business and basic research aimed forat driving innovation. Research and development costs are charged to expenses as incurred. We incurred ¥97.0 billion, ¥102.0 billion ¥111.3 billion and ¥108.5¥111.3 billion and as research and development expenses for the years ended March 31, 2015, 2014 2013 and 2012,2013, respectively.

D.    Trend Information

Information pertaining to the trends other than the discussion on the matters below can also be found in “Operating Trends and Prospects for the fiscal year ending March 31 2015”.2016.”

Issues Facing DOCOMO and Management’s Responses to Those Issues

UnderWe developed our corporate vision for 2020, “HEART: Pursuing Smart Innovation” to propel further growth and propose new values to society in anticipation of future social changes.

Also, under the sloganbanner of becoming a “Partner for a Smart Life,smart life” of our customers, we tackled the challenge of “reinforcing our competitiveness in telecommunications business” and “stepped up our efforts in the smart life business and other businesses.”

In April 28, 2015, we announced our medium-term initiatives and the Business Management Policies for FY 2015 (year ending March 31, 2016).

Initiatives in the future for the medium-term

To respond to customer needs on an ongoing basis, we will implement initiatives for “co-creation”—an effort to create new added value together with various external partners by constantly evolving the format of collaboration.

(1)Roll-out of “+d”

As presented in “Medium-Term Vision 2015,” we have moved aheadto date worked on new value creation centered on mobile communications by pursuing convergence with other industries and services. Going forward, we will further advance these undertakings and embark on a new initiative dubbed “+d”—a joint value creation initiative that we plan to promote together with partners, making available to our partners our own business assets, such as our payment platform and point program, etc. To further accelerate this initiative, we will standardize the names of the various services that we offer. In the new arrangement, our services will begin with the initiatives aimed at improvingletter “d,” so customers can easily appreciate the various our competitiveness in the mobile phone business and accelerating the expansion of new business fields.services that they can utilize.

In the fiscal year ended March 31, 2014, we enriched our “dmarket” portal that offers a wide variety of convenient content and pursued collaboration and alliances with external partners to provide new services in various sectors such as “healthcare” and “learning.” Also, to add momentum to these initiatives, we strived to strengthen our managerial foundation through structural reforms, stepping up cost-cutting efforts and shifting management resources to new business fields.

(2)Co-Creation of Social Values

In the fiscal year ending March 31, 2015, we will work to enhance our comprehensive strengths by further accelerating our existing efforts primarily in the four areas of “devices (handsets),” “networks,” “services” and “billing plans and sales channels.”

As part of our actions for “devices,” we will endeavor to expand the number of smartphone users even further and promote the use of a second mobile device, e.g., a mobile phone plus a tablet, toward the goal of achieving further increase in packet revenues.

In the area of “networks,” we will concentrate resources on LTE for the purpose of building the strongest area coverage through the deployment of “Quad-Band LTE” network, rolling out an additional 40,000 LTE base stations within the fiscal year ending March 31, 2015. We plan to launch VoLTE service in the summer of 2014 to offer enhanced voice quality. Furthermore, the verification trial of LTE-Advanced is also scheduled to begin in the fiscal year ending March 31, 2015, with the aim of commencing its commercial service at an early date.

As for “services,” we will work to add more variety to “dmarket” to make the market place even more attractive, and aim to grow its subscriber base to 10 million as quickly as possible. Leveraging the relationship we have constructed with overseas carriers hitherto, we will pursue revenue expansion opportunities abroad by deploying the new services cultivated in Japan in overseas markets. With the goal of achieving ¥1 trillion in revenues from new business fields in the fiscal year ending March 31, 2016.

With respect to “billing plans and sales channels,” in June 2014, we will launch a new billing plan called “Kake-hodai & Pake-aeru,” which offers unlimited domestic voice calls for a flat monthly rate and enables users to share packet-data quota among family members and introduced a new discount for young customers up to the age of 25 and discounts according to the number of years of use. We will also brush up our sales channel including call centerswork to offer new values to various partners, further evolving the forms of collaboration, which have so far been centered on value creation for consumers. Specifically, in the areas of “IoT*1,” “Regional Revitalization,” “2020*2,” and other customer interfaces that are sources“Solution of strength for DOCOMO and will endeavor to facilitate the uptake of the new billing plan.

Through these initiatives,Social Issues,” we will strive to expandcreate new services and businesses in collaboration with partners utilizing the assets of both parties, with the goal of capturing new revenue opportunities in new domains that transcend the confines of our smartphone user base, boost packet usage and lowercurrent industries or business formats.

FY2015 Business Management Policies

We developed our FY2015 Business Management Policies, positioning FY2015 as the churn rate so as to put the mobile phone business onyear of making a new growth track, while taking the lead in service differentiationsolid step toward the expansionachievement of our new business revenues and income.medium-term growth. Considering the attainment of operating income

In order to establish

target a growth track,matter of utmost importance, we will also aim to achieve significant cost efficiency improvement by properly controlling the “Monthly Support” discounts, sales expenses, network costs and other expenditures.

Meanwhile, we will also work to reinforce our management foundation through structure reforms. In addition to thetake actions aimed at increasing our telecommunications services revenues, expanding the smart life business and other businesses and improving our operational efficiency and speeding up our decision-making process, wecost efficiency.

(1)Actions Aimed at Increasing Telecommunications Services Revenues

-Facilitate subscriptions to new billing plan and “docomo Hikari” service, and strengthen retention measures.

-Boost packet revenues by encouraging subscriber migration to larger data buckets.

(2)Actions Aimed at Expansion of Smart Life Business and Other Businesses

-Accelerate measures aimed at expanding the adoption of “dmarket” and other services, and expand our sphere of service by adding home offerings.

-

Cultivate new demand by stepping up enterprise sales, and stepping up B2B2C*3 offerings.

(3)Cost Efficiency Improvement

-Reinforcement of “PREMIUM 4G” service and more efficient use of capital expenditures.

-Rigorous cost efficiency improvements through structural reforms.

We will implement a group structure reform effective July 1, 2014continue to further improve customer services by creating an organization comprising a groupengage ourselves in co-creation of specialistsadded value for customers in collaboration with deep-rooted ties withpartners, so that what is perceived as new today can be taken for granted in the community, while shifting resources to areas (new companies and business fields) strengthened by the slimming down of branches.future.

Considering shareholder returns as one of the most important issues in our corporate management, we will endeavor to continue stable dividend payments while taking into consideration our consolidated financial results and consolidated dividend payout ratio.

*1Abbreviation for Internet of Things. A concept that describes a world in which everything is connected to the Internet, enabling remote control and management of devices, etc.
*2“2020” refers to the anticipated increase in tourism and general economic activity, between now and 2020 and the opportunity to develop various new products and services to capture this anticipated increase in demand.
*3Abbreviation for Business to Business to Consumer; a business arrangement in which an entity supports the consumer business of another company.

Decision to exercise option for sale of stake in TTSL

On April 25, 2014, our boardTata Teleservices Limited (“TTSL”) is a telecommunication operator in India and a privately held company.

As of directors resolved to exercise an option for the sale of our entire stake (1,248,974,378 shares, orMarch 31, 2015, we held approximately 26.5% of the outstanding shares) in TTSL, our affiliate accounted for by the equity method, as soon as the conditions for such exercise are met.common shares of TTSL.

Under the shareholders agreement (the “Agreement”), concluded by entered into among TTSL, Tata Sons Limited (“Tata Sons”), the parent company of TTSL, and us, when we entered into a business alliance with TTSL in March 2009, we shall have awere granted certain shareholder rights including the right to require thatTata Sons to find a suitable buyer for our TTSLentire stake (1,248,974,378 shares, be acquiredor approximately 26.5% of outstanding shares) in TTSL for 50% of the our acquisition price, which amounts to 72.5 billion Indian rupees (or ¥126.2 billion*¥141.4 billion*) or aat fair value, whichever is higher, in the event that TTSL fails to achieve certain specified performance targets by March 31, 2014.

The above-mentioned right became exercisable on May 30, 2014, and we planexercised the right on July 7, 2014.

The obligation of Tata Sons under the Agreement was not fulfilled, although we repeatedly held discussions with Tata Sons in regards to exercise the above-mentioned right and expectsale of its entire stake in TTSL, pursuant to sell our TTSL shares in accordance with the Agreement. It is uncertain howAccordingly, we submitted its request for arbitration to the option will be performed, however,London Court of International Arbitration on January 3, 2015.

The sale of investment in TTSL has not been completed as Tata Sons has not fulfilled its obligation, and thus we arehave not ableaccounted for the sales transaction for the year ended March 31, 2015. We continue to predict how events will unfold. An estimateaccount for the investment in TTSL under the equity method as we continue to hold approximately 26.5% of the outstanding voting shares of TTSL and have representation on the board of directors of TTSL even after

submitting the request for arbitration. The financial effect of this financial effectmatter cannot be madeestimated at this time due to these uncertainties.the aforementioned uncertainties surrounding this investment. We may recognize a gain or loss upon disposition of its TTSL shares or ifin the event that it becomes probable that the transaction as described above iswill not be carried out.

 

*1 rupee = ¥1.74¥1.95 as of May 31, 201429, 2015

E.    Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements.

F.    Tabular Disclosure of Contractual Obligations

Please refer to Item 5.B.

G.    Critical Accounting Policies and Estimates, and Recently issued Accounting Standards

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires our management to make estimates about expected future cash flows and other matters that affect the amounts reported in our financial statements in accordance with accounting policies established by our management. Note 2 to our consolidated financial statements includes a summary of the significant accounting policies used in the preparation of our consolidated financial statements. Certain accounting policies are particularly sensitive because of their significance to our

reported results and because of the possibility that future events may differ significantly from the conditions and assumptions underlying the estimates used and judgments relating thereto made by our management in preparing our financial statements. Our management has discussed the selection and development of the accounting estimates and the following disclosure regarding the critical accounting policies with our independent registered public accountantsaccounting firm as well as our Auditaudit & Supervisory Board Members.supervisory board members. The Auditaudit & Supervisory Board Memberssupervisory board members attend meetings of the board of directors and certain executive meetings to express their opinion and are under a statutory duty to audit the administration of our affairs by our directors and to audit our financial statements. Our critical accounting policies are as follows.

Useful lives of property, plant and equipment, internal use software and other intangible assets

The values of our property, plant and equipment, such as the base stations, antennas, switching centers and transmission lines used by our cellulartelecommunications business, our internal-use software and our other intangible assets are recorded in our financial statements at acquisition or development cost and depreciated or amortized over their estimated useful lives. We estimate the useful lives of property, plant and equipment, internal-use software and other intangible assets in order to determine the amount of depreciation and amortization expenses to be recorded in each fiscal year. Our total depreciation and amortization expenses for the years ended March 31, 2015, 2014 and 2013 were ¥659.8 billion, ¥718.7 and 2012 were ¥718.7 billion, ¥700.2 and ¥684.8¥699.8 billion, respectively. We determine the useful lives of our assets at the time the assets are acquired and base our determinations on expected usage, experience with similar assets, established laws and regulations as well as taking into account anticipated technological or other changes. The estimated useful lives of our wireless telecommunications equipment are generally set at from 8 to 16 years. The estimated useful life of our internal-use software is set up to 57 years. If technological or other changes occur more rapidly or in a different form than anticipated, new laws or regulations are enacted, or the intended usage changes, the useful lives assigned to these assets may need to be shortened, resulting in recognition of additional depreciation and amortization expenses or losses in future periods. Effective July 1, 2014, we revised our estimate of the expected useful life of certain software for telecommunications network and internal-use software based on the actual utilization of the software to reflect an extended expected maximum useful life from 5 years to 7 years. Due to this change, “Depreciation and amortization” in the fiscal year ended March 31, 2015, decreased by ¥51.3 billion.

In the fiscal years ended March 31, 2014 2013 and 2012,2013, changes to the estimated useful lives of certain property, plant and equipment, internal-use software and other intangible assets did not have a material impact on our operating results or financial positions.

Impairment of long-lived assets

We perform an impairment review for our long-lived assets other than goodwill and otherintangible assets that have indefinite intangiblesuseful lives (“unamortizable intangible assets”) to be held and used, including fixed assets such as our property, plant and equipment and certain identifiable intangibles such as software for telecommunications network, internal-use software and rights to use telecommunications facilities of wire line network operators, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. This analysis is separate from our analysis of the useful lives of our assets, although it is affected by some similar factors. Factors that we consider important and that can trigger an impairment review include, but are not limited to, the following trends or conditions related to the business that utilizes a particular asset:

 

significant decline in the market value of an asset;

 

loss of operating cash flow in current period;

 

introduction of competitive technologies and services;

 

significant underperformance of expected or historical cash flows;

 

significant or continuing decline in subscriptions;

 

changes in the manner of usage of an asset; and

 

other negative industry or economic trends.

When we determine that the carrying amount of specific assets may not be recoverable based on the existence or occurrence of one or more of the above or other factors, we estimate the future cash inflows and outflows expected to be generated by the assets over their expected useful lives. We also estimate the sum of expected undiscounted future net cash flows based upon historical trends adjusted to reflect our best estimate of

future market and operating conditions. If the carrying value of the assets exceeds the sum of the expected undiscounted future net cash flows, we record an impairment loss based on the fair values of the assets. Such fair values may be based on established markets, independent appraisals and valuations or discounted cash flows. If actual market and operating conditions under which assets are used are less favorable or subscriber numbers are less than those projected by management, either of which results in loss of cash flows, additional impairment charges for assets not previously written-off may be required. For the fiscal years ended March 31, 2015, we recorded an impairment loss of ¥30.2 billion on our multimedia broadcasting business for mobile devices related long-lived assets. Please refer to Note 5 to our consolidated financial statements for further information. For the fiscal years ended March 31, 2014 2013 and 2012,2013, we recognized impairment loss for a certain long-lived assets, of which the impact of the impairment on our financial results was insignificant.

Impairment of goodwill and unamortizable intangible assets

The majority of our goodwill was recognized when we purchased all the remaining non-controlling interests in our eight regional subsidiaries through share exchanges and made those subsidiaries wholly owned in November 2002. In addition, we have acquired majority equity stakes in a number of companies in recent years for the purpose of expanding into new business fields,smart life domains, and the recognition of these majority investments resulted in an increase of goodwill. Consequently, the carrying amount of goodwill as of March 31, 20142015 was ¥262.5¥266.3 billion. The carrying amount of indefiniteunamortizable intangible assets as of March 31, 20142015 was ¥13.5¥16.4 billion.

We perform annually, usually as of March 31, and if an event or circumstances occurs that would imply impairment, an impairment test of goodwill and unamortizable intangible assets that have indefinite useful lives (hereinafter indefinite intangible assets) recognized as a result of

business combinations. We apply a two-step test when assessing goodwill for impairment by reporting unit either at the operating segment level or one level below such segment. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). Fair value of the reporting unit is determined using mainlyprimarily through the discounted cash flow method. If the carrying value of the reporting unit exceeds its fair value, an indication of goodwill impairment exists for the reporting unit and we perform the second step of the impairment test (measurement). Under the second step, based on a comparison of the fair value and carrying value of the reporting unit’s goodwill, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the fair value of that goodwill. For the impairment test of indefiniteunamortizable intangible assets, we compare the fair value and carrying value of the indefiniteunamortizable intangible assets, and recognize impairment loss for any excess of the carrying amount over the fair value of the applicable intangible asset. In determining the fair value, we estimate the future cash flows that are expected to be generated by the applicable reporting unit, based on the business plan and other factors of the reporting unit subject to impairment test of goodwill or indefinite intangible assets. If different estimates or assumptions are used in determining the discounted present value of future cash flows, it could result in different appraisal of goodwill, and may require additional impairment charges to be recognized in the future.

TheFor the fiscal years ended March 31, 2013 and 2014, the most significant amount of recorded goodwill residesresided in the mobile business in Japan reporting unit, which is included in our mobile business segment. This reporting unit has recorded goodwill of ¥133.5 billion and has passed the first step of the impairment test by a substantial margin formargin. During the yearsfiscal year ended March 31, 2014, 20132015, we realigned its operating segments in order to reflect the change in the management of the businesses which resulted in a reorganization of our financial reporting structure of internal organization in a manner that caused the composition of its reportable segments to change. In addition, reporting units were also realigned accordingly and 2012.the goodwill were allocated to respective reporting units based on relative fair value. For the fiscal year ended March 31, 2015, the most significant amount of recorded goodwill resides in the telecommunications business in Japan reporting unit, which is included in our telecommunications business segment. This reporting unit has recorded goodwill of ¥127.3 billion since as of the date of the change in the reporting units and has passed the first step of the impairment test by a substantial margin. The fair value of the remaining goodwill which resides in other reporting units also exceeds the net carrying amount by a significant margin or is not considered significant.significant for the fiscal year ended March 31, 2013, 2014 and 2015. Fair values of the reporting unit have primarily been estimated using the discounted cash flow method which is based upon the future business plan. The future business plan is supported by the historical operating results and our most recent views of our long term outlook. However, if operating income were to decline significantly in the future due to now unforeseen events, it would adversely affect the estimated fair value of the reporting unit.

We did not recognize any goodwill impairment for the fiscal yearyears ended March 31, 2015 and 2014. The amount of goodwill impairment charges for the fiscal year ended March 31, 2013 was ¥7.3 billion. In the fiscal year ended March 31, 2012, because of the rapid adverse change in its business environment, we recognized a ¥6.3 billion of goodwill impairment charge for its PacketVideo Corporation reporting unit. The fair value of this reporting unit was measured using the discounted cash flow method in combination with a market approach.

Impairment of investments

We have made investments in certain domestic and foreign entities. These investments are accounted for under the equity method, cost method, or at fair value as appropriate based on various conditions such as ownership percentages, exercisable influence over the investments and marketability of the investments. In the past, we experienced material impairments in the value of our investments in equity method affiliates that were included in “Equity in net income (losses) of affiliates” in our consolidated statements of income and comprehensive income for relevant years. It is possible that we could experience similar impairments with respect to our “Investments in affiliates” and “Marketable securities and other investments” again in the future. We may also experience material gains or losses on the sale of our investments. As of March 31, 2014,2015, the total carrying value of “Investments in affiliates” was ¥424.5¥439.1 billion, while the total carrying value for investments in “Marketable securities and other investments” was ¥171.9¥195.0 billion. Our major investee companies are Sumitomo

Mitsui Card Co., Ltd., Philippine Long Distance Telephone Company of the Philippines and TTSL (Tata Teleservices Limited) of India and PLDT (Philippine Long Distance Telephone Company) of the Philippines and these are classified as “Investments in affiliates” as of March 31, 2014.2015.

Equity method and cost method accounting require that we assess if a decline in value or an associated event regarding any such investment has occurred and, if so, whether such decline is other than temporary. We perform a review for impairment whenever events or changes in circumstances indicate that the carrying amount of an investment may not be recoverable. Factors that we consider important and that can trigger an impairment review include, but are not limited to, the following:

 

significant or continued declines in the market values of the investee;

 

loss of operating cash flow in current period;

 

significant underperformance of historical cash flows of the investee;

 

significant impairment losses or write-downs recorded by the investee;

 

significant changes in the quoted market price of public investee affiliates;

 

negative results of competitors of investee affiliates; and

 

other negative industry or economic trends.

In performing our evaluations, we utilize various information including discounted cash flow valuations, independent valuations and, if available, quoted market values. Determination of recoverable amounts sometimes requires estimates involving results of operations and financial position of the investee, changes in technology, capital expenditures, market growth and share, discount factors and terminal values. In the event we determine as a result of such evaluations that there are other than temporary declines in value of investment below its carrying value, we record an impairment charge. Such write-down to fair value establishes a new cost basis in the carrying amount of the investment. The impairment charge of “Investment in affiliates” is included in “Equity in net income (losses) of affiliates” while the impairment charge of “Marketable securities and other investments” is reflected in “Other income (expense)” in our consolidated statements of income. For the years ended March 31, 2015, 2014 and 2013, we recorded impairment charges accompanying other than temporary declines in the values of certain investee affiliates.

The impact of the impairment charges of “Investment in affiliates” on our results of operations and financial position for the fiscal year ended March 31, 2015 was inconsequential.

The amounts of impairment charges on “Investments in affiliates” for the fiscal yearyears ended March 31, 2014 and 2013 were ¥51.3 billion and ¥25.9 billion, including TTSL respectively. In estimating the investment value of those equity method investees, we used the weighted average cost of capital of 12.6% mainly for the fiscal year ended March 31, 2014 and 11.3% to 15.9% for the fiscal year ended March 31, 2013 as a significant unobservable input.

We reviewed the business outlook of TTSL in order to determine if the value of the investment in TTSL has suffered a decline that was other than temporary because of the recent economic and financial environment

surrounding its industry. During the fiscal year ended March 31, 2013, our estimated future cash flows of TTSL were adjusted downward as a result of the intensifying tariff competition among mobile network operators in India and our views of our long term outlook at that time and we concluded that the recoverable amount was significantly below carrying value and that this impairment was other than temporary. Consequently, we recognized an impairment charge of ¥6.8 billion. During the fiscal year ended March 31, 2014, our estimate of future cash flows of TTSL were further revised downward as a result of the growing business risk of mobile network operators in India, including an increase in the cost of maintaining or acquiring frequency spectrum due to a steep rise of the auction price of frequency spectrum in India. Reflecting growing business risk and recent operating results of TTSL, the weighted average cost of capital increased to 12.6%, which was applied to these

revised estimated cash flows and we concluded that the further decline in value was other than temporary. Consequently, we recognized an additional impairment charge of ¥51.2 billion. As described in “D Trend“D.Trend Information” of “Operating and Financial Review and Prospects”, we plan to dispose of our entire investment in TTSL. We may recognize a gain or loss upon disposition of our TTSL shares or if the transaction as previously described above is not be carried out.

The impact of the impairment charges on our results of operations and financial position for the fiscal year ended March 31, 2012 was inconsequential.

We recorded impairment charges on certain investments which were classified as “Marketable securities and other investments.” The amount of impairment charges on “Marketable securities and other investments” was ¥0.9 billion, ¥3.1 billion ¥10.9 billion and ¥4.0¥10.9 billion for the years ended March 31, 2015, 2014 2013 and 20122013, respectively.

While we believe that the remaining carrying values of our investments are nearly equal to their fair value, circumstances in which the value of an investment is below its carrying amount or changes in the estimated realizable value can require additional impairment charges to be recognized in the future.

Accrued liabilities for point programs

We offer “docomo Points Service,” which provides benefits, including discounts on handset, to customers in exchange for points that we grant customers based on the usage of cellular and other services and record “Accrued liabilities for point programs” relating to the points that customers earn. The total amount of accrued liabilities for point programs recognized as short-term and long-term liabilities as of March 31, 2015 and 2014 and 2013 was ¥116.4¥91.6 billion and ¥144.0¥116.4 billion, respectively. Point program expense for the years ended March 31, 2015, 2014 and 2013 and 2012 was ¥67.7 billion, ¥70.8 billion ¥74.7 billion and ¥95.8¥74.7 billion, respectively.

In determining the accrued liabilities for point programs, we estimate factors such factors as the point utilization rate reflecting the forfeitures by, among other things, cancellation of subscription. Higher-than-estimated utilization rate could result in the need for recognizing additional expenses or accrued liabilities in the future. In determining the accrued liabilities for point programs as of March 31, 2014,2015, one percent raise in point utilization rate would result in an additional accrual of approximately ¥1.4¥1.1 billion, if all the other factors are held constant.

Pension liabilities

We sponsor a non-contributory defined benefit pension plan which covers almost all of our employees called for contract-type corporate pension plan. We introduced NTT DOCOMO, INC.’s contract-type corporate pension plan to a defined contribution pension plan effective on and after April 1, 2014. NTT DOCOMO, INC.’s contract-type corporate pension plan continues to remain for the pension benefits earned up to March 31, 2014. We also participate in the NTT CDBP,Corporate Defined Benefit Pension Plan (“NTT CDBP”), a contributory defined benefit welfare pension plan sponsored by NTT group.

Calculation of the amount of pension cost and liabilities for retirement allowances requires us to make various judgments and assumptions including the discount rate, expected long-term rate of return on plan assets, long-term rate of salary increases and expected remaining service lives of our plan participants. We believe that the most significant of these assumptions in the calculations are the discount rate and the expected long-term rate of return on plan assets. We determine an appropriate discount rate based on current market interest rates on

high-quality, fixed income debt securities that are currently available and expected to be available during the period to maturity of the pension benefits. In determining the expected long-term rate of return on plan assets, we consider the current and projected asset allocations, as well as expected long-term investment returns and risks for each category of the plan assets based on analysis of historical performances. The rates are reviewed annually and we review our assumptions in a timely manner when an event occurs that would have significant influence on the rates or the investment environment changes dramatically.

The discount rates applied in determination of the projected benefit obligations as of March 31, 20142015 and 2013,2014, and expected long-term rates of return on plan assets for the years ended March 31, 20142015 and 20132014 were as follows:

 

  Years ended March 31  Years ended March 31
  2013  2014  2014  2015

Contract-type corporate pension plan

        

Discount rate

  1.5%  1.4%  1.4%  1.0%

Expected long-term rate of return on plan assets

  2.0%  2.0%  2.0%  2.0%

Actual return on plan assets

  Approximately 9%  Approximately 9%  Approximately 9%  Approximately 3%

NTT CDBP

        

Discount rate

  1.5%  1.4%  1.4%  1.0%

Expected long-term rate of return on plan assets

  2.5%  2.5%  2.5%  2.5%

Actual return on plan assets

  Approximately 12%  Approximately 10%  Approximately 10%  Approximately 12%

The amount of projected benefit obligations of our contract-type corporate pension plan as of March 31, 2015 and 2014 and 2013 was ¥206.1¥218.0 billion and ¥214.8¥206.1 billion, respectively. The amount of projected benefit obligations of the NTT CDBP as of March 31, 20142015 and 2013,2014, based on actuarial computations which covered only DOCOMOour employees’ participation, was ¥116.9¥131.1 billion and ¥116.9 billion, respectively. The amount is subject to a substantial change due to differences in actual performance or changes in assumptions. In conjunction with the differences between estimates and the actual benefit obligations, net losses in excess of 10% of the greater of the projected benefit obligation or the fair value of plan assets are amortized from “Accumulated other comprehensive income (loss)” over the expected average remaining service life of employees in accordance with U.S. GAAP.

The following table shows the sensitivity of our contract-type corporate pension plan and the NTT CDBP as of March 31, 20142015 to the change in the discount rate or the expected long-term rate of return on plan assets, while holding other assumptions constant.

 

   Billions of yen

Change in Assumptions

  Change in projected
benefit obligation
  Change in pension
cost, before
applicable taxes
  Accumulated other
comprehensive
income (loss), net
of applicable taxes

Contract-type corporate pension plan

      

0.5% increase/decrease in discount rate

  (90) (9.8) / 9510.3   30.6  / (3)(0.6)  606.7 / (63)(7.0)

0.5% increase/decrease in expected long-term rate of return on plan assets

    (5)(0.4) /  40.5   

NTT CDBP

      

0.5% increase/decrease in discount rate

  (110)(13.7) / 12115.3   20.3  / (1)(0.0)  769.4 / (75)(9.5)

0.5% increase/decrease in expected long-term rate of return on plan assets

    (4)(0.4) /  30.4   

Please also refer to Note 1517 “Employees’ retirement benefits” to our consolidated financial statements for further discussion.

Revenue recognition

We defer upfront activation fees and recognize them as revenues over the expected term of a subscription. Related direct cost to the extent of the activation feefees amount are also being deferred and amortized over the same period. The reported amounts of revenue and cost of services are affected by the level of activation fees, related direct cost and the estimated length of the subscription period over which such fees and cost are amortized. Factors that affect our estimate of the subscription period over which such fees and cost are amortized include subscriber churn rate and newly introduced or anticipated competitive products, services and technology.

The current amortization periods are based on an analysis of historical trends and our experiences. For the years ended March 31, 2015, 2014 2013 and 2012,2013, we recognized as revenues deferred activation fees of ¥21.5 billion, ¥16.3 billion ¥29.6 billion and ¥14.0¥29.6 billion, respectively, as well as corresponding amounts of related deferred cost. As of March 31, 20142015 and 2013,2014, remaining unrecognized deferred activation fees were ¥90.1 billion and ¥72.7 billion, and ¥95.1 billion, respectively.

Recently issued Accounting Standards

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers (Topic 606),, which requires an entity to recognize the amount to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for us on April 1, 2017. Early adoption is notOn April 29, 2015, the FASB issued an exposure draft to delay the effective date of the ASU by one year. In the event that the exposure draft goes into effect, the standard would be effective for us on April 1, 2018 and early application of the standard as of April 1, 2017 would also be permitted.

We are currently evaluating the effect that the ASU will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have it determined the effect of the standard on our ongoing financial reporting.

Item 6. Directors, Senior Management and Employees

A.    Directors and Senior Management

Directors, Corporate Executives and Audit & Supervisory Board Members

Our members of the board of directors has the ultimate responsibility for the administration of our affairs. Our Articles of Incorporation specify the number of members of the board of directors as not more than 15. Directors15 directors are elected at a general meeting of shareholders from among those candidates nominated by the boardBoard of directors.Directors. The candidates may also be nominated by shareholders. The normal term of office of member of the board of directors is 2 years, although they may serve any number of consecutive terms. The boardBoard of directorsDirectors elects from among member of the board of directors one or more representative directors, who have the authority individually to represent us. From among directors,member of the board of directors, the Board of Directors also elects the president and may elect a chairman and one or more senior executive vice presidents and executive vice presidents.

We have an auditAudit & supervisory boardSupervisory Board as an organization that is independent from the boardBoard of directors.Directors. The auditAudit & supervisory boardSupervisory Board audits execution of duties by directors and carries out accounting audits. Our Articles of Incorporation provide for not more than 5 audit & supervisory board members. Under the Companies Act, of Japan, the auditAudit & supervisory boardSupervisory Board is composed of all of our audit & supervisory board members. Audit & supervisory board members, more than half of whom must be from outside our company, are elected at a general meeting of shareholders from among those candidates nominated by the boardBoard of directorsDirectors with the prior consent of our auditAudit & supervisory board.Supervisory Board. The candidates may also be nominated by shareholders. The auditAudit & supervisory boardSupervisory Board may, by its resolution, request that the boardBoard of directorsDirectors submit to a general meeting of shareholders an item of business concerning election of audit & supervisory board members and/or proposed candidates of audit & supervisory board members. The normal term of office of an audit & supervisory board member is 4 years, although they may serve any number of consecutive terms. Audit & supervisory board members are under a statutory duty to audit the administration of our affairs by our member of the board of directors, to audit our

financial statements and business reports submitted by our member of the board of directors to the general meetings of shareholders and to report to the shareholders the results of investigations regarding any actions by our member of the board of directors that are unreasonable or which are in violation or breach of laws, ordinances or the Articles of Incorporation of our company. They are obliged to attend meetings of the boardBoard of directorsDirectors and to express their opinions if they deem necessary, but they are not entitled to vote. It

is a statutory duty for the auditAudit & supervisory boardSupervisory Board to prepare an audit report and for identified audit & supervisory board members to submit it to identified member of the board of directors each year. An audit & supervisory board member may note his or her opinion in the audit report if his or her opinion is different from the opinion expressed in the audit report. The auditAudit & supervisory boardSupervisory Board is empowered to decide audit policy, the methods of examination of our affairs and financial position and other matters concerning the execution of the audit & supervisory board members’ work duties.

In addition to audit & supervisory board members, we must appoint independent public accountants who have statutory duties to examine the financial statements to be submitted by the boardBoard of directorsDirectors to the general meetings of shareholders, reporting thereon to the audit & supervisory board members and members of the board of directors, and examining the financial statements to be filed with the director of the Kanto Local Finance Bureau of Japan. Since our incorporation, KPMG AZSA LLC, has acted as our independent public accountant.

We introduced an executive officer system in 2005 with the aim of clarifying the board’s managerial supervision function and further enhancing its business execution functions.

The following table sets forth our members of the board of directors and audit & supervisory board members as of June 27, 201426, 2015 and certain other information.

 

Name

(Date of Birth)

 

Position/


Responsibility

 

History, Positions, Responsibilities and
Principal Concurrent Positions

 

Shares
Owned (1)

 

Date


Current
Terms
Ends

Ends

 

Initial
Appointment
Date

Member of the Board of Directors:

   

Kaoru Kato(2)

(May 20, 1951)

 

President and Chief Executive Officer

 

April 1977

 

July 2007

 

Entered NTT Public Corporation

 

Executive Vice President, Managing Director of Corporate Strategy Planning Department of NTT DoCoMo Kansai, Inc.

 27,80034,500 June 2016 June 2008
 

June 2008

 

Executive Vice President, Managing Director of Corporate Strategy and Planning Department of the Company

   
 

April 2009

 April 2009

Executive Vice President, Managing Director of Corporate Strategy and Planning Department and Managing Director of Mobile Society Research Institute of the Company

   
 

July 2009

 July 2009

Executive Vice President, Managing Director of Corporate Strategy and Planning Department of the Company

   
  June 2012 President and Chief Executive Officer of the Company   

Name

(Date of Birth)

Position/

Responsibility

History, Positions, Responsibilities and
Principal Concurrent Positions

Shares
Owned (1)

Date

Current
Terms

Ends

Initial
Appointment
Date

Kazuhiro Yoshizawa(2)

(Jun. 21, 1955)

 

Senior Executive Vice President, Chief Information Officer, Chief Information security Officer and

Chief Privacy Officer/

Responsible for

Technology,

Device and Information strategy

 

April 1979

 

June 2007

 

Entered NTT Public Corporation

 

Senior Vice President, Managing Director of Corporate Marketing Department II of the Company

 16,00018,700 June 2016 June 2011
 

June 2011

 

Senior Vice President, Managing Director of Human Resources Management Department of the Company

   
 

June 2012

 

Executive Vice President, Managing Director of Corporate Strategy & Planning Department, and Responsible for Mobile Society Research Institute of the Company

   
 

July 2013

 

Executive Vice President, Managing Director of Corporate Strategy & Planning Department, Managing Director of Structural Reform Office, and Responsible for Mobile Society Research Institute of the Company

   
 

June 2014

 

Senior Executive Vice President, Chief Information Officer, Chief Information security Officer and Chief Privacy Officer, Responsible for Technology, Device and Information strategy of the Company

Yoshikiyo Sakai (2)

(Oct. 10, 1956)

Senior Executive Vice President/

Responsible for Consumer business, Marketing, Global business and Corporate

April 1980

June 2005

Entered NTT Public Corporation

Managing Director of Investor Relations Department of the Company

6,400June 2016June 2014
July 2008Managing Director of Public Relations Department of the Company
June 2009Senior Vice President, Managing Director of Public Relations Department of the Company
June 2012Senior Vice President, Director of Finance and Accounting Department, Member of the Board of Directors of NIPPON TELEGRAPH AND TELEPHONE CORPORATION (“NTT”)
June 2014Senior Executive Vice President, Responsible for Consumer business, Marketing, Global business and Corporate of the Company

Akira Terasaki (2) (Jan. 20, 1952)

Senior Executive Vice President/

Responsible for Corporate business, Improvement of business operations and CSR

April 1976

July 2008

Entered Ministry of Posts and Telecommunications

Vice-Minister for Policy Coordination, Ministry of Internal Affairs and Communications

1,000June 2016June 2014
July 2010Special Advisor to the Ministry of Internal Affairs and Communications
October 2010Professor, Graduate School of Science and Engineering, Tokyo Institute of Technology (To the present)
July 2011Advisor, Nomura Research Institute, Ltd.
June 2014Senior Executive Vice President, Responsible for Corporate business, Improvement of business operations and CSR of the Company.   

Name

(Date of Birth)

 

Position/


Responsibility

 

History, Positions, Responsibilities and
Principal Concurrent Positions

 

Shares
Owned (1)

 

Date


Current
Terms
Ends

Ends

 

Initial
Appointment
Date

Yoshikiyo Sakai (2)

(Oct. 10, 1956)

Senior Executive Vice President/

Responsible

for Consumer

business, Marketing, Global

business and Corporate

April 1980

June 2005

Entered NTT Public Corporation

Managing Director of Investor Relations Department of the Company

8,600June 2016June 2014

July 2008

Managing Director of Public Relations Department of the Company

June 2009

Senior Vice President, Managing Director of Public Relations Department of the Company

June 2012

Senior Vice President, Director of Finance and Accounting Department, Member of the Board of Directors of NTT

June 2014

Senior Executive Vice President, Responsible for Consumer business, Marketing, Global business and Corporate of the Company

(Effective from July 1, 2015)

Senior Executive Vice President, Managing Director of Sales and Marketing Division, Responsible for Global business and Corporate of the Company

Akira Terasaki (2)

(Jan. 20, 1952)

Senior Executive Vice

President/

Responsible

for

Corporate

business,

Improvement of business operations and CSR

April 1976Entered Ministry of Posts and Telecommunications2,600June 2016June 2014

July 2008

Vice-Minister for Policy Coordination of the MIC

July 2010

Special Advisor to the MIC

October

2010

Professor, Graduate School of Science and Engineering, Tokyo Institute of Technology

July 2011

Advisor, Nomura Research Institute, Ltd.

June 2014

Senior Executive Vice President, Responsible for Corporate business, Improvement of business operations and CSR of the Company

Seizo Onoe (3)

(May 12, 1957)

 

Executive Vice President, Chief Technical

Technology Officer/ Managing Director of

R&D CenterInnovation Division

 

April 1982

 

December 2005July 2006

 

Entered NTT Public Corporation

 

Managing Director of IP Radio Access Network Development Department and Managing Director of Radio System Development Department of the Company

 15,20017,100 June 2016 June 2012
  July 2006

June 2008

 Managing Director of Radio Access Network Development Department of the Company
June 2008

Senior Vice President, Managing Director of R&D Strategy Department and Managing Director of Radio Access Network Development Department of the Company

July 2008Senior Vice President, Managing Director of R&D Strategy Department of the Company
June 2012Executive Vice President, Chief Technical Officer, Managing Director of R&D Center of the Company
(Effective from July 1, 2014)
Executive Vice President, Chief Technical Officer, Managing Director of R&D Innovation Division

Hirotaka Sato (3)

(Nov.18, 1958)

Executive Vice President, Chief Financial Officer/ Managing Director of Accounts and Finance Department, Responsible for Finance and Business alliance

April 1982

June 2005

Entered NTT Public Corporation

Senior Director of Accounts and Finance Department of the Company

11,400June 2016June 2012
July 2008Vice President of Finance and Accounting Department of NIPPON TELEGRPH AND TELEPHONE CORPORATION (“NTT”)   
  June 2011

July 2008

 

Senior Vice President, Managing Director of Corporate MarketingR&D Strategy Department I of the Company

   
  

June 2012

 Senior

Executive Vice President, Chief Technology Officer, Managing Director of Accounts and Finance DepartmentR&D Center of the Company

   
  June

July 2014

 

Executive Vice President, Chief FinancialTechnology Officer, Managing Director of Accounts and Finance Department, Responsible for Finance and Business allianceR&D Innovation Division of the Company

Kazuhiro Takagi (3)

(Jun. 29, 1956)

Executive Vice President/ Managing Director of Corporate

Marketing Division and Managing Director of TOHOKU Reconstruction Support Office, Responsible for Corporate sales

April 1982

May 2002

Entered NTT Public Corporation

Senior Director of Procurement and Supply Department of the Company

6,800June 2016June 2012
July 2005Senior Director of Human Resources Management Department of the Company
July 2008Managing Director of Frontier Services Department of the Company
June 2012Senior Vice President, Managing Director of Human Resources Management Department of the Company
June 2014Executive Vice President, Managing Director of Corporate Marketing Division and Managing Director of TOHOKU Reconstruction Support Office, Responsible for Corporate sales   

Name

(Date of Birth)

 

Position/


Responsibility

 

History, Positions, Responsibilities and
Principal Concurrent Positions

 

Shares
Owned (1)

 

Date


Current
Terms
Ends

Ends

 

Initial
Appointment
Date

Hiroyasu AsamiHirotaka Sato (3)

(Sep. 8, 1956)Nov.18, 1958)

 

Executive Vice President/President, Chief

Financial Officer/ Managing

Director of Corporate Strategy & Planning Accounts and Finance

Department, Responsible for Finance

and Business alliance

 

April 19801982

 

April 2011June 2005

 

Entered NTT Public Corporation

 

Senior Vice President, Managing Director of Smart Communication ServicesAccounts and Finance Department of the Company

 9,80013,400 June 2016 

June

2014

2012
  June 2012

July 2008

 Senior

Vice President Managing Director of Smart Communication ServicesFinance and Accounting Department Engages in Multimedia of the CompanyNTT

   
  March 2013

June 2011

 Executive

Senior Vice President, Responsible for Multimedia ServicesManaging Director of Corporate Marketing Department I of the Company

   
  July 2013

June 2012

 Executive

Senior Vice President, Managing Director of Smart-life Business DivisionAccounts and Finance Department of the Company

   
  

June 2014

 

Executive Vice President, Chief Financial Officer, Managing Director of Corporate Strategy & PlanningAccounts and Finance Department, Responsible for Finance and Business alliance of the Company

   

Shoji SutoKazuhiro Takagi (3)

(Mar. 4, 1957)Jun. 29, 1956)

 

Executive Vice President/ Responsible for Consumer salesManaging

Director of Corporate

Sales and Branches in KantoMarketing

Division and Koshinetsu areasManaging

Director of

TOHOKU Reconstruction Support Office

 

April 19801982

 

June 2009May 2002

 

Entered NTT Public Corporation

 

Executive Vice President, ManagingSenior Director of Marketing BusinessProcurement and Supply Department Member of the Board of Directors of DOCOMO Business Net Inc.Company

 9,1008,600 June 2016 June 20142012
  

July 20092005

 Executive Vice President, Managing

Senior Director of Marketing Division, MemberHuman Resources Management Department of the Board of Directors of DOCOMO Business Net Inc.Company

   
 June 2010

July 2008

 Executive Vice President,

Managing Director of Corporate Marketing Division, MemberFrontier Services Department of the Board of Directors of DOCOMO Business Net Inc.Company

   
 

June 2012

 June 2011

Senior Vice President, Managing Director of Shikoku Regional OfficeHuman Resources Management Department of the Company

   
 

June 2014

 June 2014

Executive Vice President, Responsible for Consumer salesManaging Director of Corporate Sales and Branches in KantoMarketing Division and Koshinetsu areas

(Effective from July 1, 2014)
Executive Vice President, Responsible for Consumer salesManaging Director of TOHOKU Reconstruction Support Office of the Company

   

Kiyohiro OmatsuzawaHiroyasu Asami (3)

(Jun. 22, 1957)Sep. 8, 1956)

 Executive Vice President/Managing directorDirector of NetworkCorporate Strategy& Planning Department Responsible for Network and Preparation for 2020Broadband businessApril 1980Entered NTT Public Corporation11,400June 2016June 2014
 

April 1981

 

June 20062012

 

Entered NTT Public Corporation

Senior Vice President, Managing Director of Radio Access Network EngineeringSmart Communication Services Department, Engages in Multimedia of the Company

March 2013

Executive Vice President, Responsible for Multimedia Services of the Company

July 2013

Executive Vice President, Managing Director of Smart-life Business Division of the Company

June 2014

Executive Vice President, Managing Director of Corporate Strategy & Planning Department of the Company

 13,000 June 2016

June

2014

  July 2009

June 2015

 Managing Director of Procurement and Supply Department and Member of Corporate Strategy and Planning Department of the Company
June 2010Senior

Executive Vice President, Managing Director of Procurement and SupplyCorporate Strategy & Planning Department, Responsible for Broadband business of the Company

  June 2012Senior Vice President, Managing Director of Chugoku Regional Office of the Company
June 2014Executive Vice President, Managing director of Network Department, Responsible for Network and Preparation for 2020 of the Company

Name

(Date of Birth)

 

Position/


Responsibility

 

History, Positions, Responsibilities and
Principal Concurrent Positions

 

Shares
Owned (1)

 

Date


Current
Terms
Ends

Ends

 

Initial
Appointment
Date

Kiyohiro Omatsuzawa (3)

(Jun. 22, 1957)

Executive

Vice President/

Managing

Director of Network Department, Responsible for Network and Preparation for 2020

April 1981Entered NTT Public Corporation15,300June 2016June 2014

June 2006

Managing Director of Radio Access Network Engineering Department of the Company

July 2009

Managing Director of Procurement and Supply Department and Member of Corporate Strategy and Planning Department of the Company

June 2010

Senior Vice President, Managing Director of Procurement and Supply Department of the Company

June 2012

Senior Vice President, Managing Director of Chugoku Regional Office of the Company

June 2014

Executive Vice President, Managing Director of Network Department, Responsible for Network and Preparation for 2020 of the Company

(Effective from July 1, 2015)

Executive Vice President, Responsible for Network and Preparation for 2020 of the Company

Toshiki Nakayama(3)

(Jan. 29, 1958)

 

Executive

Vice President/ Managing Director of Smart-life Business Division and

Managing Director of

Smart-life Solutions DepartmentBusiness Division

April 1981Entered NTT Public Corporation5,600June 2016June 2014

June 2011

 

April 1981

June 2008

Entered NTT Public Corporation

Vice President of Strategic Business Development Division of NIPPON TELEGRPH AND TELEPHONE CORPORATION (“NTT”)

4,100

June

2016

June

2014

June 2011Senior Vice President of Strategic Business Development Division of NTT

  June 2012
 

June 2012

Senior Vice President, Managing Director of Frontier Services Department of the Company

  July 2013
 

July 2013

Senior Vice President, Managing Director of Smart-life Solutions Department of the Company

  January 2014
 (Concurrent position) Representative Director and President of ABC HOLDINGS Co., Ltd. (To the present)

January 2014

 

(Concurrent position) Representative Director and Senior Executive Vice President of ABC Cooking Studio Co., Ltd. (To the present)

 
 

June 2014

 
June 2014

Executive Vice President, Managing Director of Smart-life Business Division and Managing Director of Smart-life Solutions Department of the Company

 
 

June 2015

 

Executive Vice President, Managing Director of Smart-life Business Division of the Company

Name

(Date of Birth)

Position/
Responsibility

History, Positions, Responsibilities and
Principal Concurrent Positions

Shares
Owned (1)

Date
Current
Terms
Ends

Initial
Appointment
Date

Hajime Kii (3)

(Apr. 20, 1960)

 SeniorExecutive Vice President/ Managing Director of Human Resources Management Department April 1983 Entered NTT Public Corporation 4,1005,300 June 2016 June 2014
  

July 20072008

 General Manager of Mobility Design Business Group of the Company
July 2008

Deputy Managing Director of Global Business Division of the Company

  
  

June 2010

 

Managing Director of Global Business Division of the Company

  
  

June 2012

 

Senior Vice President, Managing Director of Global Business Division of the Company

  
  

June 2014

 

Senior Vice President, Managing Director of Human Resources Management Department of the Company

 
 

June 2015

 

Executive Vice President, Managing Director of Human Resources Management Department of the Company

   

(Principal Concurrent Positions)

  
   

Member of the Board of Tata Teleservices Limited (India)

  

Makoto Tani (3)

(NovemberNov. 2, 1961)

 Senior Vice President/ Managing Director of General Affairs Department and Managing Director of Improvement Action Office April 1984 Entered NTT Public Corporation 2,2003,500 June 2016 June 2014
  

July 2006

 

Senior ManagerDirector of Department V and Vice PresidentManaging Director of Business Process Reform Office, Department V of NIPPON TELEGRAPH AND TELEPHONE CORPORATION (“NTT”)NTT

  
  

June 2007

 Vice President

Senior Director of General Affairs Department of NTT

  
  

October 2009

 Vice President

Senior Director of President’s Office, General Affairs Department of NTT

  
  

August 2013

 

Senior Vice President, Managing Director of Corporate Marketing Department II of the Company

  
  

June 2014

 

Senior Vice President, Managing Director of General Affairs Department and Managing Director of Improvement Action Office of the Company

Teruyasu Murakami (4)(7)

(Oct 15, 1945)

April 1968Entered Nomura Research Institute, Ltd. (“NRI”)6,000June 2016June 2013

April 2001

Representative Director, Executive Managing Director, Member of the Board of NRI

April 2002

Chief Corporate Counselor of NRI

June 2008

Independent Director of Benesse Holdings, Inc.

April 2012

Director of Research Institute for Industrial Strategy (To the present)

June 2013

Member of the Board of Directors of the Company

  

(Principal concurrent positions)

 

Director of Research Institute for Industrial Strategy

Name

(Date of Birth)

 

Position/


Responsibility

 

History, Positions, Responsibilities and
Principal Concurrent Positions

 

Shares
Owned (1)

 

Date


Current
Terms
Ends

Ends

 

Initial
Appointment
Date

Teruyasu Murakami (4)(7)

(Oct 15, 1945)

April 1968Entered Nomura Research Institute, Ltd. (“NRI”)5,500June 2016June 2013
April 2001Representative Director, Executive Managing Director, Member of the Board of NRI
April 2002Chief Corporate Counselor of NRI
June 2008Independent Director of Benesse Holdings, Inc.
April 2012Director of Research Institute for Industrial Strategy (To the present)
June 2013Member of the Board of Directors of the Company

(Principal concurrent positions)

Director of Research Institute for Industrial Strategy

Takashi Nakamura (4)

(May 15, 1964)

  April 1987 Entered NIPPON TELEGRAPH AND TELEPHONE CORPORATION (“NTT”)NTT 1,000 June 2016 June 2013
 January 1999 

January 1999

Manager of Department IV, NTT-Holding Provisional Headquarters of NTT

  

October 2002

 
October 2002

Senior ManagerDirector of Department IV of NTT

  

April 2005

 
April 2005

Senior ManagerDirector of Accounts and Finance Department of NIPPON TELEGRAPH AND TELEPHONE WEST CORPORATION (“NTT West”)West

  

July 2008

 
July 2008

Senior ManagerDirector of Personnel Department of NTT West

  

July 2011

 
July 2011

Senior ManagerDirector of Finance and Accounting Department of NTT (To the present)

  

June 2013

 
June 2013

Member of the Board of Directors of the Company

  
   

 

(Principal concurrent positions)

 

Senior ManagerDirector of Finance and Accounting Department of NTT

  

Audit & Supervisory Board Member:

 

Tooru
Kobayashi (5)

(Aug. 8, 1952)

 

Full-time

Audit & Supervisory

Board Member

 April 1976 Entered NTT Public Corporation 15,90017,700 June 2016 June 2014
  

July 2008

 

Executive Vice President, Managing Director of Tokai Regional Office of the Company

   
  

June 2011

 

Representative Director and Executive Vice President, Member of the Board of Directors of Sumitomo Mitsui Card Co. Ltd. (“SMCC”)

  
  

April 2012

 

Representative Director and Senior Executive Vice President, Member of the Board of Directors of SMCC

  
  

June 2013

 

President and Chief Executive Officer, Member of the Board of Directors of DOCOMO Service, Inc.

  
  

June 2014

 

Audit & Supervisory Board Member of the Company

 

Naoto Shiotsuka (5)(6)

(Jul. 15, 1952)

 

Full-time

Audit & Supervisory

Board Member

 April 1977Entered NTT Public Corporation4,700June 2019June 2013

June 2005

Senior Vice President, Senior Executive Manager of Finance Department of NTT DATA

June 2007

Director and Senior Vice President, Senior Executive Manager of Finance Department (Chief Financial Officer) of NTT DATA

June 2009

Director and Executive Vice President, Senior Executive Manager of Finance Department (Chief Financial Officer), In charge of CSR of NTT DATA

June 2011

President and Chief Executive Officer, NTT DATA MANAGEMENT SERVICE Corporation

June 2013

Audit & Supervisory Board Member of the Company

Name

(Date of Birth)

 

Position/


Responsibility

 

History, Positions, Responsibilities and
Principal Concurrent Positions

 

Shares
Owned (1)

 

Date


Current
Terms
Ends

Ends

 

Initial
Appointment
Date

Haruo
Morosawa  (5)(6)(7)

(Dec. 27, 1950)

Audit & Supervisory Board Member

April 1974

December 2000

Entered Board of Audit of Japan

Deputy Director-General, Secretariat of General Executive Bureau, Board of Audit of Japan

7,100June 2015June 2011
December 2004Director General of 1st Bureau, Board of Audit of Japan
April 2009Deputy Secretary General of General Executive Bureau, Board of Audit of Japan��
April 2010Member of the West Block Bidding Inspection Commission of Japan Railway Construction, Transport and Technology Agency

June 2011

Audit & Supervisory Board Member of the Company

Naoto Shiotsuka (5)(6)

(Jul. 15, 1952)

Audit & Supervisory Board MemberApril 1977Entered NTT Public Corporation2,700

June

2015

June

2013

June 2005Senior Vice President, Senior Executive Manager of Finance Department of NTT DATA
June 2007Director and Senior Vice President, Senior Executive Manager of Finance Department (Chief Financial Officer) of NTT DATA
June 2009Director and Executive Vice President, Senior Executive Manager of Finance Department (Chief Financial Officer), In charge of CSR of NTT DATA

June 2011

President and Chief Executive Officer, NTT DATA MANAGEMENT SERVICE Corporation

June 2013

Audit & Supervisory Board Member of the Company

Toshimune Okihara (5)(6)

(Aug. 29, 1954)

 

Full-time

Audit & Supervisory Board Member

 April 1979 Entered NTT Public Corporation 1,0002,400 

June

2015

2019
 

June

2014

  

June 2006

 

Senior Vice President, General Manager of System Engineering Department, Member of the Board of Directors of NTT Communications Corporation (“NTT Com”)

  
  

August 2006

 

Senior Vice President, General Manager of System Engineering Department, Enterprise Sales Division Member, Member of the Board of Directors of NTT Com

  
  June 2010 

Executive Vice President, General Manager of System Engineering Department, Enterprise Sales Division, Member of the Board of Directors of NTT Com

  
  

June 2011

 

President and Chief Executive Officer, Member of the Board of Directors of NTT Com Technology Corporation

  
  

June 2014

 

Audit & Supervisory Board Member of the Company

  

NameYutaka Kawataki (5)(6)(7)

(Date of Birth)Dec. 18, 1953)

 

Position/Full-time

ResponsibilityAudit & Supervisory Board Member

April 1977Entered The Board of Audit of Japan1,000June 2019June 2015

March 2013

 

History, Positions, Responsibilities and
Principal Concurrent Positions

Deputy Secretary General of The Board of Audit of Japan

April 2014

 

Shares
Owned (1)

Secretary General of The Board of Audit of Japan(Retired from the position in March 2015)

June 2015

 

Date

Current
Terms

EndsAudit & Supervisory Board Member of the Company

 

Initial
Appointment
Date

Eiko
Tsujiyama(6)(7)

(Dec. 11, 1947)

 

Audit & Supervisory

Board Member

 August 1980 Assistant Professor, Humanities Department, Ibaraki University 2,2002,800 June 20152019 June 2011
  

April 1985

 

Assistant Professor, Faculty of Economics, Musashi University

   
 April 1991 Professor, Faculty of Economics, Musashi University   
 April 2003 Professor of Accounting Faculty of Business & Commerce, Waseda University (To the present)   
 June 2011 Audit & Supervisory Board Member of the Company   
  (Principal concurrent positions)   
   Professor of Accounting Faculty of Business & Commerce, Waseda University   
  Outside Audit & Supervisory Board Member of Mitsubishi Corporation   
  Outside DirectorMember of the Board of Directors of ORIX Corporation   
  Outside Audit & Supervisory Board Member of LAWSON,Lawson, INC.   
   

Outside Audit & Supervisory Board Member of Shiseido Company, Limited

   

 

(1)DOCOMO shares owned as of May 31, 20142015
(2)Representative director
(3)Concurrently serves as an executive officer
(4)Outside director as provided in Article 2, Item 15member of the Companies Actboard of directors
(5)Full-time audit & supervisory board member
(6)Outside audit & supervisory board member as provided in Article 2, Item 16 of the Companies Act
(7)Independent director/audit & supervisory board member under the Security Listing Regulations of the Tokyo Stock Exchange regulationsauditor

The following table shows information about our executive officers as of June 27, 2014,26, 2015, including their positions and responsibilities.

 

Name

  

Position

  

Responsibility

Kiyohito Nagata

  Executive Vice President  Managing Director of Kansai Regional Office

Syohei Sakaguchi

  Senior Vice President  Managing Director of Hokkaido Regional Office

Koji Aoyama

  Senior Vice President  Managing Director of Tohoku Regional Office

Kei Irie

  Senior Vice President  Managing Director of Tokai Regional Office

Ichiro Nishino

  Senior Vice President  Managing Director of Hokuriku Regional Office

Yohji Maruyama

  Senior Vice President  Managing Director of Chugoku Regional Office

Osamu Hirokado

  Senior Vice President  Managing Director of Shikoku Regional Office

Kazunori Yamamoto

  Senior Vice President  Managing Director of Kyusyu Regional Office

Tomohisa Ueno

  Senior Vice President  

General Manager, Shinjuku Branch

(Effective from July 1, 2014)

General Manager, Tokyo Branch

NameKenichi Mori

  

Position

Senior Vice President
  

Responsibility

General Manager, Kanagawa Branch

Minoru EtohHiroshi Nakamura

  Senior Vice President  Managing Director of R&D Strategy Department

Hiroshi NakamuraMinoru Etoh

  Senior Vice President  Managing Director of Core Network DevelopmentInnovation Management Department

Seiji MaruyamaKyoji Murakami

  Senior Vice President  Managing Director of ProductSmart-life Solutions Department

Ken Yoshizaki

  Senior Vice President  Managing Director of Financial Business Department

Hozumi Tamura

  Senior Vice President  

Managing Director of Smart-life Planning Department

Managing Director of Global Service Planning Office

Morikazu TakahashiSeiji Maruyama

  Senior Vice President  Deputy Managing Director of Corporate Marketing DivisionProduct Department

Shigeto Torizuka

Senior Vice PresidentManaging Director of Sales Promotion Department

Kouji Furukawa

  Senior Vice President  Managing Director of Corporate Sales and Marketing Department I

Mitoshi HirokaneEiichi Sakamoto

  Senior Vice President  Managing Director of Information SecurityCorporate Marketing Strategy Department

Kyoji Murakami

Senior Vice President

Senior Executive Vice President, docomo Healthcare, Inc.

Engages in: Medical /Healthcare Business Promotion

 

Note:Directors who concurrently serve as an executive officer are not included in the above list.

B.Compensation

The aggregate compensation to the member of the board of directors and audit & supervisory board members during the year ended March 31, 20142015 was as follows:

 

Position

  Total
Compensation
   Millions of yen   Number
of Persons
 
    Breakdown of Compensation   
    Base
Salary
   Stock
Option
   Bonus   Retirement
Bonus
   

Director*

  ¥            488    ¥394         ¥93          13  

Audit & supervisory board member**

  ¥60    ¥60                    3  

Outside Director/Audit & supervisory board member

  ¥71    ¥71                    5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥619    ¥525         ¥93          21  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Position

  Total
Compensation
   Millions of yen   Number
of Persons
 
    Breakdown of Compensation   
    Base
Salary
   Stock
Option
   Bonus   Retirement
Bonus
   

Member of the board of directors *1

  ¥  515    ¥417                 —    ¥98          20  

Audit & supervisory board member *2

  ¥37    ¥37                  —          3  

Outside member of the board of director/ audit & supervisory board member

  ¥101    ¥101                    5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥654    ¥555         ¥98          28  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(Notes)

1.Upper limits on compensation to members of the board of directors and audit & supervisory board members were set at ¥600 million annually for directors and ¥150 million annually for audit & supervisory board members at the 15th ordinary general meeting of shareholders held on June 20, 2006.
2.DirectorMember of the board of directors includes 1 director7 directors who retired at the end of the 22nd23rd ordinary general meeting of shareholders held on June 18, 2013.19, 2014.
3.Audit & supervisory board member includes 12 audit & supervisory board membermembers who retired at the end of the 22nd23rd ordinary general meeting of shareholders held on June 18, 2013.19, 2014.
4.*1Outside Director/Audit & supervisoryExcluding outside member(s) of the board member includes 1of directors
*2Excluding outside audit & supervisory board member who retired at the end of the 22nd ordinary general meeting of shareholders held on June 18, 2013.
*Excluding Outside Director
**Excluding Outside Audit & supervisory board membermember(s)

 

C.Board Practices

Information required by this item is set forth in Items 6.A. and 6.B. of this annual report. We do not have any contracts with directors or audit & supervisory board members providing for severance benefits upon termination of employment.

In order to enable our directors (including former directors) and audit & supervisory board members (including former audit & supervisory board members) to fully perform the roles expected of them in the

execution of their work duties, we are permitted, pursuant to the Companies Act and our Articles of Incorporation, to release directors and audit & supervisory board members from liability for damages resulting from neglect of duties, with such release to be made by resolution of the boardBoard of directors,Directors, and to be within the range permitted by law. Further, we can conclude agreements with outsidemembers of the board of directors (excluding members of the board of directors with executive authority over operations, etc.) and auditorsaudit & supervisory board members limiting their liability for damages resulting from neglect of duties. However, the liability limit pursuant to these agreements is the amount stipulated by law.

 

D.Employees

As of March 31, 2014,2015, DOCOMO and its subsidiaries had 24,86025,680 employees representing an increase of 970820 employees since March 31, 2013.2014. As of March 31, 2014, 2013 2012 and 20112012 we had 24,860, 23,890, 23,289 and 22,95423,289 employees, respectively. The average number of temporary employees for the year ended March 31, 20142015 was 11,393.11,732.

Of our 24,86025,680 employees on March 31, 2014, 2,5512015, 2,898 were staff in departments such as human resources, general affairs, management planning, accounting and finance, while the rest were engaged in business operations, such as sales, research and development and related matters. Also, as of March 31, 2014, 2,2402015, 2,143 employees were working at overseas consolidated subsidiaries.

We consider our level of remuneration, non-wage benefits, including our employee share ownership program, working conditions and other allowances, including lump-sum payments and annuities to employees

upon retirement, to be generally competitive with those offered in Japan by other large enterprises. We have an extensive training program for new employees. To increase incentives, the NTT group has implemented a bonus plan based on overall business performance and personal results. The general retirement age has been 60.

Most of our non-management employees are members of ALL NTT WORKERS UNION OF JAPAN. We consider our relationship with such unions to be excellent. We have never had a strike.

 

E.Share Ownership

Information required by this item is set forth in Item 6.A. of this annual report and below. We have not granted stock options to any of our members of the board of directors or audit & supervisory board members and we do not currently have any stock option plans approved pursuant to which they may be granted shares or stock options.

As of May 31, 2014,2015, our members of the board of directors and audit & supervisory board members owned 162,300180,200 of our shares. Currently, all of our full-time members of the board of directors and audit & supervisory board members participate in a director stock purchase plan, pursuant to which a plan administrator makes open market purchases of shares for the accounts of participating directors on a monthly basis.

Certain of our employees and certain other of our subsidiaries’ employees participate in an employee stock purchase plan, pursuant to which a plan administrator makes open market purchases of our shares for the accounts of participating employees on a monthly basis. Such purchases are made out of amounts deducted from each participating employee’s salary. In addition, if the employee chooses to participate in an optional benefit plan, we contribute a maximum of ¥80 for each ¥1,000 contributed by the employee.

Item 7. Major Shareholders and Related Party Transactions

 

A.Major Shareholders

As of March 31, 2014,2015, NTT owned 2,764,000,0002,587,008,900 shares, or 66.65% of our outstanding voting shares and 63.32% of our total issued shares. To the best of our knowledge, no other shareholder beneficially owned more than 5% of the outstanding shares (excluding treasury shares). The Japanese government, in the name of the Minister of Finance, owned 36.56%34.91% of the voting rights of NTT as of the same date. NTT does not have any special voting rights. For more information regarding our relationship with NTT, see Item 4.B-104.B-9 “Relationship with NTT.”

There was no change in NTT’s share ownership of our total issued shares in the fiscal yearyears ended March 31, 2012, 2013, 2014 and 2014.2015.

The ownership and distribution of the shares by category of shareholders according to our register of shareholders and register of beneficial shareholders as of March 31, 20142015 were as follows:

 

Category

  Number of
Shareholders
   Number of
Shares Held
   Issued
Voting Shares
   Number of
Shareholders
   Number of
Shares Held
   Issued
Voting Shares
 

Japanese financial institutions

   252     345,650,695     7.92     232     369,129,758     9.03  

Japanese securities companies

   60     76,156,249     1.74     45     91,297,355     2.23  

Other Japanese corporations

   2,127     2,816,942,036     64.54     1,827     2,634,279,038     64.47  

Foreign corporations and individuals

   951     607,330,993     13.91     965     541,138,994     13.24  

Japanese individuals, treasury shares and others

   324,428     518,920,027     11.89     279,490     449,926,855     11.01  
  

 

   

 

   

 

   

 

   

 

   

 

 

Total

   327,818     4,365,000,000     100     282,559     4,085,772,000     100  
  

 

   

 

   

 

   

 

   

 

   

 

 

 

According to The Bank of New York Mellon, depositary for our ADSs, as of March 31, 2014, 24,669,5492015, 21,765,312 shares of our common stock were held in the form of 24,669,54921,765,312 ADRs. According to our register of shareholders, as of March 31, 2014,2015, there were 327,818282,559 holders of common stock of record worldwide. As of March 31, 2014,2015, there were 224230 group record holders of our common stock with addresses in the

United States, whose shareholdings represented approximately 5.0%5.5% of the issued common stock on that date. Because some of these ADSs and shares were held by brokers or other nominees, the number of record holders with addresses in the United States may be fewer than the number of beneficial owners in the United States.

None of our shares of common stock entitles the holder to any preferential voting rights.

We know of no arrangements the operation of which may at a later time result in a change of control.

 

B.Related Party Transactions

We have entered into a number of different types of transactions with NTT, its other subsidiaries and its affiliated companies in the ordinary course of business. For information regarding our relationship with NTT, see Item 4.B-104.B-9 “Relationship with NTT.”

With NTT FINANCE, CORPORATION (“NTT FINANCE”), we have also entered into contracts for bailments of cash for consumption and a contract regarding the transfer of receivables based on a basic contract regarding the transfer of billing claims and account receivables relating to the company’s mobile communications services, installment receivables for subscribers’ equipment purchases and others. NTT and its subsidiaries collectively own 99.9% of the voting interest in NTT FINANCE as of March 31, 2014.2015. For information regarding our transactions with NTT FINANCE, see Note 1315 of “Notes to Consolidated Financial Statements—Related Party Transactions.”

 

C.Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

 

A.Consolidated Statements and Other Financial Information

Financial Statements

The information required by this item is set forth beginning on page F-2Refer to “Consolidated Financial Statements and Schedule” of this annual report.

Legal or Arbitration Proceedings

The information on legal or arbitration proceedings required by this item is set forth in Item 4.B-114.B-10 “Legal Proceedings” of this annual report.

Dividend Policy

We believe that providing adequate returns to shareholders is one of the most important issues in corporate management while atraising corporate value through the same time we are making effortsgrowth and expansion of our businesses. We plan to strengthen our financial position and maintain internal reserves. We aim to continue stable dividend paymentspay dividends by taking into account our consolidated results, consolidated financial resultsposition and consolidated dividend payout ratio based on the operating environment, with the goal to continue to pay regular dividends.principle of stable and sustainable dividend payments.

We expect to pay an annual dividend of ¥60¥70 per share for the year ending March 31, 2015,2016, which will consist of a ¥30¥35 interim dividend and a ¥30¥35 year-end dividend.

 

B.Significant Changes

Except as otherwise disclosed herein, there has been no significant change in our financial position since March 31, 2014,2015, the date of our last audited financial statements.

Item 9. The Offer and Listing

 

A.Offer and Listing Details

Price Ranges of Shares

Since October 1998, our shares have been listed on the First Section of the Tokyo Stock Exchange (“TSE”). On June 6, 2014,5, 2015, the closing sale price of our shares on the TSE was ¥1,719¥2,304.5 per share. Our shares are also quoted and traded through the New York Stock Exchange (“NYSE”). The following table lists the reported high and low sale prices of our shares on the TSE, highs and lows of Tokyo Stock Price Index (“TOPIX”) and Nikkei Stock Average for the periods indicated:

 

  TSE (1)   TOPIX   Nikkei Stock Average   TSE *1*2   TOPIX   Nikkei Stock Average 
  (Japanese yen)   (Points)   (Japanese yen)   (Japanese yen)   (Points)   (Japanese yen) 

Fiscal Year ended March 31,

  High   Low   High   Low   High   Low   High   Low   High   Low   High   Low 

2010

   1,504     1,275     987.27     778.21     11,147.62     8,084.62  

2011

��  1,590     1,280     1,001.77     725.90     11,408.17     8,227.63     1,590     1,280     1,001.77     725.90     11,408.17     8,227.63  

2012

   1,518     1,336     879.48     703.88     10,255.15     8,135.79     1,518     1,336     879.48     703.88     10,255.15     8,135.79  

2013

   1,497     1,119     1,061.75     692.18     12,650.26     8,238.96     1,497     1,119     1,061.75     692.18     12,650.26     8,238.96  

1st Quarter

   1,383     1,233     863.23     692.18     10,190.35     8,238.96  

2nd Quarter

   1,372     1,260     781.94     703.31     9,288.53     8,328.02  

3rd Quarter

   1,274     1,119     861.57     710.32     10,433.63     8,488.14  

4th Quarter

   1,497     1,260     1,061.75     862.62     12,650.26     10,398.61  

2014

   1,756     1,358     1,308.08     971.33     16,320.22     11,805.78     1,756     1,358     1,308.08     971.33     16,320.22     11,805.78  

1st Quarter

   1,666     1,358     1,289.77     971.33     15,942.60     11,805.78     1,666     1,358     1,289.77     971.33     15,942.60     11,805.78  

2nd Quarter

   1,670     1,473     1,232.02     1,103.94     14,953.29     13,188.14     1,670     1,473     1,232.02     1,103.94     14,953.29     13,188.14  

3rd Quarter

   1,730     1,506     1,302.87     1,138.75     16,320.22     13,748.94     1,730     1,506     1,302.87     1,138.75     16,320.22     13,748.94  

4th Quarter

   1,756     1,530     1,308.08     1,139.27     16,164.01     13,995.86     1,756     1,530     1,308.08     1,139.27     16,164.01     13,995.86  

2015

   2,252.5     1,515     1,594.71     1,121.50     19,778.60     13,885.11  

1st Quarter

   1,778     1,515     1,273.80     1,121.50     15,442.67     13,885.11  

2nd Quarter

   1,934.5     1,731     1,346.43     1,224.85     16,374.14     14,753.84  

3rd Quarter

   1,898     1,612.5     1,454.22     1,177.22     18,030.83     14,529.03  

4th Quarter

   2,252.5     1,731     1,594.71     1,343.29     19,778.60     16,592.57  

Calendar Year 2013

                        

Calendar Year 2014

                        

December

   1,730     1,608     1,302.87     1,222.20     16,320.22     15,112.54     1,893.5     1,752.5     1,454.22     1,346.37     18,030.83     16,672.94  

Calendar Year 2014

                        

Calendar Year 2015

                        

January

   1,756     1,631     1,308.08     1,211.22     16,164.01     14,764.57     2,047     1,731     1,433.35     1,343.29     17,850.59     16,592.57  

February

   1,706     1,530     1,234.54     1,139.27     15,094.54     13,995.86     2,150     1,955     1,529.20     1,387.38     18,865.39     17,271.87  

March

   1,697     1,540     1,241.88     1,145.90     15,312.60     14,203.21     2,252.5     2,085.5     1,594.71     1,504.45     19,778.60     18,577.06  

April

   1,652     1,515     1,223.26     1,121.50     15,164.39     13,885.11     2,296     2,040.5     1,633.81     1,519.41     20,252.12     18,927.95  

May

   1,698     1,608     1,205.60     1,143.63     14,744.16     13,964.43     2,273.5     2,100     1,680.39     1,571.43     20,655.33     19,257.85  

June (through June 6, 2014)

   1,739     1,692     1,238.89     1,210.82     15,144.34     14,777.51  

June (through June 5, 2015)

   2,364.5     2,228.5     1,683.19     1,658.99     20,619.61     20,363.18  

 

(1)*1As we conducted a 1:100 stock split with an effective date of October 1, 2013, figures provided for “TSE” are adjusted accordingly.
*2Since TSE introduced the sub-yen tick sizes for TOPIX100 stocks on July 22, 2014 (¥0.5 tick sizes was introduced between ¥1,000 and ¥5,000), the stock prices from 2nd quarter of fiscal year ended March 31, 2015 contain decimals.

Since March 2002, our American Depositary Shares have been listed on the NYSE. On June 6, 2014,5, 2015, the closing sale price of American Depositary Shares on the NYSE was $16.84$18.34 per share. The following table lists the reported high and low sale prices of our American Depositary Shares on the NYSE for the periods indicated:

 

   NYSE 
   (U.S. dollars) 

Fiscal Year ended March 31,

  

High

   Low 

2010

   16.49     13.11  

2011

   19.23     14.47  

2012

   19.55     16.56  

2013

   17.49     13.81  

1st Quarter

   17.15     15.49  

2nd Quarter

   17.49     16.16  

3rd Quarter

   16.36     13.81  

4th Quarter

   15.80     14.40  

2014

   16.74     14.58  

1st Quarter

   16.58     14.58  

2nd Quarter

   16.74     14.95  

3rd Quarter

   16.51     15.64  

4th Quarter

   16.86     15.12  

Calendar Year 2013

        

December

   16.51     15.88  

Calendar Year 2014

        

January

   16.86     15.87  

February

   16.68     15.12  

March

   16.51     15.14  

April

   16.12     15.02  

May

   16.76     15.88  

June (through June 6, 2014)

   16.93     16.61  

In addition, we delisted from the London Stock Exchange (listed in March 2002) in March 10, 2014.

   NYSE 
   (U.S. dollars) 

Fiscal Year ended March 31,

  

High

   Low 

2011

   19.23     14.47  

2012

   19.55     16.56  

2013

   17.49     13.81  

2014

   16.74     14.58  

1st Quarter

   16.58     14.58  

2nd Quarter

   16.74     14.95  

3rd Quarter

   16.51     15.64  

4th Quarter

   16.86     15.12  

2015

   18.64     14.42  

1st Quarter

   17.35     15.02  

2nd Quarter

   18.10     16.62  

3rd Quarter

   17.12     14.60  

4th Quarter

   18.64     14.42  

Calendar Year 2014

        

December

   15.79     14.60  

Calendar Year 2015

        

January

   17.02     14.42  

February

   18.03     16.64  

March

   18.64     17.39  

April

   19.22     17.24  

May

   18.56     17.49  

June (through June 5, 2015)

   18.87     18.11  

 

B.Plan of Distribution

Not applicable.

 

C.Markets

See “A. Offer and Listing Details” in Item 9.A.9 of this annual report for information on the markets on which our common stock is listed or quoted.

 

D.Selling Shareholders

Not applicable.

 

E.Dilution

Not applicable.

F.Expenses of the Issue

Not applicable.

Item 10. Additional Information

 

A.Share Capital

Not applicable.

 

B.Memorandum and Articles of Association

1. Objects and Purposes in Our Articles of Incorporation

Article 2 of our Articles of Incorporation, which are attached as an exhibit to this annual report, state our purposes, which include engaging in the telecommunications business, other businesses related to the operation of a wireless telecommunication services provider and non-related businesses.

2. Provisions Regarding Our Directors

There is no provision in our Articles of Incorporation as to a member of the board of director’s power to vote on a proposal, arrangement or contract in which a member of the board of director is materially interested, but, under the Companies Act, a director is required to refrain from voting on such matters at meetings of the boardBoard of directors.Directors.

The Companies Act provides that compensation for members of the board of directors is fixed by resolution of a general meeting of shareholders of a company. Within the upper limit approved by the shareholders’ meeting, the boardBoard of directorsDirectors will determine the amount of compensation for each director. Themember of the board of directorsdirectors. The Board of Directors may, by its resolution, leave such decision to the discretion of the Company’s president.

The Companies Act provides that the incurrence by a company of a significant loan from a third party should be approved by a resolution of the Company’s boardBoard of directors.Directors. Our Regulations of the Board of Directors have adopted this policy.

There is no mandatory retirement age for our members of the board of directors under the Companies Act or our Articles of Incorporation.

There is no requirement concerning the number of shares one individual must hold in order to qualify him or her as a directormember of the board of directors of NTT DOCOMO, INC. under the Companies Act or our Articles of Incorporation.

3. Holding of Our Shares by Foreign Investors

There are no limitations on the rights of non-residents or foreign shareholders to hold or exercise voting rights on our shares imposed by the Companies Act or our Articles of Incorporation or our other constituent documents.

4. Rights of Our Shareholders

The following section contains certain information relating to the shares, including summaries of certain provisions of our Articles of Incorporation and Share Handling Regulations and of the Companies Act relating to joint stock corporations.

 

  

General

At present, our authorized share capital is 17,460,000,000 shares with no par value of which 4,365,000,0004,085,772,000 shares have been issued. All issued shares are fully paid and non-assessable.

On January 5, 2009, a new central clearing system for shares of Japanese listed companies was established pursuant to the Act on Book-Entry of Company Bonds, Shares, etc. of Japan (including the cabinet order and ministerial ordinances promulgated thereunder; the “Act on Book-Entry”), and since then the shares of all Japanese companies listed on any Japanese financial instruments exchange, including our shares, have become

subject to this new system. On the same day, all existing shares were dematerialized and all existing share certificates for such shares became null and void. At present, the Japan Securities Depository Center, Incorporated (“JASDEC”) is the sole institution that is designated by the relevant authorities as a book-entry transfer institution which is permitted to engage in the clearing operations of shares of Japanese listed companies under the Act on Book-Entry, under the new clearing system, in order for any person to hold, sell or otherwise dispose of shares of Japanese listed companies, such person must have an account at an account management institution unless such person has an account directly at JASDEC. “Account management institutions” are, in general, financial instruments firms engaged in type 1 financial instruments business (i.e., securities brokers/dealers), banks, trust companies and certain other financial institutions which meet the requirements prescribed by the Act on Book-Entry.

Under the Act on Book-Entry, any transfer of shares is effected through book entry, and title to the shares passes to the transferee at the time when the number of the shares to be transferred is, by an application for book entry, recorded in the transferee’s account at an account management institution. The holder of an account at an account management institution is presumed to be the legal owner of the shares recorded in such account.

Under the Companies Act and the Act on Book-Entry, in order to assert shareholders’ rights against us, a shareholder must have its name and address registered in the register of shareholders, except in limited circumstances. Although, in general, holders of an account with shares recorded are to be registered in the register of shareholders on the basis of information notified by JASDEC to us at certain prescribed time, in order to exercise minority shareholders’ rights (other than those for which the record dates are fixed) against us, a holder of an account with shares needs to make an application though an account management institution to JASDEC, which will then give a notice of the name and address of such holder, the number of shares held by such holder and other requisite information to us, and to exercise rights within 4 weeks from such notice.

The registered beneficial holder of deposited shares underlying the ADSs is the depositary for the ADSs. Accordingly, holders of ADSs will not be able to directly assert shareholders’ rights against us.

 

  

Dividends

Dividends on our shares are generally distributed in proportion to the number of shares owned by each shareholder.

In Japan, the ex-dividend date and the record date for any dividend precede the date of determination of the amount of the dividend to be paid. Generally, the ex-dividend date is 2 business days prior to the record date.

Under the Companies Act, we are permitted to make distributions of surplus to our shareholders any number of times per fiscal year pursuant to resolutions of our general meeting of shareholders, subject to certain limitations described below. Distributions of surplus are required, in principle, to be authorized by a resolution of the general meeting of shareholders. In an exception to the above rule, we are permitted to make distributions of surplus in cash to our shareholders by board resolution once per fiscal year if our Articles of Incorporation so provide. Currently, our Articles of Incorporation so provide. This exception is intended to make it possible to distribute an interim dividend.

We are also permitted to make distributions of surplus pursuant to a board resolution if certain requirements under the Companies Act are met, including that our Articles of Incorporation provide that the boardBoard of directorsDirectors may determine to distribute surplus. Currently, our Articles of Incorporation do not so provide. Accordingly, distributions of our surplus must be approved by a general meeting of shareholders.

Distributions of surplus may be made in cash or in-kind in proportion to the number of shares held by each shareholder. If a distribution of surplus is to be made in-kind, we may, pursuant to a general meeting of shareholders resolution, or as the case may be, a board resolution, grant our shareholders a right to require us to

make the distribution in cash instead of in-kind. If no such right is granted, the relevant distribution must be approved by a special resolution of a general meeting of shareholders (see “Voting Rights”). Currently, we do not have any concrete plan to make a distribution of surplus in-kind.

Under the Companies Act, when we make a distribution of surplus, we must set aside in our additional paid-in capital or legal reserves an amount equal to one-tenth of the amount of surplus so distributed, until the sum of our additional paid-in capital and legal reserves reaches one-quarter of our stated capital as required by an ordinance of the Ministry of Justice.

Under the Companies Act, we may distribute any dividends up to the amount of the aggregate of (a) and (b) below, less the aggregate of (c) through (f) below, on an unconsolidated basis, as of the effective date of such distribution, if our net assets are not less than ¥3,000,000:

 

 (a)the amount of surplus, as described below;

 

 (b)in the event that extraordinary financial statements as of, or for a period from the beginning of the fiscal year to, the specified date are approved, the aggregate amount of (i) the amount of the current net income for such period described in the profit and loss statement included in the extraordinary financial statements and (ii) the amount of consideration that we received for the treasury stock that we disposed of during such period;

 

 (c)the book value of our treasury stock;

 

 (d)in the event that we disposed of treasury stock after the end of the previous fiscal year, the amount of consideration that we received for such treasury stock;

 

 (e)in the event of that which is described in (b) in this paragraph, the aggregate amount of current net loss for such period described in the profit and loss statement included in the extraordinary financial statements; and

 

 (f)the aggregate amount of accounts provided for in an ordinance of the Ministry of Justice.

For the purposes of this section, the amount of surplus is the excess of the aggregate of I. through IV. below, less the aggregate of V. through VII. below, on an unconsolidated basis:

 

 I.the total amount of (x) assets and (y) the book value of treasury stock less the total amount of (i) liabilities, (ii) stated capital, (iii) additional paid-in capital, (iv) legal reserve and (v) certain other amounts set forth in an ordinance of the Ministry of Justice;

 

 II.in the event that we disposed of treasury stock after the end of the previous fiscal year, the difference between the book value of such treasury stock and the consideration that we received for such treasury stock;

 

 III.in the event that we reduced our stated capital after the end of the previous fiscal year, the amount of such reduction less the portion thereof that has been transferred to additional paid-in capital and/or the legal reserve (if any);

 

 IV.in the event that additional paid-in capital and/or legal reserves were reduced after the end of the previous fiscal year, the amount of such reduction less the portion thereof that has been transferred to stated capital (if any);

 

 V.in the event that we canceled treasury stock after the end of the previous fiscal year, the book value of such treasury stock;

 VI.in the event that we distributed dividends after the end of the previous fiscal year, the aggregate of the following amounts:

a.    the aggregate amount of the book value of the distributed assets, excluding the book value of such assets that would be distributed to shareholders for their exercise of the right to receive dividends in cash instead of dividends in kind;

b.    the aggregate amount of cash distributed to shareholders who exercised the right to receive dividends in cash instead of dividends in kind; and

c.    the aggregate amount of cash paid to shareholders holding fewer shares that was required in order to receive dividends in kind;

 

 VII.the aggregate amounts of a. through d. below, less e. and f. below:

a.    in the event that the amount of surplus was reduced and transferred to additional paid-in capital, the legal reserve and/or stated capital after the end of the previous fiscal year, the amount so reduced;

b.    in the event that we distributed dividends after the end of the previous fiscal year, the amount set aside in additional paid-in capital and/or legal reserve;

c.    in the event that we disposed of treasury stock in the process of (x) a merger in which we succeeded all rights and obligations of a merged company, (y) a corporate split in which we succeeded all or a part of the rights and obligations of a split company or (z) a share exchange in which we acquired all shares of a company after the end of the previous fiscal year, the difference between the book value of such treasury stock and the consideration that we received for such treasury stock;

d.    in the event that we reduced the amount of surplus in the process of a corporate split (including absorption-type corporate split and incorporation-type corporate split) in which we became a split company after the end of the previous fiscal year, the amount so reduced;

e.    in the event that we made (x) a merger in which we succeeded all rights and obligations of a merged company, (y) a corporate split in which we succeeded all or a part of the rights and obligations of a split company or (z) a share exchange in which we acquired all shares of a company after the end of the previous fiscal year, the aggregate amount of (i) the amount of our capital surplus after such merger, corporate split or share exchange, less the amount of our capital surplus before such merger, corporate split or share exchange, and (ii) the amount of our retained earnings after such merger, corporate split or share exchange, less the amount of our retained earnings before such merger, corporate split or share exchange; and

f.    in the event that the amount of capital surplus increased in accordance with the provisions of an ordinance of the Ministry of Justice after the end of the previous fiscal year, such increased amount.

Under the Companies Act, we will be permitted to prepare non-consolidated extraordinary financial statements consisting of a balance sheet as of any date subsequent to the end of the previous fiscal year and an income statement for the period from the first day of the current fiscal year to the date of such balance sheet. If we prepare such extraordinary financial statements, special provisions may apply to the calculation of distributable amount.

We plan to make distributions of surplus twice per fiscal year, if possible. The record date for annual dividends is March 31 and the record date for interim dividends is September 30. Under the Act on Book-Entry, holders of account with shares recorded as of the respective record dates are deemed to be registered in the register of shareholders as of such record dates on the basis of information notified by JASDEC to us.

For information as to Japanese taxes on dividends, see “Taxation—Japanese Taxation” below.in Item 10.

 

  

Capital and Reserves

An increase in our authorized share capital is only possible pursuant to an amendment of our articles of incorporation.

The entire paid-in amount of new shares is required to be accounted for as stated capital, although we may account for an amount not exceeding one-half of such paid-in amount as additional paid-in capital. We may at any time reduce the whole or any part of our additional paid-in capital and legal reserve or transfer them to stated capital by resolution of a general meeting of shareholders.

 

  

Stock Splits

We may at any time split our issued shares into a greater number of shares by resolution of the boardBoard of directors.Directors. So long as the shares are our only class of issued shares, we may increase the number of authorized shares in the same ratio as that of any stock split by amending our Articles of Incorporation, which amendment may be effected by board resolution without shareholder’s approval.

Under the Act on Book-Entry, we must give notice to JASDEC regarding a stock split at least 2 weeks prior to the relevant record date. On the effective date of the stock split, the numbers of shares recorded in all accounts held by our shareholders at account management institutions or at JASDEC will be increased in accordance with the applicable ratio.

 

  

Consolidation of Shares

Generally, we may consolidate shares into a smaller number of shares by a special resolution of a general meeting of shareholders. A company that conducts a consolidation of shares is required by the Companies Act to give public notice to its shareholders in order to inform them of the ratio and effective date of the consolidation of shares.

Under the Act on Book-Entry, we must give notice to JASDEC regarding a consolidation of shares at least 2 weeks prior to the relevant record date. On the effective date of the consolidation of shares, the number of shares recorded in all accounts held by our shareholders at account management institutions or at JASDEC will be decreased in accordance with the applicable ratio.

 

  

Unit Share System

Effective from October 1, 2013, the unit share system has been introduced pursuant to the amendments to our articles of incorporation that were approved by a resolution of the boardBoard of directorsDirectors of April 26, 2013 and 100 shares constitute one unit of shares. Under the unit share system, shareholders have, at general meetings of shareholders, one vote for each unit of shares held by them, and shares constituting less than a full unit carry no voting rights. Our articles of incorporation provide that holders of shares constituting less than a full unit do not have shareholder rights, except for those specified in the Companies Act or an ordinance of the Ministry of Justice which include rights (i) to receive dividends, (ii) to receive cash or other assets in the case of a consolidation or split of shares, share exchange (kabushiki-kokan), share transfer (kabushiki-iten), or merger and (iii) to be allotted rights to subscribe for new shares and stock acquisition rights for free when such rights are granted to shareholders. Holders of shares constituting less than a full unit may at any time request that we purchase such shares constituting less than a full unit at their market price in accordance with our share handling regulations. In addition, holders of shares constituting less than a full unit may require that we sell them such number of shares, that, when combined with the number of shares already held by such holder, constitute a whole unit of shares; provided that we be obliged to comply with such request only when there is a sufficient number of treasury shares to accommodate such request. As prescribed in the share handling regulations, such requests must be made through an account management institution and JASDEC pursuant to the rules set by JASDEC without going through the notification procedure required for the exercise of shareholders’ rights to which shareholders

are entitled regardless of record dates. The boardBoard of directorsDirectors may reduce the number of shares constituting one unit or cease to use the unit share system by amendments to the articles of incorporation without shareholders’ approval even though amendments to the articles of incorporation generally require a special resolution adopted at the general meeting of shareholders.

Under the new book-entry transfer system described above, shares constituting less than a full unit are transferable. Under the rules of the Japanese financial instruments exchanges, however, shares constituting less than a full unit do not comprise a trading unit, except in limited circumstances, and accordingly may not be sold on the Japanese financial instruments exchanges.

 

  

General Meeting of Shareholders

The ordinary general meeting of our shareholders is usually held in June of each fiscal year in Tokyo. In addition, we may hold an extraordinary general meeting of shareholders whenever necessary. Notice of a shareholders’ meeting stating the purpose thereof and a summary of the matters to be acted upon must be dispatched to each shareholder having voting rights (or, in the case of a non-resident shareholder, to his or her mailing address or standing proxy in Japan) at least 2 weeks prior to the date set for the meeting. The record date for an ordinary general meeting of shareholders is March 31.

Under the Companies Act and our Articles of Incorporation, any shareholder of record as of the relevant record date who is holding 300 or more voting rights or 1 percent or more of the total number of voting rights for 6 months or longer may propose a matter to be considered at a general meeting of shareholders by submitting a written request to our director at least 8 weeks prior to the date of such meeting. To the contrary, under the Act on Book-Entry, such shareholder is not required to be registered in the register of shareholders when exercising the right of proposal, but such shareholder is required to make an application though an account management institution to JASDEC, which will then give us notice of the name and address of such shareholder, the number of shares held by such shareholder and other requisite information, and to exercise the right of proposal within 4 weeks from such notice.

 

  

Voting Rights

Generally, a holder of our shares is entitled to one vote for each one unit of shares (100 shares). Except as otherwise provided in law and our Articles of Incorporation, a resolution can be adopted at a meeting of shareholders by shareholders holding a majority of our shares having voting rights represented at such meeting. Shareholders may also exercise their voting rights through proxies, provided that a proxy is one of our shareholders or that in the case of a shareholder being a government or a juridical person, its proxy may be its employee. Shareholders who intend to be absent from the shareholders’ meeting may exercise their voting rights in writing or by electronic means. The Companies Act and our Articles of Incorporation provide that the quorum for appointment of directors and audit & supervisory board members shall not be less than one-third of the total number of the voting rights represented at the meeting. Our Articles of Incorporation provide that shares may not be voted cumulatively for the appointment of directors.

Under the Companies Act and our Articles of Incorporation, certain corporate actions must be approved by a “special resolution” of our meeting of shareholders, when the quorum is one-third of the total number of shares having voting rights and the approval of the holders of not less than two-thirds of our shares having voting rights represented at the meeting is required. Examples of corporate actions that require a special resolution are:

 

any amendment of our articles of incorporation (except for amendments that may be authorized solely by the boardBoard of directorsDirectors under the Companies Act);

 

a reduction of stated capital (except for a reduction of stated capital for the purpose of replenishing capital deficiencies at the day of the ordinary general meeting);

a distribution by us of surplus in-kind, if we do not grant shareholders the right to require us to effect the distribution in cash, instead of in-kind;

 

a dissolution or a merger, subject to a certain exception under which a shareholders’ resolution is not required;

the transfer of the whole or an important part of the business, except for the transfer of an important part of the business in which the book value of transferred assets does not exceed 20% of that of the Company’s total assets;

 

the taking over of the whole of the business of any other corporation;

 

a share exchange or share transfer for the purpose of establishing a parent and wholly owned subsidiary relationship, subject to a certain exception under which a shareholders’ resolution is not required;

 

a company split, subject to a certain exception under which a shareholders’ resolution is not required;

 

the offering of shares at a “specially favorable” price and any offering of stock acquisition rights or bonds with stock acquisition rights at a “specially favorable” price or in a “specially favorable” condition to any persons other than shareholders; and

 

any purchase of the Company’s own shares from a certain person.

The voting rights of holders of ADSs are exercised by the depositary based on instructions from those holders. With respect to voting by holders of ADSs, please see Exhibit 1 of the Registration Statement on Form F-6 (File No. 333-134940) filed on September 16, 2013.

 

  

Liquidation Rights

In the event of our liquidation, the assets remaining after payment of all taxes, liquidation expenses and debts will be distributed among the shareholders in proportion to the respective number of shares which they hold.

 

  

Issue of Additional Shares and Pre-emptive Rights

Shareholders have no pre-emptive rights. Authorized but unissued shares may be issued at such times and upon such terms as the boardBoard of directorsDirectors determines, by its resolution subject to the limitations as to the offering of shares at a “specially favorable” price mentioned above. Under the Companies Act, the boardBoard of directorsDirectors may, however, determine to grant shareholders subscription rights in connection with a particular issue of shares. Any such subscription rights must be granted on uniform terms to all shareholders on apro rata basis. In addition, we are required to notify each shareholder of certain matters regarding such subscription rights, as well as the date by which shareholders need to exercise such rights.

We may issue stock acquisition rights or bonds with stock acquisition rights in relation to which stock acquisition rights are non-separable. Except where the issue of stock acquisition rights would be on “specially favorable” terms or price, the issue of stock acquisition rights or of bonds with stock acquisition rights may be authorized by a resolution of the boardBoard of directors.Directors. Upon exercise of the stock acquisition rights, the holder of such rights may, subject to the terms and conditions thereof, either acquire shares by paying the applicable exercise price or, if so determined by a resolution of the boardBoard of directors,Directors, by making a substitute payment, such as having bonds redeemed without payment to the holder in lieu of the exercise price.

 

  

Dilution

It is possible that, in the future, market conditions and other factors might make subscription rights allocated to shareholders desirable at a subscription price substantially below their current market price, in which case shareholders who do not exercise and are unable otherwise to realize the full value of their subscription rights will suffer dilution of their equity interest in us. As of March 31, 2014,2015, we have not issued stock acquisition rights or bond with stock acquisition rights.

  

Report to Shareholders

We furnish to our shareholders notices of shareholders’ meetings, annual business reports, includingnon-consolidated and consolidated financial reports, and notices of resolutions adopted at the shareholders’ meetings, in Japanese and English translation. Such notices as described above may be given by electronic means to those shareholders who have agreed to such method of notice.

 

  

Record Date

In addition to the record dates for an ordinary general meeting of shareholders and annual and interim dividends which are provided for in our Articles of Incorporation, by a resolution of the boardBoard of directorsDirectors and after giving at least 2 weeks’ prior public notice, we may at any time set a record date in order to determine shareholders who are entitled to certain rights pertaining to the shares.

Under the Act on Book-Entry, we are required to give notice of each record date to JASDEC at least 2 weeks prior to such record date. JASDEC is required to promptly give us notice of the names and addresses of all of our shareholders of record, the numbers of shares held by them and other relevant information as of such record date.

 

  

Repurchase of our Own Shares

Under the Companies Act, we are generally required to obtain authorization for any acquisition of our own shares by means of:

 

 (i)a resolution at a general meeting of shareholders;

 

 (ii)a resolution of the boardBoard of directorsDirectors if the acquisition is in accordance with our Articles of Incorporation; or

 

 (iii)a resolution of the boardBoard of directorsDirectors if the acquisition is to purchase our shares from a subsidiary.

We may only dispose of shares we may so acquire in accordance with the procedures applicable to a new share issuance under the Companies Act.

Upon due authorization, we may acquire our own shares:

 

in the case of (i) and (ii) above:

 

through the stock exchanges on which the shares are listed or the over-the-counter markets on which the shares are traded; or

 

by way of tender offer;

 

in the case of (i) above, from a specific person, but only if our shareholders approve this acquisition by special resolution; and

 

in the case of (iii) above, from the subsidiary.

In the event we are to acquire our own shares from a specific person other than a subsidiary at the price which exceeds market price, each other shareholder may request us to acquire the shares held by such shareholder as well.

Acquisitions described in (i) and (ii) above must satisfy certain other requirements, including that the total amount of the purchase price may not exceed the distributable amount.

  

Shareholders of Unknown Location

We are not required to send a notice to a shareholder if a notice to such shareholder fails to arrive at the registered address of the shareholder in our register of shareholders or at the address otherwise notified to us continuously for 5 years or more.

In addition, we may dispose of the shares at the then market price of the shares and hold or deposit the proceeds for such shareholder, the location of which is unknown, (i) notices to the shareholders fails to arrive continuously for 5 years or more at the registered address of the shareholder in our register of shareholders or at the address otherwise notified to us, and (ii) the shareholder fails to receive dividends on the shares continuously for 5 years or more at the address registered in our register of shareholders or at the address otherwise notified to us.

 

  

American Depositary Receipts

The current ADS/share ratio is one ADS per each share of common stock.

For further information regarding our American Depositary Receipt program, please refer to Exhibit 1 of the Registration Statement on Form F-6 (File No.333-134940) filed on September 16, 2013.

 

 *We changed the ratio of ADS to underlying shares in accordance with the stock split effectuated on October 1, 2013, where each of our common shares were split at a ratio of 1:100 as of the effective date.

 

  

Reporting of Substantial Shareholdings

The Financial Instruments and Exchange Act of Japan and its related regulations require any person who has become, solely or jointly, a holder of more than 5% of the total issued shares of a company that is listed on any Japanese financial instruments exchange, to file a report with the director of the competent Local Finance Bureau of the Ministry of Finance within 5 business days from the date of becoming such holder. With certain exceptions, a similar report must also be filed in respect of any subsequent change of 1% or more in the holding or of any change specified in the ordinance in material matters set out in any previously-filed reports. For this purpose, shares issuable upon exercise of stock acquisition rights are taken into account in determining both the number of shares held by the holder and the issuer’s total issued shares. Copies of each report must also be furnished to the issuer of the shares and to all Japanese financial instruments exchanges on which the shares are listed. These reports are made available for public inspection.

 

  

Daily Price Fluctuation Limits under Japanese Financial Instruments Exchange Rules

Share prices on Japanese financial instruments exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges set daily price limits, which limit the maximum range of fluctuation within a single trading day. Daily price limits are set according to the previous day’s closing price or special quote. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take place outside these limits. Consequently, an investor wishing to sell at a price above or below the relevant daily limit may not be able to sell his or her shares at such price on a particular trading day, or at all.

On June 6, 2014,5, 2015, the closing price of our shares on the Tokyo Stock Exchange was ¥1,719¥2,304.5 per share. The following table shows the daily price limit for a stock on the Tokyo Stock Exchange with a closing price of between ¥1,500¥2,000 and ¥2,000¥3,000 per share, as well as the daily price limit if our per share price were to rise to between ¥2,000¥3,000 and ¥3,000,¥5,000, or fall to between ¥1,000¥1,500 and ¥1,500.¥2,000.

Selected Daily Price Limits

 

Previous Day’s Closing Price or Special Quote

Previous Day’s Closing Price or Special Quote

   Maximum Daily Price
Movement
 

Previous Day’s Closing Price or Special Quote

   Maximum Daily Price
Movement
 

Over

  ¥ 1,000    Less than  ¥ 1,500    ¥300    ¥ 1,500    Less than  ¥ 2,000    ¥400  

Over

   1,500    Less than   2,000     400     2,000    Less than   3,000     500  

Over

   2,000    Less than   3,000     500     3,000    Less than   5,000     700  

For a history of the trading price of our shares on the Tokyo Stock Exchange, see Item 9.A.

C.Material Contracts

We have not entered into any material contracts (which would present any significant impact on our financial condition), other than in the ordinary course of business.

 

D.Exchange Controls

There are no laws, decrees, regulations or other legislation which materially affect our ability to import or export capital for our use or our ability to pay dividends to nonresident holders of our shares.

 

E.Taxation

1. United States Federal Income Taxation

This section describes the material United States federal income tax consequences of owning shares or ADSs. It applies to you only if you are a U.S. holder (as defined below) and hold your shares or ADSs as capital assets for tax purposes. This section does not apply to you if you are a member of a special class of holders subject to special rules, including:

 

a dealer in securities;

 

a trader in securities that elects to use a mark-to-market method of accounting for securities holdings;

 

a tax-exempt organization;

 

a life insurance company;

 

a person liable for alternative minimum tax;

 

a person that actually or constructively owns 10% or more of our voting stock;

 

a person that holds shares or ADSs as part of a straddle or a hedging or a conversion transaction;

 

a person that purchases or sells shares or ADSs as part of a wash sale for tax purposes; or

 

a person whose functional currency is not the U.S. dollar.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect, as well as on the Convention Between the Government of the United States of America and the Government of the Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (“the Treaty”). These laws are subject to change, possibly on a retroactive basis. In addition, this section is based in part upon the representations of The Bank of New York Mellon as depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.

If a partnership holds shares or ADSs, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the shares or ADSs should consult its tax advisor with regard to the United States federal income tax treatment of an investment in shares or ADSs.

In general, and taking into account the earlier assumptions, for United States federal income tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the shares represented by those ADRs. Exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to United States federal income tax.

For purposes of United States federal income taxation, you are treated as a U.S. holder if 1) you are a beneficial owner of shares or ADSs and 2) you are, for United States federal income tax purposes:

 

a citizen or resident of the United States;

 

a domestic corporation;

an estate whose income is subject to United States federal income tax regardless of its source; or

 

a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.

You should consult your own tax advisor regarding the United States federal, state and local and the Japanese and other tax consequences of owning and disposing of shares and ADSs in your particular circumstances.

2.Taxation of Dividends

Under the United States federal income tax laws, and subject to the passive foreign investment company rules discussed below, if you are a U.S. holder, the gross amount of any dividend paid by us out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) is subject to United States federal income taxation. If you are a non-corporate U.S. holder, dividends that constitute qualified dividend income will be taxable to you at the preferential rates of 15% applicable to long-term capital gains provided that you hold the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. For a U.S. holder who is subject to the highest income tax rate, 20% is the applicable tax rate instead of the preferential rates of 15%. Dividends paid by us with respect to our shares or ADSs generally will be qualified dividend income. You must include any Japanese tax withheld from the dividend payment in this gross amount even though you do not in fact receive it. The dividend is taxable to you when you, in the case of shares, or the depositary, in the case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S. dollar value of the Japanese yen payments made, determined at the spot Japanese yen/U.S. dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. In general, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a nontaxable return of capital to the extent of your basis in the shares or ADSs and thereafter as capital gain. However we do not expect to calculate earnings and profits in accordance with United States federal income tax principles. Accordingly, you should expect to generally treat distributions we make as dividends.

Subject to certain limitations, the Japanese tax withheld in accordance with the Treaty and paid over to Japan will be creditable or deductible against your United States federal income tax liability. To the extent a refund of the tax withheld is available to you under Japanese law or under the Treaty, the amount of tax that is refundable will not be eligible for credit against your United States federal income tax liability. Please see “Japanese Taxation”,Taxation,” below, for the procedures for obtaining a reduced rate of withholding under the Treaty or a tax refund. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are

subject to the preferential tax rates. Dividends will generally be income from sources outside the United States and will, depending on your circumstances, generally be either “passive” or “general” income for purposes of computing the foreign tax credit allowable to you.

Distributions of additional shares to you with respect to shares or ADSs that are made as part of a pro rata distribution to all of our shareholders generally will not be subject to United States federal income tax. Your basis in the new shares or ADSs received will be determined by allocating your basis in the shares or ADSs you held at the time of the distribution between the new shares or ADSs and the shares or ADSs you held at the time of the distribution based on their relative fair market values on the date of the distribution.

  

Taxation of Capital Gains

Subject to the passive foreign investment company rules discussed below, if you are a U.S. holder and you sell or otherwise dispose of your shares or ADSs, you will recognize capital gain or loss for the United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your shares or ADSs. Capital gain of a non-corporate U.S. holder is generally taxed at preferential rates where the property is held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

 

  

Passive Foreign Investment Company Rules

We believe that our shares and ADSs should not be treated as stock of a passive foreign investment company, or “PFIC,” for United States federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If we were to be treated as a PFIC, unless a U.S. holder were to elect to be taxed annually on a mark-to-market basis with respect to the shares or ADSs, gain realized on the sale or other disposition of your shares or ADSs would in general not be treated as capital gain. Instead, if you are a U.S. holder, you would be treated as if you had realized such gain and certain “excess distributions” ratably over your holding period for the shares or ADSs and would generally be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, your shares or ADSs will be treated as stock in a PFIC if we were a PFIC at any time during your holding period in your shares or ADSs. In addition, dividends that you receive from us will not be eligible for the special tax rates applicable to qualified dividend income if we are treated as a PFIC with respect to you either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.

3.Japanese Taxation

The following is a summary of the principal Japanese tax consequences to owners of our shares or ADSs who are non-resident individuals or non-Japanese corporations without a permanent establishment in Japan to which income from our shares is taxable. The tax treatment is subject to possible changes in the applicable Japanese laws or double taxation conventions occurring after the date of this annual report. This summary is not exhaustive of all possible tax considerations that may apply to a particular investor. Potential investors should consult their own tax advisors as to:

 

the overall tax consequences of the acquisition, ownership and disposition of shares or ADSs, including specifically the tax consequences under Japanese law;

 

the laws of the jurisdiction of which they are resident; and

 

any tax treaty between Japan and their country of residence.

Generally, a non-resident individual or a non-Japanese corporation as a holder of shares or ADSs is subject to Japanese withholding tax on dividends paid by us. In the absence of any applicable tax treaty, convention or agreement reducing the maximum rate of withholding tax, the rate of Japanese withholding tax applicable to

dividends paid by us to a non-resident individual of Japan or a non-Japanese corporation is 20.42% (up to December 31, 2037, which rate of Japanese withholding tax includes the Special Reconstruction Income Tax, which is described below) and will be 20% after December 31, 2037. With respect to dividends paid on listed shares issued by a Japanese corporation (such as our shares) to a non-resident individual of Japan or a non-Japanese corporation, the aforementioned 20.42% or 20% withholding tax rate is reduced to (i) 7.147% for dividends to be due and payable on or before December 31, 2013, (ii) 15.315% for dividends to be due and payable on or before December 31, 2037, and (iii)(ii) 15% for dividends to be due and payable thereafter. This tax reduction is not available for a non-resident individual who holds 3% or more of the issued shares of a Japanese corporation. For the purpose of this paragraph, the Special Reconstruction Income Tax is a special surtax at the rate of 2.1% imposed on individuals and corporations (whether residents or non-residents of Japan, or Japanese

corporations or non-Japanese corporations) up to December 31, 2037 for reconstruction funding after the Great East Japan Earthquake. This special surtax is applicable to various income taxes including withholding tax on dividends and the amount of such special surtax is calculated by multiplying the amount of the original income tax by the surtax rate of 2.1%. In consequence, the amount of the aggregate withholding tax on dividends will be the original amount of such withholding tax plus the original amount multiplied by the surtax rate (i.e. 102.1% of the original amount). Japan has income tax treaties whereby the withholding tax rate is provided not to exceed the prescribed rate, which is generally 15% or 10%, for portfolio investors. 15% is applied under the income tax treaties with, among others, Belgium, Canada, Denmark, Finland, Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, Singapore Spain and Sweden,Spain, and 10% is applied under the income tax treaties with Australia, France, Hong Kong, Kuwait, The Netherlands, Portugal, Saudi Arabia, Sweden, Switzerland, the United Kingdom, and the United States.States and United Arab Emirates. In addition, under the income tax treaty between the United States and Japan, dividends paid to pension funds of qualified United States residents eligible to enjoy treaty benefits are exempt from Japanese income taxation by way of withholding or otherwise unless such dividends are derived from the carrying on of a business, directly or indirectly, by such pension funds. Under the income tax treaties between Japan and the United Kingdom, The Netherland, and Switzerland, similar treatment will be applied to dividends. Under Japanese tax law, any reduced maximum rate applicable under a tax treaty shall be available when such maximum rate is below the rate otherwise applicable under the Japanese tax law referred to in the preceding paragraph with respect to the dividends to be paid by us on the shares.

Non-resident holders who are entitled to a reduced rate of Japanese withholding tax on payments of dividends on the shares by us are required to submit an Application Form for the Income Tax Convention regarding Relief from Japanese Income Tax on Dividends in advance through us to the relevant tax authority before the payment of dividends. A standing proxy for non-resident holders may provide the application. In this regard, a certain simplified special filing procedure is available for non-resident holders of listed shares to claim treaty benefits of exemption from or reduction of Japanese withholding tax, with respect to dividends to be due and payable on or after January 1, 2014, by submitting a Special Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends of Listed Stocks. With respect to ADSs, this reduced rate is applicable if the depositary or its agent submits in duplicate two Application Forms for Income Tax Convention (one is FORM 4 subtitled “Extension of Time for Withholding of Tax on Dividends with respect to Foreign Depositary Receipt” to the payer of dividends, who has to file the original with the district director of tax office for the place where the payer resides, by the day before the payment of dividends and the other is FORM 5 subtitled “Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends with respect to Foreign Depositary Receipt” to the district director of tax office through the payer of Dividends in 8 months from the day following the base date of payment of dividends for application purposes for which FORM 4 has been submitted). To claim this reduced rate, a non-resident holder of ADSs will be required to file proof of taxpayer status, residence and beneficial ownership (as applicable) and to provide other information or documents as may be required by the depositary. Non-resident holders who do not submit an application in advance will generally be entitled to claim a refund from the relevant Japanese tax authority of withholding taxes withheld in excess of the rate of an applicable tax treaty.

Gains derived from the sale of shares or ADSs outside Japan, or from the sale of shares within Japan by a non-resident holder, generally are not subject to Japanese income or corporation taxes provided that such gains are from portfolio investments where the shareholding ratio is within certain prescribed level.

Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has acquired shares or ADSs as a legatee, heir or donee, even if the individual is not a Japanese resident.

 

F.Dividends and Paying Agents

Not applicable.

G.Statement by Experts

Not applicable.

 

H.Documents on Display

We have filed with the SEC this annual report on Form 20-F under the Securities Exchange Act of 1934 with respect to our shares and ADSs.

You may review a copy of the annual report and other information without charge at the SEC’s public reference room at 100 F Street, NE., Washington, D.C. 20549. You may also obtain copies of all or any portion of the annual report from the public reference room. For information regarding the procedures of the public reference room, please call the SEC at 1-800-SEC-0330. The SEC also maintains a web site at www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.

As a foreign private issuer, we are exempt from the rules under the Securities Exchange Act of 1934 prescribing the furnishing and content of proxy statements to shareholders.

 

I.Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

We are primarily exposed to market risks from changes in interest rates, foreign currency exchange rates and stock prices. The fair value of our assets and liabilities, our earnings and cash flows may be negatively impacted by these market risks.

To manage these risks, we use derivative instruments such as interest rate swap agreements, foreign exchange forward contracts, foreign currency option contracts, etc. as needed. The derivative instruments are executed with creditworthy financial institutions and our management believes that there is little risk of default by these counterparties. We set and follow internal regulations that establish conditions to enter into derivative contracts and procedures for approving and monitoring such contracts.

No specific hedging activities are taken against the fluctuations in prices of marketable securities.

Interest rate risk

We may use interest rate swap transactions from time to time in certain cases, under which we receive fixed rate interest payments and pay floating rate interest payments, to hedge the changes in fair value of certain debt as a part of our asset-liability management.

We were not a counterparty to any interest rate swap arrangements designated as instruments hedging the changes in fair value as of March 31, 20132014 and 20142015 and did not enter into any interest rate swaps designated as instruments hedging the changes in fair value for the fiscal years ended March 31, 20132014 and 2014.2015.

The following table below provides information about financial instruments that are sensitive to changes in interest rates:

 

  Weighted
Average
Interest
Rate
(per annum)
  Millions of yen   Weighted
Average
Interest
Rate
(per annum)
  Millions of yen 
   Expected Maturity Fair
value
3/31/14
    Expected Maturity Fair
value
3/31/15
 
   Year ending March 31,    Year ending March 31, 
       2015     2016 2017 2018 2019 Thereafter       Total              2016     2017 2018 2019     2020     Thereafter       Total       

DEBT

                    

Corporate bonds

Japanese Yen Bonds

   1.2             ¥60,000   ¥110,000   ¥50,000   ¥220,000   ¥228,199  

Corporate bonds

          

Japanese Yen Bonds

   1.2         ¥60,000   ¥110,000       ¥50,000   ¥220,000   ¥228,073  

Borrowings from banks and others

                    

Japanese Yen Loans

   0.9  233    203    200    200            836    839     0.9  203    200    200                603    605  

Euro Loans

   7.5  15                        15    15  
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Long term debt, including current portion Total

   ¥248   ¥203   ¥200   ¥60,200   ¥110,000   ¥50,000   ¥220,851   ¥229,053     ¥203   ¥200   ¥60,200   ¥110,000       ¥50,000   ¥220,603   ¥228,678  
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Foreign exchange risk

In order to mitigate foreign currency risks we engage in foreign currency hedge and option transactions. As of March 31, 2014,2015, the foreign exchange forward contracts outstanding totaled ¥474¥100 million, with an unrealized loss of ¥2¥0 million. As of March 31, 2014,2015, the foreign currency option contracts outstanding totaled ¥85,338¥48,740 million, with an unrealized gain of ¥272¥394 million.

Investment price risk

The fair values of certain investments of ours, primarily in marketable securities, expose us to fluctuation risks of securities prices. In general, we have invested in highly-liquid and low-risk instruments, which are not held for trading purposes. These investments are subject to changes in the market prices of the securities. The following table below provides information about our market sensitive marketable securities:

 

  Millions of yen   Millions of yen 
  March 31, 2014   March 31, 2015 
  Carrying
Amount
   Fair Value   Carrying
Amount
   Fair Value 

Equity securities available-for-sale

  ¥158,770    ¥ 158,770    ¥181,824    ¥181,824  

Debt securities available-for-sale

   5     5     6     6  
  

 

   

 

   

 

   

 

 

Total

  ¥158,775    ¥158,775    ¥181,830    ¥181,830  
  

 

   

 

   

 

   

 

 

Concentrations of credit risk

As of March 31, 2014,2015, the amount of other receivables resulting from the sale of receivables to NTT FINANCE was ¥248,732¥259,218 million, and the amount of receivables held for sale was ¥983,644¥1,149,081 million. For information regarding our transactions with NTT FINANCE, see Note 1315 of “Notes to Consolidated Financial Statements—Related Party Transactions.”

Item 12. Description of Securities Other Thanthan Equity Securities

Fees payable by ADR Holders

The following table shows the fees and charges that a holder of our ADR may have to pay, either directly or indirectly:

 

Services

  

Fees[USD]

Taxes and other governmental charges

  As applicable

Such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Issuer or Foreign Registrar and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder

  As applicable

Such cable, telex and facsimile transmission expenses as are expressly provided in thisthe Deposit Agreement

  As applicable

Such expenses as are incurred by the Depositary in the conversion of Foreign Currency

  As applicable

The execution and delivery of Receipts and the surrender of Receipts

  $5.00 or less per 100 ADRADS

Any cash distribution made pursuant to the Deposit Agreement

  $0.02 or less per ADRADS

The distribution of securities, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a results of the deposit of such securities, but which securities are instead distributed by the Depositary to Owners.

  As applicable

Fees paid to DOCOMO by the Depositary

The Bank of New York Mellon, as Depositary, has reimbursed DOCOMO for the New York Stock Exchange listing fees of $42,000 for the calendar year 2013.2014. Furthermore, from April 1, 20132014 to March 31, 2014,2015, the Bank of New York Mellon has waived a total of $132,000$134,000 in fees associated with the administration of the ADR program, investor relations expenses and administrative fees for routine corporate actions such as, among others, proxy process fees and cash distribution process fees, in addition to their standard fees for providing investor relations information services.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

1. Disclosure Controls and Procedures

The Company’s management carried out an evaluation, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March 31, 20142015 pursuant to the U.S. Securities Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of March 31, 20142015 were effective.

2. Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the U.S. Securities Exchange Act of 1934. Internal control over financial reporting of the Company is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, however, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of internal control to future periods are subject to risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management evaluated the effectiveness of the Company’s internal control over financial reporting as of March 31, 20142015 by using the criteria set forth in Internal Control—Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 1992.. Based upon this evaluation, our management concluded that the Company’s internal control over financial reporting as of March 31, 20142015 was effective.

Our independent registered public accounting firm, has issued an audit report on the effectiveness of our internal control over financial reporting as of March 31, 2014,2015, which appears on page F-3 of this annual report on Form 20-F.

3. Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the year ended March 31, 20142015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

Our auditAudit & supervisory boardSupervisory Board has resolved to elect Ms. Eiko Tsujiyama as “audit committee financial expert” within the meaning of the rules of the Securities and Exchange Commission. In addition, Ms. Tsujiyama is an outside audit & supervisory board member under the Companies Act and is independent from us.

Item 16B. Code of Ethics

We have a code of ethics that applies to our chief executive officer, chief financial officer and other senior officers in order to promote honesty, integrity, transparency, and ethical conduct in such persons’ performance of their management responsibilities. Our code of ethics, as of June 27, 2014,26, 2015, is attached to this annual report on Form 20-F as exhibit 11.1.

Item 16C. Principal Accountant Fees and Services

Fees Paid to the Independent Auditor

The Company and its subsidiaries engaged KPMG AZSA LLC to perform an annual audit of the Company’s financial statements.

The following table presents information concerning fees paid to KPMG AZSA LLC and its affiliates for the years ended March 31, 20132014 and 2014.2015.

 

  Millions of yen   Millions of yen 
  Year ended March 31,   Year ended March 31, 
      2013           2014           2014           2015     

Audit fees (1)

  ¥                1,028    ¥              1,072    ¥                1,072    ¥              1,122  

Audit-related fees (2)

   2     4     4     3  

Tax-related fees (3)

   34     39     39     48  

All other fees (4)

   23     16     16     10  
  

 

   

 

   

 

   

 

 

Total

  ¥1,087    ¥1,131    ¥1,131    ¥1,183  
  

 

   

 

   

 

   

 

 

 

(1)These are fees for professional services performed by KPMG AZSA LLC and its affiliates for the audit of the Company and its subsidiaries’ annual financial statements and services that are normally provided in connection with statutory and regulatory filings.
(2)These are fees for assurance and related services rendered by these accountants that are reasonably related to the performance of the audit or review of the Company’s and its subsidiaries’ financial statements and are not reported under audit fees.
(3)These are fees for professional services rendered by KPMG for tax returns and tax consultation services.
(4)These are fees for the services provided by KPMG AZSA LLC and its affiliates, other than the fees reported in paragraphs (1) through (3), such as providing guidance and counsel on International Financial Reporting Standards.

Pre-Approval of Services Provided by KPMG AZSA LLC and its affiliates

The Company and its subsidiaries have adopted policies and procedures for the Company’s boardBoard of directors’Directors’ and the auditAudit & supervisory board’sSupervisory Board’s pre-approving all audit and non-audit work performed by KPMG AZSA LLC and its affiliates. Specifically, the policies and procedures prohibit KPMG AZSA LLC and its affiliates from performing any services for the Company or its subsidiaries without the prior approval of the Company’s boardBoard of directorsDirectors and the auditAudit & supervisory board.Supervisory Board.

AllFor the fiscal year ended March 31, 2015, all of the services provided by KPMG AZSA LLC and its affiliates since Rule 2-01(c)(7) of Regulation S-X became effective were approved by the Company’s boardBoard of directorsDirectors and the auditAudit & supervisory boardSupervisory Board pursuant to the approval policies described above, and none of such services were approved pursuant to the procedures described in Rule 2-01(c)(7)(i)(C) of Regulation S-X, which waives the general requirement for pre-approval in certain circumstances.

Item 16D. Exemptions from the Listing Standards for Audit Committees

With respect to the requirements of Rule 10A-3 under the Securities Exchange Act of 1934 relating to listed company audit committees, which apply to us through Section 303A.06 of the New York Stock Exchange’s Listed Company Manual, we rely on an exemption provided by paragraph (c)(3) of that Rule available to foreign

private issuers with audit & supervisory board members meeting certain requirements. For a New York Stock Exchange-listed Japanese company with an auditAudit & supervisory board,Supervisory Board, the requirements for relying on paragraph (c)(3) of Rule 10A-3 are as follows:

 

 The auditAudit & supervisory boardSupervisory Board must be established, and its members must be selected, pursuant to Japanese law requiring such a board for Japanese companies that elect to have a corporate governance system with audit & supervisory board members.

 

 Japanese law must and does require the auditAudit & supervisory boardSupervisory Board to be separate from the boardBoard of directors.Directors.

 

 None of the members of the auditAudit & supervisory boardSupervisory Board may be elected by management, and none of the listed company’s executive officers may be a member of the auditAudit & supervisory board.Supervisory Board.

 

 Japanese law must and does set forth standards for the independence of the members of the auditAudit & supervisory boardSupervisory Board from the listed company or its management.

 

 The auditAudit & supervisory board,Supervisory Board, in accordance with Japanese law or the listed company’s governing documents (such as Articles of Incorporation, Regulations of the Board of Directors and etc.), must be responsible, to the election of independent auditor and the extent permitted by Japanese law, for the appointment, retention and oversight of the work of any registered public accounting firm engaged (including, to the extent permitted by Japanese law, the resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the listed company, including its principal accountant which audits its consolidated financial statements included in its annual reports on Form 20-F.

 

 To the extent permitted by Japanese law:

 

the auditAudit & supervisory boardSupervisory Board must establish procedures for (i) the receipt, retention and treatment of complaints received by the listed company regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential, anonymous submission by the listed company’s employees of concerns regarding questionable accounting or auditing matters;

 

the auditAudit & supervisory boardSupervisory Board must have the authority to engage independent counsel and other advisers, as it determines necessary to carry out its duties; and

 

the listed company must provide for appropriate funding, as determined by its auditAudit & supervisory board,Supervisory Board, for payment of (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the listed company, (ii) compensation to any advisers employed by the auditAudit & supervisory board,Supervisory Board, and (iii) ordinary administrative expenses of the audit & supervisory board member that are necessary or appropriate in carrying out its duties.

In our assessment, our auditAudit & supervisory board,Supervisory Board, which meets the requirements for reliance on the exemption in paragraph (c)(3) of Rule 10A-3 described above, is not significantly different from an audit committee meeting all the requirements of paragraph (b) of Rule 10A-3 (without relying on any exemption provided by that Rule) at acting independently of management and performing the functions of an audit committee as contemplated therein.

Item 16E. Purchases of Equity Securities by Issuer and Affiliated Purchasers

ISSUER PURCHASES OF EQUITY SECURITIES

There were no purchases of our equity securities by NTT DOCOMO and its affiliated purchasers for the fiscal year ended March 31, 2014.

Period

  (a) Total
Number of
Shares
Purchased*
   (b) Average
Price Paid
per Share

(Yen)
   (c) Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
   (d) Maximum
Number of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs
 

April 1 to 30, 2014

   0          0     0  

May 1 to 31, 2014

   0          0     0  

June 1 to 30, 2014

   0          0     0  

July 1 to 31, 2014

   0          0     0  

August 1 to 31, 2014

   0          0     0  

September 1 to 30, 2014

   181,530,121     1,695     181,530,121     138,469,879  

October 1 to 31, 2014

   74     1,693     0     0  

November 1 to 30, 2014

   17,548,500     1,839     17,548,500     120,921,379  

December 1 to 31, 2014

   16,197,500     1,835     16,197,500     104,723,879  

January 1 to 31, 2015

   13,300,000     1,903     13,300,000     91,423,879  

February 1 to 28, 2015

   18,050,000     2,049     18,050,000     73,373,879  

March 1 to 31, 2015

   18,650,050     2,201     18,650,000     54,723,879  

Total

   265,276,245     1,783     265,276,121       

*Shares purchased include compulsory acquisition of less-than-one-unit shares purchased from time to time

Note:On April 25, 2014, the Board of Directors resolved that NTT DOCOMO, INC. may repurchase up to 320 million outstanding shares of its common stock for an amount in total not exceeding ¥500,000 million during the period from April 26, 2014 through March 31, 2015. To be more specific, repurchase by a tender offer (up to 206,489,675 outstanding shares of its common stock at an amount in total not exceeding ¥350,000 million, ¥1,695 per common share from during the period from August 7, 2014 through September 3, 2014) resolved at the meeting of the Board of Directors held on August 6, 2014, and share repurchase (up to 138,469,879 outstanding shares of its common stock at an amount in total not exceeding ¥192,306 million from during the period from November 1, 2014 through March 31, 2015) resolved at the meeting of the Board of Directors held on October 31, 2014.

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

 

  

Committees

Under the Companies Act, Japanese joint stock corporations (kabushiki kaisha) above a certain size whose shares are transferable without the approval of such corporations, including the Company, may elect to structure their corporate governance system to beas either, that of a company with an audit & supervisory board (kansayakukai secchikaishasecchigaisha) or that of, a company with nominating committees or similar (shimei iinkaitou secchikaisha), or a company with audit and supervisory committees (kansatou iinkai secchikaisha). The company with audit or similar committees is a new corporate governance system introduced by the Companies Act amendment enacted as of May 1st, 2015. The Company is currently a company with an audit & supervisory board.

As a company with an audit & supervisory board, the Company is not required under the Companies Act to have any outside directors on itsmember of the board of directors.

However, due to the amendment described above, new rules to promote the establishment of outside member of the board of directors are established and if a listed company greater than a certain scale does not have any outside member of the board of directors appointed, the Company is obligated to explain why it is not appropriate to appoint an outside member of the board of directors at the annual general meeting of shareholders.

Also, the definition of outside member of the board of directors has been revised in this amendment of the Companies Act and outside member of the board of directors are now defined as those who fulfill all of the conditions below:

A person who is not an Executive Director, Executive Officer, manager or other employee (hereafter, “Executive Director, etc.”) of the Company or its subsidiaries and have not been an Executive Director, etc. of the Company or its subsidiaries in the 10 years prior to appointment as an outside member of the board of directors;

A person who has been a member of the board of directors, accounting advisor or audit & supervisory board member of the Company or its subsidiaries at any time in the 10 years prior to appointment as an outside member of the board of directors, those who have not been an executive director, etc. of the Company or its subsidiaries in the 10 years prior to the appointment to the said position;

A person who is not a Parent Company, etc. of the Company (limited to a natural person) or a member of the board of directors, executive officer, manager or other employee of a Parent Company, etc.;

A person who is not an Executive Director, etc. of a subsidiary, etc. of the Parent Company, etc. of the Company (excluding the Company and its subsidiaries); and

A person who is not a spouse or relative within the second degree of kinship of a member of the board of directors, executive officer, manager or other important employee of the Company, nor its Parent Company, etc (limited to a natural person).

The tasks of auditing the performance of its members of the board of directors and auditing the Company’s financial statements are assigned to the Company’s audit & supervisory board members, who are separate from the Company’s member of the board of directors. Under the Companies Act, at least one half of a company’s audit & supervisory board members are required to be “outside”outside audit & supervisory board members who must meet certain requirements. An “outside”Due to the amendment to the Companies Act, the definition of outside audit & supervisory board member ismembers has also been revised, and outside audit & supervisory board members are defined as those who meet all of the following requirements:

A person who has not been a member of the board of directors, accounting advisor, executive officer, manager or other employee of the Company or its subsidiaries within the 10 years prior to the appointment;

A person who has been an audit & supervisory board member of the Company or its subsidiaries at any time in the 10 years prior to this appointment, the person who has never served as annot been a member of the board of directors, accounting advisor, executive officer, manager or employee of the Company or its subsidiaries in the 10 years prior to the appointment to the said audit & supervisory board member accounting councilor,position;

A person who is not a Parent Company, etc. of the Company (limited to a natural person) or a member of the board of directors, audit & supervisory board member, executive officer, manager or any other employee of a Parent Company, etc.;

A person who is not an Executive Director, etc. of a subsidiary, etc. of Parent Company, etc. (excluding the Company and its subsidiaries); and

A person who is not the spouse or a relative within the second degree of kinship of a member of the board of directors, manager or other important employee of the Company, or any ofnor its subsidiaries.Parent Company, etc. (limited to a natural person).

In addition, the Securities Listing Regulations of the Tokyo Stock Exchange (“TSE”) requires the Company as a TSE-listed company to designate at least 1 “independent”one independent director/audit & supervisoryauditor. Further, the regulations state that companies must take efforts to secure at least one independent director/auditor who is a member of the board member.of directors. An “independent”independent director/audit & supervisory board memberauditor is defined as an outside director/member of the board of directors/audit & supervisory board member who is unlikely to have conflicts of interest with general investors. As of June 2014, 2015,

we have appointed 1one outside directormember of the board of directors and 2two outside audit & supervisory board members as “independent”independent director/auditor. These outside member of the board of directors and outside audit & supervisory board members.members meet the revised criteria for outside member of the board of directors or outside audit & supervisory board members under the aforementioned Companies Act amendment.

Furthermore, the TSE formulated as an appendix to its rules titled Japan’s Corporate Governance Code applicable to all listed companies on the TSE, which was issued on June 1, 2015. The TSE requires all listed companies to adopt the Corporate Governance Code or explain the reasons for not adopting the Corporate Governance Code in their corporate governance reports. The Corporate Governance Code establishes fundamental principles for effective corporate governance, consisting of i) securing the rights and equal treatment of shareholders, ii) appropriate cooperation with various stakeholders other than shareholders, iii) ensuring appropriate information disclosure and transparency, iv) responsibilities of the Board of Directors and v) constructive dialogue with shareholders.

 

  

Audit & Supervisory Board

Under the audit & supervisory board member system that the Company employs, the auditAudit & supervisory boardSupervisory Board is a legally separate and independent body from the boardBoard of directors.Directors. The function of the auditAudit & supervisory boardSupervisory Board and each audit & supervisory board member is similar to that of independent directors, including those who are members of the audit committee, of a U.S. company: to audit the performance of the member of the board of directors, and express an opinion if it is the opinion of the auditAudit & supervisory boardSupervisory Board that the method, or the results of the audit report by the Company’s accounting firm is not suitable and express the reason for such opinion, for the protection of the Company’s shareholders. Further, due to the aforementioned amendments to the Companies Act, agenda items for shareholder’s meetings in relation to the selection, termination or discontinuation of accounting auditors will be determined by the Audit & Supervisory Board.

Under the Companies Act, the Company is required to have not less than 3 audit & supervisory board members. The Articles of Incorporation of the Company permit it to have up to 5 audit & supervisory board members. Currently, 5 audit & supervisory board members of the Company have been elected. The term of office of each audit & supervisory board member is up to 4 years after his/her election, whereas the term of office of each director is up to 2 years after his/her election.

With respect to the requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934, relating to listed company audit committees, the Company relies on an exemption under that rule which is available to foreign private issuers with audit & supervisory boards meeting certain criteria.

 

  

Directors

The Company’s member of the board of directors must be elected at a general meeting of shareholders. Its boardBoard of directorsDirectors does not have the power to fill vacancies thereon.

The Company’s audit & supervisory board members must also be elected at a general meeting of shareholders. The Company’s boardBoard of directorsDirectors must obtain the consent of its auditAudit & supervisory boardSupervisory Board in order

to submit a proposal for election of an audit & supervisory board member to a general meeting of shareholders. The audit & supervisory board is empowered to request that the Company’s member of the board of directors submit a proposal for election of an audit & supervisory board member to a general meeting of shareholders. All audit & supervisory board members have the right to state their opinion concerning the election of an audit & supervisory board member at the general meeting of shareholders.

 

  

Compensation

The maximum aggregate compensation amount for the Company’s member of the board of directors and that of the Company’s audit & supervisory board members must be, and accordingly has been, approved at a general meeting of shareholders.

The Company must also obtain the approval at a general meeting of shareholders if the Company desires to change such maximum amount of compensation.

The compensation amount for each directormember of the board of directors is determined by the Company’s President or another directormember of the board of directors who is delegated to do so by the boardBoard of directors,Directors, and that for each audit & supervisory board member is determined upon consultation among the audit & supervisory board members.

There are no procedural or disclosure requirements with respect to the use of compensation consultants, independent legal counsel or other advisors.

 

  

Shareholder Approval with respect to any Equity Compensation Plan

Pursuant to the Companies Act, if the Company desires to adopt an equity compensation plan under which stock acquisition rights are granted on specially favorable conditions (except where such rights are granted to all of its shareholders on apro rata basis), the Company must approve the said plan by a “special resolution” of a general meeting of shareholders, where the quorum is one-third of the total number of voting rights and the approval of at least two-thirds of the voting rights represented at the meeting is required.

Item 16H. Mine Safety Disclosure

Not applicable.

PART III

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

The information required by this item is set forth beginning on page F-2Refer to “Consolidated Financial Statements and Schedule” of this annual report.reports.

Item 19. Exhibits

 

Exhibit
Number

  

Description

  1.1  Articles of Incorporation of the registrant (English translation)
  1.2  Share Handling Regulations of the registrant (English translation) *1
  1.3  Regulations of the Board of Directors of the registrant (English translation)
  1.4  Regulations of the Audit & Supervisory Board of the registrant (English translation)
  2.1  Form of Deposit Agreement among the registrant, The Bank of New York Mellon as Depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt (incorporated by reference to Exhibit 1 of the Registration Statement on Form F-6 (File No. 333-134940) filed on September 16, 2013)
 8.1  List of Significant Subsidiaries (See “Business Overview” in Item 4.B of this Form 20-F)
11.1  Code of Ethics (English translation)* *2
12.1  Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2  Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1  Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
13.2  Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
   101.INS   XBRL Instance Document
   101.SCH  XBRL Taxonomy Extension Schema
   101.CAL  XBRL Taxonomy Extension Calculation Linkbase
   101.DEF  XBRL Taxonomy Extension Definition Linkbase
   101.LAB  XBRL Taxonomy Extension Label Linkbase
   101.PRE  XBRL Taxonomy Extension Presentation Linkbase

 

*1Previously filed with the Securities and Exchange Commission on June 27, 2014 and herein incorporated by reference.
*2Previously filed with the Securities and Exchange Commission on June 27, 2006 and herein incorporated by reference.

We have not included as exhibits certain instruments with respect to our long-term debt. The amount of debt authorized under each such debt instrument does not exceed 10% of our total assets. We agree to furnish a copy of any such instrument to the Commission upon request.

 

 

Google, Android, Google Play Google Apps for Business, Google Apps for Education, Google Apps are trademarks or registered trademarks of Google Inc.

Wi-Fi is a registered trademark of the Wi-Fi Alliance.

Xperia is a trademark or registered trademark of Sony Mobile Communications AB.

TM and© 20142015 Apple Inc. All rights reserved. iPad and iPhone is a trademarkare trademarks of Apple Inc., registered in the U.S. and other countries. The iPhone trademark is used under a license from AIPHONE CO., LTD.

TM and© 2014 Apple Inc. All rights reserved. iPadhitoe is a trademarksregistered trademark of AppleToray industries, Inc., registered in the U.S. and other countries.NTT.

NOTTV is a registered trademark of mmbi, Inc.

FeliCa is a registered trademark of Sony Corporation.

All other trademarks are the property of their respective owners.

NTT DOCOMO, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

 

   Page 

Reports of independent registered public accounting firm

   F-2  

Consolidated balance sheets as of March 31, 20132014 and 20142015

   F-4  

Consolidated statements of income for the years ended March 31, 2012, 2013, 2014 and 20142015

   F-6  

Consolidated statements of comprehensive income for the years ended March 31, 2012, 2013, 2014 and 20142015

   F-7  

Consolidated statements of changes in equity for the years ended March 31, 2012, 2013, 2014 and 20142015

   F-8  

Consolidated statements of cash flows for the years ended March 31, 2012, 2013, 2014 and 20142015

   F-9  

Notes to consolidated financial statements

   F-10  

Financial statement schedule for the years ended March  31, 2012, 2013, 2014 and 2014:2015:
Schedule II—Valuation and qualifying accounts

   F-68F-72  

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

NTT DOCOMO, INC.:

We have audited the consolidated financial statements of NTT DOCOMO, INC. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NTT DOCOMO, INC. and subsidiaries as of March 31, 20142015 and 2013,2014, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2014,2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), NTT DOCOMO, INC.’s internal control over financial reporting as of March 31, 2014,2015, based on criteria established in Internal Control—Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 27, 201426, 2015 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

(signed) KPMG AZSA LLC

Tokyo, Japan

June 27, 201426, 2015

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

NTT DOCOMO, INC.:

We have audited NTT DOCOMO, INC.’s internal control over financial reporting as of March 31, 2014,2015, based on criteria established in Internal Control—Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). NTT DOCOMO, INC.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 15. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, NTT DOCOMO, INC. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2014,2015, based on criteria established in Internal Control—Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of NTT DOCOMO, INC. and subsidiaries as of March 31, 20142015 and 2013,2014, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended March 31, 2014,2015, and our report dated June 27, 201426, 2015 expressed an unqualified opinion on those consolidated financial statements.

(signed) KPMG AZSA LLC

Tokyo, Japan

June 27, 201426, 2015

NTT DOCOMO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 20132014 and 20142015

 

  Millions of yen   Millions of yen 
  2013 2014   2014 2015 
ASSETS      

Current assets:

      

Cash and cash equivalents

  ¥493,674   ¥526,920    ¥526,920   ¥105,553  

Short-term investments

      

Third parties

   31,762    19,561     19,561    3,757  

Related parties

   10,000             240,000  

Accounts receivable

      

Third parties

   251,109    276,409     276,409    258,761  

Related parties

   9,233    5,100     5,100    5,830  

Receivables held for sale

   638,149    787,459     787,459    897,999  

Credit card receivables

   194,607    220,979     220,979    234,412  

Other receivables

      

Third parties

   32,151    34,127     34,127    30,576  

Related parties

   257,698    281,835     281,835    296,699  
  

 

  

 

   

 

  

 

 

Total accounts receivable, receivables held for sale, credit card receivables and other receivables

   1,382,947    1,605,909     1,605,909    1,724,277  

Less: Allowance for doubtful accounts

   (16,843  (15,078   (15,078  (14,100
  

 

  

 

   

 

  

 

 

Total accounts receivable, receivables held for sale, credit card receivables and other receivables, net

   1,366,104    1,590,831     1,590,831    1,710,177  

Inventories

   180,736    232,126     232,126    186,275  

Deferred tax assets

   70,784    61,592     61,592    61,512  

Prepaid expenses and other current assets

      

Third parties

   74,577    86,991     86,991    98,618  

Related parties

   8,865    8,741     8,741    9,484  
  

 

  

 

   

 

  

 

 

Total current assets

   2,236,502    2,526,762     2,526,762    2,415,376  
  

 

  

 

   

 

  

 

 

Property, plant and equipment:

      

Wireless telecommunications equipment

   5,151,686    4,975,826     4,975,826    5,027,390  

Buildings and structures

   882,165    897,759     897,759    890,382  

Tools, furniture and fixtures

   532,506    553,497     553,497    508,810  

Land

   200,382    201,121     201,121    200,736  

Construction in progress

   127,592    158,173     158,173    193,497  
  

 

  

 

   

 

  

 

 

Sub-total

   6,894,331    6,786,376     6,786,376    6,820,815  

Accumulated depreciation and amortization

   (4,334,047  (4,228,610   (4,228,610  (4,309,748
  

 

  

 

   

 

  

 

 

Total property, plant and equipment, net

   2,560,284    2,557,766     2,557,766    2,511,067  
  

 

  

 

   

 

  

 

 

Non-current investments and other assets:

      

Investments in affiliates

   474,502    424,531     424,531    439,070  

Marketable securities and other investments

   155,923    171,875     171,875    195,047  

Intangible assets, net

   691,651    665,960     665,960    636,319  

Goodwill

   217,640    262,462     262,462    266,311  

Other assets

      

Third parties

   302,533    369,593     369,593    430,633  

Related parties

   257,606    259,581     259,581    15,090  

Deferred tax assets

   273,084    269,500     269,500    237,427  
  

 

  

 

   

 

  

 

 

Total non-current investments and other assets

   2,372,939    2,423,502     2,423,502    2,219,897  
  

 

  

 

   

 

  

 

 

Total assets

  ¥7,169,725   ¥7,508,030    ¥7,508,030   ¥7,146,340  
  

 

  

 

   

 

  

 

 

 

See accompanying notes to consolidated financial statements.

NTT DOCOMO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS—(Continued)

MARCH 31, 20132014 and 20142015

 

  Millions of yen   Millions of yen 
  2013 2014   2014 2015 
LIABILITIES AND EQUITY      

Current liabilities:

      

Current portion of long-term debt

  ¥70,437   ¥248    ¥248   ¥203  

Short-term borrowings

      9,495    2,048  

Third parties

   6,801    9,495  

Related parties

   5,506      

Accounts payable, trade

      

Third parties

   565,142    643,822     643,822    664,945  

Related parties

   140,582    154,493     154,493    146,854  

Accrued payroll

   55,961    54,294     54,294    54,955  

Accrued interest

   713    346  

Accrued income taxes

   135,418    175,683     175,683    68,563  

Other current liabilities

      

Third parties

   142,346    159,720     160,066    169,631  

Related parties

   7,954    7,885     7,885    7,103  
  

 

  

 

   

 

  

 

 

Total current liabilities

   1,130,860    1,205,986     1,205,986    1,114,302  
  

 

  

 

   

 

  

 

 

Long-term liabilities:

      

Long-term debt (exclusive of current portion)

   171,022    220,603     220,603    220,400  

Accrued liabilities for point programs

   140,855    113,001     113,001    89,929  

Liability for employees’ retirement benefits

   171,221    160,666     160,666    173,872  

Other long-term liabilities

      

Third parties

   143,267    112,558     112,558    127,932  

Related parties

   1,935    1,703     1,703    1,700  
  

 

  

 

   

 

  

 

 

Total long-term liabilities

   628,300    608,531     608,531    613,833  
  

 

  

 

   

 

  

 

 

Total liabilities

   1,759,160    1,814,517     1,814,517    1,728,135  
  

 

  

 

   

 

  

 

 

Redeemable noncontrolling interests

       14,869     14,869    15,589  
  

 

  

 

   

 

  

 

 

Equity:

      

NTT DOCOMO, INC. shareholders’ equity

      

Common stock, without a stated value—

      

Authorized shares

      

17,460,000,000 shares as of March 31, 2013 and 2014

   

17,460,000,000 shares as of March 31, 2014 and 2015

   

Issued shares

      

4,365,000,000 shares as of March 31, 2013 and 2014

   

4,365,000,000 shares as of March 31, 2014

   

4,085,772,000 shares as of March 31, 2015

   

Outstanding shares

      

4,146,760,100 shares as of March 31, 2013 and 2014

   949,680    949,680  

4,146,760,100 shares as of March 31, 2014

   

3,881,483,855 shares as of March 31, 2015

   949,680    949,680  

Additional paid-in capital

   732,609    732,875     732,875    339,783  

Retained earnings

   4,112,466    4,328,389     4,328,389    4,397,228  

Accumulated other comprehensive income (loss)

   (49,112  9,590     9,590    52,599  

Treasury stock

      

218,239,900 shares as of March 31, 2013 and 2014

   (377,168  (377,168

218,239,900 shares as of March 31, 2014

   

204,288,145 shares as of March 31, 2015

   (377,168  (359,218
  

 

  

 

   

 

  

 

 

Total NTT DOCOMO, INC. shareholders’ equity

   5,368,475    5,643,366     5,643,366    5,380,072  

Noncontrolling interests

   42,090    35,278     35,278    22,544  
  

 

  

 

   

 

  

 

 

Total equity

   5,410,565    5,678,644     5,678,644    5,402,616  
  

 

  

 

   

 

  

 

 

Commitments and contingencies

      

Total liabilities and equity

  ¥7,169,725   ¥7,508,030    ¥7,508,030   ¥7,146,340  
  

 

  

 

   

 

  

 

 

See accompanying notes to consolidated financial statements.

NTT DOCOMO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED MARCH 31, 2012, 2013, 2014 and 20142015

 

 Millions of yen   Millions of yen 
 2012 2013 2014   2013 2014 2015 

Operating revenues:

       

Mobile communications services

   

Telecommunications services

    

Third parties

 ¥3,302,545   ¥3,147,531   ¥2,934,655    ¥3,155,984   ¥2,942,847   ¥2,727,891  

Related parties

  23,948    20,947    21,133     20,947    21,133    19,264  

Equipment sales

       

Third parties

  496,556    754,521    870,597     754,521    870,597    903,231  

Related parties

  2,333    3,572    1,403     3,572    1,403    858  

Other operating revenues

       

Third parties

  396,034    508,452    591,130     499,999    582,938    682,967  

Related parties

  18,587    35,099    42,285     35,099    42,285    49,186  
 

 

  

 

  

 

   

 

  

 

  

 

 

Total operating revenues

  4,240,003    4,470,122    4,461,203     4,470,122    4,461,203    4,383,397  
 

 

  

 

  

 

   

 

  

 

  

 

 

Operating expenses:

       

Cost of services (exclusive of items shown separately below)

       

Third parties

  673,383    782,352    805,685     782,352    805,685    892,178  

Related parties

  220,560    221,145    253,934     221,145    253,934    267,336  

Cost of equipment sold (exclusive of items shown separately below)

  695,008    767,536    785,209     767,536    785,209    853,062  

Depreciation and amortization

  684,783    700,206    718,694     699,754    718,694    659,787  

Impairment loss

   452        30,161  

Selling, general and administrative

       

Third parties

  965,816    940,002    879,323     940,002    879,323    838,423  

Related parties

  125,993    221,701    199,159     221,701    199,159    203,379  
 

 

  

 

  

 

   

 

  

 

  

 

 

Total operating expenses

  3,365,543    3,632,942    3,642,004     3,632,942    3,642,004    3,744,326  
 

 

  

 

  

 

   

 

  

 

  

 

 

Operating income

  874,460    837,180    819,199     837,180    819,199    639,071  
 

 

  

 

  

 

   

 

  

 

  

��

 

 

Other income (expense):

       

Interest expense

  (2,774  (1,786  (1,211   (1,786  (1,211  (797

Interest income

  1,376    1,587    1,680     1,587    1,680    1,283  

Other, net

  3,896    (3,639  13,381     (3,639  13,381    4,326  
 

 

  

 

  

 

   

 

  

 

  

 

 

Total other income (expense)

  2,498    (3,838  13,850     (3,838  13,850    4,812  
 

 

  

 

  

 

   

 

  

 

  

 

 

Income before income taxes and equity in net income (losses) of affiliates

  876,958    833,342    833,049     833,342    833,049    643,883  

Income taxes:

       

Current

  339,622    305,026    319,683     305,026    319,683    218,552  

Deferred

  52,176    18,033    (11,704   18,033    (11,704  19,515  
 

 

  

 

  

 

   

 

  

 

  

 

 

Total income taxes

  391,798    323,059    307,979     323,059    307,979    238,067  
 

 

  

 

  

 

   

 

  

 

  

 

 

Income before equity in net income (losses) of affiliates

  485,160    510,283    525,070     510,283    525,070    405,816  

Equity in net income (losses) of affiliates (including impairment charges of investments in affiliates)

  (24,208  (29,570  (69,117   (29,570  (69,117  (7,782
 

 

  

 

  

 

   

 

  

 

  

 

 

Net income

  460,952    480,713    455,953     480,713    455,953    398,034  
 

 

  

 

  

 

   

 

  

 

  

 

 

Less: Net (income) loss attributable to noncontrolling interests

  2,960    10,313    8,776     10,313    8,776    12,059  
 

 

  

 

  

 

   

 

  

 

  

 

 

Net income attributable to NTT DOCOMO, INC.

 ¥463,912   ¥491,026   ¥464,729    ¥491,026   ¥464,729   ¥410,093  
 

 

  

 

  

 

   

 

  

 

  

 

 

Per share data:

       

Weighted average common shares outstanding—Basic and Diluted

  4,146,760,100    4,146,760,100    4,146,760,100     4,146,760,100    4,146,760,100    4,038,191,678  
 

 

  

 

  

 

   

 

  

 

  

 

 

Basic and Diluted earnings per share attributable to
NTT DOCOMO, INC.

 ¥111.87   ¥118.41   ¥112.07    ¥118.41   ¥112.07   ¥101.55  
 

 

  

 

  

 

   

 

  

 

  

 

 

See accompanying notes to consolidated financial statements.

NTT DOCOMO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED MARCH 31, 2012, 2013, 2014 and 20142015

 

  Millions of yen   Millions of yen 
  2012 2013 2014   2013 2014 2015 

Net income

  ¥460,952   ¥480,713   ¥455,953    ¥480,713   ¥455,953   ¥398,034  

Other comprehensive income (loss):

        

Unrealized holding gains (losses) on available-for-sale securities, net of applicable taxes

   1,901    20,680    8,751     20,680    8,751    22,468  

Less: Reclassification of realized gains and losses, net of applicable taxes included in net income

   1,994    6,109    (84   6,109    (84  120  

Unrealized gains (losses) on cash flow hedges, net of applicable taxes

   (2  31    (76   31    (76  (20

Less: Reclassification of realized gains and losses, net of applicable taxes included in net income

           59         59    16  

Foreign currency translation adjustment, net of applicable taxes

   (32,082  34,041    31,653     34,041    31,653    29,678  

Less: Reclassification of realized gains and losses, net of applicable taxes included in net income

   3,084    155    6,010     155    6,010      

Pension liability adjustment, net of applicable taxes

        

Actuarial gains (losses) arising during period, net

   (2,746  (5,895  11,929     (5,895  11,929    (9,159

Prior service cost arising during period, net

   (72      3,361         3,361      

Less: Amortization of prior service cost

   (1,347  (1,458  (1,457   (1,458  (1,457  (894

Less: Curtailment gain

           (3,294       (3,294    

Less: Amortization of actuarial gains and losses

   1,606    1,805    1,963     1,805    1,963    1,104  

Less: Amortization of transition obligation

   76    80    80     80    80    72  
  

 

  

 

  

 

   

 

  

 

  

 

 

Total other comprehensive income (loss)

   (27,588  55,548    58,895     55,548    58,895    43,385  
  

 

  

 

  

 

   

 

  

 

  

 

 

Comprehensive income

   433,364    536,261    514,848     536,261    514,848    441,419  
  

 

  

 

  

 

   

 

  

 

  

 

 

Less: Comprehensive (income) loss attributable to noncontrolling interests

   2,974    10,182    8,583     10,182    8,583    11,683  
  

 

  

 

  

 

   

 

  

 

  

 

 

Comprehensive income attributable to NTT DOCOMO, INC.

  ¥436,338   ¥546,443   ¥523,431    ¥546,443   ¥523,431   ¥453,102  
  

 

  

 

  

 

   

 

  

 

  

 

 

See accompanying notes to consolidated financial statements.

NTT DOCOMO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

YEARS ENDED MARCH 31, 2012, 2013, 2014 and 20142015

 

 Millions of yen  Millions of yen 
 NTT DOCOMO, INC. shareholders’ equity        NTT DOCOMO, INC. shareholders’ equity       
 Common
stock
 Additional
paid-in
capital
 Retained
earnings
 Accumulated
other
comprehensive
income (loss)
 Treasury
stock
 Total NTT
DOCOMO, INC.
shareholders’
equity
 Noncontrolling
interests
 Total equity 

Balance as of March 31, 2011

 ¥949,680   ¥732,914  ¥3,621,965   ¥(76,955) ¥(377,168 ¥4,850,436   ¥27,158   ¥4,877,594  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Cash dividends declared (¥54 per share)

    (223,925    (223,925   (223,925

Cash distributions to noncontrolling interests

           (1,280  (1,280

Acquisition of new subsidiaries

           1,746    1,746  

Contributions from noncontrolling interests

   (322     (322  21,655    21,333  

Others

           (61  (61

Net income

    463,912      463,912    (2,960  460,952  

Other comprehensive income (loss)

     (27,574   (27,574  (14  (27,588
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  Common
stock
 Additional
paid-in
capital
 Retained
earnings
 Accumulated
other
comprehensive
income (loss)
 Treasury
stock
 Total NTT
DOCOMO, INC.
shareholders’
equity
 Noncontrolling
interests
 Total equity 

Balance as of March 31, 2012

 ¥949,680   ¥732,592   ¥3,861,952   ¥(104,529 ¥(377,168 ¥5,062,527   ¥46,244   ¥5,108,771   ¥949,680  ¥732,592  ¥3,861,952   ¥(104,529) ¥(377,168) ¥5,062,527   ¥46,244  ¥5,108,771  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Cash dividends declared (¥58 per share)

    (240,512    (240,512   (240,512    (240,512    (240,512   (240,512

Cash distributions to noncontrolling interests

           (4  (4           (4  (4

Acquisition of new subsidiaries

           6,957    6,957             6,957    6,957  

Changes in interest in subsidiaries

   17       17    (1,045  (1,028   17       17    (1,045  (1,028

Others

           120    120             120    120  

Net income

    491,026      491,026    (10,313  480,713      491,026      491,026    (10,313  480,713  

Other comprehensive income (loss)

     55,417     55,417    131    55,548       55,417     55,417    131    55,548  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance as of March 31, 2013

 ¥949,680   ¥732,609   ¥4,112,466   ¥(49,112 ¥(377,168 ¥5,368,475   ¥42,090   ¥5,410,565   ¥949,680   ¥732,609   ¥4,112,466   ¥(49,112 ¥(377,168 ¥5,368,475   ¥42,090   ¥5,410,565  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Cash dividends declared (¥60 per share)

    (248,806    (248,806   (248,806    (248,806    (248,806   (248,806

Cash distributions to noncontrolling interests

           (1,032  (1,032           (1,032  (1,032

Acquisition of new subsidiaries

           2,588    2,588             2,588    2,588  

Changes in interest in subsidiaries

   266       266     266     266       266     266  

Others

           215    215             215    215  

Net income

    464,729      464,729    (8,776  455,953      464,729      464,729    (8,776  455,953  

Other comprehensive income (loss)

     58,702     58,702    193    58,895       58,702     58,702    193    58,895  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance as of March 31, 2014

 ¥949,680   ¥732,875   ¥4,328,389   ¥9,590   ¥(377,168 ¥5,643,366   ¥35,278   ¥5,678,644   ¥949,680   ¥732,875   ¥4,328,389   ¥9,590   ¥(377,168 ¥5,643,366   ¥35,278   ¥5,678,644  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Purchase of treasury stock

      (473,036  (473,036   (473,036

Retirement of treasury stock

   (393,092  (97,894   490,986           

Cash dividends declared (¥60 per share)

    (243,360    (243,360   (243,360

Cash distributions to noncontrolling interests

           (1,061  (1,061

Acquisition of new subsidiaries

           732    732  

Others

           (2  (2

Net income

    410,093      410,093    (12,777  397,316  

Other comprehensive income (loss)

     43,009     43,009    374    43,383  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance as of March 31, 2015

 ¥949,680   ¥339,783   ¥4,397,228   ¥52,599   ¥(359,218 ¥5,380,072   ¥22,544   ¥5,402,616  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

*Changes in the redeemable noncontrolling interest are not included in the table.

See accompanying notes to consolidated financial statements.

NTT DOCOMO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED MARCH 31, 2012, 2013, 2014 and 20142015

 

  Millions of yen   Millions of yen 
  2012 2013 2014   2013 2014 2015 

Cash flows from operating activities:

        

Net income

  ¥460,952   ¥480,713   ¥455,953    ¥480,713   ¥455,953   ¥398,034  

Adjustments to reconcile net income to net cash provided by operating activities—

        

Depreciation and amortization

   684,783    700,206    718,694     699,754    718,694    659,787  

Deferred taxes

   52,176    18,033    (11,704   18,033    (11,704  19,515  

Loss on sale or disposal of property, plant and equipment

   24,055    31,878    34,303     31,878    34,303    40,073  

Inventory write-downs

   12,662    4,415    13,716  

Impairment loss

   452        30,161  

Impairment loss on marketable securities and other investments

   4,030    10,928    3,055     10,928    3,055    902  

Equity in net (income) losses of affiliates (including impairment charges of investments in affiliates)

   24,208    29,570    69,117     29,570    69,117    7,782  

Dividends from affiliates

   12,052    15,899    17,415     15,899    17,415    17,591  

Changes in assets and liabilities:

        

(Increase) / decrease in accounts receivable

   (198,538  706,742    (9,269   706,742    (9,269  17,489  

(Increase) / decrease in receivables held for sale

       (638,149  (149,310   (638,149  (149,310  (110,540

(Increase) / decrease in credit card receivables

   (14,584  (8,646  (13,849   (8,646  (13,849  (7,497

(Increase) / decrease in other receivables

   2,359    (229,252  (21,875   (229,252  (21,875  (13,467

Increase / (decrease) in allowance for doubtful accounts

   5,388    (7,024  (2,815   (7,024  (2,815  2,931  

(Increase) / decrease in inventories

   245    (22,375  (50,849   (35,037  (55,264  32,270  

(Increase) / decrease in prepaid expenses and other current assets

   (2,021  (12,564)  (7,661   (12,564  (7,661  (10,565

(Increase) / decrease in non-current installment receivable for handsets

   (12,809  88,075         88,075          

(Increase) / decrease in non-current receivables held for sale

       (149,972  (53,276   (149,972  (53,276  (55,468

Increase / (decrease) in accounts payable, trade

   94,747    (39,377  65,083     (39,377  65,083    5,278  

Increase / (decrease) in accrued income taxes

   (11,751  (15,844  39,691     (15,844  39,691    (107,166

Increase / (decrease) in other current liabilities

   7,361    10,805    (40,422   10,805    (40,422  16,964  

Increase / (decrease) in accrued liabilities for point programs

   (26,451  (32,281  (27,854   (32,281  (27,854  (23,072

Increase / (decrease) in liability for employees’ retirement benefits

   7,095    9,539    (10,732   9,539    (10,732  13,209  

Increase / (decrease) in other long-term liabilities

   (12,296  (34,215  (32,977   (34,215  (32,977  11,925  

Other, net

   9,558    19,716    29,924     19,716    29,924    3,125  
  

 

  

 

  

 

   

 

  

 

  

 

 

Net cash provided by operating activities

   1,110,559    932,405    1,000,642     932,405    1,000,642    962,977  
  

 

  

 

  

 

   

 

  

 

  

 

 

Cash flows from investing activities:

        

Purchases of property, plant and equipment

   (480,416  (535,999  (498,668   (535,999  (498,668  (493,189

Purchases of intangible and other assets

   (237,070  (242,918  (213,508   (242,918  (213,508  (170,203

Purchases of non-current investments

   (35,582  (7,444  (16,186   (7,444  (16,186  (5,107

Proceeds from sale of non-current investments

   2,540    1,731    5,235     1,731    5,235    1,753  

Acquisitions of subsidiaries, net of cash acquired

   (3,624  (17,886  (19,213   (17,886  (19,213    

Purchases of short-term investments

   (1,164,203  (665,223  (39,084   (665,223  (39,084  (34,613

Redemption of short-term investments

   1,023,698    915,105    68,937     915,105    68,937    50,806  

Long-term bailment for consumption to a related party

       (240,000       (240,000        

Proceeds from redemption of long-term bailment for consumption to a related party

           10,000         10,000      

Short-term bailment for consumption to a related party

   (80,000      (70,000       (70,000    

Proceeds from redemption of short-term bailment for consumption to a related party

       90,000    70,000     90,000    70,000      

Other, net

   72    700    (1,093   700    (1,093  (641
  

 

  

 

  

 

   

 

  

 

  

 

 

Net cash used in investing activities

   (974,585  (701,934  (703,580   (701,934  (703,580  (651,194
  

 

  

 

  

 

   

 

  

 

  

 

 

Cash flows from financing activities:

        

Proceeds from long-term debt

       60,000    50,000     60,000    50,000      

Repayment of long-term debt

   (171,879  (82,181  (74,989   (82,181  (74,989  (248

Proceeds from short-term borrowings

   4,991    20,750    13,740     20,750    13,740    221,606  

Repayment of short-term borrowings

   (4,467  (15,599  (26,132   (15,599  (26,132  (229,065

Principal payments under capital lease obligations

   (4,380  (2,801  (2,128   (2,801  (2,128  (1,729

Payments to acquire treasury stock

           (473,036

Dividends paid

   (223,865  (240,388  (248,814   (240,388  (248,814  (243,349

Contributions from noncontrolling interests

   21,333    2,349    193  

Other, net

   (349  (3,097  18,337     (748  18,530    (8,436
  

 

  

 

  

 

   

 

  

 

  

 

 

Net cash provided by (used in) financing activities

   (378,616  (260,967  (269,793   (260,967  (269,793  (734,257
  

 

  

 

  

 

   

 

  

 

  

 

 

Effect of exchange rate changes on cash and cash equivalents

   (831  2,092    5,977     2,092    5,977    1,107  
  

 

  

 

  

 

   

 

  

 

  

 

 

Net increase (decrease) in cash and cash equivalents

   (243,473  (28,404  33,246     (28,404  33,246    (421,367

Cash and cash equivalents at beginning of year

   765,551    522,078    493,674     522,078    493,674    526,920  
  

 

  

 

  

 

   

 

  

 

  

 

 

Cash and cash equivalents at end of year

  ¥522,078   ¥493,674   ¥526,920    ¥493,674   ¥526,920   ¥105,553  
  

 

  

 

  

 

   

 

  

 

  

 

 

Supplemental disclosures of cash flow information:

        

Cash received during the year for:

    

Cash received during the fiscal year for:

    

Income tax refunds

  ¥251   ¥1,017   ¥886    ¥1,017   ¥886   ¥1,539  

Cash paid during the year for:

    

Cash paid during the fiscal year for:

    

Interest, net of amount capitalized

   2,922    1,840    1,578     1,840    1,578    876  

Income taxes

   351,964    321,453    280,434     321,453    280,434    326,107  

Non-cash investing and financing activities:

        

Assets acquired through capital lease obligations

   2,036    1,931    1,513     1,931    1,513    940  

Assets of wireless telecommunications equipment acquired through exchanges of similar equipment

           3,605  

Retirement of treasury stock

           490,986  

See accompanying notes to consolidated financial statements.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of operations:

NTT DOCOMO, INC. and subsidiaries (“DOCOMO”) is a joint stock corporation that was incorporated under the laws of Japan in August 1991 as the wireless telecommunications arm of NIPPON TELEGRAPH AND TELEPHONE CORPORATION (“NTT”). NTT, 35.65%32.47% of which is owned by the Japanese government, owns 63.32% of NTT DOCOMO, INC.’s issued stock and 66.65% of NTT DOCOMO, INC.’s voting stock outstanding as of March 31, 2014.2015.

DOCOMO mainly provides its subscribers with mobile communications services such as Xi LTELTE(Xi) services and FOMA services. In addition, DOCOMO sells handsets and related equipment primarily to agent resellers who in turn sell such equipment to subscribers.

2. Summary of significant accounting and reporting policies:

(a) Adoption of new accounting standards

Reporting of amounts reclassified out of accumulated other comprehensive income—

Effective April 1, 2013, DOCOMO adopted Accounting Standards Update (“ASU”) 2013-02 “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” issued by the Financial Accounting Standards Board (“FASB”) in February 2013.

ASU2013-02 requires an entity to present disclose separately for each component of other comprehensive income, current period reclassifications out of accumulated other comprehensive income and other amounts of current-period other comprehensive income and disclose the effect of reclassifications out of accumulated other comprehensive income on net income respective line items only for those items that are reported in their entirety in net income. For other items that are not reclassified in their entirety into net income, an entity is required to cross-reference to the note that provides additional information about the effect of the reclassification.

The adoption of ASU2013-02 does not have any impact on DOCOMO’s results of operations and financial position. See “Accumulated other comprehensive income (loss)” in Note 10 “Equity” for related disclosure.

(b) Recently issued Accounting Standards

Revenue from Contracts with Customers—

On May 28, 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606),” which requires an entity to recognize the amount to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for DOCOMO on April 1, 2017. Early adoption is not permitted.

DOCOMO is evaluating the effect that the ASU will have on DOCOMO’s consolidated financial statements and related disclosures. DOCOMO has not yet selected a transition method nor has it determined the effect of the standard on DOCOMO’s ongoing financial reporting.

(c) Significant accounting policies

Principles of consolidation—

The consolidated financial statements include accounts of NTT DOCOMO, INC. and its majority-owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

DOCOMO also evaluates whether DOCOMO has a controlling financial interest in an entity through means other than voting rights and accordingly determines whether DOCOMO should consolidate the entity. For the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, DOCOMO had no variable interest entities to be consolidated or disclosed.

Use of estimates—

The preparation of DOCOMO’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. DOCOMO has identified the following areas where it believes estimates and assumptions are particularly critical to the consolidated financial statements. These are determination of useful lives of property, plant and equipment, internal use software and other intangible assets, impairment of goodwill and unamortizable intangible assets, impairment of long-lived assets, impairment of investments, accrued liabilities for point programs, pension liabilities and revenue recognition.

Effective July 1, 2014, DOCOMO revised its estimate of the expected useful life of certain software for telecommunications network and internal-use software based on the actual utilization of the software to reflect an extended expected maximum useful life from 5 years to 7 years. This modification will be applied prospectively as a change in accounting estimate.

The impact from this change in accounting estimate on the consolidated statements of income is increases in “Income before income taxes and equity in net income (losses) of affiliates,” “Net income attributable to NTT DOCOMO, INC.” and “Basic and Diluted earnings per share attributable to NTT DOCOMO, INC.” of ¥51,307 million, ¥32,939 million and ¥8.16, respectively, for the fiscal year ended March 31, 2015.

Cash and cash equivalents—

DOCOMO considers cash in banks and short-term highly liquid investments with original maturities of 3 months or less at the date of purchase to be cash and cash equivalents.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Short-term investments—

Highly liquid investments, which have original maturities of longer than 3 months at the date of purchase and remaining maturities of 1 year or less at the end of fiscal year, are considered to be short-term investments.

Receivables held for sale—

The accounts receivable for DOCOMO’s mobile communicationstelecommunications services, installment receivables for subscribers’ equipment purchases and others (“receivables for mobile communicationstelecommunications services”) which DOCOMO decides to sell are reclassified to “Receivables held for sale” and “Other assets” in the consolidated balance sheet.

Receivables held for sale are measured at the lower of cost or fair value and the amount by which cost exceeds fair value was ¥9,079¥7,064 million and ¥7,064¥7,635 million for the fiscal years ended March 31, 20132014 and 2014,2015, respectively, and was recorded as a valuation allowance in “Allowance for doubtful accounts” and “Other assets” in the consolidated balance sheets.

In addition, the aggregated amount of losses on sales of “receivables for mobile communicationstelecommunications services” and adjustments to record the receivables held for sale at the lower of cost or fair value was ¥65,280 million, ¥64,789 million and ¥64,789¥67,327 million for the fiscal years ended March 31, 2013, 2014 and 2014,2015, respectively, and was recorded as “Selling, general and administrative” expenses in the consolidated statements of income. The fair value of receivables held for sale is measured based on the estimated future discounted cash flows.

Allowance for doubtful accounts—

The allowance for doubtful accounts is computed based on historical bad debt experience and the estimated uncollectible amount based on the analysis of certain individual accounts, including claims in bankruptcy.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Inventories—

Inventories are stated at the lower of cost or market. The cost of equipment sold is determined by thefirst-in, first-out method. Inventories consist primarily of handsets and accessories. DOCOMO evaluates its inventory mainly for obsolescence on a periodic basis and records valuation adjustments as required. Due to the rapid technological changes associated with the wireless telecommunications business, DOCOMO recognized losses on write-downs for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 resulting in losses totaling ¥14,651 million, ¥12,662 million, ¥4,415 million and ¥4,415¥13,716 million, respectively, which were included in “Cost of equipment sold” in the consolidated statements of income.

Property, plant and equipment—

Property, plant and equipment are stated at cost and include interest cost incurred during construction, as discussed below in “Capitalized interest.” Property, plant and equipment under capital leases are stated at the present value of minimum lease payments. Depreciation is computed by the declining-balance method at rates based on the estimated useful lives of the respective assets with the exception of buildings, which are depreciated on a straight-line basis. Useful lives are determined at the time the asset is acquired and are based on its expected use, past experience with similar assets and anticipated technological or other changes. If technological or other changes occur more or less rapidly or in a different form than anticipated or the intended use changes, the useful lives assigned to these assets are adjusted as appropriate. Property, plant and equipment held under capital leases and leasehold improvements are amortized using either the straight-line method or the declining-balance method, depending on the type of the assets, over the shorter of the lease term or estimated useful life of the asset.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The estimated useful lives of major depreciable assets are as follows:

 

Major wireless telecommunications equipment

   8 to 16 years  

Steel towers and poles for antenna equipment

   30 to 40 years  

Reinforced concrete buildings

   42 to 56 years  

Tools, furniture and fixtures

   4 to 15 years  

Depreciation and amortization expenses of property, plant and equipment for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 were ¥460,295 million, ¥477,311 million, ¥480,836 million and ¥480,836¥481,971 million, respectively.

When depreciable telecommunications equipment is retired or abandoned in the normal course of business, the amounts of such telecommunications equipment and its accumulated depreciation are deducted from the respective accounts. Any remaining balance is charged to expense immediately. DOCOMO estimates the fair values of its asset retirement obligations to restore certain leased land and buildings used for DOCOMO’s wireless telecommunications equipment to their original states. The aggregate fair value of its asset retirement obligations does not have a material impact on DOCOMO’s results of operations or financial position.

Expenditures for replacements and betterments are capitalized, while expenditures for maintenance and repairs are expensed as incurred. Assets under construction are not depreciated until placed in service. The rental costs associated with ground or building operating leases that are incurred during a construction period are expensed.

Capitalized interest—

DOCOMO capitalizes interest related to the construction of property, plant and equipment over the period of construction. DOCOMO also capitalizes interest associated with the development of internal-use software. DOCOMO amortizes such capitalized interest over the estimated useful lives of the related assets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investments in affiliates—

The equity method of accounting is applied to investments in affiliates where DOCOMO is able to exercise significant influence over the investee, but does not have a controlling financial interest. Under the equity method of accounting, DOCOMO records its share of income and losses of the affiliate and adjusts its carrying amount. DOCOMO periodically reviews the facts and circumstances related thereto to determine whether or not it can exercise significant influence over the operating and financial policies of the affiliate. For some investees accounted for under the equity method, DOCOMO records its share of income or losses of such investees with up to a 3 month lag in its consolidated statements of income.

DOCOMO evaluates the recoverability of the carrying value of its investments in affiliates, which includes investor level goodwill, when there are indicators that a decline in value below its carrying amount may be other than temporary. In performing its evaluations, DOCOMO utilizes various information including cash flow projections, independent valuations and, as applicable, quoted market values to determine recoverable amounts and the length of time an investment’s carrying value exceeds its estimated current recoverable amount. In the event of a determination that a decline in value is other than temporary, a charge to earnings is recorded for the loss, and a new cost basis in the investment is established.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Marketable securities and other investments—

Marketable securities consist of debt and equity securities. DOCOMO determines the appropriate classification of its investment securities at the time of purchase. DOCOMO periodically reviews the carrying amounts of its marketable securities for impairments that are other than temporary. If this evaluation indicates that a decline in value is other than temporary, the security is written down to its estimated fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether a decline in value is other than temporary, DOCOMO considers whether DOCOMO has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the decline in value, the severity and duration of the decline, changes in value subsequent toyear-end, forecasted earnings performance of the investee and the general market condition in the geographic area or industry the investee operates in.

Equity securities held by DOCOMO, whose fair values are readily determinable, are classified asavailable-for-sale securities. Available-for-sale equity securities are carried at fair value with unrealized holding gains or losses, net of applicable taxes, included in “Accumulated other comprehensive income (loss).” Realized gains and losses are determined using the average cost method and are reflected currently in earnings.

Debt securities held by DOCOMO, which DOCOMO has the positive intent and ability to hold to maturity, are classified as held-to-maturity, and the other debt securities that may be sold before maturity are classified as available-for-sale securities. Held-to-maturity debt securities are carried at amortized cost. Available-for-sale debt securities are carried at fair value with unrealized holding gains or losses, net of applicable taxes, included in “Accumulated other comprehensive income (loss).” Realized gains and losses are determined using thefirst-in, first-out cost method and are reflected currently in earnings. DebtHighly liquid debt securities with original maturities of 3 months or less at the date of purchase are recorded as “Cash and cash equivalents,” while thosedebt securities that are not recorded as “Cash and cash equivalents” with original maturities of longer than 3 months at the date of purchase and remaining maturities of 1 year or less at the end of fiscal year are recorded as “Short-term investments” in the consolidated balance sheets.

DOCOMO did not hold or transact any trading securities during the fiscal years ended March 31, 2012, 2013, 2014 and 2014.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2015.

Other investments include equity securities whose fair values are not readily determinable. Equity securities whose fair values are not readily determinable are carried at cost. Other-than-temporary declines in value are charged to earnings. Realized gains and losses are determined using the average cost method and are reflected currently in earnings.

Goodwill and other intangible assets—

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Other intangible assets primarily consist of software for telecommunications network, internal-use software, software acquired to be used in manufacture of handsets and rights to use certain telecommunications facilities of wireline operators.

DOCOMO does not amortize either goodwill, including investor level goodwill related to the investments accounted for under the equity method, or other intangible assets acquired in a purchase business combination and determined to have an indefinite useful life. However, (1) goodwill, except those related to equity method investments, and (2) other intangible assets that have indefinite useful lives are tested annually for impairment mainly as of March 31 and the assets are also tested between the annual tests if an event or circumstances occurs that would imply impairment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

DOCOMO applies a two-step test when assessing goodwill for impairment. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). Fair value of the reporting unit is determined using mainly discounted cash flow method. If the carrying value of the reporting unit exceeds its fair value, an indication of goodwill impairment exists for the reporting unit and DOCOMO performs the second step of the impairment test (measurement). Under the second step, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. If the fair value of the reporting unit exceeds its carrying value, the second step does not need to be performed.

TheFor the fiscal years ended March 31, 2013 and 2014, the most significant amount of recorded goodwill residesresided in the mobile business in Japan reporting unit,units, which iswas included in DOCOMO’s mobile business segment. ThisThe reporting unit hashad recorded goodwill of ¥133,505 million and hashad passed the first step of the impairment test by a substantial margin formargin.

During the fiscal yearsyear ended March 31, 2012, 20132015, DOCOMO realigned its operating segments. This realignment was due to a change in the management of DOCOMO’s businesses, which led DOCOMO to reorganize the internal organization of its financial reporting structure in a manner that caused the composition of DOCOMO’s reporting segments to change. DOCOMO realigned its reporting units in accordance with the realignment of its reporting segments and 2014.goodwill was allocated to reporting units based on their relative fair value.

For the fiscal year ended March 31, 2015, the most significant amount of recorded goodwill resides in the telecommunications business in Japan reporting unit, which is included in DOCOMO’s telecommunications business segment. This reporting unit has recorded goodwill of ¥127,272 million since as of the date of the change in the reporting units and has passed the first step of the impairment tests by a substantial margin. The fair value of the remaining goodwill which resides in other reporting units also exceeds the net carrying amount by a significant margin or is not considered significant.significant for the fiscal years ended March 31, 2013, 2014 and 2015. Fair values have primarily been estimated using the discounted cash flow method which is based upon the future business plan. The future business plan is supported by the historical operating results and DOCOMO’s most recent views of the long term outlook. However, if operating income were to decline significantly in the future due to now unforeseen events, it would adversely affect the estimated fair value of the reporting unit.

For the goodwill impairment losses recorded during the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, see Note 78 “Goodwill and other intangible assets.”

Goodwill related to equity method investments is tested for impairment as a part of theother-than-temporary impairment assessment of the equity method investment as a whole.

Intangible assets that have finite useful lives, consisting primarily of software for telecommunications network, internal-use software, software acquired to be used in manufacture of handsets and rights to use telecommunications facilities of wireline operators are amortized on a straight-line basis over their useful lives.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

DOCOMO capitalizes the cost of internal-use software which has a useful life in excess of 1 year. Subsequent costs for additions, modifications or upgrades to internal-use software are capitalized only to the extent that the software is able to perform a task it previously did not perform. Software acquired to be used in manufacture of handsets is capitalized if the technological feasibility of the handset to be ultimately marketed has been established at the time of acquisition. Software maintenance and training costs are expensed as incurred. Capitalized software costs are amortized over up to 57 years.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Amounts capitalized related to rights to use certain telecommunications assets of wireline operators, primarily NTT, are amortized over 20 years.

Impairment of long-lived assets—

DOCOMO’s long-lived assets other than goodwill, such as property, plant and equipment, software and intangibles subject to amortization,amortizable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held for use is evaluated by a comparison of the carrying amount of the asset with future undiscounted cash flows expected to be generated by the asset or asset group. If the asset (or asset group) is determined to be impaired, the loss recognized is the amount by which the carrying value of the asset (or asset group) exceeds its fair value as measured through various valuation techniques, including discounted cash flow methods, quoted market value and third-party independent appraisals, as considered necessary.

Hedging activities—

DOCOMO uses derivative instruments, including interest rate swap agreements, foreign exchange forward contracts, non-deliverable forward contracts (NDF) and foreign currency option contracts, and other financial instruments in order to manage its exposure to fluctuations in interest rates and foreign exchange rates. DOCOMO does not hold or issue derivative instruments for trading purposes. These financial instruments are effective in meeting the risk reduction objectives of DOCOMO by generating either transaction gains or losses which offset transaction gains or losses of the hedged items or cash flows which offset the cash flows related to the underlying position in respect of amount and timing.

All derivative instruments are recorded in the consolidated balance sheets at fair value. The recorded fair values of derivative instruments represent the amounts that DOCOMO would receive or pay to terminate the contracts at each fiscal year end. For derivative instruments that qualify as fair value hedge instruments, the changes in fair value of the derivative instruments are recognized currently in earnings, which offset the changes in fair value of the related hedged assets or liabilities that are also recognized in earnings of the period. For derivative instruments that qualify as cash flow hedge instruments, the changes in fair value of the derivative instruments are initially recorded in “Accumulated other comprehensive income (loss)” and reclassified into earnings when the relevant hedged transaction is realized. For derivative instruments that do not qualify as hedging instruments, the changes in fair value of the derivative instruments are recognized currently in earnings.

DOCOMO discontinues hedge accounting when it is determined that the derivative instruments or other financial instruments are no longer highly effective as a hedge or when DOCOMO decides to discontinue the hedging relationship.

Cash flows from derivative instruments that are designated as qualifying hedges are classified in the consolidated statements of cash flows under the same categories as the cash flows from the relevant assets, liabilities or anticipated transactions.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accrued liabilities for point programs—

DOCOMO offers “docomo Points Service,” which provides benefits, including discount on handset, to customers in exchange for points that DOCOMO grants customers based on the usage of cellular and other services and record “Accrued liabilities for point programs” relating to the points that customers earn. In determining the accrued liabilities for point programs, DOCOMO estimates such factors as the point utilization rate reflecting the forfeitures by, among other things, cancellation of subscription.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Employees’ retirement benefit plans—

DOCOMO recognizes the funded status of its defined benefit plans, measured as the difference between the plan assets at fair value and the benefit obligation, in the consolidated balance sheets. Changes in the funded status are recognized as changes in comprehensive income during the fiscal period in which such changes occur.

Pension benefits earned during the year as well as interest on projected benefit obligations are accrued currently. Actuarial losses (gains) in excess of 10% of the greater of the projected benefit obligation or the fair value of plan assets and prior service cost due to the changes of benefit plans, both of which are included in “Accumulated other comprehensive income (loss),” are amortized to earnings over the expected average remaining service period of employees on a straight-line basis.

Redeemable noncontrolling interests—

A portion of noncontrolling interests of a subsidiary can be put to DOCOMO upon certain events. As redemption of the noncontrolling interests is not solely in the control of DOCOMO, it is considered as “Redeemable noncontrolling interests” and presented in between Liabilities and Equity in the consolidated balance sheets.

As ofFor the fiscal years ended March 31, 2014 and 2015, DOCOMO believes that subsequent fair value adjustment of the presented amount of redeemable noncontrolling interests is unnecessarynot required because theythese are not currently redeemable andor it is not probable that theythese will become redeemable. DOCOMO will reassess the probability each fiscal year.of redemption annually.

Revenue recognition—

DOCOMO primarily generates revenues from two sources—mobile communications services and equipment sales. These revenue sources are separate and distinct earnings processes. Mobile communications service is sold to the subscriber directly or through third-party resellers who act as agents, while equipment, including handsets, are sold principally to agent resellers.

DOCOMO sets its mobile communications services rates in accordance with the Japanese Telecommunications Business Act and government guidelines, which currently allow wireless telecommunications operators to set their own tariffs without government approval. Mobile communications service revenues primarily consist of basic monthly charges, airtime charges and fees for activation.

Basic monthly charges and airtime charges are recognized as revenues at the time the service is provided to the subscribers. DOCOMO’s monthly billing plans for cellular (FOMA and mova)(FOMA) services generally include a certain amount of allowances (free minutes and/or packets), and the used amount of the allowances is subtracted from total usage in calculating the airtime revenue from a subscriber for the month. DOCOMO offers a billing arrangementarrangements called “Nikagetsu Kurikoshi” (2 month carry-over), and “Packet Kurikoshi,” in which unused allowances are automatically carried over.

“Nikagetsu Kurikoshi” is a billing arrangement, in which the unused allowances of the monthly free minutes and/or packets are automatically carried over for up to the following two months. In addition, DOCOMO offers an arrangement

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

which enables the unused allowances that were carried over for the two months to be automatically used to cover the airtime and/or packet charges exceeding the allowances of the other subscriptions in the “Family Discount” group, a discount billing arrangement for families. Out of the unused allowance in a month, DOCOMO defers the revenues based on the portion which is estimated to be used in the following two months. As for the portion which is estimated to expire, DOCOMO recognizes the revenue attributable to such portion of allowances ratably as the remaining allowances are utilized, in addition to the revenue recognized when subscribers make calls or utilize data transmissions.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

“Packet Kurikoshi” is a billing arrangement, in which the unused allowances of the monthly packet data which can be used without speed cap are automatically carried over for up to the following month. DOCOMO defers revenues based on the portion of unused allowances that are estimated to be utilized in the next month. As DOCOMO does not have sufficient empirical evidence to reasonably estimate unused allowances that will be utilized in the next month, DOCOMO deducts and defers all amounts allocated to unused allowances from revenues. The deferred revenues are recognized as revenues in the next month.

Equipment sales are recognized as revenues when equipment is accepted mainly by agent resellers, and all inventory risk is transferred mainly to agent resellers from DOCOMO. Certain commissions paid to agent resellers and incentives offered to subscribers are recognized as a reduction of revenue upon delivery of the equipment to such agent resellers.

From the fiscal year ended March 31, 2014, DOCOMO commenced a new incentive program which provides certain discounts for subscribers who purchase qualified smartphones under the installment payment arrangement. Under the incentive program, DOCOMO provides subscribers the discountdiscounts depending on the number of installinstallment payments upon certain events including replacement of the original smartphones. WithDuring the commencement of the program,fiscal year ended March 31, 2014, DOCOMO has recorded a reduction of revenues based on the maximum potential discount amount of installment receivables as this program has just been established and DOCOMO does not have ano sufficient empirical evidence was available to reasonably estimate such amounts. During the fiscal year ended March 31, 2015, DOCOMO has recognized estimated future discount amount as a reduction of revenue since DOCOMO developed sufficient empirical evidence such as an analysis of the historical churn rate and replacement rate of the qualified and other smartphones to reasonably estimate the future discount amount.

DOCOMO enables subscribers to select installment payments for the purchase of the handset over a period of 12 or 24 months. When installment payments are selected, under agreements entered into among DOCOMO, subscribers and agent resellers, DOCOMO provides financing by providing funds for the purchase of the handset by the subscribers. DOCOMO then includes current installments for the receivable for the purchased handset with basic monthly charges and airtime charges for the installment payment term. This is a separate contract from the mobile communications services contract between DOCOMO and the subscriber or the handset purchase agreement between the agent resellers and the subscriber, and cash collection from the subscriber is the recovery of the cash payment. Therefore, cash collection from subscribers for the purchased handsets does not have an impact on DOCOMO’s revenue.

Non-recurring upfront fees such as activation fees are deferred and recognized as revenues over the estimated average period of the subscription for each service. The related direct costs are also deferred to the extent of the related upfront fee amount and are amortized over the same period.

The above-mentioned deferredOn March 1, 2015, DOCOMO commenced an optical-fiber broadband service, “docomo Hikari,” by utilizing the wholesale optical-fiber access service of NIPPON TELEGRAPH AND TELEPHONE EAST CORPORATION and NIPPON TELEGRAPH AND TELEPHONE WEST CORPORATION, subsidiaries of NTT. Since the “docomo Hikari” started from March 1, 2015, the revenue and deferred charges as of “docomo Hikari” service included in telecommunications services on the consolidated statements of income for the year ended March 31, 20132015 was immaterial.

In addition to the above, DOCOMO sells a variety of goods and 2014 weredigital media contents, such as follows:video and music distribution, electronic books and other services offered through DOCOMO’s “dmarket” portal, and renders services such as “Mobile Device Protection Service,” of which revenues are included in other operating

      Millions of yen 
   Locations          2013                   2014         

Current deferred revenue

  Other current liabilities  ¥    68,956    ¥    53,720  

Long-term deferred revenue

  Other long-term liabilities   70,150     55,841  

Current deferred charges

  Prepaid expenses and other
current assets
   24,942     16,847  

Long-term deferred charges

  Other assets   70,150  ��  55,841  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

revenues on the consolidated statements of income. DOCOMO recognizes the related revenues when the following criteria are met. Persuasive evidence of an arrangement or contract exists, delivery has occurred or service has been rendered, the selling price is fixed and collection is reasonably assured.

In addition, DOCOMO evaluates whether it is appropriate to record the gross amount of the revenues and related costs for those goods and services by considering a number of factors, including, but not limited to, whether DOCOMO is the primary obligor under the arrangement or contract, has the inventory risk and has latitude in establishing prices. As DOCOMO generally is the primary obligor with the inventory risk, latitude in establishing prices and/or credit risks, the related revenues are presented on a gross basis.

Contrarily, for certain transactions on the “dmarket,” DOCOMO is not considered the primary obligor, does not take or take little inventory risk, has no latitude in establishing prices and/or credit risk. DOCOMO is considered an agent for such transactions and related revenues are presented on a net basis.

The deferred revenue and deferred charges as of March 31, 2014 and 2015 were as follows:

      Millions of yen 
   Locations  2014   2015 

Current deferred revenue

  Other current liabilities  ¥    53,720    ¥    64,796  

Long-term deferred revenue

  Other long-term liabilities   55,841     79,610  

Current deferred charges

  Prepaid expenses and other current assets   16,847     17,293  

Long-term deferred charges

  Other assets   55,841     72,801  

Selling, general and administrative expenses—

Selling, general and administrative expenses primarily include commissions paid to sales agents, expenses associated with point programs, advertising expenses, as well as other expenses such as payroll and related benefit costs of personnel not directly involved in the service operations and maintenance process.

Income taxes—

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

DOCOMO recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the fiscal year in which the change in judgment occurs. DOCOMO has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as a part of income tax expense in the consolidated statements of income.

Earnings per share attributable to NTT DOCOMO, INC.—

Basic earnings per share attributable to NTT DOCOMO, INC. include no dilution and are computed by dividing income available to common shareholders by the weighted average number of shares of common stock

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

outstanding for the period. Diluted earnings per share attributable to NTT DOCOMO, INC. assume the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock.

DOCOMO did not issue dilutive securities during the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, and therefore there is no difference between basic and diluted earnings per share attributable to NTT DOCOMO, INC.

Foreign currency translation—

All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at appropriate year-end current rates and all income and expense accounts are translated at rates that approximate those rates prevailing at the time of the transactions. The accompanying translation adjustments are included in “Accumulated other comprehensive income (loss).”

Foreign currency receivables and payables of DOCOMO are translated at appropriate year-end current rates and the accompanying translation gains or losses are included in earnings currently.

The effects of exchange rate fluctuations from the initial transaction date to the settlement date are recorded as exchange gain or loss, which are included in “Other income (expense)” in the consolidated statements of income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(d)(b) Reclassifications

Certain reclassifications have been made to the prior periods’ consolidated financial statements to conform to the presentation used for the fiscal year ended March 31, 2014.2015.

(c) Recently issued Accounting Standards

Revenue from Contracts with Customers—

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers (Topic 606)”, which requires an entity to recognize the amount to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for DOCOMO on April 1, 2017. On April 29, 2015, the FASB issued an exposure draft to delay the effective date of the ASU by one year. In the event that the exposure draft goes into effect, the standard would be effective for DOCOMO on April 1, 2018 and early adoption of the standard as of April 1, 2017 would also be permitted.

DOCOMO is currently evaluating the effect that the ASU will have on its consolidated financial statements and related disclosures.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. Cash and cash equivalents:

“Cash and cash equivalents” as of March 31, 20132014 and 20142015 comprised the following:

 

  Millions of yen   Millions of yen 
  2013   2014   2014   2015 

Cash

  ¥260,109    ¥157,650    ¥157,650    ¥92,821  

Certificates of deposit

   60,000     20,000     20,000       

Commercial paper

   69,989     2,212     2,212     802  

Bailment for consumption

   100,000     346,911     346,911     11,930  

Other

   3,576     147     147       
  

 

   

 

   

 

   

 

 

Total

  ¥493,674   ¥526,920   ¥526,920    ¥105,553  
  

 

   

 

   

 

   

 

 

The aggregate amount of commercial paper as of March 31, 20132014 and 20142015 was ¥69,989¥2,212 million and ¥2,212¥802 million, respectively, all of which were included in “Cash and cash equivalents” in the consolidated balance sheet. The commercial paper as of March 31, 2013 was classified as held-to-maturity securities, amortized amounts of which approximate their fair value. The commercial paper as of March 31, 2014 and 2015 was classified as available-for-sale securities, fair value of which approximates their amortized amounts.

The aggregate amount of certificates of deposit as of March 31, 2013 and 2014 were ¥60,000 million and ¥20,000 million, respectively, all of which were recorded in “Cash and cash equivalents” in the consolidated balance sheet.

Information regarding “Bailment for consumption” is disclosed in Note 1315 “Related party transactions.”

4. Inventories:

“Inventories” as of March 31, 20132014 and 20142015 comprised the following:

 

  Millions of yen   Millions of yen 
  2013   2014   2014   2015 

Finished goods

  ¥178,019    ¥229,473    ¥229,473    ¥183,325  

Materials and supplies

   2,717     2,653     2,653     2,950  
  

 

   

 

   

 

   

 

 

Total

  ¥180,736   ¥232,126   ¥232,126    ¥186,275  
  

 

   

 

   

 

   

 

 

5. Impairment of long-lived assets:

Impairment of multimedia broadcasting business for mobile devices assets—

For the fiscal year ended March 31, 2015, DOCOMO failed to meet the forecasted revenues of the multimedia broadcasting business for mobile devices of DOCOMO’s smart life business segment due to new competition in content streaming services provided through smart phones and other devices, resulting in a significant increase in uncertainty over the likelihood of future significant improvement of the profitability of this business. This triggered, DOCOMO to conduct a recoverability assessment for its long-lived assets, including property, plant and equipment and intangible assets, of the multimedia broadcasting business for the fiscal year ended March 31, 2015.

The estimated undiscounted future cash flows generated by such long-lived assets were less than their carrying amounts. The fair value of long-lived assets related to the multimedia broadcasting business for mobile devices was estimated primarily based on the discounted cash flow method. As the discounted cash flows expected to be generated by the long-lived assets would be a negative, DOCOMO recorded an impairment for the entire carrying amount of these assets.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, DOCOMO estimated the fair value of certain equipment related to the multimedia broadcasting business based on the observable market transactions of comparable assets, such as the orderly liquidation value of each asset.

Consequently, a reduction of the carrying amounts to fair value was necessary resulting in DOCOMO recording a non-cash impairment loss of ¥30,161 million as “Impairment loss” in the consolidated statements of income, which included an impairment loss for the intangible assets of ¥6,365 million.

6. Investments in affiliates:

Sumitomo Mitsui Card Co., Ltd.—

Sumitomo Mitsui Card Co., Ltd. (“Sumitomo Mitsui Card”) is a credit card operator in Japan and a privately held company.

As of March 31, 20132014 and 2014,2015, DOCOMO held 34% of the outstanding common shares of Sumitomo Mitsui Card. DOCOMO entered into an agreement with Sumitomo Mitsui Card, Sumitomo Mitsui Financial

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Group, Inc. and Sumitomo Mitsui Banking Corporation to jointly promote credit transaction services which use mobile phones compatible with the “Osaifu-Keitai” (wallet-phone) service.

Philippine Long Distance Telephone Company—

Philippine Long Distance Telephone Company (“PLDT”) is a telecommunication operator in the Philippines and a public company listed on the Philippine Stock Exchange and the New York Stock Exchange.

DOCOMO held approximately 15% of PLDT’s outstanding common shares and approximately 9% of voting interest in PLDT as of March 31, 20132014 and 2014.2015. The ratio of outstanding common shares and voting interest in PLDT held by DOCOMO as of March 31, 20132014 and 20142015 are different because PLDT issued voting preferred stock in October, 2012 as below.

On March 14, 2006, DOCOMO acquired approximately 7% of PLDT’s outstanding common shares from NTT Communications Corporation (“NTT Com”), a subsidiary of NTT. From March 2007 to February 2008, DOCOMO acquired approximately an additional 7% of PLDT’s outstanding common shares in the market. As a result, DOCOMO and NTT Com held approximately 15% and 6%, respectively, of PLDT’s outstanding common shares. Together with the PLDT common shares continued to be held by NTT Com, on a consolidated basis NTT held approximately 20% of the total outstanding common shares of PLDT.

As a result of the foregoing, in the fiscal year ended March 31, 2008, DOCOMO determined to apply the equity method of accounting for the investment in PLDT retrospectively from the date of the initial acquisition of PLDT shares, as DOCOMO obtained the ability to exercise significant influence over PLDT with facts that DOCOMO had the board representation and the right to exercise the voting rights associated with the ownership interest collectively held by DOCOMO and NTT Com in accordance with an agreement between PLDT and its major shareholders, including NTT Com and DOCOMO.

In October 2012, PLDT issued voting preferred stocks in order to dilute the foreign ownership interest in PLDT to less than the 40%, as a decision of the Supreme Court of the Philippines increased the foreign ownership percentage of PLDT in excess of 40% limit, which conflicts with a restriction on a foreign ownership in the Philippines. As a result, DOCOMO’s voting interest in PLDT decreased to approximately 9% from 15%.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At that time, the guidelines of foreign ownership requirements were not clearly finalized yet, and therefore there was uncertainty about the foreign ownership requirements. As a consequence, DOCOMO determined it no longer had the ability to exercise significant influence over PLDT during the three-month period ended December 31, 2012 and discontinued the application of the equity method of accounting for the investment in PLDT.

In May 2013, the Securities and Exchange Commission in the Philippines announced a memorandum to clarify the guideline of foreign ownership requirements. DOCOMO has determined it has the ability to exercise significant influence over PLDT, and therefore, DOCOMO has reinstated the equity method of accounting retrospectively for its investment in PLDT.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consequently, the consolidated financial statements for the fiscal year ended March 31, 2013 have been revised for this reinstatement. The effects on the consolidated financial statements for the fiscal year ended March 31, 2013 due to the revisions are as follows.

Effects on consolidated balance sheet

   Millions of yen 

Line items

  As previously reported   Adjustments  As revised 

Investments in affiliates

  ¥352,025    ¥122,477   ¥474,502  

Marketable securities and other investments

   371,569     (215,646  155,923  

Deferred tax assets

   239,015     34,069    273,084  

Total non-current investments and other assets

   2,432,039     (59,100  2,372,939  

Retained earnings

   4,117,073     (4,607  4,112,466  

Accumulated other comprehensive income (loss)

   5,381     (54,493  (49,112

Total NTT DOCOMO, INC. shareholders’ equity

   5,427,575     (59,100  5,368,475  

Effects on consolidated statement of income

 

                                                                                 
   Millions of yen 

Line items

  As previously reported  Adjustments  As revised 

Total other income (expense)

  ¥4,478   ¥  (8,316 ¥(3,838

Income before income taxes and equity in net income (losses) of affiliates

   841,658    (8,316  833,342  

Income taxes

   325,628    (2,569  323,059  

Equity in net income (losses) of affiliates

   (30,710  1,140    (29,570

Net income

   485,320    (4,607  480,713  

Net income attributable to NTT DOCOMO, INC.

   495,633    (4,607  491,026  

Effects on consolidated statement of comprehensive income

 

                                                                                 
   Millions of yen 

Line items

  As previously reported  Adjustments  As revised 

Unrealized holding gains (losses) on available-for-sale securities, net of applicable taxes

  ¥75,614   ¥(48,825 ¥26,789  

Unrealized gains (losses) on cash flow hedges, net of applicable taxes

   45    (14  31  

Foreign currency translation adjustment, net of applicable taxes

   39,124    (4,928  34,196  

Pension liability adjustment, net of applicable taxes

   (4,742  (726  (5,468

Total other comprehensive income (loss)

   110,041    (54,493  55,548  

Comprehensive income

   595,361    (59,100  536,261  

Comprehensive income attributable to NTT DOCOMO, INC.

   605,543    (59,100  546,443  

Effect on per share data

                                                                                 
   Yen 

Line items

  As previously reported   Adjustments  As revised 

Basic and Diluted earnings per share attributable to NTT DOCOMO, INC.

  ¥  119.52    ¥     (1.11 ¥  118.41  

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Effect on per share data

   Yen 

Line items

  As previously reported   Adjustments  As revised 

Basic and Diluted earnings per share attributable to NTT DOCOMO, INC.

  ¥119.52    ¥(1.11 ¥118.41  

DOCOMO’s carrying amount of its investment in PLDT was ¥122,478¥130,815 million and ¥130,815¥143,819 million as of March 31, 20132014 and 2014,2015, respectively. The aggregate market price of the PLDT shares owned by DOCOMO was ¥215,646¥197,354 million and ¥197,354¥240,522 million as of March 31, 20132014 and 2014,2015, respectively.

Tata Teleservices Limited—

Tata Teleservices Limited (“TTSL”) is a telecommunication operator in India and a privately held company.

As of March 31, 20132014 and 2014,2015, DOCOMO held approximately 26.5% of the outstanding common shares of TTSL.

On November 12, 2008, DOCOMO entered into a capital alliance with TTSL and Tata Sons Limited (“Tata Sons”), the parent company of TTSL. On March 25, 2009, DOCOMO acquired approximately 26% of the outstanding common shares of TTSL pursuant to the capital alliance and accounted for the investment by applying the equity method.

DOCOMO made additional investments in response to a rights offering that TTSL commenced in March and May, 2011. TTSL has used the capital increase to strengthen the quality of the 3G network in India’s market. As a result of its participation in the rights offering, DOCOMO’s equity interest in TTSL slightly increased to approximately 26.5%.

DOCOMO determined that the decline in value below carrying amount was other-than-temporary and recognized impairment charges of ¥6,813 million and ¥51,244 million related to its investment in TTSL for the fiscal years ended March 31, 2013 and 2014, respectively.

On April 25, 2014, DOCOMO’s board of directors resolved to exercise an option for the sale of DOCOMO’s entire stake (1,248,974,378 shares, or approximately 26.5% of outstanding shares) in TTSL, DOCOMO’s affiliate accounted for by the equity method, as soon as the conditions for such exercise are met.

Under the shareholders agreement (the “Agreement”), concluded by entered into among TTSL, Tata Sons Limited and DOCOMO, when DOCOMO entered into a business alliance with TTSL in March 2009, DOCOMO shall have acertain shareholder rights including the right to require thatTata Sons to find a suitable buyer for DOCOMO’s TTSLentire stake (1,248,974,378 shares, be acquiredor approximately 26.5% of outstanding shares) in TTSL for 50% of the DOCOMO’s acquisition price, which amounts to 72.5 billion Indian rupees (or ¥126.2¥141.4 billion*) or aat fair value, whichever is higher, in the event that TTSL fails to achieve certain specified performance targets by March 31, 2014.

The above-mentioned right became exercisable on May 30, 2014, and DOCOMO plansexercised the right on July 7, 2014.

The obligation of Tata Sons under the Agreement was not fulfilled, although DOCOMO repeatedly held discussions with Tata Sons in regards to exercise the above-mentioned right and expectssale of its entire stake in TTSL, pursuant to sell DOCOMO’s TTSL shares in accordance with the Agreement. It is uncertain howAccordingly, DOCOMO submitted its request for arbitration to the option will be performed, however,London Court of International Arbitration on January 3, 2015.

The sale of investment in TTSL has not been completed as Tata Sons has not fulfilled its obligation, and thus DOCOMO ishas not ableaccounted for the sales transaction for the year ended March 31, 2015. DOCOMO continues to predict how events will unfold. An estimateaccount for the investment in TTSL under the equity method as DOCOMO continues to hold approximately 26.5% of the outstanding voting shares of TTSL and have the representation on the board of directors of TTSL, even after submitting the request for arbitration. The financial effect of this financial effectmatter cannot be madeestimated at this time due to these uncertainties.the aforementioned uncertainties surrounding this investment. DOCOMO may recognize a gain or loss upon disposition of its TTSL shares or ifin the event that it becomes probable that the transaction as described above iswill not be carried out.

 

* 1 rupee = ¥1.74¥1.95 as of May 31, 201429, 2015

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Impairment—

DOCOMO evaluates the recoverability of the carrying value of its investments in affiliates including those mentioned above when there are indications that a decline in value below carrying amount may be other than temporary.

DOCOMO determined that there were other-than-temporary declines in values, of certain investments and recognized impairment charges for the fiscal years ended March 31, 2012, 2013, and 2014. For the fiscal year ended March 31, 2012, the impact of impairment charges on DOCOMO’s results of operations or financial position was inconsequential. For the fiscal years ended March 31, 2013 and 2014, DOCOMO recognized impairment charges on certain investments including TTSL aggregating ¥25,913 million and ¥51,279 million, respectively. The impairment charges are included in “Equity in net income (losses) of affiliates” in the consolidated statements of income.

DOCOMO reviewed the business outlook of TTSL in order to determine if the value of the investment in TTSL has suffered a decline that was other than temporary because of the recent economic and financial environment surrounding its industry.

During the fiscal year ended March 31, 2013, DOCOMO’s estimated future cash flows of TTSL were adjusted downward as a result of the intensifying tariff competition among mobile network operators in India and DOCOMO’s views of its long term outlook at that time and DOCOMO concluded that the recoverable amount was significantly below carrying value and that this impairment was other than temporary. Consequently, DOCOMO recognized an impairment charge of ¥6,813 million.

During the fiscal year ended March 31, 2014, DOCOMO’s estimate of future cash flows of TTSL were further revised downward as a result of the growing business risk of mobile network operators in India, including an increase in the cost of maintaining or acquiring frequency spectrum due to a steep rise of the auction price of frequency spectrum in India. Reflecting growing business risk and recent operating results of TTSL, the weighted average cost of capital increased to 12.6%, which was applied to these revised estimated cash flows and DOCOMO concluded that the further decline in value was other than temporary. Consequently, DOCOMO recognized an additional impairment charge of ¥51,244 million.

During the fiscal year ended March 31, 2015, DOCOMO determined that the value of the investment in TTSL had not suffered a decline that was other than temporary. As previously described, DOCOMO plans to dispose of DOCOMO’s entire investment in TTSL. DOCOMO may recognize a gain or loss upon disposition of DOCOMO’s TTSL shares or if the transaction as previously described above is not carried out. In addition, DOCOMO recorded impairment charges for other than temporary declines on investments in certain affiliates for the fiscal year ended March 31, 2015. Those impairment charges do not have a material impact on DOCOMO’s results of operations or financial position.

DOCOMO believes that the estimated fair values of each of its investments in affiliates as of March 31, 20142015 are equal to or exceed the related carrying values on an individual basis.

Others—

All of the significant affiliates, except for PLDT, are privately held companies as of March 31, 2014.2015.

DOCOMO’s shares of undistributed earnings of its affiliates included in its consolidated retained earnings were ¥22,208 million, ¥30,311 million, ¥36,111 million and ¥36,111¥44,367 million, as of March 31, 2012, 2013, 2014 and 2014,2015, respectively. DOCOMO does not have significant business transactions with its affiliates.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The total carrying value of DOCOMO’s “Investments in affiliates” in the consolidated balance sheets as of March 31, 20132014 and 20142015 was greater by ¥314,038¥264,751 million and ¥264,751¥280,140 million, respectively, than its aggregate underlying equity in net assets of such affiliates as of the date of the most recent available financial statements of the investees. The differences mainly consist of investor level goodwill and fair value adjustments for amortizable intangible assets.

The following represents summarized financial information for DOCOMO’s affiliates.

   Millions of yen 
   2013 
   TTSL   Others 

Operating information

    

Operating revenues

  ¥210,092    ¥820,708  

Operating income (loss)

   (33,477   156,955  

Income (loss) from continuing operations

   (72,301   136,382  

Net income (loss)

   (72,301   136,382  

Net income (loss) attributable to shareholders’ of the affiliates

   (70,858   119,567  
  

 

 

   

 

 

 
   Millions of yen 
   2014 
   TTSL   Others 

Balance sheet information

    

Current assets

  ¥55,080    ¥1,372,867  

Non-current assets

   457,960     1,444,558  

Current liabilities

   201,407     1,148,036  

Long-term liabilities

   454,612     717,908  

Equity

   (142,979   951,481  
  

 

 

   

 

 

 

Redeemable preferred stock

   1,433       

Redeemable common stock

        555  

Noncontrolling interests

   21,277     1,639  
  

 

 

   

 

 

 
   Millions of yen 
   2014 
   TTSL   Others 

Operating information

    

Operating revenues

  ¥227,582    ¥911,020  

Operating income (loss)

   (28,683   171,193  

Income (loss) from continuing operations

   (85,026   122,511  

Net income (loss)

   (85,026   122,511  

Net income (loss) attributable to shareholders’ of the affiliates

   (84,613   122,324  
  

 

 

   

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

The following represents summarized financial information for DOCOMO’s affiliates.

   Millions of yen 
   2012 
   TTSL  Others 

Operating information

   

Operating revenues

  ¥198,554   ¥754,101  

Operating income (loss)

   (47,794  138,245  

Income (loss) from continuing operations

   (95,813  90,448  

Net income (loss)

   (95,813  90,448  

Net income (loss) attributable to shareholders’ of the affiliates

   (89,460  92,939  
  

 

 

  

 

 

 

   Millions of yen 
   2013 
   TTSL  Others 

Balance sheet information

   

Current assets

  ¥81,659   ¥1,204,470  

Non-current assets

   453,207    1,249,170  

Current liabilities

   198,503    968,680  

Long-term liabilities

   388,539    651,356  

Equity

   (52,176  833,604  
  

 

 

  

 

 

 

Redeemable preferred stock

   1,325      

Noncontrolling interests

   20,057   1,501 
  

 

 

  

 

 

 

   Millions of yen 
   2013 
   TTSL  Others 

Operating information

   

Operating revenues

  ¥210,092   ¥820,708  

Operating income (loss)

   (33,477  156,955  

Income (loss) from continuing operations

   (72,301  136,382  

Net income (loss)

   (72,301  136,382  

Net income (loss) attributable to shareholders’ of the affiliates

   (70,858  119,567  
  

 

 

  

 

 

 

   Millions of yen 
   2014 
   TTSL  Others 

Balance sheet information

   

Current assets

  ¥55,080   ¥1,372,867  

Non-current assets

   457,960    1,444,558  

Current liabilities

   201,407    1,148,036  

Long-term liabilities

   454,612    717,908  

Equity

   (142,979  951,481  
  

 

 

  

 

 

 

Redeemable preferred stock

   1,433      

Redeemable common stock

       555  

Noncontrolling interests

   21,277   1,639 
  

 

 

  

 

 

 

   Millions of yen 
   2015 
   TTSL   Others 

Balance sheet information

    

Current assets

  ¥76,869    ¥1,415,618  

Non-current assets

   468,569     1,766,763  

Current liabilities

   141,608     1,234,202  

Long-term liabilities

   601,880     843,066  

Equity

   (198,050   1,105,113  
  

 

 

   

 

 

 

Redeemable preferred stock

   48,964       

Noncontrolling interests

   22,920     2,212  
  

 

 

   

 

 

 
   Millions of yen 
   2015 
   TTSL   Others 

Operating information

    

Operating revenues

  ¥238,040    ¥991,113  

Operating income (loss)

   (19,853   168,368  

Income (loss) from continuing operations

   (79,390   127,466  

Net income (loss)

   (79,390   127,466  

Net income (loss) attributable to shareholders’ of the affiliates

   (78,742   127,468  
  

 

 

   

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

   Millions of yen 
   2014 
   TTSL  Others 

Operating information

   

Operating revenues

  ¥227,582   ¥911,020  

Operating income (loss)

   (28,683  171,193  

Income (loss) from continuing operations

   (85,026  122,511  

Net income (loss)

   (85,026  122,511  

Net income (loss) attributable to shareholders’ of the affiliates

   (84,613)  122,324 
  

 

 

  

 

 

 

6.7. Marketable securities and other investments:

“Marketable securities and other investments” as of March 31, 20132014 and 20142015 comprised the following:

 

  Millions of yen   Millions of yen 
  2013   2014   2014   2015 

Marketable securities:

        

Available-for-sale

  ¥140,865    ¥158,775    ¥158,775    ¥181,830  

Other investments

   15,058     13,100     13,100     13,217  
  

 

   

 

   

 

   

 

 

Marketable securities and other investments (Non-current)

  ¥155,923    ¥171,875    ¥171,875    ¥195,047  
  

 

   

 

   

 

   

 

 

The carrying amount and fair value of debt securities classified as available-for-sale included in “Marketable securities and other investments” as of March 31, 20132014 and 2014,2015, aggregated by maturities, were as follows:

 

  Millions of yen   Millions of yen 
  2013   2014   2014   2015 
  Carrying
amount
   Fair value   Carrying
amount
   Fair value   Carrying
amount
   Fair
value
   Carrying
amount
   Fair
value
 

Due after 1 year through 5 years

  ¥        —    ¥        —    ¥        5    ¥        5    ¥        5    ¥        5    ¥        6    ¥        6  

Due after 5 years through 10 years

                                        

Due after 10 years

                                        
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  ¥    ¥    ¥5    ¥5    ¥5    ¥5    ¥6    ¥6  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The cost, gross unrealized holding gains and losses and fair value as of March 31, 20132014 and 2014,2015, aggregated by type of available-for-sale securities included in “Marketable securities and other investments,” were as follows:

 

   Millions of yen 
   2013 
   Cost /Amortized
cost
   Gross unrealized
holding gains
   Gross unrealized
holding losses
   Fair value 

Available-for-sale:

        

Equity securities

  ¥95,452    ¥46,539    ¥1,126    ¥140,865  

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

   Millions of yen 
   2014 
   Cost /Amortized
cost
   Gross unrealized
holding gains
   Gross unrealized
holding losses
   Fair value 

Available-for-sale:

        

Equity securities

  ¥105,482    ¥53,498    ¥210    ¥158,770  

Debt securities

   5          0     5  

 

  Millions of yen   Millions of yen 
  2014   2015 
  Cost /Amortized
cost
   Gross unrealized
holding gains
   Gross unrealized
holding losses
   Fair value   Cost /Amortized
cost
   Gross unrealized
holding gains
   Gross unrealized
holding losses
   Fair value 

Available-for-sale:

                

Equity securities

  ¥105,482    ¥53,498    ¥210    ¥158,770    ¥105,396    ¥76,662    ¥234    ¥181,824  

Debt securities

   5          0     5     5     1          6  

The proceeds and gross realized gains (losses) from the sale of available-for-sale securities and other investments for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 
  2012 2013 2014   2013 2014 2015 

Proceeds

  ¥  2,189   ¥  1,723   ¥  2,729    ¥  1,723   ¥  2,729   ¥  1,003  

Gross realized gains

   1,211    836    1,846     836    1,846    609  

Gross realized losses

   (202  (44  (44   (44  (44  (734

The fair value of and gross unrealized holding losses on available-for-sale securities and cost method investments included in other investments as of March 31, 20132014 and 2014,2015, aggregated by investment category and length of time during which individual securities were in a continuous unrealized loss position, were as follows:

 

 Millions of yen  Millions of yen 
 2013  2014 
 Less than 12 months 12 months or longer Total  Less than 12 months 12 months or longer Total 
 Fair value Gross unrealized
holding losses
 Fair value Gross unrealized
holding losses
 Fair value Gross unrealized
holding losses
  Fair value Gross unrealized
holding losses
 Fair value Gross unrealized
holding losses
 Fair value Gross unrealized
holding losses
 

Available-for-sale:

            

Equity securities

 ¥4,013   ¥1,124   ¥10   ¥2   ¥4,023   ¥1,126   ¥6,816   ¥210   ¥   ¥   ¥6,816   ¥210  

Debt securities

  5    0            5    0  

Cost method investments

  271    1,730    215    936    486    2,666    16    110    326    1,674    342    1,784  

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 Millions of yen  Millions of yen 
 2014  2015 
 Less than 12 months 12 months or longer Total  Less than 12 months 12 months or longer Total 
 Fair value Gross unrealized
holding losses
 Fair value Gross unrealized
holding losses
 Fair value Gross unrealized
holding losses
  Fair value Gross unrealized
holding losses
 Fair value Gross unrealized
holding losses
 Fair value Gross unrealized
holding losses
 

Available-for-sale:

            

Equity securities

 ¥6,816   ¥210   ¥   ¥   ¥6,816   ¥210   ¥3,094   ¥234   ¥   ¥   ¥3,094   ¥234  

Debt securities

  5    0            5    0  

Cost method investments

  16    110    326    1,674    342    1,784            192    1,935    192    1,935  

Other investments include long-term investments in various privately held companies.

For long-term investments in various privately held companies for which there are no quoted market prices, a reasonable estimate of fair value could not be made without incurring excessive costs. Accordingly, DOCOMO believes that it is not practicable to disclose estimated fair values of these cost method investments. Unless DOCOMO identifies events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments, the fair value of such cost method investments is not estimated.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The aggregate carrying amount of cost method investments included in other investments and the aggregate carrying amount of investments whose fair values were not evaluated for impairment as of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 
  2013   2014   2014   2015 

Cost method investments included in other investments

  ¥  15,014    ¥  13,061    ¥13,061    ¥13,178  

Including: Investments whose fair values were not evaluated for impairment

   11,856     10,836     10,836     11,050  

The amount of other-than-temporary impairment of “marketable securities and other investments” is disclosed in Note 1214 “Other income (expense).”

7.8. Goodwill and other intangible assets:

Goodwill—

The majority of DOCOMO’s goodwill was recognized when DOCOMO purchased all the remaining noncontrolling interests in its eight regional subsidiaries through share exchanges and made these subsidiaries wholly owned in November 2002.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The changes in the carrying amount of goodwill by segment for the fiscal years ended March 31, 20132014 and 20142015 were as follows:

 

   Millions of yen 
   2013 
   Mobile phone
business
  All other
businesses
  Consolidated 

Balance at beginning of year

    

Gross goodwill

  ¥151,866   ¥59,334   ¥211,200  

Accumulated impairment losses

   (6,310      (6,310
  

 

 

  

 

 

  

 

 

 
   145,556    59,334    204,890  
  

 

 

  

 

 

  

 

 

 

Goodwill acquired during the year

   19,278    985    20,263  

Impairment losses

       (7,281  (7,281

Foreign currency translation adjustment

   1,465    1,586    3,051  

Other

   (16  (3,267  (3,283
  

 

 

  

 

 

  

 

 

 

Balance at end of year

    

Gross goodwill

   172,593    58,638    231,231  

Accumulated impairment losses

   (6,310  (7,281  (13,591
  

 

 

  

 

 

  

 

 

 
  ¥166,283  ¥51,357  ¥217,640 
  

 

 

  

 

 

  

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

   Millions of yen 
   2014 
   Telecommunications
business
   Smart life
business
   Other
businesses
  Consolidated 

Balance at beginning of year

       

Gross goodwill

  ¥132,116    ¥46,512    ¥52,603   ¥231,231  

Accumulated impairment losses

             (13,591  (13,591
  

 

 

   

 

 

   

 

 

  

 

 

 
   132,116     46,512     39,012    217,640  
  

 

 

   

 

 

   

 

 

  

 

 

 

Goodwill acquired during the year

   8,657     24,095     2,060    34,812  

Foreign currency translation adjustment

   1,052     56     8,902    10,010  
  

 

 

   

 

 

   

 

 

  

 

 

 

Balance at end of year

       

Gross goodwill

   141,825     70,663     63,565   ��276,053  

Accumulated impairment losses

             (13,591  (13,591
  

 

 

   

 

 

   

 

 

  

 

 

 
  ¥141,825    ¥70,663    ¥49,974   ¥262,462  
  

 

 

   

 

 

   

 

 

  

 

 

 

 

  Millions of yen   Millions of yen 
  2014   2015 
  Mobile phone
business
 All other
businesses
 Consolidated   Telecommunications
business
   Smart life
business
   Other
businesses
 Consolidated 

Balance at beginning of year

           

Gross goodwill

  ¥172,593   ¥58,638   ¥231,231��   ¥141,825    ¥70,663    ¥63,565   ¥276,053  

Accumulated impairment losses

   (6,310  (7,281  (13,591             (13,591  (13,591
  

 

  

 

  

 

   

 

   

 

   

 

  

 

 
   166,283   51,357   217,640    141,825     70,663     49,974    262,462  
  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Goodwill acquired during the year

   2,060    32,752    34,812  

Foreign currency translation adjustment

   8,233    1,777    10,010     2,093     84     2,492    4,669  

Other

        6     (826  (820
  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Balance at end of year

           

Gross goodwill

   182,886    93,167    276,053     143,918     70,753     65,231    279,902  

Accumulated impairment losses

   (6,310  (7,281  (13,591             (13,591  (13,591
  

 

  

 

  

 

   

 

   

 

   

 

  

 

 
  ¥176,576  ¥85,886  ¥262,462   ¥143,918    ¥70,753    ¥51,640   ¥266,311  
  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Segment information is disclosed in Note 1416 “Segment reporting.”

The main components of goodwill acquired for the fiscal year ended March 31, 2013 was associated with the acquisition of all of the shares of Buongiorno S.p.A. The main components of goodwill acquired for the fiscal year ended March 31, 2014 was associated with the acquisition of 51% shares of ABC HOLDINGSCooking Studio Co., Ltd.

In the fiscal year ended March 31, 2013, DOCOMO recognized a ¥7,281 million impairment charge. The amount of this impairment loss was included in “Selling, general and administrative” expenses in the consolidated statement of income.

Other intangible assets—

Other intangible assets, as of March 31, 2013 and 2014 comprised the following:

   Millions of yen 
   2013 
   Gross carrying
amount
   Accumulated
amortization
   Net carrying
amount
 

Amortizable intangible assets:

      

Software for telecommunications network

  ¥967,249    ¥682,388    ¥284,861  

Internal-use software

   1,269,794     983,028     286,766  

Software acquired to be used in manufacture of handsets

   227,990     151,880     76,110  

Rights to use telecommunications facilities of wireline operators

   16,986     5,895     11,091  

Other

   54,216     26,551     27,665  
  

 

 

   

 

 

   

 

 

 

Total amortizable intangible assets

  ¥2,536,235    ¥1,849,742    ¥686,493  
  

 

 

   

 

 

   

 

 

 

Unamortizable intangible assets:

      

Trademarks and trade names

  

  ¥5,158  
      

 

 

 

Total unamortizable intangible assets

  

  ¥5,158  
      

 

 

 

Total

  

  ¥691,651 
      

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Other intangible assets—

Other intangible assets, as of March 31, 2014 and 2015 comprised the following:

   Millions of yen 
   2014 
   Gross carrying
amount
   Accumulated
amortization
   Net carrying
amount
 

Amortizable intangible assets:

      

Software for telecommunications network

  ¥1,042,875    ¥758,399    ¥284,476  

Internal-use software

   1,340,963     1,073,233     267,730  

Software acquired to be used in manufacture of handsets

   240,366     175,441     64,925  

Rights to use telecommunications facilities of wireline operators

   17,259     6,545     10,714  

Other

   56,774     32,173     24,601  
  

 

 

   

 

 

   

 

 

 

Total amortizable intangible assets

  ¥2,698,237    ¥2,045,791    ¥652,446  
  

 

 

   

 

 

   

 

 

 

Unamortizable intangible assets:

      

Trademarks and trade names

  

  ¥13,514  
      

 

 

 

Total unamortizable intangible assets

  

  ¥13,514  
      

 

 

 

Total

  

  ¥665,960  
      

 

 

 

   Millions of yen 
   2015 
   Gross carrying
amount
   Accumulated
amortization
   Net carrying
amount
 

Amortizable intangible assets:

      

Software for telecommunications network

  ¥1,084,746    ¥802,180    ¥282,566  

Internal-use software

   1,387,249     1,131,005     256,244  

Software acquired to be used in manufacture of handsets

   250,022     201,021     49,001  

Rights to use telecommunications facilities of wireline operators

   18,271     7,276     10,995  

Other

   56,959     35,852     21,107  
  

 

 

   

 

 

   

 

 

 

Total amortizable intangible assets

  ¥2,797,247    ¥2,177,334    ¥619,913  
  

 

 

   

 

 

   

 

 

 

Unamortizable intangible assets:

      

Trademarks and trade names

  

  ¥13,210  

Other

  

   3,196  
      

 

 

 

Total unamortizable intangible assets

  

  ¥16,406  
      

 

 

 

Total

  

  ¥636,319  
      

 

 

 

Effective July 1, 2014, DOCOMO revised its estimate of the expected useful life of a part of the software for telecommunications network and internal-use software based on the actual utilization of the software to reflect an extended expected maximum useful life from 5 years to 7 years.

The amount of amortizable intangible assets acquired during the fiscal year ended March 31, 20142015 was ¥206,317¥154,682 million, the main components of which were software for telecommunications network in the amount of ¥99,882¥70,428 million and internal-use software in the amount of ¥82,890¥71,086 million. The weighted-average amortization period of such software for telecommunications network and internal-use software is 5.06.7 years and 4.85.9 years, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Amortization of intangible assets for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 was ¥224,488¥222,443 million, ¥222,895¥237,858 million and ¥237,858¥177,816 million, respectively. Estimated amortization of existing intangible assets for fiscal years ending March 31, 2015, 2016, 2017, 2018, 2019 and 20192020 is ¥220,564¥157,622 million, ¥167,391¥134,924 million, ¥110,465¥108,876 million, ¥62,075¥81,936 million and ¥21,356¥52,827 million, respectively. The weighted-average amortization period of the intangible assets acquired during the fiscal year ended March 31, 20142015 is 4.96.3 years.

The amount of unamortizable intangible assets acquired during the fiscal year ended March 31, 2014 was ¥8,363 million, the component of which was trade names.

8.9. Other assets:

“Other assets” as of March 31, 20132014 and 20142015 comprised the following:

 

  Millions of yen   Millions of yen 
  2013 2014   2014   2015 

Deposits

  ¥72,002   ¥83,627    ¥83,627    ¥82,731  

Deferred customer activation costs

   70,150    55,841     55,841     72,801  

Receivables held for sale (Non-current)

   149,972    203,249     203,249     258,717  

Allowance for doubtful accounts

   (1,926  (1,395   (1,395   (5,402

Long-term bailment for consumption to a related party

   240,000    240,000     240,000       

Other

   29,941    47,852     47,852     36,876  
  

 

  

 

   

 

   

 

 

Total

  ¥560,139  ¥629,174   ¥629,174    ¥445,723  
  

 

  

 

   

 

   

 

 

Information regarding “Long-term bailment for consumption to a related party” is disclosed in Note 1315 “Related party transactions.”

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9.10. Short-term borrowings and long-term debt:

Short-term borrowings, excluding the current portion of long-term debt as of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen       Millions of yen     
  2013   2014   2014   2015 

Short-term borrowings denominated in Japanese Yen:

        

Unsecured short-term loans from financial institutions

  ¥—      ¥7,700    ¥7,700    ¥400  

(Year ended March 31, 2014—weighted-average variable rate per annum : 0.5% as of March 31, 2014)

    

(Year ended March 31, 2014—weighted-average rate per annum :
0.5% as of March 31, 2014)

    

(Year ended March 31, 2015—weighted-average rate per annum :
0.7% as of March 31, 2015)

    

Short-term borrowings denominated in Euro:

        

Unsecured short-term loans from financial institutions

   12,307     1,795     1,795     1,648  

(Year ended March 31, 2013—weighted-average variable rate per annum : 1.2% as of March 31, 2013)

    

(Year ended March 31, 2014—weighted-average variable rate per annum : 1.3% as of March 31, 2014)

    

(Year ended March 31, 2014—weighted-average rate per annum :
1.3% as of March 31, 2014)

    

(Year ended March 31, 2015—weighted-average rate per annum :
1.3% as of March 31, 2015)

    
  

 

   

 

   

 

   

 

 

Total short-term borrowings

  ¥  12,307   ¥    9,495   ¥  9,495    ¥2,048  
  

 

   

 

   

 

   

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Long-term debt as of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 
  2013 2014   2014   2015 

Debt denominated in Japanese Yen:

       

Unsecured corporate bonds

  ¥240,000   ¥220,000    ¥220,000    ¥220,000  

(Year ended March 31, 2013—interest rates per annum : 0.2%-2.0%, due : years ending March 31, 2014-2019)

   

(Year ended March 31, 2014—interest rates per annum : 0.2%-2.0%, due : years ending March 31, 2018-2024)

       

(Year ended March 31, 2015—interest rates per annum : 0.2%-2.0%, due : years ending March 31, 2018-2024)

    

Unsecured indebtedness to financial institutions

   1,016    836     836     603  

(Year ended March 31, 2013—interest rates per annum : 0.9%-1.5%, due : years ending March 31, 2014-2018)

   

(Year ended March 31, 2014—interest rates per annum :0.9%-1.2%, due : years ending March 31, 2015-2018)

   

(Year ended March 31, 2014—interest rates per annum : 0.9%-1.2%, due : years ending March 31, 2015-2018)

    

(Year ended March 31, 2015—interest rates per annum : 0.9%-1.2%, due : years ending March 31, 2016-2018)

    

Debt denominated in Euro:

       

Unsecured indebtedness to financial institutions

   443    15     15       

(Year ended March 31, 2013—interest rates per annum : 2.4%-7.5%, due : years ending March 31, 2014-2018)

   

(Year ended March 31, 2014—interest rates per annum : 7.5%, due : year ending March 31, 2018)

       
  

 

  

 

   

 

   

 

 

Sub-total

  ¥241,459   ¥220,851    ¥220,851    ¥220,603  

Less: Current portion

   (70,437  (248   (248   (203
  

 

  

 

   

 

   

 

 

Total long-term debt

  ¥171,022  ¥220,603   ¥220,603    ¥220,400  
  

 

  

 

   

 

   

 

 

For the fiscal year ended March 31, 2013, DOCOMO redeemed ¥60,000 million unsecured corporate bonds and newly issued ¥60,000 million unsecured corporate bonds at 0.2% maturing through the fiscal year ending March 31, 2018. For the fiscal year ended March 31, 2014, DOCOMO redeemed ¥70,000 million unsecured corporate bonds and newly issued an additional ¥50,000 million of unsecured corporate bonds at 0.73% per annum maturing throughin the fiscal year ending March 31, 2024.

NTT For the fiscal year ended March 31, 2015, DOCOMO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

did not redeem or issue corporate bonds.

Interest rates on DOCOMO’s debts are mainly fixed. DOCOMO may use interest rate swap agreements, under which DOCOMO receives fixed rate interest payments and pays floating rate interest payments, to hedge the changes in fair value of certain debt as a part of its asset-liability management (ALM). Information relating to interest rate swap agreements is disclosed in Note 1921 “Financial instruments.” DOCOMO did not enter into any interest rate swaps agreements designated as instruments hedging the changes in fair value for the fiscal yearyears ended March 31, 20132014 and 2014.2015. DOCOMO was not a counterparty to any interest rate swap agreements designated as instruments hedging the changes in fair value as of March 31, 20132014 and 2014.2015.

Interest costs related specifically to short-term borrowings and long-term debt for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 totaled ¥4,356 million, ¥3,916 million, ¥3,096 million and ¥3,096¥2,790 million, respectively. “Interest expense” in the consolidated statements of income excludes the amounts of capitalized interest.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The aggregate amounts of annual maturities of long-term debt as of March 31, 2014,2015, were as follows:

 

Year ending March 31,

  Millions of yen   Millions of yen 

2015

  ¥248  

2016

   203    ¥203  

2017

   200     200  

2018

   60,200     60,200  

2019

   110,000     110,000  

2020

     

Thereafter

   50,000     50,000  
  

 

   

 

 

Total

  ¥220,851    ¥220,603  
  

 

   

 

 

10.11. Redeemable noncontrolling interest

Changes in the redeemable noncontrolling interest for the fiscal years ended March 31, 2014 and 2015 were as follows:

   Millions of yen 
   2014   2015 

Balance at beginning of year

  ¥    ¥14,869  
  

 

 

   

 

 

 

Acquisition of new subsidiary

   14,869       

Comprehensive income

    

Net income

        718  

Other comprehensive income (loss)

    

Foreign currency translation adjustment, net of applicable taxes

        2  
  

 

 

   

 

 

 

Balance at end of year

  ¥14,869    ¥15,589  
  

 

 

   

 

 

 

12. Equity:

(a) Dividends

The Corporate LawCompanies Act of Japan (“Companies Act”) provides that (i) dividends of earnings require approval at a general meeting of shareholders, (ii) interim cash dividends can be distributed upon the approval of the board of directors, if the articles of incorporation provide for such interim cash dividends and (iii) an amount equal to at least 10% of decrease in retained earnings by dividends payment be appropriated from retained earnings to a legal reserve up to 25% of capital stock. The legal reserve is available for distribution upon approval of the shareholders.

The distributable amount available for the payments of dividends to shareholders as of March 31, 20142015 was ¥4,181,996¥3,830,140 million and was included in “Additional paid-in capital” and “Retained earnings.”

In the general meeting of shareholders held on June 19, 2014,18, 2015, the shareholders approved cash dividends of ¥124,403¥135,852 million or ¥30¥35 per share, payable to shareholders of record atas of March 31, 2014,2015, which were declared by the board of directors on April 25, 2014.28, 2015.

(b) Issued shares and treasury stock

With regard to the acquisition of treasury stock, the Corporate Law of JapanCompanies Act provides that (i) it can be done according to the resolution of the general meeting of shareholders, and (ii) the acquisition of treasury stock

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

through open market transactions can be done according to the resolution of the board of directors if the articles of incorporation contain such a provision. The provision is stipulated in DOCOMO’sNTT DOCOMO, INC.’s articles of incorporation. In accordance with the above (ii), the provision that NTT DOCOMO, INC. may acquirerepurchase treasury stock through open market transactions by a resolution of the Board of Directors is stipulated in DOCOMO’sNTT DOCOMO, INC.’s articles of incorporation in order to improve capital efficiency and to implement flexible capital policies in accordance with the business environment.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On April 25, 2014, the board of directors resolved that DOCOMO may repurchase up to 320 million outstanding shares of its common stock at an amount in total not exceeding ¥500,000 million during the period from April 26, 2014 through March 31, 2015.

The numbers of issued shares and treasury stock as of March 31, 2014 were 4,365,000,000 and 218,239,900, respectively, and have not been changed since March 31, 2011. DOCOMO has not issued shares other than shares of its common stock.

On April 26, 2013, the board of directors approved a stock split and the adoption of a unit share system.system from October 1, 2013. Based on the intent of the “Action Plan for Consolidating Trading Units” announced by stock exchanges of Japan in November 2007, NTT DOCOMO, INC. conducted the 1:100 stock split and adopted the unit share system which sets 100 shares as a share–trading unit. There was no effective change to the investment units due to the stock split and adoption of the unit share system.

Public notice date of record date, record date and effective date were September 13, 2013, September 30, 2013 and October 1, 2013, respectively.

NTT DOCOMO, INC. has reflected the effect of this split in the consolidated financial statements and notes to the consolidated financial statements.

On April 25, 2014, the board of directors resolved that NTT DOCOMO, INC. may repurchase up to 320 million outstanding shares of its common stock for an amount in total not exceeding ¥500,000 million during the period from April 26, 2014 through March 31, 2015. NTT DOCOMO, INC. also carries out compulsory acquisition of less-than-one-unit shares upon request.

The changes in the number of issued shares and treasury stock were as follows. NTT DOCOMO, INC. has not issued shares other than shares of its common stock.

   Number of
issued shares
  Number of
treasury stock
 

As of March 31, 2012

   4,365,000,000    218,239,900  
  

 

 

  

 

 

 

As of March 31, 2013

   4,365,000,000    218,239,900  
  

 

 

  

 

 

 

As of March 31, 2014

   4,365,000,000    218,239,900  
  

 

 

  

 

 

 

Acquisition of treasury stock based on the resolution of the board of directors

       265,276,121  

Acquisition of treasury stock through purchase of less-than-one-unit shares

       124  

Retirement of treasury stock

   (279,228,000  (279,228,000
  

 

 

  

 

 

 

As of March 31, 2015

   4,085,772,000    204,288,145  
  

 

 

  

 

 

 

On August 6, 2014, the board of directors resolved that NTT DOCOMO, INC. may repurchase up to 206,489,675 outstanding shares of its common stock for an amount in total not exceeding ¥350,000 million from during the period from August 7, 2014 through September 3, 2014. Based on this resolution, NTT DOCOMO, INC. repurchased 181,530,121 shares of its common stock for a total purchase price of ¥307,694 million between August 2014 and September 2014.

On October 31, 2014, the board of directors resolved that NTT DOCOMO, INC. may repurchase up to 138,469,879 outstanding shares of its common stock for an amount in total not exceeding ¥192,306 million from during the period from November 1, 2014 through March 31, 2015. Based on this resolution, NTT DOCOMO, INC. repurchased 83,746,000 shares of its common stock for a total purchase price of ¥165,342 million between November 2014 and March 2015.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The aggregate number and price of shares repurchased from NTT DOCOMO, INC. parent company, NTT, were 176,991,100 shares and ¥300,000 million, respectively for the fiscal year ended March 31, 2015.

The aggregate number and price of shares repurchased for the fiscal year ended March 31, 2015 were as follows:

Year ended March 31,

  Shares   Millions of yen 

2015

   265,276,245    ¥473,036  

Based on the resolution of the board of directors, NTT DOCOMO, INC. retired its own shares held as treasury stock as shown in the following table for the fiscal year ended March 31 2015.

Date of the resolution of the board of directors

  Shares   Millions of yen 

March 27, 2015

   279,228,000    ¥490,986  

The Companies Act and related ordinance provide that in case the aggregate purchase price of the retired shares exceeds the balance of “Additional paid-in capital,” “Additional paid-in capital” shall be reduced to zero and the remaining balance shall be deducted from the balance of “Retained earnings” on non-consolidated balance sheet.

The share retirement for the fiscal year ended March 31, 2015 resulted in decreases of “Additional paid-in capital” by ¥393,092 million and “Retained earnings” by ¥97,894 million on the consolidated balance sheets in response to the treatment described above. There were no changes in the number of authorized shares.

(c) Accumulated other comprehensive income (loss)

Changes in accumulated other comprehensive income (loss)—

Changes in accumulated other comprehensive income (loss), net of applicable taxes, for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 were as follows:

 

 Millions of yen 
 2012 
 Unrealized holding
gains (losses) on
available-for-sale
securities
 Unrealized gains
(losses) on cash
flow hedges
 Foreign currency
translation
adjustment
 Pension liability
adjustment
 Total 

Balance as of March 31, 2011

 ¥5,691  ¥(109) ¥(54,989) ¥(27,548 ¥(76,955)
 

 

  

 

  

 

  

 

  

 

 

Other comprehensive income (loss)

  3,895    (2  (28,984  (2,483  (27,574
 

 

  

 

  

 

  

 

  

 

 

Balance as of March 31, 2012

 ¥9,586  ¥(111) ¥(83,973) ¥(30,031) ¥(104,529)
 

 

  

 

  

 

  

 

  

 

 
 Millions of yen  Millions of yen 
 2013  2013 
 Unrealized holding
gains (losses) on
available-for-sale
securities
 Unrealized gains
(losses) on cash
flow hedges
 Foreign currency
translation
adjustment
 Pension liability
adjustment
 Total  Unrealized holding
gains (losses) on
available-for-sale
securities
 Unrealized gains
(losses) on cash
flow hedges
 Foreign currency
translation
adjustment
 Pension liability
adjustment
 Total 

Balance as of March 31, 2012

 ¥9,586  ¥(111) ¥(83,973) ¥(30,031 ¥(104,529) ¥9,586   ¥(111 ¥(83,973 ¥(30,031 ¥(104,529
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Other comprehensive income (loss)

  26,786    31    34,066    (5,466  55,417    26,786    31    34,066    (5,466  55,417  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance as of March 31, 2013

 ¥36,372  ¥(80) ¥(49,907) ¥(35,497) ¥(49,112) ¥36,372   ¥(80 ¥(49,907 ¥(35,497 ¥(49,112
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 Millions of yen  Millions of yen 
 2014  2014 
 Unrealized holding
gains (losses) on
available-for-sale
securities
 Unrealized gains
(losses) on cash
flow hedges
 Foreign currency
translation
adjustment
 Pension liability
adjustment
 Total  Unrealized holding
gains (losses) on
available-for-sale
securities
 Unrealized gains
(losses) on cash
flow hedges
 Foreign currency
translation
adjustment
 Pension liability
adjustment
 Total 

Balance as of March 31, 2013

 ¥36,372  ¥(80) ¥(49,907) ¥(35,497 ¥(49,112) ¥36,372   ¥(80 ¥(49,907 ¥(35,497 ¥(49,112
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Other comprehensive income (loss) before reclassifications

  8,751    (76  31,653    15,290    55,618    8,751    (76  31,653    15,290    55,618  

Amounts reclassified from accumulated other comprehensive income (loss)

  (84  59    6,010    (2,708  3,277    (84  59    6,010    (2,708  3,277  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Other comprehensive income (loss)

  8,667   (17)  37,663   12,582    58,895    8,667    (17  37,663    12,582    58,895  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Less: other comprehensive (income) loss attributable to noncontrolling interests

  (1      (193  1    (193  (1      (193  1    (193
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance as of March 31, 2014

 ¥45,038  ¥(97) ¥(12,437) ¥(22,914) ¥9,590  ¥45,038   ¥(97 ¥(12,437 ¥(22,914 ¥9,590  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 
 Millions of yen 
2015 
 Unrealized holding
gains (losses) on
available-for-sale
securities
 Unrealized gains
(losses) on cash
flow hedges
 Foreign currency
translation
adjustment
 Pension liability
adjustment
 Total 

Balance as of March 31, 2014

 ¥45,038   ¥(97 ¥(12,437 ¥(22,914 ¥9,590  
 

 

  

 

  

 

  

 

  

 

 

Other comprehensive income (loss) before reclassifications

  22,468    (20  29,678    (9,159  42,967  

Amounts reclassified from accumulated other comprehensive income (loss)

  120    16        282    418  
 

 

  

 

  

 

  

 

  

 

 

Other comprehensive income (loss)

  22,588    (4  29,678    (8,877  43,385  
 

 

  

 

  

 

  

 

  

 

 

Less: other comprehensive (income) loss attributable to noncontrolling interests

  (6      (370      (376
 

 

  

 

  

 

  

 

  

 

 

Balance as of March 31, 2015

 ¥67,620   ¥(101 ¥16,871   ¥(31,791 ¥52,599  
 

 

  

 

  

 

  

 

  

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Reclassifications out of accumulated other comprehensive income (loss) to net income—

Amounts reclassified out of accumulated other comprehensive income (loss) to net income and affected line items in the consolidated statement of income for the fiscal yearyears ended March 31, 2014 and 2015 were as follows:

 

Millions of yen
2014
Amounts reclassified
out of accumulated
other comprehensive
income (loss) (*1)

Affected line items in the consolidated

statement of income

Unrealized holding gains (losses) on
available-for-sale securities

¥(492“Other, net” of “Other income (expense)”
657“Equity in net income (losses) of affiliates”

165Pre-tax amount
(81Tax benefit (expense)

84Net-of-tax amount

Unrealized gains (losses) on cash flow hedges

(92“Equity in net income (losses) of affiliates”

(92Pre-tax amount
33Tax benefit (expense)

(59Net-of-tax amount

Foreign currency translation adjustment

(6“Other, net” of “Other income (expense)”
(9,483“Equity in net income (losses) of affiliates”

(9,489Pre-tax amount
3,479Tax benefit (expense)

(6,010Net-of-tax amount

Pension liability adjustment

4,218(*2)

4,218Pre-tax amount
(1,510Tax benefit (expense)

2,708Net-of-tax amount

Total reclassified amounts

¥(3,277Net-of-tax amount

   Millions of yen
   Amounts reclassified out of accumulated other comprehensive income  (loss) (*1)  
   2014  2015  

Affected line items in the consolidated

statements of income

Unrealized holding gains (losses) onavailable-for-sale securities

  ¥(492 ¥14   “Other, net” of “Other income (expense)”
   657    (201 “Equity in net income (losses) of affiliates”
  

 

 

  

 

 

  
   165    (187 Pre-tax amount
   (81  67   Tax benefit (expense)
  

 

 

  

 

 

  
   84    (120 Net-of-tax amount
  

 

 

  

 

 

  

Unrealized gains (losses) on cash flow hedges

   (92  (25 “Equity in net income (losses) of affiliates”
  

 

 

  

 

 

  
   (92  (25 Pre-tax amount
   33    9   Tax benefit (expense)
  

 

 

  

 

 

  
   (59  (16 Net-of-tax amount
  

 

 

  

 

 

  

Foreign currency translation adjustment

   (6     “Other, net” of “Other income (expense)”
   (9,483     “Equity in net income (losses) of affiliates”
  

 

 

  

 

 

  
   (9,489     Pre-tax amount
   3,479       Tax benefit (expense)
  

 

 

  

 

 

  
   (6,010     Net-of-tax amount
  

 

 

  

 

 

  

Pension liability adjustment

   4,218    (439 (*2)
  

 

 

  

 

 

  
   4,218    (439 Pre-tax amount
   (1,510  157   Tax benefit (expense)
  

 

 

  

 

 

  
   2,708    (282 Net-of-tax amount
  

 

 

  

 

 

  

Total reclassified amounts

  ¥(3,277 ¥(418 Net-of-tax amount
  

 

 

  

 

 

  

 

(*1)Amounts in parentheses indicate decreased effects on net income.
(*2)Amounts reclassified out of pension liability adjustment are included in the computation of net periodic pension cost. See Note 15 “Employees’ retirement benefits” for additional details.

See Note 17 “Employees’ retirement benefits” for additional details.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Tax effects on other comprehensive income (loss)—

Tax effects allocated to each component of other comprehensive income (loss), including amounts attributable to noncontrolling interests, for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 were as follows:

   Millions of yen 
   2012 
   Pre-tax
amount
  Tax benefit /
(expense)
  Net-of-tax
amount
 

Unrealized holding gains (losses) on available-for-sale securities

  ¥1,622   ¥279   ¥1,901  

Less: Reclassification of realized gains and losses included in net income

   3,390    (1,396  1,994  

Unrealized gains (losses) on cash flow hedges

   12    (14  (2

Foreign currency translation adjustment

   (50,795  18,713    (32,082

Less: Reclassification of realized gains and losses included in net income

   5,105    (2,021  3,084  

Pension liability adjustment

    

Actuarial gains (losses) arising during period, net

   (4,209  1,463    (2,746

Prior service cost arising during period, net

   (122  50    (72

Less: Amortization of prior service cost

   (2,275  928    (1,347

Less: Amortization of actuarial gains and losses

   2,713    (1,107  1,606  

Less: Amortization of transition obligation

   129    (53  76  
  

 

 

  

 

 

  

 

 

 

Total other comprehensive income (loss)

  ¥(44,430 ¥16,842   ¥(27,588
  

 

 

  

 

 

  

 

 

 

Unrealized holding losses on available-for-sale securities, foreign currency translation losses and actuarial gains, net of tax, attributable to noncontrolling interests were ¥(0) million, ¥(14) million and ¥0 million, respectively, for the fiscal year ended March 31, 2012.

 

   Millions of yen 
   2013 
   Pre-tax
amount
  Tax benefit /
(expense)
  Net-of-tax
amount
 

Unrealized holding gains (losses) on available-for-sale securities

  ¥32,172   ¥(11,492 ¥20,680  

Less: Reclassification of realized gains and losses included in net income

   9,890    (3,781  6,109  

Unrealized gains (losses) on cash flow hedges

   48    (17  31  

Foreign currency translation adjustment

   45,531    (11,490  34,041  

Less: Reclassification of realized gains and losses included in net income

   241    (86  155  

Pension liability adjustment

    

Actuarial gains (losses) arising during period, net

   (9,172  3,277    (5,895

Less: Amortization of prior service cost

   (2,271  813    (1,458

Less: Amortization of actuarial gains and losses

   2,812    (1,007  1,805  

Less: Amortization of transition obligation

   125    (45  80  
  

 

 

  

 

 

  

 

 

 

Total other comprehensive income (loss)

  ¥79,376   ¥(23,828 ¥55,548  
  

 

 

  

 

 

  

 

 

 

Unrealized holding gains on available-for-sale securities, foreign currency translation gains and actuarial losses, net of tax, attributable to noncontrolling interests were ¥3 million, ¥130 million and ¥(2) million, respectively, for the fiscal year ended March 31, 2013.

   Millions of yen 
   2014 
   Pre-tax
amount
  Tax benefit /
(expense)
  Net-of-tax
amount
 

Unrealized holding gains (losses) on available-for-sale securities

  ¥13,574   ¥(4,823 ¥8,751  

Less: Reclassification of realized gains and losses included in net income

   (165  81    (84

Unrealized gains (losses) on cash flow hedges

   (119  43    (76

Less: Reclassification of realized gains and losses included in net income

   92    (33  59  

Foreign currency translation adjustment

   36,447    (4,794  31,653  

Less: Reclassification of realized gains and losses included in net income

   9,489    (3,479  6,010  

Pension liability adjustment

    

Actuarial gains (losses) arising during period, net

   18,585    (6,656  11,929  

Prior service cost arising during period, net

   5,235    (1,874  3,361  

Less: Amortization of prior service cost

   (2,270  813    (1,457

Less: Curtailment gain

   (5,131  1,837    (3,294

Less: Amortization of actuarial gains and losses

   3,058    (1,095  1,963  

Less: Amortization of transition obligation

   125    (45  80  
  

 

 

  

 

 

  

 

 

 

Total other comprehensive income (loss)

  ¥78,920   ¥(20,025 ¥58,895  
  

 

 

  

 

 

  

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

   Millions of yen 
   2014 
   Pre-tax
amount
  Tax benefit /
(expense)
  Net-of-tax
amount
 

Unrealized holding gains (losses) on available-for-sale securities

  ¥13,574   ¥(4,823 ¥8,751  

Less: Reclassification of realized gains and losses included in net income

   (165  81    (84

Unrealized gains (losses) on cash flow hedges

   (119  43    (76

Less: Reclassification of realized gains and losses included in net income

   92    (33  59  

Foreign currency translation adjustment

   36,447    (4,794  31,653  

Less: Reclassification of realized gains and losses included in net income

   9,489    (3,479  6,010  

Pension liability adjustment

    

Actuarial gains (losses) arising during period, net

   18,585    (6,656  11,929  

Prior service cost arising during period, net

   5,235    (1,874  3,361  

Less: Amortization of prior service cost

   (2,270  813    (1,457

Less: Curtailment gain

   (5,131  1,837    (3,294

Less: Amortization of actuarial gains and losses

   3,058    (1,095  1,963  

Less: Amortization of transition obligation

   125    (45  80  
  

 

 

  

 

 

  

 

 

 

Total other comprehensive income (loss)

  ¥78,920   ¥(20,025 ¥58,895  
  

 

 

  

 

 

  

 

 

 

Unrealized holding gains on available-for-sale securities, foreign currency translation gains and actuarial losses, net of tax, attributable to noncontrolling interests were ¥1 million, ¥193 million and ¥(1) million, respectively, for the fiscal year ended March 31, 2014.

  Millions of yen 
  2015 
  Pre-tax
amount
  Tax benefit /
(expense)
  Net-of-tax
amount
 

Unrealized holding gains (losses) on available-for-sale securities

 ¥34,890   ¥(12,422 ¥22,468  

Less: Reclassification of realized gains and losses included in net income

  187    (67  120  

Unrealized gains (losses) on cash flow hedges

  (31  11    (20

Less: Reclassification of realized gains and losses included in net income

  25    (9  16  

Foreign currency translation adjustment

  37,371    (7,693  29,678  

Pension liability adjustment

   

Actuarial gains (losses) arising during period, net

  (14,258  5,099    (9,159

Less: Amortization of prior service cost

  (1,392  498    (894

Less: Amortization of actuarial gains and losses

  1,719    (615  1,104  

Less: Amortization of transition obligation

  112    (40  72  
 

 

 

  

 

 

  

 

 

 

Total other comprehensive income (loss)

 ¥58,623   ¥(15,238 ¥43,385  
 

 

 

  

 

 

  

 

 

 

Unrealized holding gains on available-for-sale securities and foreign currency translation gains, net of tax, attributable to noncontrolling interests were ¥6 million and ¥370 million, respectively, for the fiscal year ended March 31, 2015.

11.13. Research and development expenses and advertising expenses:

Research and development expenses—

Research and development costs are charged to expense as incurred. Research and development expenses are included primarily in “Selling, general and administrative” expenses and amounted to ¥108,474 million, ¥111,294 million, ¥102,039 million and ¥102,039¥96,997 million for the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, respectively.

Advertising expenses—

Advertising costs are charged to expense as incurred. Advertising expenses are included primarily in “Selling, general and administrative” expenses and amounted to ¥61,872 million, ¥69,969 million, ¥67,128 million and ¥67,128¥69,129 million for the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

12.14. Other income (expense):

Other income (expense) included in “Other, net” in the consolidated statements of income for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 comprised the following:

 

  Millions of yen   Millions of yen 
  2012 2013 2014   2013 2014 2015 

Net realized gains (losses) on dispositions of investments in affiliates

  ¥423   ¥(3 ¥1,888    ¥(3 ¥1,888   ¥(46

Net realized gains (losses) on dispositions of marketable securities and other investments

   1,009    792    1,802     792    1,802    (125

Other-than-temporary impairment loss on marketable securities and other investments

   (4,030  (10,928  (3,055   (10,928  (3,055  (902

Foreign exchange gains (losses), net

   (1,034  (913  4,409     (913  4,409    (409

Rental revenue received

   1,765    2,378    1,270     2,378    1,270    1,447  

Dividends income

   4,362    5,649    3,999     5,649    3,999    3,675  

Penalties and compensation for damages

   1,419    2,173    1,840     2,173    1,840    1,460  

Bad debt expenses

   (5  (2,454  (35   (2,454  (35  (1

Other, net

   (13  (333  1,263     (333  1,263    (773
  

 

  

 

  

 

   

 

  

 

  

 

 

Total

  ¥3,896   ¥(3,639 ¥13,381    ¥(3,639 ¥13,381   ¥4,326  
  

 

  

 

  

 

   

 

  

 

  

 

 

13.15. Related party transactions:

DOCOMO is majority-owned by NTT, which is a holding company for more than 9001,000 companies comprising the NTT group.

DOCOMO has entered into a number of different types of transactions with NTT, its subsidiaries and its affiliates in the ordinary course of business. DOCOMO’s transactions with NTT group companies include purchases of wireline telecommunications services (i.e. for DOCOMO’s offices and operations facilities) based on actual usage, leasing of various telecommunications facilities and sales of DOCOMO’s various wireless telecommunications services. As of March 31, 20132014 and 2014,2015, the balances of “Accounts payable, trade” attributable to transactions with related parties primarily consisted of accounts payable relating to a number of different types of transactions with NTT group companies and Sumitomo Mitsui Card, which is DOCOMO’s affiliate. During the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, DOCOMO purchased capital equipment from NTT group companies in the amount of ¥91,416 million, ¥93,207 million, ¥75,768 million and ¥75,768¥59,925 million, respectively.

NTT DOCOMO, INC. repurchased its common stock from NTT during the fiscal year ended March 31, 2015. Information regarding the acquisition of treasury stock is disclosed in Note 12 “Equity.”

NTT and its subsidiaries collectively own 99.9%99.99% of the voting interests in NTT FINANCE CORPORATION (“NTT FINANCE”), of which DOCOMO owned 2.9%2.92% as of March 31, 2014.2015. Accordingly, NTT FINANCE is a related party of DOCOMO. DOCOMO has carried out the following transactions with NTT FINANCE.

DOCOMO has entered into contracts for bailments of cash for consumption with NTT FINANCE for cash management purposes. Under the terms of the contracts, excess cash generated at DOCOMO is bailed to NTT FINANCE and NTT FINANCE manages the funds on behalf of DOCOMO. DOCOMO can withdraw the funds upon its demand and receives relevant interest from NTT FINANCE. The funds are accounted for as “Cash and cash equivalents,” “Short-term investments,” or “Other assets” depending on the initial contract periods.

The balance of bailments was ¥350,000 million as of March 31, 2013. The assets related to the contracts were recorded as “Cash and cash equivalents” of ¥100,000 million, “Short-term investments” of ¥10,000 million,

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

and “Other assets” of ¥240,000 million in the consolidated balance sheet as of March 31, 2013. The contracts had remaining terms to maturity ranging less than 3 years with an average interest rate of 0.2% per annum as of March 31, 2013.

The balance of bailments was ¥586,911 million as of March 31, 2014. The assets related to the contracts were recorded as “Cash and cash equivalents” of ¥346,911 million and “Other assets” of ¥240,000 million in the consolidated balance sheet as of March 31, 2014. The contracts had remaining terms to maturity ranging less than 2 years with an average interest rate of 0.2% per annum as of March 31, 2014.

The balance of bailments was ¥251,930 million as of March 31, 2015. The assets related to the contracts were recorded as “Cash and cash equivalents” of ¥11,930 million and “Short-term investments” of ¥240,000 million in the consolidated balance sheet as of March 31, 2015. The contracts had remaining terms to maturity ranging less than 1 year with an average interest rate of 0.1% per annum as of March 31, 2015.

The average balances of the contracts for bailments that expired during the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 were ¥58,907 million, ¥67,836 million, ¥99,206 million and ¥99,206¥111,077 million, respectively. The amount of interest derived from the contracts was recorded as “Interest income” of ¥183 million, ¥248 million, ¥796 million and ¥796¥589 million in the consolidated statements of income for the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, respectively.

In May, 2012, DOCOMO and NTT FINANCE entered into a basic contract regarding the transfer of DOCOMO’s “receivables for mobile communicationstelecommunications services” for the convenience of DOCOMO’s customers. In June, 2012, DOCOMO and NTT FINANCE entered into an individual contract regarding the transfers of receivables.

Under the contracts, “receivables for mobile communicationstelecommunications services” which DOCOMO decides to sell are reclassified to receivables held for sale and are sold to NTT FINANCE at fair value on a monthly basis. By the end of the month following the month of sale, the entire amount sold is paid to DOCOMO by NTT FINANCE. DOCOMO has no further involvement with the receivables sold.

For the fiscal year ended March 31, 2013, the amount of “receivables for mobile communicationstelecommunications services” that DOCOMO sold to NTT FINANCE was ¥2,741,252 million and the aggregated amount of losses on sales of receivables and adjustments to recognize the receivables held for sale at the lower of cost or fair value was ¥65,280 million and was included in “Selling, general and administrative” expenses in the consolidated statement of income. The amount DOCOMO has not collected from NTT FINANCE, as of March 31, 2013, was ¥240,205 million and was included in “Other receivables” in its consolidated balance sheet.

For the fiscal year ended March 31, 2014, the amount of “receivables for mobile communicationstelecommunications services” that DOCOMO sold to NTT FINANCE was ¥3,717,135 million and the aggregated amount of losses on sales of receivables and adjustments to recognize the receivables held for sale at the lower of cost or fair value was ¥64,789 million and was included in “Selling, general and administrative” expenses in the consolidated statement of income. The amount DOCOMO has not collected from NTT FINANCE, as of March 31, 2014, was ¥248,732 million and was included in “Other receivables” in its consolidated balance sheet.

For the fiscal year ended March 31, 2015, the amount of “receivables for telecommunications services” that DOCOMO sold to NTT FINANCE was ¥3,862,878 million and the aggregated amount of losses on sales of receivables and adjustments to recognize the receivables held for sale at the lower of cost or fair value was ¥67,327 million and was included in “Selling, general and administrative” expenses in the consolidated statement of income. The amount DOCOMO has not collected from NTT FINANCE, as of March 31, 2015, was ¥259,218 million and was included in “Other receivables” in its consolidated balance sheet.

14.NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. Segment reporting:

DOCOMO’s chief operating decision maker (“CODM”) is its board of directors. The CODM evaluates the performance and makes resource allocations of its segments based on the information provided by DOCOMO’s internal management reports. Accounting policies used to determine segment profit or loss and segment assets are consistent with those used to prepare the consolidated financial statements in accordance with U.S. GAAP. There were no transactions between the operating segments.

DOCOMO hasrealigned its formerly five operating segments, which consisthad consisted of its mobile phone business, credit services business, home shopping services business, internet connection services business for hotel facilities, and miscellaneous

businesses into three operating segments, which consist of its telecommunications business, smart life business and other businesses from the fiscal year ended March 31, 2015 in order to clarify the responsibilities of management of the telecommunications business where DOCOMO is taking steps to reinforce its competitiveness and the smart life business where DOCOMO is striving for further expansion of revenue sources.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

businesses. The mobile phonetelecommunications business includes mobile phone services (Xi services, FOMA(LTE(Xi) services and movaFOMA services), packet communications services,optical-fiber broadband service, satellite mobile communications services, international services and the equipment sales related to these services. DOCOMO terminated movaThe smart life business includes video and music distribution, electronic books and other services on March 31, 2012. Creditoffered through DOCOMO’s “dmarket” portal, as well as finance/payment services, business primarily includes DCMX services. Home shopping services business includes home shoppingand various other services business provided primarily through TV media. Internet connection services business for hotel facilities includes high-speed internet connection services for hotel facilities, which are provided in many countries in the world, mainly Asia and Europe.to support our customers’ daily lives. The miscellaneousother businesses primarily includes advertisement services,“Mobile Device Protection Service,” as well as development, sales and maintenance of IT systems.

DueIn connection with this realignment, segment information for the fiscal years ended March 31, 2013 and 2014 has been restated to its quantitative significance, onlyconform to the mobile phone business qualifies as a reportablepresentation for the fiscal year ended March 31, 2015.

Accounting policies used to determine segment operating revenues and therefore is disclosed as such. The remaining four operating segmentsincome (loss) are each quantitatively insignificant and therefore combined and disclosed as “All other businesses.”consistent with those used to prepare the consolidated financial statements in accordance with U.S. GAAP.

Assets by segment are not included in the management reports which are reported to the CODM, however, they are disclosed herein only to provide additional information. The “Reconciliation” column“Corporate” row in the tables below is included to reflect the recorded amounts of common assets which are not allocated to any segments, and assets in “Reconciliation”“Corporate” primarily include cash and cash equivalents, securities and investments in affiliates. DOCOMO allocates amounts of assets and related depreciation and amortization expenses to common assets, such as buildings for telecommunications purposes and common facilities, on a systematic and rational basis based on the proportionate amount of network assets to each segment. Capital expenditures in the “Reconciliation” column include certain expenditures related to the buildings for telecommunications purposes and common facilities, which are not allocated to each segment.

   Millions of yen 

Year ended March 31, 2012

  Mobile phone
business
   All other
businesses
  Total segments   Reconciliation   Consolidated 

Operating revenues

  ¥4,110,585    ¥129,418   ¥4,240,003    ¥    ¥4,240,003  

Operating expenses

   3,224,241     141,302    3,365,543          3,365,543  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Operating income (loss)

  ¥886,344    ¥(11,884 ¥874,460    ¥    ¥874,460  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Other income (expense)

         ¥2,498  
         

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

         ¥876,958  
         

 

 

 

Depreciation and amortization

  ¥674,330    ¥10,453   ¥684,783    ¥    ¥684,783  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Other significant non-cash items:

         

Point program expense

  ¥89,378    ¥6,412   ¥95,790    ¥    ¥95,790  

Impairment losses of goodwill

   6,310         6,310          6,310  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total assets

  ¥4,970,087    ¥343,293   ¥5,313,380    ¥1,634,702    ¥6,948,082  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Capital expenditures

  ¥561,661    ¥23,584   ¥585,245    ¥141,588    ¥726,833  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

   Millions of yen 

Year ended March 31, 2013

  Mobile phone
business
   All other
businesses
  Total
segments
   Reconciliation   Consolidated 

Operating revenues

  ¥  4,275,172    ¥  194,950   ¥  4,470,122    ¥    ¥  4,470,122  

Operating expenses

   3,406,855     226,087    3,632,942          3,632,942  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Operating income (loss)

  ¥868,317    ¥(31,137 ¥837,180    ¥    ¥837,180  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Other income (expense)

         ¥(3,838
         

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

         ¥833,342  
         

 

 

 

Depreciation and amortization

  ¥682,260    ¥17,946   ¥700,206    ¥    ¥700,206  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Other significant non-cash items:

         

Point program expenses

  ¥64,998    ¥9,652   ¥74,650    ¥    ¥74,650  

Impairment losses of goodwill

        7,281    7,281          7,281  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total assets

  ¥5,199,591    ¥411,986   ¥5,611,577    ¥1,558,148    ¥7,169,725  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Capital expenditures

  ¥606,137    ¥19,272   ¥625,409    ¥128,251    ¥753,660  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Segment operating revenues:

 

   Millions of yen 

Year ended March 31, 2014

  Mobile phone
business
   All other
businesses
  Total
segments
   Reconciliation   Consolidated 

Operating revenues

  ¥  4,235,897    ¥  225,306   ¥  4,461,203    ¥    ¥  4,461,203  

Operating expenses

   3,400,444     241,560    3,642,004          3,642,004  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Operating income (loss)

  ¥835,453    ¥(16,254 ¥819,199    ¥    ¥819,199  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Other income (expense)

         ¥13,850  
         

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

         ¥833,049  
         

 

 

 

Depreciation and amortization

  ¥700,516    ¥18,178   ¥718,694    ¥    ¥718,694  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Other significant non-cash item:

         

Point program expenses

  ¥59,151    ¥11,686   ¥70,837    ¥    ¥70,837  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total assets

  ¥5,487,312    ¥485,697   ¥5,973,009    ¥1,535,021    ¥7,508,030  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Capital expenditures

  ¥581,925    ¥16,728   ¥598,653    ¥104,471    ¥703,124  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 
   Millions of yen 

Year Ended March 31

  2013  2014  2015 

Telecommunications business-

    

External customers

  ¥3,921,187   ¥3,825,429   ¥3,653,344  

Intersegment

   2,567    1,899    1,221  
  

 

 

  

 

 

  

 

 

 

Subtotal

   3,923,754    3,827,328    3,654,565  

Smart life business-

    

External customers

   286,274    345,504    421,384  

Intersegment

   7,882    11,279    15,613  
  

 

 

  

 

 

  

 

 

 

Subtotal

   294,156    356,783    436,997  

Other businesses-

    

External customers

   262,661    290,270    308,669  

Intersegment

   9,779    11,954    11,146  
  

 

 

  

 

 

  

 

 

 

Subtotal

   272,440    302,224    319,815  
  

 

 

  

 

 

  

 

 

 

Segment total

   4,490,350    4,486,335    4,411,377  

Elimination

   (20,228  (25,132  (27,980
  

 

 

  

 

 

  

 

 

 

Consolidated

  ¥  4,470,122   ¥  4,461,203   ¥  4,383,397  
  

 

 

  

 

 

  

 

 

 

Segment operating income (loss):

   Millions of yen 

Year Ended March 31

  2013  2014  2015 

Segment operating income (loss) -

    

Telecommunications business

  ¥836,793   ¥812,736   ¥636,076  

Smart life business

   15,138    11,805    (3,896

Other businesses

   (14,751  (5,342  6,891  
  

 

 

  

 

 

  

 

 

 

Consolidated operating income

   837,180    819,199    639,071  

Other income (expenses)

   (3,838  13,850    4,812  
  

 

 

  

 

 

  

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

  ¥     833,342   ¥     833,049   ¥     643,883  
  

 

 

  

 

 

  

 

 

 

Segment assets:

   Millions of yen 

As of March 31

  2013  2014  2015 

Segment assets -

    

Telecommunications business

  ¥5,063,554   ¥5,256,976   ¥5,275,952  

Smart life business

   434,477    540,164    546,997  

Other businesses

   174,630    210,214    235,255  
  

 

 

  

 

 

  

 

 

 

Segment total

   5,672,661    6,007,354    6,058,204  

Elimination

   (2,036  (2,263  (1,875
  

 

 

  

 

 

  

 

 

 

Corporate

   1,499,100    1,502,939    1,090,011  
  

 

 

  

 

 

  

 

 

 

Consolidated

  ¥  7,169,725   ¥  7,508,030   ¥  7,146,340  
  

 

 

  

 

 

  

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Significant items:

   Millions of yen 

Year Ended March 31

  2013   2014   2015 

Depreciation and amortization-

      

Telecommunications business

  ¥657,892    ¥669,495    ¥614,821  

Smart life business

   20,021     20,779     24,252  

Other businesses

   21,841     28,420     20,714  
  

 

 

   

 

 

   

 

 

 

Consolidated

  ¥  699,754    ¥  718,694    ¥  659,787  
  

 

 

   

 

 

   

 

 

 

   Millions of yen 

Year Ended March 31

  2013   2014   2015 

Capital expenditures-

      

Telecommunications business

  ¥713,023    ¥658,427    ¥635,445  

Smart life business

   27,891     27,494     17,195  

Other businesses

   12,746     17,203     9,125  
  

 

 

   

 

 

   

 

 

 

Consolidated

  ¥  753,660    ¥  703,124    ¥  661,765  
  

 

 

   

 

 

   

 

 

 

   Millions of yen 

Year Ended March 31

  2013  2014  2015 

Point program expenses-

    

Telecommunications business

  ¥65,547   ¥59,959   ¥60,971  

Smart life business

   9,443    11,215    6,945  

Other businesses

             
  

 

 

  

 

 

  

 

 

 

Segment total

   74,990    71,174    67,916  

Elimination

   (340  (337  (211
  

 

 

  

 

 

  

 

 

 

Consolidated

  ¥    74,650   ¥    70,837   ¥    67,705  
  

 

 

  

 

 

  

 

 

 

   Millions of yen 

Year Ended March 31

  2013   2014   2015 

Impairment losses of goodwill-

      

Telecommunications business

  ¥    ¥    ¥  

Smart life business

               

Other businesses

   7,281            
  

 

 

   

 

 

   

 

 

 

Consolidated

  ¥      7,281    ¥           —    ¥           —  
  

 

 

   

 

 

   

 

 

 

   Millions of yen 

Year Ended March 31

  2013   2014   2015 

Impairment loss of long-lived assets-

      

Telecommunications business

  ¥    ¥    ¥  

Smart life business

             30,161  

Other businesses

   452            
  

 

 

   

 

 

   

 

 

 

Consolidated

  ¥         452    ¥           —    ¥    30,161  
  

 

 

   

 

 

   

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Segment operating income (loss) is segment operating revenues less segment operating expenses.

As indicated in “Use of estimates” under Note 2. (b) “Significant accounting policies” effective July 1, 2014, DOCOMO has revised its estimate of the useful life of certain software related to its telecommunications network and certain internal-use software based on the actual utilization of the software. As a result, compared with the method used prior to July 1, 2014, segment operating income for the Telecommunications business segment, Smart life business segment, and Other businesses segment increased by ¥46,927 million, ¥1,251 million and ¥3,129 million, respectively, for the fiscal year ended March 31, 2015. Furthermore, the amortization expenses decreased by the same amounts for the fiscal year ended March 31, 2015.

Impairment loss of long-lived assets relates to the multimedia broadcasting business for mobile devices that is included in the smart life business segment.

DOCOMO does not disclose geographical information because the amounts of operating revenues generated and long-lived assets owned outside Japan are immaterial.

There were no sales and operating revenue from transactions with a single external customer amounting to 10% or more of DOCOMO’s revenues for the fiscal years ended March 31, 2012, 2013, 2014 and 2014.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2015.

Operating revenues from products and services were as follows:

 

  Millions of yen   Millions of yen 

Year ended March 31,

  2012   2013   2014   2013   2014   2015 

Telecommunications business

  ¥3,176,931    ¥2,963,980    ¥2,747,155  

Mobile communications services

  ¥  3,326,493    ¥  3,168,478    ¥  2,955,788     3,168,478     2,955,788     2,736,649  

—Voice revenues

   1,541,884     1,274,584     1,065,196  

—Packet communications revenues

   1,784,609     1,893,894     1,890,592  

— Voice revenues

   1,274,584     1,065,196     883,844  

— Packet communications revenues

   1,893,894     1,890,592     1,852,805  

Optical-fiber broadband service and other telecommunications service

   8,453     8,192     10,506  

Equipment sales

   498,889     758,093     872,000     758,093     872,000     904,089  

Other operating revenues

   414,621     543,551     633,415     535,098     625,223     732,153  
  

 

   

 

   

 

   

 

   

 

   

 

 

Total operating revenues

  ¥4,240,003    ¥4,470,122    ¥4,461,203    ¥  4,470,122    ¥  4,461,203    ¥  4,383,397  
  

 

   

 

   

 

   

 

   

 

   

 

 

15.17. Employees’ retirement benefits:

Severance payments and contract-type corporate pension plans (Defined Benefit Pension Plans)—

Employees whose services with DOCOMO are terminated are normally entitled to lump-sum severance or retirement payments and pension benefits based on internal labor regulations. The amounts are determined by a combination of factors such as the employee’s salary eligibility, length of service and other conditions. The pension benefit is covered by the contract-type corporate pension plans, which are the non-contributory defined benefit pension plans, sponsored by DOCOMO.

ForDuring the fiscal year ended March 31, 2014, DOCOMO decided to transition from NTT DOCOMO, INC.’s contract-type corporate pension plan to a defined contribution pension plan effective on and after April 1, 2014. NTT DOCOMO, INC.’s contract-type corporate pension plan continues to remain for the pension benefit earned up to March 31, 2014. Upon a curtailment of this pension plan, NTT DOCOMO, INC. fully amortized its prior service cost and recognized a curtailment gain of ¥5,131 million for the fiscal year ended March 31, 2014.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

The following table presents reconciliations and changes in the contract-type corporate pension plans’ projected benefit obligations and fair value of plan assets for the fiscal years ended March 31, 20132014 and 2014.2015. DOCOMO uses a measurement date of March 31 for its contract-type corporate pension plans.

 

  Millions of yen   Millions of yen 
  2013 2014   2014   2015 

Change in benefit obligations:

       

Projected benefit obligation, beginning of year

  ¥202,403   ¥214,805    ¥214,805    ¥206,055  

Service cost

   9,879    10,435     10,435     8,562  

Interest cost

   3,789    3,171     3,171     2,821  

Actuarial (gain) loss

   8,710    (11,418   (11,418   9,408  

Transfer of liability from contract-type corporate pension plans of the NTT group

   714    504     504     195  

Other

   852      

Benefit payments

   (11,542  (11,442   (11,442   (9,091
  

 

  

 

   

 

   

 

 

Projected benefit obligation, end of year

  ¥214,805   ¥206,055    ¥   206,055    ¥   217,950  
  

 

  

 

   

 

   

 

 

Change in fair value of plan assets:

       

Fair value of plan assets, beginning of year

  ¥81,262   ¥90,345    ¥90,345    ¥98,840  

Actual return on plan assets

   6,975    8,258     8,258     2,529  

Employer contributions

   5,323    3,765     3,765     1,248  

Transfer of plan assets from contract-type corporate pension plans of the NTT group

   171    118     118     36  

Benefit payments

   (3,386  (3,646   (3,646   (3,672
  

 

  

 

   

 

   

 

 

Fair value of plan assets, end of year

  ¥90,345   ¥98,840    ¥98,840    ¥98,981  
  

 

  

 

   

 

   

 

 

As of March 31:

       

Funded status

  ¥(124,460 ¥(107,215  ¥(107,215  ¥(118,969
  

 

  

 

   

 

   

 

 

The amounts recognized in the consolidated balance sheets as of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 
  2013 2014   2014   2015 

Liability for employees’ retirement benefits

  ¥(124,517 ¥(120,296  ¥(120,296  ¥(129,189

Asset for employees’ retirement benefits

   57    13,081     13,081     10,220  
  

 

  

 

   

 

   

 

 

Net amount recognized

  ¥(124,460 ¥(107,215  ¥  (107,215  ¥  (118,969
  

 

  

 

   

 

   

 

 

Asset for employees’ retirement benefits is included in “Other assets” in the consolidated balance sheets.

Amounts recognized in “Accumulated other comprehensive income (loss)” as of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 
  2013 2014   2014   2015 

Actuarial gains (losses), net

  ¥(44,927 ¥(25,338  ¥(25,338  ¥(33,386

Prior service cost, net

   8,685    1,919     1,919     1,068  

Transition obligation

   (687  (564   (564   (452
  

 

  

 

   

 

   

 

 

Total

  ¥(36,929 ¥(23,983  ¥    (23,983  ¥    (32,770
  

 

  

 

   

 

   

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

The accumulated benefit obligation for the contract-type corporate pension plans was ¥208,538¥206,052 million and ¥206,052¥217,949 million as of March 31, 20132014 and 2014,2015, respectively.

The projected benefit obligation, the accumulated benefit obligation and the fair value of plan assets in the pension plans with the projected or accumulated benefit obligation in excess of the plan assets as of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 
  2013   2014   2014   2015 

Plans with projected benefit obligation in excess of plan assets:

        

Projected benefit obligation

  ¥214,724    ¥205,939    ¥  205,939    ¥  216,552  

Fair value of plan assets

   90,207     98,670     98,670     97,323  

Plans with accumulated benefit obligation in excess of plan assets:

        

Accumulated benefit obligation

  ¥208,457    ¥205,937    ¥205,937    ¥216,550  

Fair value of plan assets

   90,207     98,670     98,670     97,323  

The net periodic pension cost for the contract-type corporate pension plans for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 comprised the following:

 

  Millions of yen   Millions of yen 
  2012 2013 2014   2013 2014 2015 

Service cost

  ¥9,491   ¥9,879   ¥10,435    ¥9,879   ¥10,435   ¥8,562  

Interest cost on projected benefit obligation

   3,831    3,789    3,171     3,789    3,171    2,821  

Expected return on plan assets

   (1,569  (1,617  (1,791   (1,617  (1,791  (2,003

Amortization of prior service cost

   (1,907  (1,898  (1,635     (1,898  (1,635  (851

Curtailment gain

           (5,131       (5,131    

Amortization of actuarial gains and losses

   1,644    1,667    1,704     1,667    1,704    834  

Amortization of transition obligation

   125    123    123     123    123    112  
  

 

  

 

  

 

   

 

  

 

  

 

 

Net periodic pension cost

  ¥11,615   ¥11,943   ¥6,876    ¥11,943   ¥   6,876   ¥    9,475  
  

 

  

 

  

 

   

 

  

 

  

 

 

Other changes in plan assets and benefit obligations of the contract-type corporate pension plans recognized in “Accumulated other comprehensive income (loss)” for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 comprised the following:

 

  Millions of yen   Millions of yen 
  2012 2013 2014   2013 2014 2015 

Other changes in plan assets and benefit obligations recognized in “Accumulated other comprehensive income (loss)”:

        

Actuarial (gains) losses arising during period, net

  ¥2,624   ¥3,352   ¥(17,885  ¥3,352   ¥(17,885 ¥8,882  

Prior service cost arising during period, net

   121          

Amortization of prior service cost

   1,907    1,898    1,635     1,898    1,635    851  

Curtailment gain

           5,131         5,131      

Amortization of actuarial gains and losses

   (1,644  (1,667  (1,704     (1,667  (1,704  (834

Amortization of transition obligation

   (125  (123  (123   (123  (123  (112
  

 

  

 

  

 

   

 

  

 

  

 

 

Total recognized in “Accumulated other comprehensive income (loss)”

  ¥2,883   ¥3,460   ¥(12,946  ¥3,460   ¥(12,946 ¥    8,787  
  

 

  

 

  

 

   

 

  

 

  

 

 

Total recognized in net periodic pension cost and “Accumulated other comprehensive income (loss)” was ¥15,403 million, ¥(6,070) million and ¥18,262 million for the fiscal years ended March 31, 2013, 2014 and 2015, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Total recognized in net periodic pension cost and “Accumulated other comprehensive income (loss)” was ¥14,498 million, ¥15,403 million and ¥(6,070) million for the fiscal years ended March 31, 2012, 2013 and 2014, respectively.

The amount of actuarial losses, transition obligation and prior service cost, which are expected to be amortized and reclassified from “Accumulated other comprehensive income (loss)” to net pension cost during the fiscal year ending March 31, 20152016 is ¥557¥1,121 million, ¥112¥49 million and ¥(851)¥(782) million, respectively.

The assumptions used in determination of the contract-type corporate pension plans’ projected benefit obligations as of March 31, 20132014 and 20142015 were as follows:

 

  2013 2014   2014 2015 

Discount rate

   1.5  1.4   1.4  1.0

Long-term rate of salary increases

   2.9    2.9     2.9    2.9  

The assumptions used in determination of the net periodic pension cost for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 were as follows:

 

  2012 2013 2014   2013 2014 2015 

Discount rate

   2.0  1.9  1.5   1.9  1.5  1.4

Long-term rate of salary increases

   2.9    2.9    2.9     2.9    2.9    2.9  

Expected long-term rate of return on plan assets

   2.0    2.0    2.0     2.0    2.0    2.0  

In determining the expected long-term rate of return on plan assets, DOCOMO considers the current and projected asset allocations, as well as expected long-term investment returns and risks for each category of the plan assets based on analysis of historical results.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents the fair values of DOCOMO’s pension plan assets as of March 31, 20132014 and 2014.2015. Descriptions of fair value hierarchy and the inputs used in measuring fair value are presented in Note 1820 “Fair value measurements.”

   Millions of yen 
   2013 
   Total   Level 1   Level 2   Level 3 

Cash and cash equivalents

  ¥625    ¥625    ¥    ¥  

Debt securities

        

Japanese government bonds/local government bonds

   25,739     24,973     766       

Domestic corporate bonds

   6,846          6,846       

Foreign government bonds

   5,685     2,472     3,213       

Foreign corporate bonds

   204     14     190       

Equity securities

        

Domestic stocks

   9,019     9,015     4       

Foreign stocks

   5,883     5,881          2  

Securities investment trust beneficiary certificates

        

Domestic debt securities

   901          901       

Domestic equity securities

   816          816       

Foreign debt securities

   558          558       

Foreign equity securities

   691          691       

Pooled funds

   21,159          21,159       

Life insurance company general accounts

   10,028          10,028       

Other

   2,191          6     2,185  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥90,345    ¥42,980    ¥45,178    ¥2,187  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

   Millions of yen 
   2014 
   Total   Level 1   Level 2   Level 3 

Cash and cash equivalents

  ¥356    ¥356    ¥    ¥  

Debt securities

        

Japanese government bonds/local government bonds

   20,138     19,868     270       

Domestic corporate bonds

   6,507          6,507       

Foreign government bonds

   5,296     5,224     72       

Foreign corporate bonds

   147     36     111       

Equity securities

        

Domestic stocks

   7,346     7,346            

Foreign stocks

   5,709     5,709            

Securities investment trust beneficiary certificates

        

Domestic debt securities

   829          829       

Domestic equity securities

   718          718       

Foreign debt securities

   541          541       

Foreign equity securities

   725          725       

Pooled funds

   33,319          33,319       

Life insurance company general accounts

   15,036          15,036       

Other

   2,173          0     2,173  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥98,840    ¥38,539    ¥58,128    ¥2,173  
  

 

 

   

 

 

   

 

 

   

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Cash and cash equivalents

Cash and cash equivalents include foreign currency deposits and call loans, and are all classified as Level 1.

Debt securities

Debt securities include Japanese government bonds and local government bonds, domestic corporate bonds, foreign government bonds and foreign corporate bonds. If active market prices are available, fair value is measured by quoted prices for identical assets in active markets, which is classified as Level 1. If active market prices are not available, fair value is measured by inputs derived principally from observable market data provided by financial institutions, which is classified as Level 2.

Equity securities

Equity securities include domestic stocks and foreign stocks. If active market prices are available, fair value is measured by quoted prices for identical assets in active markets, which is classified as Level 1. If active market prices are not available, fair value is measured by inputs derived principally from observable market data provided by financial institutions, which is classified as Level 2. Fair value measured by inputs derived from unobservable data is classified as Level 3.

Securities investment trust beneficiary certificates

Securities investment trust beneficiary certificates include bond investment trusts and foreign stock investment trusts. Fair values of securities investment trust beneficiary certificates are measured by inputs derived principally from observable market data provided by financial institutions. Therefore, they are classified as Level 2.

Pooled funds

Pooled funds include government bonds, local government bonds, domestic stocks and foreign stocks. Pooled funds are evaluated based on the fair value as reported by the trust operator, and are classified as Level 2.

Life insurance company general accounts

Life insurance company general accounts are the financial assets which guarantee an expected rate of return and a principal and they are all classified as Level 2.

Other

Other mainly includes fund of hedge funds. Fair value measured by inputs derived from unobservable data is classified as Level 3.

A Level 3 reconciliation is not disclosed since the amounts in Level 3 are immaterial.

The contract-type corporate pension plans’ policy toward plan asset management is formulated with the ultimate objective of ensuring the steady disbursement of pension benefits in future periods. The long-term objective of asset management, therefore, is to secure the total profits deemed necessary to ensure the financial soundness of the plan assets. To achieve this, DOCOMO selects various investments and takes into consideration their expected returns and risks and the correlation among the investments. DOCOMO then sets a target

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

allocation ratio for the plan assets and endeavors to maintain that ratio. The target ratio is formulated from a mid- to long-term perspective and reviewed annually. In the event that the investment environment changes dramatically, DOCOMO will review the asset allocation as necessary. The target ratio in March 2014 was: domestic bonds, 47.0%; domestic stocks, 13.0%; foreign bonds, 10.0%; foreign stocks, 10.0%; and life insurance company general accounts, 20.0%.

As of March 31, 2013 and 2014, securities owned by the contract-type corporate pension plans as its plan assets included the stock of NTT and the NTT group companies listed in Japan including DOCOMO in the amount of ¥267 million (0.3% of total plan assets) and ¥283 million (0.3% of total plan assets), respectively.

DOCOMO expects to contribute ¥1,126 million to the contract-type corporate pension plans in the fiscal year ending March 31, 2015.

The benefit payments, which reflect expected future service under the contract-type corporate pension plans, are expected to be as follows:

Year ending March 31,

  Millions of yen 

2015

  ¥11,284  

2016

   12,628  

2017

   12,447  

2018

   12,883  

2019

   12,038  

2020-2024

   65,607  

Social welfare pension scheme and NTT Kigyou-Nenkin-Kikin (NTT Corporate Defined Benefit Pension Plan)—

DOCOMO participates in the national welfare pension plan (“National Plan”) and a contributory defined benefit pension plan sponsored by the NTT group (NTT Kigyou-Nenkin-Kikin or NTT Corporate Defined Benefit Pension Plan, “NTT CDBP”). The National Plan is a government-regulated social welfare pension plan under the Japanese Employees’ Pension Insurance Act and both NTT group and its employees provide contributions to such plan every year. The National Plan is considered a multi-employer plan and contributions to such plan are recognized as expenses. The total amount of contributions by DOCOMO was ¥15,414 million, ¥16,044 million and ¥15,982 million for the fiscal years ended March 31, 2012, 2013 and 2014, respectively. In addition, the National Plan is a social welfare pension scheme, and because the information required by its accounting standards is limited, additional quantitative information relating to participation in the multi-employer plan is not disclosed.

Both NTT group, including DOCOMO, and its employees provide contributions to the NTT CDBP to supplement the pension benefits to which the employees are entitled under the National Plan. The NTT CDBP is regulated under the Defined-Benefit Corporate Pension Act. The NTT CDBP is considered a defined benefit pension plan. The participation by DOCOMO and its subsidiaries in the NTT CDBP is accounted for as a single employer plan. The number of DOCOMO’s employees covered by the NTT CDBP as of March 31, 2013 and 2014 represented approximately 11.4% and 10.7% of the total members, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents reconciliations and changes in the NTT CDBP’s projected benefit obligation and fair value of plan assets for the fiscal years ended March 31, 2013 and 2014. The amount in the table is based on actuarial computations which covered only DOCOMO employees’ participation in the NTT CDBP. The funded status was recognized as “Liability for employees’ retirement benefits” in the consolidated balance sheets as of March 31, 2013 and 2014.

   Millions of yen 
   2013  2014 

Change in benefit obligations:

   

Projected benefit obligation, beginning of year

  ¥102,784   ¥116,939  

Service cost

   3,585    4,067  

Interest cost

   1,891    1,690  

Actuarial (gain) loss

   10,844    1,424  

Plan amendment

       (5,235

Internal adjustment due to transfer of employees within the NTT group

   (487  30  

Other

   71    27  

Benefit payments

   (1,749  (2,044
  

 

 

  

 

 

 

Projected benefit obligation, end of year

  ¥116,939   ¥116,898  
  

 

 

  

 

 

 

Change in fair value of plan assets:

   

Fair value of plan assets, beginning of year

  ¥63,864   ¥70,235  

Actual return on plan assets

   7,439    7,031  

Employer contributions

   841    863  

Employee contributions

   420    406  

Internal adjustment due to transfer of employees within the NTT group

   (651  10  

Other

   71    27  

Benefit payments

   (1,749  (2,044
  

 

 

  

 

 

 

Fair value of plan assets, end of year

  ¥70,235   ¥(76,528
  

 

 

  

 

 

 

As of March 31:

   

Funded status

  ¥(46,704 ¥(40,370
  

 

 

  

 

 

 

Amounts recognized in “Accumulated other comprehensive income (loss)” as of March 31, 2013 and 2014 were as follows:

   Millions of yen 
   2013  2014 

Actuarial gains (losses), net

  ¥(22,983 ¥(17,807

Prior service cost, net

   356    4,973  
  

 

 

  

 

 

 

Total

  ¥(22,627 ¥(12,834
  

 

 

  

 

 

 

The accumulated benefit obligation for the NTT CDBP regarding DOCOMO employees was ¥90,670 million and ¥90,418 million as of March 31, 2013 and 2014, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The projected benefit obligation, the accumulated benefit obligation and the fair value of plan assets in the pension plans with the projected or accumulated benefit obligation in excess of the plan assets as of March 31, 2013 and 2014 were as follows:

   Millions of yen 
   2013   2014 

Plans with projected benefit obligation in excess of plan assets:

    

Projected benefit obligation

  ¥116,939    ¥116,898  

Fair value of plan assets

   70,235     76,528  

Plans with accumulated benefit obligation in excess of plan assets:

    

Accumulated benefit obligation

  ¥90,561    ¥90,294  

Fair value of plan assets

   70,115     76,393  

The net periodic pension cost for the NTT CDBP regarding DOCOMO employees for the fiscal years ended March 31, 2012, 2013 and 2014 comprised the following:

   Millions of yen 
   2012  2013  2014 

Service cost

  ¥3,478   ¥3,585   ¥4,067  

Interest cost on projected benefit obligation

   1,897    1,891    1,690  

Expected return on plan assets

   (1,519  (1,523  (1,719

Amortization of prior service cost

   (357  (356  (618

Amortization of actuarial gains and losses

   1,024    1,077    1,288  

Contribution from employees

   (416  (420  (406
  

 

 

  

 

 

  

 

 

 

Net periodic pension cost

  ¥4,107   ¥4,254   ¥4,302  
  

 

 

  

 

 

  

 

 

 

Other changes in plan assets and benefit obligations of the NTT CDBP regarding DOCOMO employees recognized in “Accumulated other comprehensive income (loss)” for the fiscal years ended March 31, 2012, 2013 and 2014 comprised the following:

   Millions of yen 
   2012  2013  2014 

Other changes in plan assets and benefit obligations recognized in “Accumulated other comprehensive income (loss)”:

    

Prior service cost arising during period

  ¥   ¥   ¥(5,235

Actuarial (gains) losses arising during period, net

   2,154    4,928    (3,888

Amortization of prior service cost

   357    356            618  

Amortization of actuarial gains and losses

   (1,024  (1,077  (1,288
  

 

 

  

 

 

  

 

 

 

Total recognized in “Accumulated other comprehensive income (loss)”

  ¥      1,487   ¥      4,207   ¥(9,793
  

 

 

  

 

 

  

 

 

 

Total recognized in net periodic pension cost and “Accumulated other comprehensive income (loss)” was ¥5,594 million, ¥8,461 million and ¥(5,491) million for the fiscal years ended March 31, 2012, 2013 and 2014, respectively.

The amount of actuarial losses and prior service cost, which are expected to be amortized and reclassified from “Accumulated other comprehensive income (loss)” to net periodic pension cost during the fiscal year ending March 31, 2015 is ¥686 million and ¥(525) million, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The assumptions used in determining the NTT CDBP’s projected benefit obligations, based on actuarial computations which covered only DOCOMO employees’ participation in the NTT CDBP, as of March 31, 2013 and 2014 were as follows:

       2013          2014     

Discount rate

   1.5  1.4

Long-term rate of salary increases

   3.9    3.4  

The assumptions used in determining the net periodic pension cost, based on actuarial computations which covered only DOCOMO employees’ participation in the NTT CDBP, for the fiscal years ended March 31, 2012, 2013 and 2014 were as follows:

       2012          2013          2014     

Discount rate

   2.0  1.9  1.5

Long-term rate of salary increases

   3.3    3.3    3.9  

Expected long-term rate of return on plan assets

   2.5    2.5    2.5  

In determining the expected long-term rate of return on plan assets, the NTT CDBP considers the current and projected asset allocations, as well as expected long-term investment returns and risks for each category of the plan assets based on analysis of historical results.

The following table presents the fair values of NTT CDBP’s pension plan assets as of March 31, 2013 and 2014. Descriptions of fair value hierarchy and the inputs used in measuring fair value are presented in Note 18 “Fair value measurements.”

   Millions of yen 
   2013 
   Total   Level 1   Level 2   Level 3 

Cash and cash equivalents

  ¥517    ¥517    ¥    ¥  

Debt securities

        

Japanese government bonds/local government bonds

   20,738     20,122     616       

Domestic corporate bonds

   5,859          5,859       

Foreign government bonds

   4,676     2,079     2,597       

Foreign corporate bonds

   119     4     115       

Equity securities

        

Domestic stocks

   13,037     13,028     9       

Foreign stocks

   7,499     7,493          6  

Securities investment trust beneficiary certificates

        

Domestic debt securities

   1,193          1,193       

Domestic equity securities

   1,637          1,637       

Foreign debt securities

   1,018          1,018       

Foreign equity securities

   1,041          1,041       

Pooled funds

   8,192          8,192       

Life insurance company general accounts

   4,441          4,441       

Other

   268          1     267  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥70,235    ¥43,243    ¥26,719    ¥      273  
  

 

 

   

 

 

   

 

 

   

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

  Millions of yen   Millions of yen 
  2014   2015 
  Total   Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3 

Cash and cash equivalents

  ¥568    ¥568    ¥    ¥    ¥340    ¥340    ¥    ¥  

Debt securities

                

Japanese government bonds/local government bonds

   21,576     21,210     366          22,378     22,036     342       

Domestic corporate bonds

   5,843          5,843          7,205          7,205       

Foreign government bonds

   5,541     5,475     66          5,865     5,816     49       

Foreign corporate bonds

   92     12     80   ��      121     28     93       

Equity securities

                

Domestic stocks

   13,477     13,477               8,088     8,087     1       

Foreign stocks

   8,284     8,284          0     5,635     5,635            

Securities investment trust beneficiary certificates

                

Domestic debt securities

   1,295          1,295          923          923       

Domestic equity securities

   1,871          1,871          778          778       

Foreign debt securities

   1,298          1,298          580          580       

Foreign equity securities

   1,194          1,194          766          766       

Pooled funds

   6,704          6,704          30,324          30,324       

Life insurance company general accounts

   8,564          8,564          14,386          14,386       

Other

   221          2     219     1,592          0     1,592  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  ¥76,528    ¥49,026    ¥27,283    ¥      219    ¥98,981    ¥41,942    ¥55,447    ¥1,592  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Cash and cash equivalents

Cash and cash equivalents include foreign currency deposits and call loans, and are all classified as Level 1.

Debt securities

Debt securities include Japanese government bonds and local government bonds, domestic corporate bonds, foreign government bonds and foreign corporate bonds. If active market prices are available, fair value is measured by quoted prices for identical assets in active markets, which is classified as Level 1. If active market prices are not available, fair value is measured by inputs derived principally from observable market data provided by financial institutions, which is classified as Level 2.

Equity securities

Equity securities include domestic stocks and foreign stocks. If active market prices are available, fair value is measured by quoted prices for identical assets in active markets, which is classified as Level 1. If active market prices are not available, fair value is measured by inputs derived principally from observable market data provided by financial institutions, which is classified as Level 2. Fair value measured by inputs derived from unobservable data is classified as Level 3.

Securities investment trust beneficiary certificates

Securities investment trust beneficiary certificates include bond investment trusts and foreign stock investment trusts. Fair values of securities investment trust beneficiary certificates are measured by inputs derived principally from observable market data provided by financial institutions. Therefore, they are classified as Level 2.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Pooled funds

Pooled funds include government bonds, local government bonds, domestic stocks and foreign stocks. Pooled funds are evaluatedmeasured based on the fair value as reported by the trust operator, and are classified as Level 2.

Life insurance company general accounts

Life insurance company general accounts are the financial assets which guarantee an expected rate of return and a principal and they are all classified as Level 2.

Other

Other mainly includes fund of hedge funds. Fair value measured by inputs derived from unobservable data is classified as Level 3.

A Level 3 reconciliation is not disclosed since the amounts in Level 3 are immaterial.

The contract-type corporate pension plans’ policy toward plan asset management is formulated with the ultimate objective of ensuring the steady disbursement of pension benefits in future periods. The long-term objective of asset management, therefore, is to secure the total profits deemed necessary to ensure the financial soundness of the plan assets. To achieve this, DOCOMO selects various investments and takes into consideration their expected returns and risks and the correlation among the investments. DOCOMO then sets a target allocation ratio for the plan assets and endeavors to maintain that ratio. The target ratio is formulated from amid- to long-term perspective and reviewed annually. In the event that the investment environment changes dramatically, DOCOMO will review the asset allocation as necessary. The target ratio in March 2015 was: domestic bonds, 47.0%; domestic stocks, 13.0%; foreign bonds, 10.0%; foreign stocks, 10.0%; and life insurance company general accounts, 20.0%.

As of March 31, 2014 and 2015, securities owned by the contract-type corporate pension plans as its plan assets included the stock of NTT and the NTT group companies listed in Japan including DOCOMO in the amount of ¥283 million (0.3% of total plan assets) and ¥231 million (0.2% of total plan assets), respectively.

DOCOMO expects to contribute ¥1,166 million to the contract-type corporate pension plans in the fiscal year ending March 31, 2016.

The benefit payments, which reflect expected future service under the contract-type corporate pension plans, are expected to be as follows:

Year ending March 31,

  Millions of yen 

2016

  ¥12,885  

2017

   12,513  

2018

   12,914  

2019

   12,381  

2020

   12,326  

2021-2025

   65,416  

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Defined contribution pension plan

NTT DOCOMO, INC. recognized ¥2,060 million of retirement benefit expenses related to DOCOMO’s defined contribution benefit plan in the fiscal year ended March 31, 2015.

Social welfare pension scheme and NTT Kigyou-Nenkin-Kikin (NTT Corporate Defined Benefit Pension Plan)—

DOCOMO participates in the national welfare pension plan (“National Plan”) and a contributory defined benefit pension plan sponsored by the NTT group (NTT Kigyou-Nenkin-Kikin or NTT Corporate Defined Benefit Pension Plan, “NTT CDBP”). The National Plan is a government-regulated social welfare pension plan under the Japanese Employees’ Pension Insurance Act and both NTT group and its employees provide contributions to such plan every year. The National Plan is considered a multi-employer plan and contributions to such plan are recognized as expenses. The total amount of contributions by DOCOMO was ¥16,044 million, ¥15,982 million and ¥16,168 million for the fiscal years ended March 31, 2013, 2014 and 2015, respectively. In addition, the National Plan is a social welfare pension scheme, and because the information required by its accounting standards is limited, additional quantitative information relating to participation in the multi-employer plan is not disclosed.

Both NTT group, including DOCOMO, and its employees provide contributions to the NTT CDBP to supplement the pension benefits to which the employees are entitled under the National Plan. The NTT CDBP is regulated under the Defined-Benefit Corporate Pension Act. The NTT CDBP is considered a defined benefit pension plan. The participation by DOCOMO and its subsidiaries in the NTT CDBP is accounted for as a single employer plan. The number of DOCOMO’s employees covered by the NTT CDBP as of March 31, 2014 and 2015 represented approximately 10.7% and 10.9% of the total members, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents reconciliations and changes in the NTT CDBP’s projected benefit obligation and fair value of plan assets for the fiscal years ended March 31, 2014 and 2015. The amount in the table is based on actuarial computations which covered only DOCOMO employees’ participation in the NTT CDBP. The funded status was recognized as “Liability for employees’ retirement benefits” in the consolidated balance sheets as of March 31, 2014 and 2015.

   Millions of yen 
   2014  2015 

Change in benefit obligations:

   

Projected benefit obligation, beginning of year

  ¥116,939   ¥116,898  

Service cost

   4,067    3,905  

Interest cost

   1,690    1,613  

Actuarial (gain) loss

   1,424    10,630  

Plan amendment

   (5,235    

Internal adjustment due to transfer of employees within the NTT group

   30    21  

Other

   27    (72

Benefit payments

   (2,044  (1,853
  

 

 

  

 

 

 

Projected benefit obligation, end of year

  ¥116,898   ¥131,142  
  

 

 

  

 

 

 

Change in fair value of plan assets:

   

Fair value of plan assets, beginning of year

  ¥70,235   ¥76,528  

Actual return on plan assets

   7,031    9,309  

Employer contributions

   863    2,136  

Employee contributions

   406    432  

Internal adjustment due to transfer of employees within the NTT group

   10    (21

Other

   27    (72

Benefit payments

   (2,044  (1,853
  

 

 

  

 

 

 

Fair value of plan assets, end of year

  ¥76,528   ¥86,459  
  

 

 

  

 

 

 

As of March 31:

   

Funded status

  ¥(40,370 ¥(44,683
  

 

 

  

 

 

 

Amounts recognized in “Accumulated other comprehensive income (loss)” as of March 31, 2014 and 2015 were as follows:

   Millions of yen 
   2014   2015 

Actuarial gains (losses), net

  ¥(17,807  ¥ (20,334

Prior service cost, net

   4,973     4,448  
  

 

 

   

 

 

 

Total

  ¥(12,834  ¥(15,886
  

 

 

   

 

 

 

The accumulated benefit obligation for the NTT CDBP regarding DOCOMO employees was ¥90,418 million and ¥100,386 million as of March 31, 2014 and 2015, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The projected benefit obligation, the accumulated benefit obligation and the fair value of plan assets in the pension plans with the projected or accumulated benefit obligation in excess of the plan assets as of March 31, 2014 and 2015 were as follows:

   Millions of yen 
   2014   2015 

Plans with projected benefit obligation in excess of plan assets:

    

Projected benefit obligation

  ¥116,898    ¥131,142  

Fair value of plan assets

   76,528     86,459  

Plans with accumulated benefit obligation in excess of plan assets:

    

Accumulated benefit obligation

  ¥90,294    ¥100,219  

Fair value of plan assets

   76,393     86,283  

The net periodic pension cost for the NTT CDBP regarding DOCOMO employees for the fiscal years ended March 31, 2013, 2014 and 2015 comprised the following:

   Millions of yen 
   2013  2014  2015 

Service cost

  ¥3,585   ¥4,067   ¥3,905  

Interest cost on projected benefit obligation

   1,891    1,690    1,613  

Expected return on plan assets

   (1,523  (1,719  (1,892

Amortization of prior service cost

   (356  (618  (525

Amortization of actuarial gains and losses

   1,077    1,288    686  

Contribution from employees

   (420  (406  (432
  

 

 

  

 

 

  

 

 

 

Net periodic pension cost

  ¥4,254   ¥4,302   ¥3,355  
  

 

 

  

 

 

  

 

 

 

Other changes in plan assets and benefit obligations of the NTT CDBP regarding DOCOMO employees recognized in “Accumulated other comprehensive income (loss)” for the fiscal years ended March 31, 2013, 2014 and 2015 comprised the following:

   Millions of yen 
   2013  2014  2015 

Other changes in plan assets and benefit obligations recognized in “Accumulated other comprehensive income (loss)”:

    

Prior service cost arising during period

  ¥   ¥(5,235 ¥  

Actuarial (gains) losses arising during period, net

   4,928    (3,888   3,213  

Amortization of prior service cost

   356    618    525  

Amortization of actuarial gains and losses

   (1,077  (1,288  (686
  

 

 

  

 

 

  

 

 

 

Total recognized in “Accumulated other comprehensive income (loss)”

  ¥4,207   ¥(9,793 ¥3,052  
  

 

 

  

 

 

  

 

 

 

Total recognized in net periodic pension cost and “Accumulated other comprehensive income (loss)” was ¥8,461 million, ¥(5,491) million and ¥6,407 million for the fiscal years ended March 31, 2013, 2014 and 2015, respectively.

The amount of actuarial losses and prior service cost, which are expected to be amortized and reclassified from “Accumulated other comprehensive income (loss)” to net periodic pension cost during the fiscal year ending March 31, 2016 is ¥771 million and ¥(524) million, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The assumptions used in determining the NTT CDBP’s projected benefit obligations, based on actuarial computations which covered only DOCOMO employees’ participation in the NTT CDBP, as of March 31, 2014 and 2015 were as follows:

   2014  2015 

Discount rate

   1.4  1.0

Long-term rate of salary increases

   3.4    3.4  

The assumptions used in determining the net periodic pension cost, based on actuarial computations which covered only DOCOMO employees’ participation in the NTT CDBP, for the fiscal years ended March 31, 2013, 2014 and 2015 were as follows:

   2013  2014  2015 

Discount rate

   1.9  1.5  1.4

Long-term rate of salary increases

   3.3    3.9    3.4  

Expected long-term rate of return on plan assets

   2.5    2.5    2.5  

In determining the expected long-term rate of return on plan assets, the NTT CDBP considers the current and projected asset allocations, as well as expected long-term investment returns and risks for each category of the plan assets based on analysis of historical results.

The following table presents the fair values of NTT CDBP’s pension plan assets as of March 31, 2014 and 2015. Descriptions of fair value hierarchy and the inputs used in measuring fair value are presented in Note 20 “Fair value measurements.”

   Millions of yen 
   2014 
   Total   Level 1   Level 2   Level 3 

Cash and cash equivalents

  ¥568    ¥568    ¥    ¥  

Debt securities

        

Japanese government bonds/local government bonds

   21,576     21,210     366       

Domestic corporate bonds

   5,843          5,843       

Foreign government bonds

   5,541     5,475     66       

Foreign corporate bonds

   92     12     80       

Equity securities

        

Domestic stocks

   13,477     13,477            

Foreign stocks

   8,284     8,284          0  

Securities investment trust beneficiary certificates

        

Domestic debt securities

   1,295          1,295       

Domestic equity securities

   1,871          1,871       

Foreign debt securities

   1,298          1,298       

Foreign equity securities

   1,194          1,194       

Pooled funds

   6,704          6,704       

Life insurance company general accounts

   8,564          8,564       

Other

   221          2     219  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥76,528    ¥49,026    ¥27,283    ¥219  
  

 

 

   

 

 

   

 

 

   

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

   Millions of yen 
   2015 
   Total   Level 1   Level 2   Level 3 

Cash and cash equivalents

  ¥664    ¥664    ¥    ¥  

Debt securities

        

Japanese government bonds/local government bonds

   24,043     23,681     362       

Domestic corporate bonds

   6,771          6,771       

Foreign government bonds

   6,108     6,062     46       

Foreign corporate bonds

   88     26     62       

Equity securities

        

Domestic stocks

   15,955     15,953     2       

Foreign stocks

   9,227     9,227          0  

Securities investment trust beneficiary certificates

        

Domestic debt securities

   1,500          1,500       

Domestic equity securities

   2,143          2,143       

Foreign debt securities

   1,463          1,463       

Foreign equity securities

   1,359          1,359       

Pooled funds

   6,987          6,987       

Life insurance company general accounts

   9,971          9,971       

Other

   180          0     180  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥86,459    ¥55,613    ¥30,666    ¥180  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents

Cash and cash equivalents include foreign currency deposits and call loans, and are all classified as Level 1.

Debt securities

Debt securities include Japanese government bonds and local government bonds, domestic corporate bonds, foreign government bonds and foreign corporate bonds. If active market prices are available, fair value is measured by quoted prices for identical assets in active markets, which is classified as Level 1. If active market prices are not available, fair value is measured by inputs derived principally from observable market data provided by financial institutions, which is classified as Level 2.

Equity securities

Equity securities include domestic stocks and foreign stocks. If active market prices are available, fair value is measured by quoted prices for identical assets in active markets, which is classified as Level 1. If active market prices are not available, fair value is measured by inputs derived principally from observable market data provided by financial institutions, which is classified as Level 2. Fair value measured by inputs derived from unobservable data is classified as Level 3.

Securities investment trust beneficiary certificates

Securities investment trust beneficiary certificates include bond investment trusts and foreign stock investment trusts. Fair values of securities investment trust beneficiary certificates are measured by inputs derived principally from observable market data provided by financial institutions. Therefore, they are classified as Level 2.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pooled funds

Pooled funds include government bonds, local government bonds, domestic stocks and foreign stocks. Pooled funds are measured based on the fair value as reported by the trust operator, and are classified as Level 2.

Life insurance company general accounts

Life insurance company general accounts are the financial assets which guarantee an expected rate of return and a principal and they are all classified as Level 2.

Other

Other includes loans to employees and lease receivables. Fair value measured by inputs derived from unobservable data is classified as Level 3.

A Level 3 reconciliation is not disclosed since the amounts in Level 3 are immaterial.

The NTT CDBP’s policy toward plan asset management is formulated with the ultimate objective of ensuring the steady disbursement of pension benefits in future periods. The long-term objective of asset management, therefore, is to secure the total profits deemed necessary to ensure the financial soundness of the plan assets. To achieve this, the NTT CDBP selects various investments and takes into consideration their expected returns and risks and the correlation among the investments. The NTT CDBP then sets a target allocation ratio for the plan assets and endeavors to maintain that ratio. The target ratio is formulated from amid- to long-term perspective and reviewed annually. In the event that the investment environment changes dramatically, the NTT CDBP will review the asset allocation as necessary. The weighted average target ratio in March 20142015 was: domestic bonds, 42.9%42.8%; domestic stocks, 20.9%20.8%; foreign bonds, 10.0%; foreign stocks, 14.4%; and life insurance company general accounts, 11.8%12.0%.

As of March 31, 20132014 and 2014,2015, domestic stock owned by the NTT CDBP as its plan assets included common stock of NTT and the NTT group companies listed in Japan including DOCOMO in the amount of ¥4,473¥4,278 million (0.5%(0.4% of total plan assets) and ¥4,278¥4,453 million (0.4% of total plan assets), respectively.

DOCOMO expects to contribute ¥2,031¥2,129 million to the NTT CDBP in the fiscal year ending March 31, 2015.2016.

The benefit payments, which reflect expected future service under the NTT CDBP, based on actuarial computations which covered only DOCOMO employees are expected to be as follows:

 

Year ending March 31,

  Millions of yen   Millions of yen 

2015

  ¥        1,822  

2016

   1,936    ¥1,876  

2017

   2,008     1,996  

2018

   2,126     2,113  

2019

   2,193     2,183  

2020-2024

   11,753  

2020

   2,210  

2021-2025

   11,999  

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

16.18. Income taxes:

Total income taxes for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 comprised the following:

 

  Millions of yen   Millions of yen 
  2012 2013   2014   2013   2014   2015 

Income from continuing operations

  ¥  391,798   ¥  323,059    ¥  307,979    ¥  323,059    ¥  307,979    ¥  238,067  

Other comprehensive income (loss)

   (16,842  23,828     20,025     23,828     20,025     15,238  
  

 

  

 

   

 

   

 

   

 

   

 

 

Total income taxes

  ¥374,956   ¥346,887    ¥328,004    ¥346,887    ¥328,004    ¥253,305  
  

 

  

 

   

 

   

 

   

 

   

 

 

For the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, NTT DOCOMO, INC. and its domestic subsidiaries were subject to a National Corporate Tax of 30%28.05%, 28%28.05%, and approximately 28%25.5%, respectively, a Corporate Inhabitant Tax of approximately 6%, 5%, and 5%, respectively and a deductible Corporate Enterprise Tax and Special Local Corporate Tax of approximately 8%. The rate of the Corporate Inhabitant Tax and Corporate Enterprise Tax differs depending on the municipality.

The aggregate statutory income tax rates for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 were 40.8%38.1%, 38.1% and 38.1%35.8%, respectively. The actual effective income tax rates for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 were 44.7%38.8%, 38.8%37.0% and 37.0%, respectively.

Reconciliation of the difference of the actual effective income tax rate and the statutory income tax rate of DOCOMO is as follows:

 

      2012         2013         2014           2013         2014         2015     

Statutory income tax rate

   40.8  38.1  38.1   38.1  38.1  35.8

Expenses not deductible for tax purposes

   0.4    0.4    0.1     0.4    0.1    0.3  

Research and other credits

   (0.7  (0.9  (0.8   (0.9  (0.8  (0.7

Tax credits of investment in productivity improvement facilities

           (3.6

Change in valuation allowance

   0.9    1.5    1.1     1.5    1.1    2.0  

Effect of enacted changes in tax laws and rates

   4.7    0.3    1.0     0.3    1.0    3.9  

Effect of consolidation of affiliates

       0.3         0.3          

Effect of outside basis differences of equity method investment

   (1.2  (1.4  (3.1   (1.4  (3.1  (0.6

Other

   (0.2  0.5    0.6     0.5    0.6    (0.1
  

 

  

 

  

 

   

 

  

 

  

 

 

Actual effective income tax rate

   44.7  38.8  37.0   38.8  37.0  37.0
  

 

  

 

  

 

   

 

  

 

  

 

 

The amendments to the Japanese corporate tax law were enacted on November 30, 2011, and the corporate tax rate had been changed effectively from April 1, 2012. The aggregate statutory income tax rate declined from 40.8% to 38.1% or 35.8% to be used in measuring deferred tax assets and liabilities after the enactment date, resulting from temporary differences that are expected to be recovered or settled during the fiscal years from April 1, 2012 to March 31, 2015, or April 1, 2015 and thereafter. Due to the change in the enacted tax rates, net deferred tax assets as of enactment date decreased by ¥36,454 million, and the adjustment to deferred tax assets and liabilities as of enactment date amounted to ¥36,454 million is recorded in the “Income taxes – deferred” on the consolidated statements of income. Net income attributable to NTT DOCOMO, INC. decreased by ¥36,582 million as of enacted date.

The amendments to the Japanese corporate tax lawCorporate Tax Law were enacted on March 20, 2014, and the corporate tax rate was changed effectively from April 1, 2014. The aggregate statutory income tax rate declined from 38.1% to 35.8% to be used in measuring deferred tax assets and liabilities after the enactment date, resulting from

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

temporary differences that are expected to be recovered or settled during the fiscal year from April 1, 2014 and thereafter. The impact of the change in the enacted tax rate on DOCOMO’s financial results was insignificant.insignificant for the fiscal year ended March 31, 2014.

Amendments to the Japanese Corporate Tax Law were enacted on March 31, 2015, and the corporate tax rate has been changed effective from April 1, 2015 and will be changed again effective from April 1, 2016. The aggregate statutory income tax rate to be used in measuring deferred tax assets and liabilities after the enactment date declined from 35.8% to 33.4%, and 32.8%, resulting from temporary differences that are expected to be recovered or settled during the fiscal years from April 1, 2015 to March 31, 2016 and April 1, 2016 and

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

thereafter, respectively. Due to the change in the enacted tax rates, net deferred tax assets as of enactment date decreased by ¥25,040 million, and the effect of this adjustment is recorded in the “Income taxes-deferred” on the consolidated statements of income for the fiscal year ended March 31, 2015. Net income attributable to NTT DOCOMO, INC. decreased by ¥25,264 million as of enacted date.

According to amendments to the Japanese Corporate Tax Law enacted on March 20, 2014, new deductible special depreciation or tax credits for the investments of productivity improvement facilities were introduced. DOCOMO applied the tax credit for the investments of these eligible investments. The tax credit for investments in productivity improvement facilities amounted to ¥23,435 million for NTT DOCOMO, INC. and its domestic subsidiaries for the fiscal year ended March 31, 2015. Under the Japanese Corporate Tax Law, the investment tax credit does not reduce any tax basis of the related assets. DOCOMO recognized the entire tax benefit from this investment tax credit as a reduction to current income tax expense based on the Flow-Through Method. There was no unused investment tax credit as of March 31, 2015.

Deferred income taxes result from temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Significant components of deferred tax assets and liabilities as of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 
  2013 2014   2014 2015 

Deferred tax assets:

      

Investments in affiliates

  ¥81,764   ¥108,244    ¥108,244   ¥102,665  

Property, plant and equipment and intangible assets

   72,658    74,996     74,996    84,347  

Liability for employees’ retirement benefits

   60,771    57,662     57,662    56,590  

Accrued liabilities for loyalty programs

   74,683    55,409     55,409    39,363  

Operating loss carryforwards

   24,844    37,566  

Deferred revenues regarding “Nikagetsu Kurikoshi” (2-month carry-over)

  ��16,769    13,000  

Operating loss carry-forwards

   37,566    39,031  

Marketable securities and other investments

   11,255    11,358  

Deferred revenues regarding “Nikagetsu Kurikoshi” and “Packet Kurikoshi”

   13,000    10,723  

Compensated absences

   11,156    10,621  

Accrued enterprise tax

   11,270    11,754     11,754    6,970  

Marketable securities and other investments

   11,766    11,255  

Compensated absences

   11,780    11,156  

Inventories

   3,373    6,328  

Accrued bonus

   6,263    5,703  

Receivables held for sale

       10,276     10,276    5,434  

Accrued bonus

   7,145    6,263  

Inventories

   6,316    3,373  

Allowance for doubtful accounts

   506    3,654  

Accrued commissions to agent resellers

   5,913    3,104     3,104    1,945  

Asset retirement obligations

   3,762    1,893     1,893    1,755  

Other

   16,030    12,545     12,039    13,551  
  

 

  

 

   

 

  

 

 

Sub-total deferred tax assets

  ¥405,471   ¥418,496    ¥418,496   ¥400,038  

Less: Valuation allowance

   (28,158  (39,641   (39,641  (48,701
  

 

  

 

   

 

  

 

 

Total deferred tax assets

  ¥377,313   ¥378,855    ¥378,855   ¥351,337  
  

 

  

 

   

 

  

 

 

Deferred tax liabilities:

      

Investments in affiliates

  ¥18,187   ¥22,980    ¥22,980   ¥26,692  

Unrealized holding gains on available-for-sale securities

   16,441    19,284     19,284    26,204  

Identifiable intangible assets

   7,555    10,033     10,033    8,590  

Other

   462    4,963     4,963    3,473  
  

 

  

 

   

 

  

 

 

Total deferred tax liabilities

  ¥42,645   ¥57,260    ¥57,260   ¥64,959  
  

 

  

 

   

 

  

 

 

Net deferred tax assets

  ¥334,668   ¥321,595    ¥321,595   ¥286,378  
  

 

  

 

   

 

  

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

The components of net deferred tax assets included in the consolidated balance sheets as of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 
  2013 2014   2014 2015 

Deferred tax assets (Current assets)

  ¥70,784   ¥61,592    ¥61,592   ¥61,512  

Deferred tax assets (Non-current investments and other assets)

   273,084    269,500     269,500    237,427  

Other current liabilities

   (4  (199   (199  (29

Other long-term liabilities

   (9,196  (9,298   (9,298  (12,532
  

 

  

 

   

 

  

 

 

Total

  ¥334,668   ¥321,595    ¥  321,595   ¥286,378  
  

 

  

 

   

 

  

 

 

As of March 31, 2014, DOCOMO’s2015, certain subsidiaries of DOCOMO had operating loss carryforwardscarry-forwards for tax purposes of ¥143,296¥142,955 million, which may be used as a deduction in determining taxable income in future periods. The period available to offset future taxable income varies in each tax jurisdiction as follows:

 

   Millions of yen 
   20142015 

Within 5 years

  ¥18,12211,986  

6 to 20 years

   95,768104,724  

Indefinite periods

   29,40626,245  
  

 

 

 

Total

  ¥143,296142,955  
  

 

 

 

As of and for the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, DOCOMO had no material unrecognized tax benefits. DOCOMO does not believe that there will be any significant increases or decreases in reserve for unrecognized tax benefits within the next 12 months. The total amounts of interest and penalties related to unrecognized tax benefits for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 are immaterial.

In assessing the realizability of deferred tax assets, DOCOMO considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences and tax loss carry-forwards become deductible. DOCOMO considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The realizability of all of DOCOMO’s deferred tax assets is substantially dependent upon the generation of future book income and DOCOMO anticipates continuing to generate substantial book income.

The net changes in the total valuation allowance were an increase of ¥8,342 million for the fiscal year ended March 31, 2012, and an increase of ¥17,478 million for the fiscal year ended March 31, 2013, and an increase of ¥11,483 million for the fiscal year ended March 31, 2014, and an increase of ¥9,060 million for the fiscal year ended March 31, 2015, respectively. DOCOMO believes that it is more likely than not that the deferred tax assets less valuation allowances of certain subsidiaries will be realized; however, that assessment could change in the near term if estimates of future taxable income during the carry-forward period are reduced.

DOCOMO mainly files income tax returns in Japan. DOCOMO is no longer subject to regular income tax examination by the tax authority for and before the fiscal year ended March 31, 2013.

DOCOMO does not disclose amounts applicable to foreign income taxes separately because amounts applicable to foreign income from continuing operations and to foreign income taxes are immaterial.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Other taxes—

The consumption tax rate for all taxable goods and services, with minor exceptions, iswas 5%. for the fiscal years ended March 31, 2013 and 2014 and 8% for the fiscal year ended March 31, 2015. Consumption tax payable or receivable is determined based on consumption taxes levied on operating revenues offset by consumption taxes directly incurred by DOCOMO when purchasing goods and services.

17.19. Commitments and contingencies:

Leases—(a) Leases

DOCOMO leases certain facilities and equipment under capital leases or operating leases.

Assets covered under capital leases atas of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 

Class of property

  2013 2014   2014   2015 

Machinery, vessels and equipment

  ¥8,419   ¥7,100    ¥7,100    ¥5,571  

Less: Accumulated depreciation and amortization

   (5,598  (4,699   (4,699   (3,708
  

 

  

 

   

 

   

 

 

Total

  ¥2,821   ¥2,401    ¥2,401    ¥1,863  
  

 

  

 

   

 

   

 

 

Future minimum lease payments by year under capital leases together with the present value of the net minimum lease payments as of March 31, 20142015 were as follows:

 

Year ending March 31,

  Millions of yen 

2015

  ¥1,763  

Years ending March 31,

  Millions of yen 

2016

   1,269    ¥1,413  

2017

   851     1,012  

2018

   479     659  

2019

   183     378  

2020

   128  

Thereafter

   15     13  
  

 

   

 

 

Total minimum lease payments

   4,560     3,603  

Less: Amount representing interest

   (248   (180
  

 

   

 

 

Present value of net minimum lease payments

   4,312     3,423  

Less: Amounts representing estimated executory costs

   (654   (535
  

 

   

 

 

Net minimum lease payments

   3,658     2,888  

Less: Current obligation

   (1,379   (1,109
  

 

   

 

 

Long-term capital lease obligations

  ¥2,279    ¥1,779  
  

 

   

 

 

The above obligations are classified as part of “Other current liabilities” and “Other long-term liabilities” as appropriate.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

The minimum rent payments required under operating leases that have initial or remaining non-cancellable lease terms in excess of one year as of March 31, 20142015 were as follows:

 

Year ending March 31,

  Millions of yen 

2015

  ¥9,306  

Years ending March 31,

  Millions of yen 

2016

   7,595    ¥11,555  

2017

   5,807     9,009  

2018

   4,467     7,046  

2019

   3,351     5,550  

2020

   3,726  

Thereafter

   8,758     6,159  
  

 

   

 

 

Total minimum rent payments

  ¥39,284    ¥43,045  
  

 

   

 

 

Total rent expense for all operating leases except those with terms of 1 month or less that were not renewed for the fiscal years ended March 31, 2012, 2013, 2014 and 20142015 were as follows:

 

   Millions of yen 
   2012   2013   2014 

Rent expense

  ¥69,782    ¥74,636    ¥76,429  
  

 

 

   

 

 

   

 

 

 
   Millions of yen 
   2013   2014   2015 

Rent expense

  ¥74,636    ¥76,429    ¥79,634  
  

 

 

   

 

 

   

 

 

 

Litigation—(b) Litigation

DOCOMO is involved in litigation and claims arising in the ordinary course of business. DOCOMO believes that none of the litigation or claims outstanding, pending or threatened against DOCOMO would have a materially adverse effect on DOCOMO’s results of operations, financial position or cash flows.

(c) Purchase commitments—commitments

DOCOMO has entered into various contracts for the purchase of property, plant and equipment, inventories (primarily handsets) and services. Commitments outstanding as of March 31, 20142015 were ¥45,096¥25,996 million (of which ¥2,119¥926 million are with related parties) for property, plant and equipment, ¥691,341¥386,233 million (of which none are with related parties) for inventories and ¥11,294¥27,039 million (of which ¥323¥18,779 million are with related parties) for the other purchase commitments.

The amounts of purchase commitments are estimates calculated based on given assumptions and do not represent DOCOMO’s entire anticipated purchases in the future.

(d) Loan commitments—commitments

DOCOMO conducts the cash advance service accompanying credit business. Total outstanding credit lines regarding loan commitments of the cash advance service as of March 31, 20132014 and 20142015 were ¥125,892¥127,710 million and ¥127,710¥131,401 million, respectively.

Credit lines are not necessarily executed to the maximum amount because these contracts contain a clause to lower the credit lines if there are reasonable grounds.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Guarantees—(e) Guarantees

DOCOMO enters into agreements in the normal course of business that provide guarantees for counterparties. These counterparties include subscribers, related parties, foreign wireless telecommunications service providers and other business partners.

DOCOMO provides subscribers with guarantees for product defects of cellular phone handsets sold by DOCOMO, but DOCOMO is provided with similar guarantees by the handset vendors and no liabilities were recognized for these guarantees.

Though the guarantees or indemnifications provided in transactions other than those with the subscribers are different in each contract, the likelihood of almost all of the performance of these guarantees or indemnifications are remote and amount of payments DOCOMO could be claimed for is not specified in almost all of the contracts. Historically, DOCOMO has not made any significant guarantee or indemnification payments under such agreements. DOCOMO estimates the fair value of the obligations related to these agreements is not significant. Accordingly, no liabilities were recognized for these obligations.

18. NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

20.Fair value measurements:measurements:

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value according to observability. The inputs are described as follows:

Level 1—quoted prices in active markets for identical assets or liabilities

Level 2—inputs other than quoted prices included within Level 1 that are observable for the asset or liability

Level 3—unobservable inputs for the asset or liability

DOCOMO also distinguishes assets and liabilities measured at fair value every period on a recurring basis from those measured on a nonrecurring basis in certain circumstances.

(a) Assets and liabilities measured at fair value on a recurring basis

DOCOMO’s assets and liabilities measured at fair value on a recurring basis include available-for-sale securities and derivatives.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

DOCOMO’s assets and liabilities that were measured at fair value on a recurring basis at March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 
  2013   2014 
  Total   Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3 

Assets:

                

Available-for-sale securities

                

Equity securities (domestic)

  ¥62,076    ¥62,076    ¥        —    ¥        —    ¥81,598    ¥81,598    ¥    ¥        —  

Equity securities (foreign)

   78,789     78,789               77,172     77,172            

Debt securities (foreign)

   29     29               5     5            
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total available-for-sale securities

   140,894     140,894              ¥158,775    ¥158,775    ¥    ¥  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Derivatives

                

Foreign exchange forward contracts

  ¥7    ¥    ¥7    ¥  

Interest rate swap agreements

  ¥25    ¥    ¥25    ¥  

Foreign currency option contracts

   272          272       
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total derivatives

   7          7          297          297       
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  ¥140,901    ¥140,894    ¥7    ¥    ¥159,072    ¥158,775    ¥    297    ¥  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Liabilities:

                

Derivatives

                

Foreign currency option contracts

  ¥369    ¥    ¥369    ¥  

Foreign exchange forward contracts

  ¥2    ¥    ¥2    ¥  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total derivatives

   369          369          2          2       
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  ¥369    ¥    ¥369    ¥    ¥2    ¥    ¥2    ¥  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 
        

There were no transfers between Level 1 and Level 2.

   Millions of yen 
   2014 
   Total   Level 1   Level 2   Level 3 

Assets:

        

Available-for-sale securities

        

Equity securities (domestic)

  ¥81,598    ¥81,598    ¥        —    ¥        —  

Equity securities (foreign)

   77,172     77,172            

Debt securities (foreign)

   5     5            
  

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

   158,775     158,775            
  

 

 

   

 

 

   

 

 

   

 

 

 

Derivatives

        

Interest rate swap agreements

  ¥25    ¥    ¥25    ¥  

Foreign currency option contracts

   272          272       
  

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

   297          297       
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥159,072    ¥158,775    ¥297    ¥  
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

        

Derivatives

        

Foreign exchange forward contracts

  ¥2    ¥    ¥2    ¥  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

   2          2       
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥2    ¥    ¥2    ¥  
  

 

 

   

 

 

   

 

 

   

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

   Millions of yen 
   2015 
   Total   Level 1   Level 2   Level 3 

Assets:

        

Available-for-sale securities

        

Equity securities (domestic)

  ¥88,675    ¥88,675    ¥    ¥  

Equity securities (foreign)

   93,149     93,149            

Debt securities (foreign)

   6     6            
  

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

  ¥181,830    ¥181,830    ¥    ¥  
  

 

 

   

 

 

   

 

 

   

 

 

 

Derivatives

        

Foreign currency option contracts

  ¥474    ¥    ¥474    ¥  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

   474          474       
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥182,304    ¥181,830    ¥474    ¥  
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

        

Derivatives

        

Foreign currency option contracts

  ¥80    ¥    ¥80    ¥  

Foreign exchange forward contracts

   0          0       
  

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

   80          80       
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥80    ¥    ¥80    ¥  
  

 

 

   

 

 

   

 

 

   

 

 

 

There were no transfers between Level 1 and Level 2.

Available-for-sale securities

Available-for-sale securities include marketable equity securities and debt securities, which are valued using quoted prices in active markets for identical assets. Therefore, they are classified as Level 1.

Derivatives

Derivative instruments are interest rate swap agreements, foreign exchange forwardcurrency option contracts and foreign currency optionexchange forward contracts, which are valued based on observable market data, and are classified as Level 2. The valuation of such derivatives is periodically validated using observable market data, such as exchange rates.

(b) Assets and liabilities measured at fair value on a nonrecurring basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in certain circumstances.

DOCOMO may be required to measure fair value of receivables held for sale, long-lived assets, equity securities whose fair values are not readily determinable, and other assets or liabilities on a nonrecurring basis.

DOCOMO uses valuation methods such as a discounted cash flow method and market approach techniques in order to determine the fair value of its assets and liabilities classified as Level 3. DOCOMO selects a valuation method which best reflects the nature, characteristics, and risks of each asset and liability, and also determines the unobservable inputs using the best and most relevant data available. DOCOMO verifies the appropriateness of valuation methods and unobservable inputs, and may use third-party pricing information to evaluate the appropriateness of DOCOMO’s valuation during the verification processes.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

DOCOMO’s assets that were measured at fair value on a nonrecurring basis for the fiscal year ended March 31, 20132014 and 20142015 were as follows:

 

   Millions of yen 
   2013 
   Total   Level 1   Level 2   Level 3   gains (losses)
(before  taxes)
 

Assets:

          

Receivables held for sale

  ¥779,042    ¥        —    ¥779,042    ¥    ¥(8,620

Investments in affiliates

   132,010               132,010     (25,913

Goodwill

   7,855               7,855     (7,281

Long-lived assets

                       (452

Receivables held for sale

Receivables held for sale are measured at the lower of cost or fair value.

Receivables held for sale are classified as Level 2. DOCOMO measures the fair value of the receivables held for sale by discounting, at LIBOR-based discount rates, estimated future cash flows while taking into account factors such as default probabilities and loss severity of similar trade receivables.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investments in affiliates

The fair value of investments in affiliates, including TTSL, is measured based on discounted cash flow method using unobservable inputs. Therefore, they are classified as Level 3.

Goodwill

The fair value of the reporting unit is measured based on discounted cash flow method using unobservable inputs. Therefore, it is classified as Level 3.

Long-lived assets

When necessary, the fair value of long-lived assets is measured based on the relief-from-royalty method using unobservable inputs. Therefore, it is classified as Level 3.

  Millions of yen   Millions of yen 
  2014   2014 
  Total   Level 1   Level 2   Level 3   gains (losses)
(before  taxes)
   Total   Level 1   Level 2   Level 3   Gains (losses)
(before  taxes)
 

Assets:

                    

Receivables held for sale

  ¥836,638    ¥        —    ¥836,638    ¥    ¥(6,630  ¥836,638    ¥    ¥836,638    ¥    ¥(6,630

Investments in affiliates

   44,968               44,968     (51,279   44,968               44,968     (51,279

Receivables held for sale

Receivables held for sale are measured at the lower of cost or fair value.

Receivables held for sale are classified as Level 2. DOCOMO measures the fair value of the receivables held for sale by discounting, at LIBOR-based discount rates, estimated future cash flows while taking into account factors such as default probabilities and loss severity of similar trade receivables.

Investments in affiliates

The fair value of investments in affiliates, including TTSL, is measured based on discounted cash flow method using unobservable inputs. Therefore, they are classified as Level 3.

   Millions of yen 
   2015 
   Total   Level 1   Level 2   Level 3   Gains (losses)
(before  taxes)
 

Assets:

          

Receivables held for sale

  ¥935,648    ¥    ¥935,648    ¥    ¥(6,866

long-lived assets

   107          107          (30,161

Receivables held for sale

Receivables held for sale are measured at the lower of cost or fair value.

Receivables held for sale are classified as Level 2. DOCOMO measures the fair value of the receivables held for sale by discounting, at LIBOR-based discount rates, estimated future cash flows while taking into account factors such as default probabilities and loss severity of similar trade receivables.

Long-lived assets

The fair value of certain equipment related to the multimedia broadcasting business for mobile devices is measured based on observable market transactions involving sales of comparable assets and are classified as Level 2. In addition, the fair value of other long-lived assets related to the multimedia broadcasting business for mobile devices is measured based on the discounted cash flow method and are classified as Level 3. Since the future cash flows expected to be generated by such assets would be negative, the fair value in Level 3 is zero, as described in Note 5.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The valuation techniques and significant unobservable inputs used to develop measurements of main assets at fair value on a nonrecurring basis in Level 3 were as follows.

 

   Millions of yen 
    2013 
    Fair value   Valuation technique   Significant Unobservable
input
   Input value 

Assets:

        

Investments in affiliates

  ¥  132,010     
 
Discounted cash
flow method
  
  
   
 
Weighted average
cost of capital
  
  
   11.3%-15.9%  

Goodwill

   7,855     
 
Discounted cash
flow method
  
  
   
 
Weighted average
cost of capital
  
  
   9.5%  

Long-lived assets

        
 
Relief-from-royalty
method
  
  
   Royalty rate     1.5%  

   Millions of yen 
   2014 
   Fair value   Valuation technique   Significant Unobservable
input
   Input
value
 

Assets:

        

Investments in affiliates

  ¥  44,826     
 
Discounted cash
flow method
  
  
   
 
Weighted average
cost of capital
  
  
   12.6%  

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

   Millions of yen 
    2014 
    Fair value   Valuation technique   Significant Unobservable
input
   Input value 

Assets:

        

Investments in affiliates

  ¥  44,826     
 
Discounted cash
flow method
  
  
   
 
Weighted average
cost of capital
  
  
   12.6

19.21. Financial instruments:

(a) Risk management

The fair values of DOCOMO’s assets and liabilities and DOCOMO’s cash flows may be negatively impacted by fluctuations in interest rates and foreign exchange rates. To manage these risks, DOCOMO uses derivative instruments such as interest rate swap agreements, foreign exchange forward contracts,non-deliverable forward contracts (NDF) and foreign currency option contracts as needed. The financial instruments are executed with creditworthy financial institutions and DOCOMO believes that there is little risk of default by these counterparties. DOCOMO sets and follows internal regulations that establish conditions to enter into derivative contracts and procedures of approving and monitoring such contracts.

(b) Concentration of credit risk

As of March 31, 20132014 and 2014,2015, the amount of other receivables resulting from the sale of receivables to NTT FINANCE was ¥240,205¥248,732 million and ¥248,732¥259,218 million, respectively. As of March 31, 20132014 and 2014,2015, the amount of receivables held for sale was ¥779,042¥983,644 million and ¥983,644¥1,149,081 million, respectively.

Information regarding the transaction with NTT FINANCE is disclosed in Note 1315 “Related party transactions.”

(c) Fair value of financial instruments

Financial instruments—

Carrying amounts of “Cash and cash equivalents,” “Short-term investments,” “Accounts receivable,” “Receivables held for sale,” “Credit card receivables,” “Other receivables,” “Accounts payable, trade” and certain other financial instruments approximate their fair values except the items separately referred to below.

Long-term debt including current portion—

The fair value of long-term debt including current portion is estimated based on the discounted amounts of future cash flows using DOCOMO’s current incremental borrowings rates for similar liabilities.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The carrying amount and the estimated fair value of long-term debt including current portion as of March 31, 20132014 and 20142015 were as follows. The fair value is valued and validated periodically based on observable market data. Therefore, it is classified as Level 2.

 

Millions of yen
2013  

2014

Carrying amount  

Fair value

  

Carrying amount

  

Fair value

¥            241,459  ¥        252,220  ¥        220,851  ¥        229,053

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Millions of yen
2014  

2015

Carrying amount  

Fair value

  

Carrying amount

  

Fair value

¥                               220,851  ¥                            229,053  ¥                            220,603  ¥                           228,678

Derivative instruments—

(i) Fair value hedge

DOCOMO may use interest rate swap agreements, under which DOCOMO receives fixed rate interest payments and pays floating rate interest payments, to hedge the changes in fair value of certain debt as a part of its asset-liability management (ALM). DOCOMO designated interest rate swap agreements as instruments hedging the changes in fair value utilizing the short-cut method, which permitted an assumption of no ineffectiveness if the key terms of interest rate swap agreements and those of certain hedged debt were identical for the fiscal year ended March 31, 2012.

DOCOMO was not a counterparty to any interest rate swap agreements designated as instruments hedging the changes in fair value as of March 31, 20132014 and 20142015 and did not enter into any interest rate swap agreements designated as instruments hedging the changes in fair value for the fiscal years ended March 31, 20132014 and 2014.2015.

(ii) Derivatives not designated as hedging instruments

DOCOMO had interest rate swap agreements, foreign exchange forward contracts, non-deliverable forward contracts (NDF) and foreign currency option contracts to hedge the risk of fluctuations in interest rates and foreign exchange rates. DOCOMO did not designate such derivative instruments as hedging instruments.

The contract amounts as of March 31, 20132014 and 20142015 were as follows:

 

  Millions of yen   Millions of yen 

Instruments

  2013   2014   2014   2015 

Interest rate swap agreements

  ¥    ¥4,500    ¥4,500    ¥  

Foreign exchange forward contracts

   842     474     474     100  

Foreign currency option contracts

       55,056         85,338     85,338     48,740  
  

 

   

 

   

 

   

 

 

Total

  ¥55,898    ¥90,312    ¥90,312    ¥48,840  
  

 

   

 

   

 

   

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(iii) The effect on the consolidated balance sheets

The locations and fair values of the derivative instruments as of March 31, 20132014 and 2014,2015, recorded in the consolidated balance sheets, were as follows:

Asset derivatives

 

      Millions of yen 

Instruments

  

Locations

  2013   2014 

Derivatives not designated as hedging instruments

      

Interest rate swap agreements

  Prepaid expenses and other current assets  ¥    —    ¥    11  
  Other assets        14  

Foreign exchange forward contracts

  Prepaid expenses and other current assets   7       

Foreign currency option contracts

  Prepaid expenses and other current assets        64  
  Other assets        208  
    

 

 

   

 

 

 

Total

    ¥7    ¥297  
    

 

 

   

 

 

 

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Liability derivatives

     Millions of yen 

Instruments

  

Locations

  2014   2015 

Derivatives not designated as hedging instruments

      

Interest rate swap agreements

  Prepaid expenses and other current assets  ¥11    ¥  
  Other assets   14       

Foreign currency option contracts

  Prepaid expenses and other current assets   64       
  Other assets   208     474  
    

 

   

 

 

Total

    ¥  297    ¥  474  
    

 

   

 

 
Liability derivativesLiability derivatives    
     Millions of yen      Millions of yen 

Instruments

  

Locations

  2013   2014   

Locations

  2014   2015 

Derivatives not designated as hedging instruments

            

Foreign exchange forward contracts

  Other current liabilities  ¥    ¥    2    Other current liabilities  ¥2    ¥0  

Foreign currency option contracts

  

Other current liabilities

Other long-term liabilities

   

 

20

    349

  

  

   

 


  

  

  Other long-term liabilities        80  
    

 

   

 

     

 

   

 

 

Total

    ¥369    ¥2      ¥    2    ¥    80  
    

 

   

 

     

 

   

 

 

The fair values of derivative instruments were valued and validated periodically based on observable market data and represent the amount that DOCOMO could have settled with the counterparties to terminate the contracts outstanding as of March 31, 20132014 and 2014.2015.

(iv) The effect on the consolidated statements of income

The locations and gain (loss) amounts of the derivative instruments for the fiscal years ended March 31, 2012, 2013, 2014 and 2014,2015, recognized in the consolidated statements of income, were as follows:

 

    Amount of gain (loss) recognized in income on derivative 
    Millions of yen 

Instruments

  Locations 2012 2013 2014 

Derivatives designated as instruments hedging the changes in fair value

     

Interest rate swap agreements

   Other, net ¥(1,232 ¥    —   ¥    —  
   

 

  

 

  

 

 

Total

   ¥(1,232 ¥    —   ¥    —  
   

 

  

 

  

 

 
    Amount of gain (loss) recognized in income on derivative    Amount of gain (loss) recognized in income on derivative 
    Millions of yen    Millions of yen 

Instruments

  Locations 2012 2013 2014   Locations 2013 2014 2015 

Derivatives not designated as hedging instruments

          

Interest rate swap agreements

   Other, net*   ¥    —   ¥    —   ¥25    Other, net* ¥   ¥25   ¥  

Foreign exchange forward contracts

   Other, net*    36    (487  713    Other, net*  (487  713    (26

Non-deliverable forward contracts (NDF)

   Other, net*    82    (6  (29  Other, net*  (6  (29  0  

Foreign currency option contracts

   Other, net*    (146  104    1,549    Other, net*  104    1,549    1,520  
   

 

  

 

  

 

    

 

  

 

  

 

 

Total

   ¥(28 ¥(389 ¥2,258     ¥(389 ¥2,258   ¥1,494  
   

 

  

 

  

 

    

 

  

 

  

 

 

 

*“Other, net” was included in “Other income (expense).”

(v) Contingent features in derivatives

As of March 31, 2014, DOCOMO had no derivative instruments with credit-risk-related contingent features.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(v) Contingent features in derivatives

As of March 31, 2015, DOCOMO had no derivative instruments with credit-risk-related contingent features.

Other—

Information regarding investments in affiliates and marketable securities and other investments is disclosed in Note 56 “Investments in affiliates” and Note 67 “Marketable securities and other investments,” respectively.

20.22. Financing receivables:

DOCOMO has financing receivables including installment receivables, credit card receivables and receivables due to transfers. Installment receivables arise from providing funds for the subscribers’ handset purchase from agent resellers. Credit card receivables arise from usage of credit services by the customers. Receivables due to transfers arise from selling DOCOMO’s “receivables for mobile communicationstelecommunications services” to NTT FINANCE. These receivables generally do not bear interest.

DOCOMO appropriately extends credit to customers upon these transactions and manages credit risks. When entering into installment payment, credit card contracts, or the contract regarding transfers of receivables with NTT FINANCE, DOCOMO performs credit check and manages the credit exposure thereafter by monitoring payment delays. The amounts per transaction for handset purchases and credit card usage are generally low and the billing cycle is also short, generally one month. Therefore, DOCOMO is able to maintain accurate past due information on a timely basis. Most of those customers utilize automated payment system to make cash payments, which mitigates the risk of uncollected receivables significantly. Besides, in relation to receivables due to transfers, the billing cycle is short, or generally two month, therefore, DOCOMO is able to maintain accurate past due information on a timely basis and the risk of uncollected receivables is mitigated. Because of the nature of the business and its effective credit control system, DOCOMO believes that a credit risk in its business is low. As a result, historical losses of installment receivables and credit card receivables have not been significant. There have been no historical losses of receivables due to transfers.

Allowance for doubtful accounts is computed based on historical bad debt experience and the estimated uncollectible amount based on the analysis of certain individual accounts, including claims in bankruptcy. When it is determined that there is little possibility of collection based on the debtor’s solvency, such receivables are written off. Since DOCOMO appropriately extends credits, manages credit risks and writes off uncollectible receivables, the amount of past due receivables is not significant.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Financing receivables and related allowance for doubtful accounts as of March 31, 20132014 and 20142015 were as follows:

 

   Millions of yen 
   2013 
   Installment
receivables
  Credit card
receivables
  Receivables
due to
transfers
   Other  Total 

Allowance for doubtful accounts:

       

Balance as of March 31, 2012

  ¥6,107   ¥3,327   ¥    ¥396   ¥9,830  
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Provision

   785    1,303         86    2,174  

Charge-offs

   (3,306  (2,250       (21  (5,577

Other deductions*

   (2,239               (2,239

Balance as of March 31, 2013

  ¥1,347   ¥2,380   ¥    ¥461   ¥4,188  
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Ending balance: collectively evaluated for impairment

   1,347    2,380         30    3,757  

Ending balance: individually evaluated for impairment

                431    431  

Financing receivables:

       

Balance as of March 31, 2013

  ¥    2,120   ¥    194,607   ¥    240,205    ¥    9,880   ¥    446,812  
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Ending balance: collectively evaluated for impairment

   2,120    194,607    240,205     9,220    446,152  

Ending balance: individually evaluated for impairment

                660    660  

*The decrease in the balance of allowance for doubtful accounts due to reclassifications to receivables held for sale from installment receivables.

The cost of installment receivables and credit card receivables which were sold for the fiscal year ended March 31, 2013 were ¥268,778 million and ¥44,901 million, respectively. The balance of receivables held for sale as of March 31, 2013 which was reclassified from installment receivables and credit card receivables were ¥504,170 million and ¥4,864 million, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

  Millions of yen   Millions of yen 
  2014   2014 
  Installment
receivables
 Credit card
receivables
 Receivables
due to
transfers
   Other Total   Installment
receivables
 Credit card
receivables
 Receivables
due to
transfers
   Other Total 

Allowance for doubtful accounts:

              

Balance as of March 31, 2013

  ¥1,347   ¥2,380   ¥    ¥461   ¥4,188    ¥1,347   ¥2,380   ¥    ¥461   ¥4,188  
  

 

  

 

  

 

   

 

  

 

   

 

  

 

  

 

   

 

  

 

 

Provision

       1,260         4,319    5,579         1,260         4,319    5,579  

Charge-offs

   (1,144  (1,496       (13  (2,653   (1,144  (1,496       (13  (2,653

Balance as of March 31, 2014

  ¥203   ¥2,144   ¥    ¥4,767   ¥7,114    ¥203   ¥2,144   ¥    ¥4,767   ¥7,114  
  

 

  

 

  

 

   

 

  

 

   

 

  

 

  

 

   

 

  

 

 

Ending balance: collectively evaluated for impairment

   203    2,144         359    2,706     203    2,144         359    2,706  

Ending balance: individually evaluated for impairment

                4,408    4,408                  4,408    4,408  

Financing receivables:

              

Balance as of March 31, 2014

  ¥462   ¥    220,979   ¥    248,732    ¥    20,073   ¥    490,246    ¥462   ¥    220,979   ¥    248,732    ¥    20,073   ¥    490,246  
  

 

  

 

  

 

   

 

  

 

   

 

  

 

  

 

   

 

  

 

 

Ending balance: collectively evaluated for impairment

   462    220,979    248,732     15,500    485,673     462    220,979    248,732     15,500    485,673  

Ending balance: individually evaluated for impairment

                4,573    4,573                  4,573    4,573  

The cost of installment receivables and credit card receivables which were sold for the fiscal year ended March 31, 2014 were ¥504,827 million and ¥57,261 million, respectively. The balance of receivables held for sale as of March 31, 2014 which was reclassified from installment receivables and credit card receivables were ¥711,283 million and ¥4,691 million, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

   Millions of yen 
   2015 
   Installment
receivables
  Credit card
receivables
  Receivables
due to
transfers
   Other  Total 

Allowance for doubtful accounts:

       

Balance as of March 31, 2014

  ¥203   ¥2,144   ¥    ¥4,767   ¥7,114  
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Provision

       5,714         (543  5,171  

Charge-offs

   (128  (1,744       (33  (1,905

Balance as of March 31, 2015

  ¥75   ¥6,114   ¥    ¥4,191   ¥10,380  
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Ending balance: collectively evaluated for impairment

   75    6,114         22    6,211  

Ending balance: individually evaluated for impairment

                4,169    4,169  

Financing receivables:

       

Balance as of March 31, 2015

  ¥411   ¥234,412   ¥259,218    ¥12,748   ¥506,789  
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Ending balance: collectively evaluated for impairment

   411    234,412    259,218     8,550    502,591  

Ending balance: individually evaluated for impairment

                4,198    4,198  

The cost of installment receivables and credit card receivables which were sold for the fiscal year ended March 31, 2015 were ¥663,102 million and ¥51,792 million, respectively. The balance of receivables held for sale as of March 31, 2015 which was reclassified from installment receivables and credit card receivables were ¥873,983 million and ¥4,101 million, respectively.

NTT DOCOMO, INC. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE

YEARS ENDED MARCH 31, 2012, 2013, 2014 and 20142015

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

 

  Millions of yen   Millions of yen 
  Balance at
beginning of
year
   Charged to
expenses
  Deductions Balance at end
of year
   Balance as of
beginning of
year
   Charged to
expenses
  Deductions Balance as of end
of year
 
   Written-off Other*    Written-off Other* 

2012

       

Allowance for doubtful accounts

  ¥19,139    ¥17,224   ¥(11,283 ¥   ¥25,080  

2013

              

Allowance for doubtful accounts

  ¥25,080    ¥(463 ¥(12,688 ¥(2,239 ¥9,690    ¥25,080    ¥(463 ¥(12,688 ¥(2,239 ¥9,690  

2014

              

Allowance for doubtful accounts

  ¥9,690    ¥6,323   ¥(6,604 ¥   ¥9,409    ¥9,690    ¥6,323   ¥(6,604 ¥   ¥9,409  

2015

       

Allowance for doubtful accounts

  ¥9,409    ¥3,531   ¥(1,073 ¥   ¥11,867  

 

*The decrease in allowance for doubtful accounts due to reclassifications to receivables held for sale from DOCOMO’s “receivables for mobile communicationstelecommunications services.”

 

  Millions of yen   Millions of yen 
  Balance at
beginning of
year
   Charged to
expenses
   Deductions* Balance at end
of year
   Balance as of
beginning of
year
   Charged to
expenses
   Deductions* Balance as of end
of year
 

2013

              

Valuation allowance for receivables held for sale

  ¥    ¥9,079    ¥       ¥9,079    ¥    ¥9,079    ¥   ¥9,079  

2014

              

Valuation allowance for receivables held for sale

  ¥9,079    ¥5,984    ¥(7,999 ¥7,064    ¥9,079    ¥5,984    ¥(7,999 ¥7,064  

2015

       

Valuation allowance for receivables held for sale

  ¥7,064    ¥6,898    ¥(6,327 ¥7,635  

 

*The decrease in valuation allowance for receivables held for sale due to sale of receivables held for sale.

 

 Millions of yen  Millions of yen 
 Balance at
beginning of
year
  Additions Deductions  Balance at end
of year
  Balance as of
beginning of
year
  Additions Deductions*  Balance as of end
of year
 
 Charged to
expenses
 Foreign
currency
translation
adjustment
 Business
combinations
  Charged to
expenses
 Foreign
currency
translation
adjustment
 Business
combinations
 

2012

      

Valuation allowance for deferred tax assets

 ¥2,338   ¥8,495   ¥(155 ¥32   ¥(30 ¥10,680  

2013

            

Valuation allowance for deferred tax assets

 ¥10,680   ¥11,147   ¥1,027   ¥5,328   ¥(24 ¥28,158   ¥10,680   ¥11,147   ¥1,027   ¥5,328   ¥(24 ¥28,158  

2014

            

Valuation allowance for deferred tax assets

 ¥28,158   ¥9,954   ¥2,226   ¥   ¥(697)  ¥39,641   ¥28,158   ¥9,954   ¥2,226   ¥   ¥(697 ¥39,641  

2015

      

Valuation allowance for deferred tax assets

 ¥39,641   ¥11,041   ¥925   ¥   ¥(2,906 ¥48,701  

*The decrease in valuation allowance for deferred tax assets due to expiration of operating loss carry-forwards.

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

NTT DOCOMO, INC.

 

By

 

/s/    KAORU KATOKaoru Kato

 Kaoru Kato
 President and Chief Executive Officer

Date: June 27, 201426, 2015


EXHIBIT INDEX

 

Exhibit
Number

 

Description

    1.1 Articles of Incorporation of the registrant (English translation)
    1.2 Share Handling Regulations of the registrant (English translation)*1
    1.3 Regulations of the Board of Directors of the registrant (English translation)
    1.4 

Regulations of the Audit & Supervisory Board of the registrant (English translation)

    2.1 Form of Deposit Agreement among the registrant, The Bank of New York Mellon as Depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt (incorporated by reference to Exhibit 1 of the Registration Statement on Form F-6 (File No. 333-134940) filed on September 16, 2013)
    8.1 List of Significant Subsidiaries (See “Business Overview” in Item 4.B of this Form 20-F)
  11.1 Code of Ethics (English translation)*2
  12.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  12.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  13.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
  13.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase

 

*1Previously filed with the Securities and Exchange Commission on June 27, 2014 and herein incorporated by reference.
*2Previously filed with the Securities and Exchange Commission on June 27, 2006 and herein incorporated by reference.