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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2017
Commission File Number:001-31221
Total number of pages: 45
NTT DOCOMO, INC.
(Translation of registrant’s name into English)
Sanno Park Tower11-1, Nagata-cho2-chome
Chiyoda-ku, Tokyo100-6150
Japan
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form20-F or Form40-F.
Form20-F ☒ Form40-F ☐
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1):☐
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(7):☐
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NTT DOCOMO, INC. | ||||||
Date: November 1, 2017 | By: | /S/ KEISUKE YOSHIZAWA | ||||
Keisuke Yoshizawa | ||||||
Managing Director, Investor Relations Department |
Information furnished in this form:
1. | Report filed on November 1, 2017 with the Director of the Kanto Local Finance Bureau of Japan pursuant to the Financial Instruments and Exchange Act of Japan |
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Quarterly Securities Report
(The Second Quarter of the 27th Business Term)
NTT DOCOMO, INC.
Table of Contents
1 | ||
2-3 | ||
2 | ||
3 | ||
4-16 | ||
4 | ||
4 | ||
3. Analysis of Consolidated Financial Condition, Results of Operations, and Cash Flow Condition | 5-16 | |
17-20 | ||
17-20 | ||
20 | ||
21-42 | ||
21-42 |
[Note]
This document is an English translation of certain items that were disclosed in our Quarterly Securities Report for the six month period ended September 30, 2017, which we filed on November 1, 2017 with the Financial Services Agency of Japan.
The forward-looking statements and projected figures concerning the future performance of NTT DOCOMO, INC. and its subsidiaries and affiliates contained or referred to herein are based on a series of assumptions, projections, estimates, judgments and beliefs of the management of NTT DOCOMO, INC. in light of information currently available to it regarding NTT DOCOMO, INC. and its subsidiaries and affiliates, the economy and telecommunications industry in Japan and overseas, and other factors. These projections and estimates may be affected by the future business operations of NTT DOCOMO, INC. and its subsidiaries and affiliates, the state of the economy in Japan and abroad, possible fluctuations in the securities markets, the pricing of services, the effects of competition, the performance of new products, services and new businesses, changes to laws and regulations affecting the telecommunications industry in Japan and elsewhere, other changes in circumstances that could cause actual results to differ materially from the forecasts contained or referred to herein, as well as other risks included in our most recent Annual Securities Report on Form20-F and other filings and submissions with the United States Securities and Exchange Commission.
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[Document Filed] | Quarterly Securities Report (“Shihanki Hokokusho”) | |
[Applicable Law] | Article24-4-7, Paragraph 1 of the Financial Instruments and Exchange Act of Japan | |
[Filed to] | Director, Kanto Local Finance Bureau | |
[Filing Date] | November 1, 2017 | |
[Fiscal Year] | The Second Quarter of the 27th Business Term (From July 1, 2017 to September 30, 2017) | |
[Company Name] | Kabushiki Kaisha NTT DOCOMO | |
[Company Name in English] | NTT DOCOMO, INC. | |
[Title and Name of Representative] | Kazuhiro Yoshizawa, Representative Director, President and Chief Executive Officer | |
[Address of Head Office] | 11-1, Nagata-cho2-chome, Chiyoda-ku, Tokyo | |
[Phone No.] | +81-3-5156-1111 | |
[Contact Person] | Hideki Maeda, Senior Manager, General Affairs Department | |
[Contact Address] | 11-1, Nagata-cho2-chome, Chiyoda-ku, Tokyo | |
[Phone No.] | +81-3-5156-1111 | |
[Contact Person] | Hideki Maeda, Senior Manager, General Affairs Department | |
[Place Where Available for Public Inspection] | Tokyo Stock Exchange, Inc. (2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo) |
* Names of companies, products, etc., contained in this release are the trademarks or registered trademarks of their respective organizations.
Apple, the Apple Logo, Apple Watch, and iPhone are trademarks of Apple Inc., registered in the U. S. and other countries.
The iPhone trademark is used under license from AiPhone Co., Ltd. TM and© 2017 Apple Inc. All rights reserved.
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Item 1. Overview of the company
U.S. GAAP
Six Months Ended September 30, 2016 | Six Months Ended September 30, 2017 | Fiscal year ended March 31, 2017 | ||||||||||||
Operating revenues | Millions of yen | | 2,288,344 [1,179,674 | ] | | 2,300,131 [1,163,435 | ] | 4,584,552 | ||||||
Income before income taxes and equity in net income (losses) of affiliates | Millions of yen | 581,164 | 554,506 | 949,563 | ||||||||||
Net income attributable to NTT DOCOMO, INC. | Millions of yen | | 405,407 [198,553 | ] | | 373,911 [183,972 | ] | 652,538 | ||||||
Comprehensive income attributable to NTT DOCOMO, INC. | Millions of yen | 369,362 | 377,880 | 662,281 | ||||||||||
NTT DOCOMO, INC. shareholders’ equity | Millions of yen | 5,427,836 | 5,760,300 | 5,530,629 | ||||||||||
Total assets | Millions of yen | 7,208,360 | 7,641,723 | 7,453,074 | ||||||||||
Basic earnings per share attributable to NTT DOCOMO, INC. | Yen | | 108.32 [53.21 | ] | | 100.93 [49.66 | ] | 175.12 | ||||||
Diluted earnings per share attributable to NTT DOCOMO, INC. | Yen | — | — | — | ||||||||||
Equity ratio (Ratio of NTT DOCOMO, INC. Shareholders’ Equity to Total Assets) | % | 75.3 | 75.4 | 74.2 | ||||||||||
Net cash provided by operating activities | Millions of yen | 671,720 | 762,923 | 1,312,418 | ||||||||||
Net cash used in investing activities | Millions of yen | (425,286 | ) | (373,661 | ) | (943,094 | ) | |||||||
Net cash provided by (used in) financing activities | Millions of yen | (238,331 | ) | (151,426 | ) | (433,097 | ) | |||||||
Cash and cash equivalents at end of period | Millions of yen | 360,211 | 527,546 | 289,610 |
Notes: | (1) | As we prepare quarterly consolidated financial reports, changes innon-consolidated key financial data, among others, are not provided. | ||
(2) | Operating revenues do not include consumption taxes. | |||
(3) | Basic earnings per share attributable to NTT DOCOMO, INC. are calculated after subtracting the number of treasury shares from the total number of shares outstanding. | |||
(4) | Diluted earnings per share attributable to NTT DOCOMO, INC. is not stated because we did not have potentially dilutive common shares that were outstanding during the period. | |||
(5) | The amounts in brackets for operating revenues, net income attributable to NTT DOCOMO, INC. and basic earnings per share attributable to NTT DOCOMO, INC. indicate their respective amounts for the three months ended September 30, 2016 and 2017. |
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There were no material changes to the business of NTT DOCOMO, INC. or its affiliated companies during the six months ended September 30, 2017. Material changes with respect to affiliated companies during the six months ended September 30, 2017 were as follows:
Equity-method Affiliates
NTT Plala Inc. became an equity-method affiliate of NTT DOCOMO, INC. from the three months ended June 30, 2017 due to our acquisition of its equity shares.
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No risks, such as unusual changes in consolidated financial condition, results of operations or cash flow conditions, were newly identified during the six months ended September 30, 2017. There was no material change in the risk factors that were described in our Annual Securities Report for the fiscal year ended March 31, 2017.
There were no material contracts relating to our operations that were agreed upon or entered into during the three months ended September 30, 2017.
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3. Analysis of Consolidated Financial Condition, Results of Operations, and Cash Flow Conditions
(1) Business Overview
The environment surrounding our business has changed significantly. In Japan’s telecommunications market, competition has intensified due to the government’spro-competition policy, the rise oflow-cost smartphones offered by Mobile Virtual Network Operators (MVNOs) and other factors. In addition, we have seen technical advancements in areas such as artificial intelligence (AI), IoT*1 and drones, as well as an expansion of customer touchpoints by various service providers leveraging loyalty point programs and other means. These changes have brought about both active competition in the telecommunications market and collaboration with new players from other industries, accelerating competition in new markets that transcend the conventional boundaries of the telecommunications business.
Amid these changes in the market environment, in April 2017, we developed and unveiled our Medium-Term Strategy 2020 “Declaration beyond” to realize a richer future with 5G. We have positioned the fiscal year ending March 31, 2018 as a year to “Challenge to Evolve” by taking the first steps towards the delivery of our Medium-Term Strategy 2020, “Declaration beyond.” We will do so by moving forward with the creation and evolution of services, the evolution of our business through “+d” and the reinforcement and evolution of our business foundations.
During the three months ended September 30, 2017, we launched “d enjoy pass,” a service that provides customers with preferential offers for a wide array of life-related services, as well as “d job,” a new smartphone-based job information service. Meanwhile, we also strived to boost the usage and enhance the convenience of “d POINTs” by increasing the number of stores participating in the program. In addition, we deepened our collaboration with Japan Professional Football League (J. League) and organized live music concerts leveraging various cutting-edge video technologies, in an effort to bring our Medium-Term Strategy 2020 “Declaration beyond” to reality.
<Actions for Future Growth>
• | Toward the realization of lifestyle innovation—one of the goals raised in our Medium-Term Strategy 2020 “Declaration beyond,” we developed an “AI Agent*2 API” (API), and started granting access to it from August 2017. By allowing open access to this API, we will step up ourAI-related undertakings by accelerating the “docomo AI Agent Open Partnership Initiative” to promote theco-creation of new services while strengthening the construction of new business models with our partners. |
• | In order to realize the experience innovation raised in our Medium-Term Strategy 2020 “Declaration beyond,” in September 2017, we conducted a trial of a “new virtual experience concert*3” through which we presented new ways of enjoying live music consisting of new viewing styles that leverage head mount displays, 3D holographic displays and holographic image projection techniques*4. |
• | We forged a collaborative relationship with J. League, with NTT DOCOMO, INC. entering into a top partnership agreement and NTT Group entering into an official technology partnership agreement, respectively, with J. League. From July 2017, based on these partnership agreements, we started taking actions aimed at strengthening the ties between local fans/supporters and J. League/club teams through the realization of experience innovation brought about by thestate-of-the-art technologies owned by us and the NTT Group and stepped up use of digital marketing tools. |
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For the six months ended September 30, 2017, operating revenues increased by ¥11.8 billion from the same period of the previous fiscal year to ¥2,300.1 billion. This was mainly due to an increase in optical-fiber broadband service revenues due to growth in the number of “docomo Hikari” users as well as the recovery of mobile communications services revenues as a result of growth in packet consumption and a decrease in the negative impact of the “Monthly Support” discount program, despite the negative impact from our various billing initiatives implemented for the purpose of enhancing returns to our customers, due mainly to our provision of lower cost services, and a decrease in equipment sales.
Operating expenses increased by ¥48.6 billion from the same period of the previous fiscal year to ¥1,751.4 billion. This was mainly due to an increase in expenses associated with the expansion of “docomo Hikari” revenues, an increase of the sales commissions incurred for agent resellers accompanying strengthened initiatives promoting the sale of smartphones and an increase of depreciation expenses, despite a decrease in cost of equipment sold.
As a result, operating income decreased by ¥36.8 billion from the same period of the previous fiscal year to ¥548.8 billion for the six months ended September 30, 2017.
Income before income taxes and equity in net income (losses) of affiliates was ¥554.5 billion, and net income attributable to NTT DOCOMO, INC. decreased by ¥31.5 billion from the same period of the previous fiscal year to ¥373.9 billion for the six months ended September 30, 2017.
*1: | Abbreviation 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: | An AI solution that enables the delivery of services or operation of various IoT devices by responding accurately to the request of each customer through dialogue. NTT Group’s AI technology “corevo” is used. |
*3: | “new experience live music event” was hosted in cooperation with our affiliate, NTT Plala Inc. |
*4: | Utilizes 3D holographic stage system, “Eyeliner,” a stage production system that employs specialized film, projection and technical lighting techniques. |
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Consolidated results of operations for the six months ended September 30, 2016 and 2017 were as follows:
<Results of operations>
Billions of yen | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Operating revenues | ¥ | 2,288.3 | ¥ | 2,300.1 | ¥ | 11.8 | 0.5 | % | ||||||||
Operating expenses | 1,702.7 | 1,751.4 | 48.6 | 2.9 | ||||||||||||
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Operating income | 585.6 | 548.8 | (36.8 | ) | (6.3 | ) | ||||||||||
Other income (expense) | (4.4 | ) | 5.7 | 10.2 | — | |||||||||||
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Income before income taxes and equity in net income (losses) of affiliates | 581.2 | 554.5 | (26.7 | ) | (4.6 | ) | ||||||||||
Income taxes | 178.7 | 173.4 | (5.3 | ) | (3.0 | ) | ||||||||||
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Income before equity in net income (losses) of affiliates | 402.5 | 381.1 | (21.4 | ) | (5.3 | ) | ||||||||||
Equity in net income (losses) of affiliates | 3.3 | (6.0 | ) | (9.4 | ) | — | ||||||||||
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Net income | 405.8 | 375.1 | (30.7 | ) | (7.6 | ) | ||||||||||
Less: Net (income) loss attributable to noncontrolling interests | (0.4 | ) | (1.2 | ) | (0.8 | ) | (191.0 | ) | ||||||||
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Net income attributable to NTT DOCOMO, INC. | ¥ | 405.4 | ¥ | 373.9 | ¥ | (31.5 | ) | (7.8 | ) | |||||||
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EBITDA margin * | 35.9 | % | 35.0 | % | (0.9)point | — | ||||||||||
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ROE * | 7.6 | % | 6.6 | % | (1.0)point | — | ||||||||||
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* | “Reconciliations of the DisclosedNon-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures” is below. |
<EBITDA and EBITDA margin>
Billions of yen | ||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | |||||||
a.EBITDA | ¥ | 820.9 | ¥ | 806.0 | ||||
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Depreciation and amortization | (220.5 | ) | (240.0 | ) | ||||
Loss on sale or disposal of property, plant and equipment | (14.8 | ) | (17.2 | ) | ||||
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Operating income | 585.6 | 548.8 | ||||||
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Other income (expense) | (4.4 | ) | 5.7 | |||||
Income taxes | (178.7 | ) | (173.4 | ) | ||||
Equity in net income (losses) of affiliates | 3.3 | (6.0 | ) | |||||
Less: Net (income) loss attributable to noncontrolling interests | (0.4 | ) | (1.2 | ) | ||||
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b. Net income attributable to NTT DOCOMO, INC. | 405.4 | 373.9 | ||||||
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c. Operating revenues | 2,288.3 | 2,300.1 | ||||||
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EBITDA margin (=a/c) | 35.9 | % | 35.0 | % | ||||
Net income margin (=b/c) | 17.7 | % | 16.3 | % | ||||
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Note: | EBITDA and EBITDA margin, as we use them in this earnings release, are different from EBITDA as used in Item 10(e) of RegulationS-K and may not be comparable to similarly titled measures used by other companies. |
<ROE>
Billions of yen | ||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | |||||||
a. Net income attributable to NTT DOCOMO, INC. | ¥ | 405.4 | ¥ | 373.9 | ||||
b. Shareholders’ equity | 5,365.0 | 5,645.5 | ||||||
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ROE(=a/b) | 7.6 | % | 6.6 | % | ||||
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Note: | Shareholders’ equity = The average of NTT DOCOMO, INC. shareholders’ equity, each as of March 31, 2017 (or 2016) and September 30, 2017 (or 2016). |
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<Operating revenues>
Billions of yen | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Telecommunications services | ¥ | 1,474.5 | ¥ | 1,568.8 | ¥ | 94.3 | 6.4 | % | ||||||||
Mobile communications services revenues | 1,417.0 | 1,459.6 | 42.6 | 3.0 | ||||||||||||
Voice revenues | 435.4 | 472.6 | 37.2 | 8.5 | ||||||||||||
Packet communications revenues | 981.6 | 987.0 | 5.4 | 0.6 | ||||||||||||
Optical-fiber broadband service and other telecommunications services revenues | 57.5 | 109.2 | 51.7 | 89.9 | ||||||||||||
Equipment sales | 380.1 | 303.5 | (76.6 | ) | (20.1 | ) | ||||||||||
Other operating revenues | 433.7 | 427.8 | (5.9 | ) | (1.4 | ) | ||||||||||
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Total operating revenues | ¥ | 2,288.3 | ¥ | 2,300.1 | ¥ | 11.8 | 0.5 | % | ||||||||
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Note: | Voice revenues include data communications revenues through circuit switching systems. |
<Operating expenses>
Billions of yen | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Personnel expenses | ¥ | 145.1 | ¥ | 144.5 | ¥ | (0.7 | ) | (0.5 | )% | |||||||
Non-personnel expenses | 1,132.1 | 1,130.8 | (1.3 | ) | (0.1 | ) | ||||||||||
Depreciation and amortization | 220.5 | 240.0 | 19.5 | 8.8 | ||||||||||||
Loss on disposal of property, plant and equipment and intangible assets | 24.8 | 28.5 | 3.7 | 15.0 | ||||||||||||
Communication network charges | 158.7 | 187.5 | 28.8 | 18.1 | ||||||||||||
Taxes and public dues | 21.5 | 20.1 | (1.4 | ) | (6.7 | ) | ||||||||||
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Total operating expenses | ¥ | 1,702.7 | ¥ | 1,751.4 | ¥ | 48.6 | 2.9 | % | ||||||||
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Segment Results
Telecommunications business —
<Results of operations>
Billions of yen | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Operating revenues from telecommunications business | ¥ | 1,856.6 | ¥ | 1,870.8 | ¥ | 14.2 | 0.8 | % | ||||||||
Operating income (loss) from telecommunications business | 524.7 | 474.4 | (50.4 | ) | (9.6 | ) |
Operating revenues from telecommunications business for the six months ended September 30, 2017 increased by ¥14.2 billion, or 0.8%, from ¥1,856.6 billion for the same period of the previous fiscal year to ¥1,870.8 billion. This was mainly due to an increase in optical-fiber broadband service revenues due to growth in the number of “docomo Hikari” users as well as the recovery of mobile communications services revenues as a result of growth of packet consumption and a decrease in the negative impact of the “Monthly Support” discount program, despite the negative impact from our various billing initiatives implemented for the purpose of enhancing returns to our customers, due mainly to our provision of lower cost services, and a decrease in equipment sales.
Operating expenses from telecommunications business increased by ¥64.5 billion, or 4.8%, from ¥1,331.9 billion for the same period of the previous fiscal year to ¥1,396.4 billion. This was mainly due to an increase in expenses associated with the expansion of “docomo Hikari” revenues, an increase of the sales commissions incurred for agent resellers accompanying strengthened initiatives promoting the sale of smartphones and an increase of depreciation expenses, despite a decrease in a cost of equipment sold.
Consequently, operating income from telecommunications business was ¥474.4 billion, a decrease of ¥50.4 billion, or 9.6%, from ¥524.7 billion for the same period of the previous fiscal year.
<<Key Topics>>
• | Targeting the increasing number of foreign travelers visiting Japan, in July 2017 we launched a data-only prepaid SIM service for visitors from abroad, “Japan Welcome SIM.” For this service, we lowered the usage fee by utilizing advertisement revenues that we receive by requiring users to view advertisements, and created a business model that provides greater added value to our partners by allowing them to combine “Japan Welcome SIM” with their own proprietary services. |
• | In September 2017, we started marketing iPhone 8, iPhone 8 Plus and Apple Watch Series 3. In conjunction with the release of iPhone 8, we launched “Upgrade Support Program Plus,” a program that allows iPhone 8 and other handsets purchasers to easily upgrade to the latest model the next time they switch handsets. |
• | In September 2017, we commenced “One Number service,” an optional service that allows users to share the same phone number between their smartphone and accessories such as wearable devices. We also improved the convenience of accessory devices, enabling voice communications or mobile data access via accessory devices even when they are placed apart from the main smartphone. |
• | The total number of our smartphone and tablet users grew to 37.09 million as of September 30, 2017, an increase of 3.00 million from September 30, 2016, driven mainly by the brisk sales of handsets covered under the “docomo with” program, which offers savings to customers who use one handset for an extended period of time as well as the continued implementation of our “Senior Smartphone Debut Discount” package. |
• | To promote the construction of a network that provides a convenient communication environment, we expanded the coverage of our “PREMIUM 4G” service to 1,554 cities and 86,300 base stations across Japan as of September 30, 2017 and offered Japan’s fastest service, a 788Mbps communication service at maximum downlink rates to start in September 2017 by further improving transmission technology. Toward the goal of further expanding the area coverage of our LTE service, we increased the total number ofLTE-enabled base stations to 170,900 stations nationwide as of September 30, 2017. |
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Number of subscriptions by services and other operating data are as follows:
<Number of subscriptions by services>
Thousand subscriptions | ||||||||||||||||
September 30, 2016 | September 30, 2017 | Increase (Decrease) | ||||||||||||||
Mobile telecommunications services | 72,943 | 75,361 | 2,418 | 3.3 | % | |||||||||||
Including: “Kake-hodai & Pake-aeru” billing plan | 33,416 | 39,617 | 6,201 | 18.6 | ||||||||||||
Mobile telecommunications services (LTE(Xi)) | 41,281 | 46,908 | 5,627 | 13.6 | ||||||||||||
Mobile telecommunications services (FOMA) | 31,662 | 28,453 | (3,209 | ) | (10.1 | ) | ||||||||||
“docomo Hikari” optical broadband service | 2,530 | 4,176 | 1,646 | 65.0 |
Note: | Number of subscriptions to Mobile telecommunications services, Mobile telecommunications services (LTE(Xi)) and Mobile telecommunications services (FOMA) includes Communication Module services subscriptions. |
<Number of units sold*1>
Thousand units | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Number of units sold | 13,450 | 12,146 | (1,304 | ) | (9.7 | )% | ||||||||||
Mobile telecommunications services (LTE(Xi)) | ||||||||||||||||
New LTE(Xi) subscription *2 | 4,829 | 4,673 | (157 | ) | (3.2 | ) | ||||||||||
Change of subscription from FOMA | 1,221 | 1,576 | 355 | 29.1 | ||||||||||||
LTE(Xi) handset upgrade by LTE(Xi) subscribers | 4,450 | 4,706 | 256 | 5.8 | ||||||||||||
Mobile telecommunications services (FOMA) | ||||||||||||||||
New FOMA subscription *2 | 1,696 | 712 | (984 | ) | (58.0 | ) | ||||||||||
Change of subscription from LTE(Xi) | 39 | 14 | (25 | ) | (65.2 | ) | ||||||||||
FOMA handset upgrade by FOMA subscribers | 1,215 | 465 | (749 | ) | (61.7 | ) | ||||||||||
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Churn rate *3 | 0.58 | % | 0.64 | % | 0.06point | — | ||||||||||
Handset churn rate *4 | 0.45 | % | 0.47 | % | 0.02point | — |
*1: | “Number of handsets sold” has been renamed to “Number of units sold” from the three months ended September 30, 2017 |
*2: | New subscriptions include mobile line subscriptions of MVNOs and Communication Module subscriptions |
*3: | “Churn rate” is calculated excluding the subscriptions and cancellations of subscriptions of MVNOs. |
*4: | Churn rate in Basic Plans (excluding Data Plans and Device Plus 500), Xi/FOMA Billing Plans and Type Limit Value / Type Limit for smartphones and feature phones etc. |
<Trend of ARPU and MOU>
Yen | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Aggregate ARPU | ¥ | 4,380 | ¥ | 4,650 | ¥ | 270 | 6.2 | % | ||||||||
Voice ARPU | 1,240 | 1,360 | 120 | 9.7 | ||||||||||||
Data ARPU | 3,140 | 3,290 | 150 | 4.8 | ||||||||||||
Packet ARPU | 2,980 | 2,980 | — | — | ||||||||||||
“docomo Hikari” ARPU | 160 | 310 | 150 | 93.8 | ||||||||||||
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MOU (minutes) | 136 | 136 | — | — |
Notes:
1. | Definition of ARPU and MOU |
a. ARPU (Average monthly Revenue Per Unit):
Average monthly revenue per unit, or ARPU, is used to measure average monthly operating revenues attributable to designated services on a per user basis. ARPU is calculated by dividing telecommunications services revenues (excluding certain revenues) by the number of active users to our wireless services in the relevant periods, as shown below under “ARPU Calculation Method.” We believe that our ARPU figures provide useful information to analyze the average usage per user and the impacts of changes in our billing arrangements. The revenue items included in the numerators of our ARPU figures are based on our U.S. GAAP results of operations.
b. MOU (Minutes of Use):
Average monthly communication time per user.
2. | ARPU Calculation Methods |
Aggregate ARPU= Voice ARPU + Packet ARPU + “docomo Hikari” ARPU
Data ARPU= Packet ARPU + “docomo Hikari” ARPU
- Voice ARPU | : Voice ARPU Related Revenues (basic monthly charges, voice communication charges) / Number of active users | |
- Packet ARPU | : Packet ARPU Related Revenues (basic monthly charges, packet communication charges) / Number of active users | |
-“docomo Hikari” ARPU | : “docomo Hikari” ARPU Related Revenues (basic monthly charges, voice communication changes) /Number of active users |
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3. | Active Users Calculation Method |
Sum of number of active users for each month ((number of users at the end of previous month + number of users at the end of current month) /2) during the relevant period
4. | The number of “users” used to calculate ARPU and MOU is the total number of subscriptions, excluding the subscriptions listed below: |
a. | Subscriptions of communication module services, “Phone Number Storage,” “Mail Address Storage,” “docomo Business Transceiver” and wholesale telecommunication services and interconnecting telecommunications facilities that are provided to MVNOs; and |
b. | Data Plan subscriptions in the case where the customer contracting for such subscription in his/her name also has a subscription for “Xi” or “FOMA” services in his/her name |
Revenues 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 are not included in the ARPU calculation.
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Smart life business —
<Results of operations>
Billions of yen | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Operating revenues from smart life business | ¥ | 250.4 | ¥ | 230.2 | ¥ | (20.2 | ) | (8.1 | )% | |||||||
Operating income (loss) from smart life business | 37.0 | 33.5 | (3.5 | ) | (9.4 | ) |
Operating revenues from smart life business for the six months ended September 30, 2017 were ¥230.2 billion, a decrease of ¥20.2 billion, or 8.1%, from ¥250.4 billion for the same period of the previous fiscal year. This was due mainly to a decrease in revenues from a subsidiary which began recording revenues on a net basis as a result of a change in its business model effective from April 1, 2017. This decrease in revenues was greater than increases in revenues from our finance/payment services and other services.
Operating expenses from smart life business were ¥196.7 billion, a decrease of ¥16.7 billion, or 7.8%, from ¥213.4 billion for the same period of the previous fiscal year. This was due mainly to a decrease in expenses attributable to a subsidiary as a result of the change in its business model described above. This decrease in expense was greater than an increase in expenses associated with various initiatives that we undertook towards future growth.
As a result, operating income from smart life business was ¥33.5 billion, a decrease of ¥3.5 billion, or 9.4%, from ¥37.0 billion for the same period of the previous fiscal year.
<<Key Topics>>
• | We expanded the number of stores where “d POINTs” can be used by adding the “Hananomai” and “Sakanaya-Dojo” restaurant chains (operated by Chimney Co. Ltd.) and the “EARTH” hair salons (operated by EARTH Holdings). We also enabled “d Mobile Payment Plus” to be used on greater number of online services, including “Takashimaya Online Store” (operated by Takashimaya Co. Ltd.) and “J. League Ticket” (operated by PIA Corporation.) As of September 30, 2017, the total number of “d POINT Club” members had grown to 63.24 million, the total number of “d POINT Card users*1” had reached 17.08 million and the number of partners participating in the “d POINTs” program was 149. |
• | In August 2017, we commenced our “d enjoy pass” service, which provides users with preferential offers in over 50,000 different services encompassing a wide variety of categories including, leisure, spa/beauty care, lifestyle, hotel/accommodation and dining, as well as member events and other opportunities for members to connect with or learn from each other. |
• | In September 2017, we launched “d job,” a service that enables users to accessjob-related information via smartphones and other devices. In addition to general job openings data, the service provides information on jobs that can be done online (for example, answering surveys/questionnaires, cloud sourcing*2, etc.), proposing new workstyles in order to tackle social issues such as balancing child/family care with work, and the reduction in the working population associated with the declining birth rate. |
• | As of September 30, 2017, the total number of “d CARD” subscribers*3 grew to 18.32 million, an increase of 1.35 million from September 30, 2016, due mainly to initiatives that we undertook such as a campaign for acquiring new subscribers. The total number of “d CARD GOLD” subscribers topped 3 million in September 2017. The total amount of transactions processed through our finance/payment services reached ¥1,486.8 billion for the six months ended September 30, 2017, an increase of ¥255.7 billion from the same period of the previous fiscal year. |
*1: | The total number of users who have registered their personal information to accumulate and use “d POINT” at participating stores. |
*2: | Outsourcing of certain tasks and operations to external parties primarily through the Internet. |
*3: | The total number of subscribers of “dCARD” and “d CARD mini.” |
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Other businesses —
<Results of operations>
Billions of yen | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Operating revenues from other businesses | ¥ | 193.4 | ¥ | 215.2 | ¥ | 21.8 | 11.3 | % | ||||||||
Operating income (loss) from other businesses | 23.9 | 40.9 | 17.0 | 71.2 |
Operating revenues from other businesses for the six months ended September 30, 2017 amounted to ¥215.2 billion, an increase of ¥21.8 billion, or 11.3%, from ¥193.4 billion for the same period of the previous fiscal year, driven mainly by an increase in the number of subscriptions to our “Mobile Device Protection Service” and the growth of revenues relating to IoT businesses.
Operating expenses from other businesses were ¥174.3 billion, an increase of ¥4.8 billion, or 2.8%, from ¥169.5 billion for the same period of the previous fiscal year, due mainly to an increase in expenses associated with IoT businesses, despite a decrease in expenses as a result of pursuing further cost efficiency.
Consequently, operating income from other businesses was ¥40.9 billion, an increase of ¥17.0 billion, or 71.2%, from ¥23.9 billion for the same period of the previous fiscal year.
<<Key Topics>>
• | In July 2017, we launched “docomo Smart Parking system” (the system) for parking lot operators. The system brings about a significant reduction in the initial investments required for coin-operated parking space business through the use of IoT devices, etc. We also introduced the “Smart Parking Peasy” application for the drivers who use the system in an effort to boost the utilization of parking lots adopting the system. |
• | The total number of subscriptions to “Anshin Pack,” a package that combines “Mobile Device Protection Service” and various other services to ensure worry-free use of smartphones, grew to 18.34 million as of September 30, 2017. |
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(2) CSR Activities
We aspire to help build a society in which everyone can share in a prosperous life of safety, security and comfort, beyond borders and across generations. We believe it is our corporate social responsibility (CSR) to fulfill the two aspects of (i) “Innovative docomo,” to solve various social issues in the fields of mobility, healthcare and medicine, education and learning, and climate change through the“co-creation of social values,” an initiative that we plan to pursue together with various partners to create new services and businesses, and (ii) “Responsible docomo,” to thoroughly ensure fair, transparent and ethical business operations as a foundation for the creation of such values. Accordingly, we will strive to realize a sustainable society while expanding our own businesses.
In July 2017, we unveiled our CSRMid-Term Target for 2020, which will serve as a new guideline for our CSR activities. Looking ahead to the year 2020 and beyond, we will take on the challenge to create a richer future in accordance with the clear directions and objectives laid out in our CSRMid-Term Target for 2020.
In September 2017, we were selected as a component of Dow Jones Sustainability Indices (DJSI), one of the world’s leading indices for ESG investment*1. We were assessed highly for our endeavors for improved network reliability, environmental actions and related reporting activities, our development of a safe and healthy workplace and our human resource development.
The principal CSR actions we undertook in the three months ended September 30, 2017 are summarized below:
<Innovative docomo>
• | Aiming to improve the productivity of agriculture and other primary industries and to solve social issues such as job creation, we commenced a verification trial of a new AI*2-based IoT solution in August 2017. This solution, which blendsAI-based analytics and provides new decision capabilities (for example, the ability to choose between cultivation techniques or make decisions based on weather conditions), allows even farmers with limited experience to easily detect signs of disease, grasp the status of vegetation growth and predict the optimal harvest time, thereby reducing the burdens of farm work. |
<Responsible docomo >
• | In the aftermath of the July 2017 torrential rain that hit northern Kyushu, we worked toward an early restoration of communication services, airlifting our portable base stations to the affected areas with helicopters and renting our satellite mobile phones to support the local governments and other agencies. We also implemented measures to assist disaster victims, including thefree-of-charge provision of battery chargers and other equipment and partial waiver of handset repair charges. In addition, we launched a charity site to provide assistance to the people and areas affected by the disaster, and collected donations using “docomo Kouza” accounts and “d POINTs”. |
• | Through our “Smartphone and Mobile Phone Safety Classes” we teach participants the rules and manners of using smartphones and mobile phones, as well as to how to respond to troubles that may arise with their use. We held a total of approximately 4,500 sessions with a cumulative participation of approximately 910,000 people in the six months ended September 30, 2017 and a cumulative participation from starting this measure topped 10 million. In addition, in order to effectively promote activities aimed at preventing delinquency and troubles in the cyber space, in collaboration with Tokyo Metropolitan Police Department (MPD), from September 2017, we started hosting a program dubbed “~Minnade manabu~ TOKYO net kyoshitsu”—a joint session of MPD’s cyber class and our “Smartphone and Mobile Phone Safety Class,” at elementary and junior and senior high schools in Tokyo. |
• | Under our “Village Social Entrepreneur” initiative, through which we provide assistance to entrepreneurs tackling social issues, we decided to extend support to the following two organizations for the fiscal year ending March 31, 2018: International Medical Co. Ltd., a company supporting the assessment and optimized treatment of anxiety disorders and depression, andMa-tourism, an organization engaged in activities promoting the continuation of traditional festivals as well as the vitalization of regional areas. |
*1: | An investment method that is named after and focuses on the three elements of “Environment,” “Social” and “Governance.” |
*2: | NTT Group’s AI technology “corevo” is used. |
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(3) Trend of Capital Expenditures
<Capital expenditures>
Billions of yen | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Total capital expenditures | ¥ | 246.1 | ¥ | 267.7 | ¥ | 21.6 | 8.8 | % | ||||||||
Telecommunications business | 237.6 | 255.3 | 17.7 | 7.4 | ||||||||||||
Smart life business | 5.8 | 6.5 | 0.7 | 12.7 | ||||||||||||
Other businesses | 2.6 | 5.8 | 3.2 | 119.4 |
We pursued more efficient use of capital expenditures and further cost reduction, and expanded the area coverage of our “PREMIUM 4G” service to construct a more convenient mobile telecommunications network. As a result, the total amount of capital expenditures we made increased by 8.8% from the same period of the previous fiscal year to ¥267.7 billion for the six months ended September 30, 2017.
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(4) Financial Position
Billions of yen | ||||||||||||||||||||
September 30, 2016 | September 30, 2017 | Increase (Decrease) | (Reference) March 31, 2017 | |||||||||||||||||
Total assets | ¥ | 7,208.4 | ¥ | 7,641.7 | ¥ | 433.4 | 6.0 | % | ¥ | 7,453.1 | ||||||||||
NTT DOCOMO, INC. shareholders’ equity | 5,427.8 | 5,760.3 | 332.5 | 6.1 | 5,530.6 | |||||||||||||||
Liabilities | 1,724.9 | 1,827.1 | 102.2 | 5.9 | 1,869.0 | |||||||||||||||
Including: Interest bearing liabilities | 222.5 | 221.7 | (0.7 | ) | (0.3 | ) | 221.9 | |||||||||||||
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Shareholders’ equity ratio (1) (%) | 75.3 | % | 75.4 | % | 0.1point | — | 74.2 | % | ||||||||||||
Debt to Equity ratio (2) (multiple) | 0.041 | 0.038 | (0.003 | ) | — | 0.040 |
Notes: | (1) Shareholders’ equity ratio = NTT DOCOMO, INC. shareholders’ equity / Total assets | |
(2) Debt to Equity ratio = Interest bearing liabilities / NTT DOCOMO, INC. shareholders’ equity |
(5) Cash Flow Conditions
Billions of yen | ||||||||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Increase (Decrease) | ||||||||||||||
Net cash provided by operating activities | ¥ | 671.7 | ¥ | 762.9 | ¥ | 91.2 | 13.6 | % | ||||||||
Net cash used in investing activities | (425.3 | ) | (373.7 | ) | 51.6 | 12.1 | ||||||||||
Net cash provided by (used in) financing activities | (238.3 | ) | (151.4 | ) | 86.9 | 36.5 | ||||||||||
Free cash flows (1) | 246.4 | 389.3 | 142.8 | 58.0 | ||||||||||||
Changes in investments for cash management purposes | (95.2 | ) | (9.9 | ) | 85.3 | 89.6 | ||||||||||
Free cash flows excluding changes in investments for cash management purposes (2) | 341.6 | 399.1 | 57.5 | 16.8 |
Notes: | (1) | Free cash flows = Net cash provided by operating activities + Net cash used in investing activities | ||
(2) | Changes in investments for cash management purposes = Changes by purchases, redemption at maturity and disposals of financial instruments held for cash management purposes with original maturities of longer than three months |
For the six months ended September 30, 2017, net cash provided by operating activities was ¥762.9 billion, an increase of ¥91.2 billion, or 13.6%, from the same period of the previous fiscal year. This was due mainly to a decrease in cash outflows for the payments of income taxes.
Net cash used in investing activities was ¥373.7 billion, a decrease of ¥51.6 billion, or 12.1%, from the same period of the previous fiscal year. This was due mainly to an increase in cash inflows from proceeds from redemption of short-term bailment for consumption to a related party.
Net cash used in financing activities was ¥151.4 billion, a decrease of ¥86.9 billion, or 36.5%, from the same period of the previous fiscal year. This was due mainly to a decrease in cash outflows for payments to acquire treasury stock, despite an increase in dividends paid.
As a result of the foregoing, the balance of cash and cash equivalents was ¥527.5 billion as of September 30, 2017, an increase of ¥237.9 billion, or 82.2%, from the previous fiscal year end.
(6) Operational and Finance Issues Facing the Corporate Group
There were no material changes in the operational and finance issues facing the corporate group for the six months ended September 30, 2017 and no new additional issues arose during the period.
(7) Research and Development
Our research and development expenses for the six months ended September 30, 2017 were ¥44.6 billion.
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Item 3. Information on NTT DOCOMO
1. Information on NTT DOCOMO’s Shares, etc.
(1) Total Number of Shares, etc.
Total Number of Shares
As of September 30, 2017 | ||||
Class | Total Number of Shares Authorized to be Issued (shares) | |||
Common stock | 17,460,000,000 | |||
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Total | 17,460,000,000 | |||
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Issued Shares
Class | Number of Shares Issued as of September 30, 2017 (shares) | Number of Shares Issued as of the Filing Date (shares) (November 1, 2017) | Stock Exchange on | Description | ||||||||
Common Stock | 3,899,563,000 | 3,899,563,000 | Tokyo Stock Exchange (The First Section) New York Stock Exchange | The number of shares per one unit of shares is 100 shares | ||||||||
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Total | 3,899,563,000 | 3,899,563,000 | — | — | ||||||||
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(2) Information on the Stock Acquisition Rights, etc.
Not applicable.
(3) Information on Moving Strike Convertible Bonds, etc.
Not applicable.
(4) Information on Shareholder Rights Plans
Not applicable.
(5) Changes in the Total Number of Issued Shares, the Amount of Common Stock, and Other
Date | Changes in the total number of issued shares (shares) | Balance of the total number of issued shares (shares) | Changes in Common Stock (millions of yen) | Balance of Common Stock (millions of yen) | Change in Capital Reserve (millions of yen) | Balance of Capital Reserve (millions of yen) | ||||||||||||||||||
July 1, 2017 - September 30, 2017 | — | 3,899,563,000 | — | 949,679 | — | 292,385 |
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(6) Major Shareholders
As of September 30, 2017 | ||||||||||
Name of Shareholder | Address | Number of Shares Held (shares) | Ownership Percentage to the Total Number of Issued Shares | |||||||
NIPPON TELEGRAPH AND TELEPHONE CORPORATION | 5-1, Otemachi1-chome, Chiyoda-ku, Tokyo | 2,469,084,400 | 63.32 | % | ||||||
THE MASTER TRUST BANK OF JAPAN, LTD. (TRUST ACCOUNT) | 11-3, Hamamatsucho 2-chome, Minato-ku, Tokyo | 75,571,200 | 1.94 | |||||||
JAPAN TRUSTEE SERVICES BANK, LTD. (TRUST ACCOUNT) | 8-11, Harumi 1-chome, Chuo-ku, Tokyo | 69,222,300 | 1.78 | |||||||
JAPAN TRUSTEE SERVICES BANK, LTD. (TRUST ACCOUNT 5) | 8-11, Harumi 1-chome, Chuo-ku, Tokyo | 27,430,300 | 0.70 | |||||||
STATE STREET BANK WEST CLIENT-TREATY 505234 | 1776 HERITAGE DRIVE, NORTH QUINCY, MA 02171, USA (15-1, Konan 2-chome, Minato-ku, Tokyo) | 26,588,265 | 0.68 | |||||||
JAPAN TRUSTEE SERVICES BANK, LTD. (TRUST ACCOUNT 9) | 8-11, Harumi 1-chome, Chuo-ku, Tokyo | 23,840,100 | 0.61 | |||||||
THE BANK OF NEW YORK MELLON AS DEPOSITARY BANK FOR DR HOLDERS | C/O THE BANK OF NEW YORK MELLON 101 BARCLAYS STREET, 22ND FLOOR WEST, NEW YORK, NY10286 U.S.A. (7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo) | 22,570,310 | 0.58 | |||||||
JP Morgan Securities Japan Co., Ltd. | 7-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo | 22,474,541 | 0.58 | |||||||
JP MORGAN CHASE BANK 380072 | 25 BANK STREET, CANARY WHARF, LONDON, E14 5JP, UNITED KINGDOM (15-1, Konan 2-chome, Minato-ku, Tokyo) | 22,184,784 | 0.57 | |||||||
JAPAN TRUSTEE SERVICES BANK, LTD. (TRUST ACCOUNT 7) | 8-11, Harumi 1-chome, Chuo-ku, Tokyo | 21,794,000 | 0.56 | |||||||
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Total | — | 2,780,760,200 | 71.31 | |||||||
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Notes: (1) | Treasury stocks (194,977,467 shares, 5.00% of issued shares) are not included in the above list. |
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(2) | All shares owned by THE MASTER TRUST BANK OF JAPAN, LTD. (TRUST ACCOUNT), JAPAN TRUSTEE SERVICES BANK, LTD. (TRUST ACCOUNT, TRUST ACCOUNT 5, TRUST ACCOUNT 9, TRUST ACCOUNT 7,respectively) are managed on behalf of trustors and are not owned by the above trustees. Breakdown of these shares are as follows: Investment trust (69,917,400 shares), pension trust (16,493,400 shares), others (131,447,100 shares). |
(3) | STATE STREET BANK WEST CLIENT—TREATY 505234 and JP MORGAN CHASE BANK 380072 are listed as major shareholders mainly due to their role as custodian banks for overseas institutional investors. |
(4) | THE BANK OF NEW YORK MELLON AS DEPOSITARY BANK FOR DR HOLDERS is the registered shareholder of deposited shares for THE BANK OF NEW YORK MELLON, which acts as depository for our ADSs. |
(7) Information on Voting Rights
Issued Shares
As of September 30, 2017 | ||||||||||
Classification | Number of Shares (shares) | Number of Voting Rights | Description | |||||||
Shares without Voting Rights | — | — | — | |||||||
Shares with Restricted Voting Rights (treasury stock, etc.) | — | — | — | |||||||
Shares with Restricted Voting Rights (others) | — | — | — | |||||||
Shares with Full Voting Rights (treasury stock, etc.) | (Treasury Stock) 194,977,400 shares of common stock | — | — | |||||||
Shares with Full Voting Rights (others) | 3,704,525,300 shares of common stock | 37,045,253 | — | |||||||
Shares Representing Less than One Unit | 60,300 shares of common stock | — | — | |||||||
Number of Issued Shares | 3,899,563,000 shares of common stock | — | — | |||||||
Total Number of Voting Rights | — | 37,045,253 | — |
Note: | The total number of shares in “Shares with Full Voting Rights (others)” includes 38,800 shares held in the name of the Japan Securities Depository Center. “Number of Voting Rights” includes 388 voting rights associated with “Shares with Full Voting Rights” held in the name of the Japan Securities Depository Center. |
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Treasury Stock
As of September 30, 2017 | ||||||||||||||||||
Name of Shareholder | Address | Number of Shares Held Under Own Name (shares) | Number of Shares Held Under the Names of Others (shares) | Total Shares Held (shares) | Ownership Percentage to the Total Number of Issued Shares | |||||||||||||
NTT DOCOMO, INC. | 11-1, Nagatacho 2-chome, Chiyoda-ku, Tokyo | 194,977,400 | — | 194,977,400 | 5.00 | % | ||||||||||||
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Total | — | 194,977,400 | — | 194,977,400 | 5.00 | |||||||||||||
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2. Changes in Directors and Senior Management
The change in directors and audit & supervisory board members during the period from the filing date of the Securities Report for the fiscal year ended March 31, 2017 to the filing date of this Quarterly Securities Report is as follows:
Change in Positions and Responsibilities
Name | Position | New Responsibilities | Former Responsibilities | Effective Date | ||||
Hozumi Tamura | Executive Vice President, Member of the Board of Directors | Executive General Manager of Network Department, Responsible for Network | General Manager of Network Department, Responsible for Network | July 1, 2017 |
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Preparation Method of Quarterly Consolidated Financial Statements
The quarterly consolidated financial statements of DOCOMO have been prepared in accordance with accounting terminology, forms and preparation methods required in order to issue American Depositary Shares, and in accordance with U.S. generally accepted accounting principles, pursuant to Article 95 of “Ordinance on the Terminology, Forms, and Preparation Methods of Quarterly Consolidated Financial Statements” (Cabinet Office Ordinance No.64, 2007).
Figures in DOCOMO’s quarterly consolidated financial statements have been rounded to the nearest million yen.
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NTT DOCOMO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 2017 and SEPTEMBER 30, 2017
Millions of yen | ||||||||
March 31, 2017 | September 30, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | ¥ | 289,610 | ¥ | 527,546 | ||||
Short-term investments | 301,070 | 310,757 | ||||||
Accounts receivable | 239,137 | 191,012 | ||||||
Receivables held for sale | 936,748 | 888,377 | ||||||
Credit card receivables | 347,557 | 384,051 | ||||||
Other receivables | 398,842 | 395,571 | ||||||
Allowance for doubtful accounts | (19,517 | ) | (20,157 | ) | ||||
Inventories | 153,388 | 142,847 | ||||||
Deferred tax assets | 81,025 | — | ||||||
Prepaid expenses and other current assets | 108,412 | 119,015 | ||||||
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Total current assets | 2,836,272 | 2,939,019 | ||||||
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Property, plant and equipment: | ||||||||
Wireless telecommunications equipment | 5,084,923 | 5,120,594 | ||||||
Buildings and structures | 906,177 | 910,603 | ||||||
Tools, furniture and fixtures | 441,513 | 449,560 | ||||||
Land | 198,980 | 199,088 | ||||||
Construction in progress | 204,413 | 224,720 | ||||||
Accumulated depreciation and amortization | (4,295,111 | ) | (4,343,703 | ) | ||||
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Total property, plant and equipment, net | 2,540,895 | 2,560,862 | ||||||
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Non-current investments and other assets: | ||||||||
Investments in affiliates | 373,758 | 382,549 | ||||||
Marketable securities and other investments | 198,650 | 189,711 | ||||||
Intangible assets, net | 608,776 | 597,307 | ||||||
Goodwill | 230,971 | 231,637 | ||||||
Other assets | 434,312 | 424,612 | ||||||
Deferred tax assets | 229,440 | 316,026 | ||||||
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Totalnon-current investments and other assets | 2,075,907 | 2,141,842 | ||||||
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Total assets | ¥ | 7,453,074 | ¥ | 7,641,723 | ||||
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LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | ¥ | 60,217 | ¥ | 170,100 | ||||
Short-term borrowings | 1,623 | 1,628 | ||||||
Accounts payable, trade | 853,538 | 708,589 | ||||||
Accrued payroll | 59,187 | 60,558 | ||||||
Accrued income taxes | 105,997 | 172,551 | ||||||
Other current liabilities | 194,494 | 225,343 | ||||||
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Total current liabilities | 1,275,056 | 1,338,769 | ||||||
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Long-term liabilities: | ||||||||
Long-term debt (exclusive of current portion) | 160,040 | 50,000 | ||||||
Accrued liabilities for point programs | 94,639 | 86,879 | ||||||
Liability for employees’ retirement benefits | 193,985 | 198,500 | ||||||
Other long-term liabilities | 145,266 | 152,952 | ||||||
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Total long-term liabilities | 593,930 | 488,331 | ||||||
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Total liabilities | 1,868,986 | 1,827,100 | ||||||
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Redeemable noncontrolling interests | 22,942 | 23,239 | ||||||
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Equity: | ||||||||
NTT DOCOMO, INC. shareholders’ equity | ||||||||
Common stock | 949,680 | 949,680 | ||||||
Additionalpaid-in capital | 326,621 | 326,595 | ||||||
Retained earnings | 4,656,139 | 4,881,867 | ||||||
Accumulated other comprehensive income (loss) | 24,631 | 28,600 | ||||||
Treasury stock | (426,442 | ) | (426,442 | ) | ||||
Total NTT DOCOMO, INC. shareholders’ equity | 5,530,629 | 5,760,300 | ||||||
Noncontrolling interests | 30,517 | 31,084 | ||||||
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Total equity | 5,561,146 | 5,791,384 | ||||||
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Commitments and contingencies | ||||||||
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Total liabilities and equity | ¥ | 7,453,074 | ¥ | 7,641,723 | ||||
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See accompanying notes to consolidated financial statements (unaudited).
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NTT DOCOMO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30, 2016 and 2017
Consolidated Statements of Income
Millions of yen | ||||||||
Six Months Ended September 30, 2016 | Six Months Ended September 30, 2017 | |||||||
Operating revenues: | ||||||||
Telecommunications services | ¥ | 1,474,493 | ¥ | 1,568,774 | ||||
Equipment sales | 380,108 | 303,520 | ||||||
Other operating revenues | 433,743 | 427,837 | ||||||
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Total operating revenues | 2,288,344 | 2,300,131 | ||||||
|
|
|
| |||||
Operating expenses: | ||||||||
Cost of services (exclusive of items shown separately below) | 632,236 | 656,431 | ||||||
Cost of equipment sold (exclusive of items shown separately below) | 364,123 | 336,420 | ||||||
Depreciation and amortization | 220,538 | 240,023 | ||||||
Selling, general and administrative | 485,850 | 518,481 | ||||||
|
|
|
| |||||
Total operating expenses | 1,702,747 | 1,751,355 | ||||||
|
|
|
| |||||
Operating income | 585,597 | 548,776 | ||||||
|
|
|
| |||||
Other income (expense): | ||||||||
Interest expense | (357 | ) | (135 | ) | ||||
Interest income | 291 | 270 | ||||||
Other, net | (4,367 | ) | 5,595 | |||||
|
|
|
| |||||
Total other income (expense) | (4,433 | ) | 5,730 | |||||
|
|
|
| |||||
Income before income taxes and equity in net income (losses) of affiliates | 581,164 | 554,506 | ||||||
|
|
|
| |||||
Income taxes: | ||||||||
Current | 129,670 | 182,774 | ||||||
Deferred | 49,025 | (9,368 | ) | |||||
|
|
|
| |||||
Total income taxes | 178,695 | 173,406 | ||||||
|
|
|
| |||||
Income before equity in net income (losses) of affiliates | 402,469 | 381,100 | ||||||
|
|
|
| |||||
Equity in net income (losses) of affiliates (including impairment charges of investments in affiliates) | 3,340 | (6,019 | ) | |||||
|
|
|
| |||||
Net income | 405,809 | 375,081 | ||||||
|
|
|
| |||||
Less: Net (income) loss attributable to noncontrolling interests | (402 | ) | (1,170 | ) | ||||
|
|
|
| |||||
Net income attributable to NTT DOCOMO, INC. | ¥ | 405,407 | ¥ | 373,911 | ||||
|
|
|
| |||||
Per share data | ||||||||
Weighted average common shares outstanding — Basic and Diluted | 3,742,803,807 | 3,704,585,533 | ||||||
|
|
|
| |||||
Basic and Diluted earnings per share attributable to NTT DOCOMO, INC. | ¥ | 108.32 | ¥ | 100.93 | ||||
|
|
|
| |||||
Consolidated Statements of Comprehensive Income | ||||||||
Millions of yen | ||||||||
Six Months Ended September 30, 2016 | Six Months Ended September 30, 2017 | |||||||
Net income | ¥ | 405,809 | ¥ | 375,081 | ||||
Other comprehensive income (loss): | ||||||||
Unrealized holding gains (losses) onavailable-for-sale securities, net of applicable taxes | (5,316 | ) | 561 | |||||
Unrealized gains (losses) on cash flow hedges, net of applicable taxes | (58 | ) | (25 | ) | ||||
Foreign currency translation adjustment, net of applicable taxes | (31,736 | ) | 2,958 | |||||
Pension liability adjustment, net of applicable taxes | 640 | 599 | ||||||
|
|
|
| |||||
Total other comprehensive income (loss) | (36,470 | ) | 4,093 | |||||
|
|
|
| |||||
Comprehensive income | 369,339 | 379,174 | ||||||
|
|
|
| |||||
Less: Comprehensive (income) loss attributable to noncontrolling interests | 23 | (1,294 | ) | |||||
|
|
|
| |||||
Comprehensive income attributable to NTT DOCOMO, INC. | ¥ | 369,362 | ¥ | 377,880 | ||||
|
|
|
|
See accompanying notes to consolidated financial statements (unaudited).
23
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2016 and 2017
Consolidated Statements of Income
Millions of yen | ||||||||
Three Months Ended September 30, 2016 | Three Months Ended September 30, 2017 | |||||||
Operating revenues: | ||||||||
Telecommunications services | ¥ | 744,784 | ¥ | 793,862 | ||||
Equipment sales | 214,355 | 152,920 | ||||||
Other operating revenues | 220,535 | 216,653 | ||||||
|
|
|
| |||||
Total operating revenues | 1,179,674 | 1,163,435 | ||||||
|
|
|
| |||||
Operating expenses: | ||||||||
Cost of services (exclusive of items shown separately below) | 327,757 | 335,211 | ||||||
Cost of equipment sold (exclusive of items shown separately below) | 209,146 | 173,878 | ||||||
Depreciation and amortization | 110,823 | 120,995 | ||||||
Selling, general and administrative | 245,642 | 262,874 | ||||||
|
|
|
| |||||
Total operating expenses | 893,368 | 892,958 | ||||||
|
|
|
| |||||
Operating income | 286,306 | 270,477 | ||||||
|
|
|
| |||||
Other income (expense): | ||||||||
Interest expense | (117 | ) | (38 | ) | ||||
Interest income | 136 | 77 | ||||||
Other, net | (453 | ) | 2,144 | |||||
|
|
|
| |||||
Total other income (expense) | (434 | ) | 2,183 | |||||
|
|
|
| |||||
Income before income taxes and equity in net income (losses) of affiliates | 285,872 | 272,660 | ||||||
|
|
|
| |||||
Income taxes: | ||||||||
Current | 60,413 | 97,194 | ||||||
Deferred | 28,634 | (8,431 | ) | |||||
|
|
|
| |||||
Total income taxes | 89,047 | 88,763 | ||||||
|
|
|
| |||||
Income before equity in net income (losses) of affiliates | 196,825 | 183,897 | ||||||
|
|
|
| |||||
Equity in net income (losses) of affiliates (including impairment charges of investments in affiliates) | 2,349 | 643 | ||||||
|
|
|
| |||||
Net income | 199,174 | 184,540 | ||||||
|
|
|
| |||||
Less: Net (income) loss attributable to noncontrolling interests | (621 | ) | (568 | ) | ||||
|
|
|
| |||||
Net income attributable to NTT DOCOMO, INC. | ¥ | 198,553 | ¥ | 183,972 | ||||
|
|
|
| |||||
Per share data | ||||||||
Weighted average common shares outstanding — Basic and Diluted | 3,731,635,498 | 3,704,585,533 | ||||||
|
|
|
| |||||
Basic and Diluted earnings per share attributable to NTT DOCOMO, INC. | ¥ | 53.21 | ¥ | 49.66 | ||||
|
|
|
| |||||
Consolidated Statements of Comprehensive Income | ||||||||
Millions of yen | ||||||||
Three Months Ended September 30, 2016 | Three Months Ended September 30, 2017 | |||||||
Net income | ¥ | 199,174 | ¥ | 184,540 | ||||
Other comprehensive income (loss): | ||||||||
Unrealized holding gains (losses) onavailable-for-sale securities, net of applicable taxes | 6,505 | (2,234 | ) | |||||
Unrealized gains (losses) on cash flow hedges, net of applicable taxes | 14 | 0 | ||||||
Foreign currency translation adjustment, net of applicable taxes | (23,631 | ) | 4,217 | |||||
Pension liability adjustment, net of applicable taxes | 499 | 163 | ||||||
|
|
|
| |||||
Total other comprehensive income (loss) | (16,613 | ) | 2,146 | |||||
|
|
|
| |||||
Comprehensive income | 182,561 | 186,686 | ||||||
|
|
|
| |||||
Less: Comprehensive (income) loss attributable to noncontrolling interests | (401 | ) | (723 | ) | ||||
|
|
|
| |||||
Comprehensive income attributable to NTT DOCOMO, INC. | ¥ | 182,160 | ¥ | 185,963 | ||||
|
|
|
|
See accompanying notes to consolidated financial statements (unaudited).
24
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30, 2016 and 2017
Millions of yen | ||||||||
Six Months Ended September 30, 2016 | Six Months Ended September 30, 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net income | ¥ | 405,809 | ¥ | 375,081 | ||||
Adjustments to reconcile net income to net cash provided by operating activities– | ||||||||
Depreciation and amortization | 220,538 | 240,023 | ||||||
Deferred taxes | 49,025 | (9,368 | ) | |||||
Loss on sale or disposal of property, plant and equipment | 14,785 | 17,153 | ||||||
Inventory write-downs | 5,916 | 2,873 | ||||||
Impairment loss on marketable securities and other investments | 2,043 | 452 | ||||||
Equity in net (income) losses of affiliates (including impairment charges | (3,340 | ) | 6,019 | |||||
Dividends from affiliates | 8,354 | 9,980 | ||||||
Changes in assets and liabilities: | ||||||||
(Increase) / decrease in accounts receivable | 42,588 | 48,298 | ||||||
(Increase) / decrease in receivables held for sale | 12,220 | 48,371 | ||||||
(Increase) / decrease in credit card receivables | (18,317 | ) | (17,994 | ) | ||||
(Increase) / decrease in other receivables | (10,365 | ) | 3,239 | |||||
Increase / (decrease) in allowance for doubtful accounts | 2,670 | 279 | ||||||
(Increase) / decrease in inventories | (3,431 | ) | 7,618 | |||||
(Increase) / decrease in prepaid expenses and other current assets | (19,632 | ) | (8,939 | ) | ||||
(Increase) / decrease innon-current receivables held for sale | 23,675 | 22,894 | ||||||
Increase / (decrease) in accounts payable, trade | (40,657 | ) | (92,583 | ) | ||||
Increase / (decrease) in accrued income taxes | (41,105 | ) | 66,536 | |||||
Increase / (decrease) in other current liabilities | 11,566 | 32,126 | ||||||
Increase / (decrease) in accrued liabilities for point programs | (6,510 | ) | (7,760 | ) | ||||
Increase / (decrease) in liability for employees’ retirement benefits | 4,644 | 4,507 | ||||||
Increase / (decrease) in other long-term liabilities | 7,054 | 8,218 | ||||||
Other, net | 4,190 | 5,900 | ||||||
|
|
|
| |||||
Net cash provided by operating activities | 671,720 | 762,923 | ||||||
|
|
|
| |||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (210,559 | ) | (230,206 | ) | ||||
Purchases of intangible and other assets | (112,859 | ) | (109,958 | ) | ||||
Purchases ofnon-current investments | (1,306 | ) | (9,993 | ) | ||||
Proceeds from sale ofnon-current investments | 3,216 | 1,258 | ||||||
Purchases of short-term investments | (65,911 | ) | (151,060 | ) | ||||
Redemption of short-term investments | 10,706 | 101,195 | ||||||
Short-term bailment for consumption to a related party | (40,000 | ) | (290,000 | ) | ||||
Proceeds from redemption of short-term bailment for consumption to a related party | — | 330,000 | ||||||
Other, net | (8,573 | ) | (14,897 | ) | ||||
|
|
|
| |||||
Net cash used in investing activities | (425,286 | ) | (373,661 | ) | ||||
|
|
|
| |||||
Cash flows from financing activities: | ||||||||
Proceeds from short-term borrowings | 12,543 | 11,592 | ||||||
Repayment of short-term borrowings | (12,098 | ) | (11,592 | ) | ||||
Principal payments under capital lease obligations | (609 | ) | (666 | ) | ||||
Payments to acquire treasury stock | (109,182 | ) | — | |||||
Dividends paid | (131,558 | ) | (148,222 | ) | ||||
Cash distributions to noncontrolling interests | (3,500 | ) | (118 | ) | ||||
Other, net | 6,073 | (2,420 | ) | |||||
|
|
|
| |||||
Net cash provided by (used in) financing activities | (238,331 | ) | (151,426 | ) | ||||
|
|
|
| |||||
Effect of exchange rate changes on cash and cash equivalents | (2,329 | ) | 100 | |||||
|
|
|
| |||||
Net increase (decrease) in cash and cash equivalents | 5,774 | 237,936 | ||||||
Cash and cash equivalents as of beginning of period | 354,437 | 289,610 | ||||||
|
|
|
| |||||
Cash and cash equivalents as of end of period | ¥ | 360,211 | ¥ | 527,546 | ||||
|
|
|
| |||||
Supplemental disclosures of cash flow information: | ||||||||
Cash received during the period for: | ||||||||
Income tax refunds | ¥ | 662 | ¥ | 125 | ||||
Cash paid during the period for: | ||||||||
Interest, net of amount capitalized | 203 | 201 | ||||||
Income taxes | 170,722 | 116,654 | ||||||
|
|
|
|
See accompanying notes to consolidated financial statements (unaudited).
25
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of presentation:
The accompanying quarterly consolidated financial statements of NTT DOCOMO, INC. and its subsidiaries (“DOCOMO”) were prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain disclosures required by U.S. GAAP have been omitted. Since DOCOMO’s American Depositary Shares were listed on the New York Stock Exchange in March 2002, DOCOMO has prepared its consolidated financial statements pursuant to the terminology, forms and preparation methods required in order to issue American Depositary Shares, which are registered with the Securities and Exchange Commission of the United States of America.
2. Summary of significant accounting and reporting policies:
(a) Adoption of new accounting standards
Balance sheet classification of deferred taxes —
On November 20, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2015-17 “Balance Sheet Classification of Deferred Taxes.” Effective April 1, 2017, DOCOMO adopted prospectively ASU2015-17 “Balance Sheet Classification of Deferred Taxes.” This ASU requires that all deferred tax liabilities and assets be classified as noncurrent on the consolidated balance sheet.
(b) Recently issued accounting standards
Revenue from Contracts with Customers —
On May 28, 2014, FASB issued ASU2014-09 “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 FASB also issued ASU2016-08 “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU2016-10 “Identifying Performance Obligations and Licensing,” ASU2016-12 “Narrow-Scope Improvements and Practical Expedients,” ASU2016-20 “Technical Corrections and Improvements to Topic 606,” and ASU2017-05 “Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” in March, April, May and December 2016, and February 2017, respectively, to partially amend ASU2014-09.
On August 12, 2015, the FASB issued ASU2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” and deferred the effective date of the ASU by one year. Consequently, the standard is expected to take effect for DOCOMO on April 1, 2018 and early adoption with original effective date for periods beginning April 1, 2017 is permitted.
26
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
The two permitted transition methods under the new standard are the full retrospective method, or the modified retrospective method. Under the full retrospective method, all periods presented will be updated upon adoption to conform to the new standard and a cumulative adjustment for effects on periods prior to the reporting period will be recorded to retained earnings at the beginning of the initial reporting period. Under the modified retrospective approach, the current reporting period will be updated to conform to the new standard and a cumulative adjustment for effects of applying the new standard to periods prior to the reporting period that includes the date of initial application is recorded to retained earnings as of the date of initial application, and also incremental disclosures related to the amount affected by the application of this new standard are required. DOCOMO has not decided on a transition method and are currently evaluating the impact of the new standard on DOCOMO’s consolidated financial statements and related disclosures. The impact on revenue resulting from the application of the new standard will be subject to assessments that are dependent on many variables, including, but not limited to, the terms, the transaction prices including discounts and the mixture of the goods and services of DOCOMO’s contractual arrangements. While DOCOMO is continuing to assess all potential impacts resulting from the application of the new standard, DOCOMO believes that the most significant impacts may include the following items:
• | The standard requires the recognition of incremental costs of obtaining and direct costs of fulfilling contracts with customers as assets. Accordingly, DOCOMO expects that part of the sales commissions and other charges that have previously been treated as expenses will be recognized as additional assets, which will be amortized over the estimated average period of the subscription for each service. |
• | The standard requires that if customers are granted by an entity the option to acquire additional goods or services at a discount by a contract agreed between the customer and the entity, the entity shall identify this option as a separate performance obligation upon granting such option as a part of the consideration of the transaction being recognized as contract liabilities, and recognize revenue when the additional good or service is transferred at a discount to the customer or when such option expires. Accordingly, DOCOMO expects that in relation to “docomo POINTs” and “d POINTs” which have traditionally been recorded as accrued liabilities, DOCOMO will recognize a part of the considerations for the transaction of mobile communications and other services as contract liabilities at the time when the points are granted, and recognize revenue when the points are used for the additional good or service at a discount or when the points expire. |
DOCOMO has established a team to implement the introduction of the new standard. DOCOMO is in the process of implementing changes to DOCOMO’s systems and setting up reporting processes and internal controls for the adoption of the new revenue recognition standard.
27
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
Recognition and Measurement of Financial Assets and Financial Liabilities —
On January 5, 2016, the FASB issued ASU2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities,” which makes targeted improvements to the accounting for, and presentation and disclosure of, financial instruments. ASU2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. ASU2016-01 does not affect the accounting for investments that would otherwise be consolidated or accounted for under the equity method. The new standard also affects the recognition of changes in fair value of financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The new standard is effective for DOCOMO on April 1, 2018. DOCOMO is currently evaluating the effect of adopting the ASU.
Lease —
On February 25, 2016, the FASB issued ASU2016-02 “Lease,” which requires all lessees to recognize theright-of-use asset and lease liability, principally. The new standard is effective for DOCOMO on April 1, 2019. DOCOMO is currently evaluating the effect of adopting the ASU.
Simplifying the Test for Goodwill Impairment —
On January 26, 2017, the FASB issued ASU2017-04 “Simplifying the Test for Goodwill Impairment,” which eliminates Step 2 from the goodwill impairment test. Instead, the amendments in this update require that an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The amendments in this update are effective for DOCOMO on April 1, 2020. Early adoption of the standard for goodwill impairment tests with measurement dates after January 1, 2017 would also be permitted. DOCOMO is currently evaluating the effect of adopting the ASU.
28
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
3. Equity:
(a) Dividends
The Companies Act of Japan (the “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 10% of the decrease in retained earnings, as a result of a dividend payment, shall be contributed to a legal reserve that can be funded up to an amount equal to 25% of capital stock. The legal reserve is available for distribution upon approval of the shareholders. In accordance with (ii) above, a provision in NTT DOCOMO, INC.’s articles of incorporation stipulates that NTT DOCOMO, INC. may, pursuant to a resolution of the Board of Directors, pay interim dividends with a record date as of September 30th of the relevant year.
In the general meeting of shareholders held on June 20, 2017, the shareholders approved cash dividends of ¥148,183 million or ¥40 per share, payable to shareholders of record as of March 31, 2017, which were declared by the Board of Directors on April 27, 2017. The source of such dividends was “Retained earnings.” NTT DOCOMO, INC. started paying the dividends on June 21, 2017.
On October 26 2017, the Board of Directors declared interim cash dividends of ¥185,229 million or ¥50 per share, payable to shareholders of record as of September 30, 2017. The source of such dividends will be “Retained earnings.” NTT DOCOMO, INC. plans to start paying the interim cash dividends on November 21, 2017.
(b) Issued shares and treasury stock
With regard to the acquisition of treasury stock, the Companies Act provides that (i) it can be executed according to a resolution of the general meeting of shareholders, and (ii) the acquisition of treasury stock through open market transactions can be done according to a resolution of the Board of Directors, if the articles of incorporation contain such a provision. In accordance with (ii) above, a provision in NTT DOCOMO, INC.’s articles of incorporation stipulates that NTT DOCOMO, INC. may repurchase treasury stock through open market transactions, by a resolution of the Board of Directors, for the purpose of improving capital efficiency and implementing flexible capital policies in accordance with the business environment.
29
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
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, 2016 | 3,958,543,000 | 197,926,250 | ||||||
|
|
|
| |||||
Acquisition of treasury stock based on the resolution of the Board of Directors | — | 40,361,000 | ||||||
Acquisition of treasury stock through purchase ofless-than-one-unit shares | — | 100 | ||||||
As of September 30, 2016 | 3,958,543,000 | 238,287,350 | ||||||
|
|
|
| |||||
Acquisition of treasury stock based on the resolution of the Board of Directors | — | 15,670,000 | ||||||
Acquisition of treasury stock through purchase ofless-than-one-unit shares | — | 117 | ||||||
Retirement of treasury stock | (58,980,000 | ) | (58,980,000 | ) | ||||
|
|
|
| |||||
As of March 31, 2017 | 3,899,563,000 | 194,977,467 | ||||||
|
|
|
| |||||
As of September 30, 2017 | 3,899,563,000 | 194,977,467 | ||||||
|
|
|
|
On April 28, 2016, the Board of Directors resolved that NTT DOCOMO, INC. may acquire up to 99,132,938 outstanding shares of its common stock by way of the Tokyo Stock Exchange Trading NetworkOff-Auction Own Share Repurchase Trading System(“ToSTNeT-3”) and market purchases in accordance with the discretionary dealing contract, at an amount in total not exceeding ¥192,514 million from May 2, 2016 through December 31, 2016.
Based on this resolution, NTT DOCOMO, INC. repurchased 9,021,000 shares of its common stock at ¥24,433 million using theToSTNeT-3 on May 18, 2016, and also repurchased 47,010,000 shares of its common stock for a total purchase price of ¥125,174 million by way of market purchases in accordance with the discretionary dealing contract as of December 31, 2016.
NTT DOCOMO, INC. also carried out compulsory acquisition ofless-than-one-unit shares upon request for the fiscal year ended March 31, 2017.
On March 24, 2017, the Board of Directors resolved that NTT DOCOMO, INC. would retire 58,980,000 shares held as treasury stock on March 31, 2017 and the share retirement on March 31, 2017 resulted in decreases of “Retained earnings” by ¥128,997 million.
30
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
The aggregate number and price of shares repurchased for the six months ended September 30, 2016 and 2017 were as follows:
Share/Millions of yen | ||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | |||||||
Aggregate number of shares repurchased | 40,361,100 | — | ||||||
Aggregate price of shares repurchased | ¥ | 109,182 | ¥ | — |
The aggregate number and price of shares repurchased for the three months ended September 30, 2016 and 2017 were as follows:
Share/Millions of yen | ||||||||
Three months ended September 30, 2016 | Three months ended September 30, 2017 | |||||||
Aggregate number of shares repurchased | 20,272,500 | — | ||||||
Aggregate price of shares repurchased | ¥ | 54,540 | ¥ | — |
On October 26, 2017, the Board of Directors resolved that NTT DOCOMO, INC. may repurchase up to 120 million outstanding shares of its common stock for an amount in total not exceeding ¥ 300,000 million during the period from October 27, 2017 through March 31, 2018.
31
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(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 six months ended September 30, 2016 and 2017 were as follows:
Millions of yen | ||||||||||||||||||||
Six months ended September 30, 2016 | ||||||||||||||||||||
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, 2016 | ¥ | 61,624 | ¥ | (218 | ) | ¥ | 6,281 | ¥ | (52,799 | ) | ¥ | 14,888 | ||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) before reclassifications | (4,332 | ) | (82 | ) | (31,813 | ) | (531 | ) | (36,758 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (984 | ) | 24 | 77 | 1,171 | 288 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) | (5,316 | ) | (58 | ) | (31,736 | ) | 640 | (36,470 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: other comprehensive (income) loss attributable to noncontrolling interests | 5 | — | 420 | — | 425 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance as of September 30, 2016 | ¥ | 56,313 | ¥ | (276 | ) | ¥ | (25,035 | ) | ¥ | (52,159 | ) | ¥ | (21,157 | ) | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Millions of yen | ||||||||||||||||||||
Six months ended September 30, 2017 | ||||||||||||||||||||
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, 2017 | ¥ | 73,363 | ¥ | (133 | ) | ¥ | (6,509 | ) | ¥ | (42,090 | ) | ¥ | 24,631 | |||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) before reclassifications | 395 | (2 | ) | (7,363 | ) | (344 | ) | (7,314 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 166 | (23 | ) | 10,321 | 943 | 11,407 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) | 561 | (25 | ) | 2,958 | 599 | 4,093 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: other comprehensive (income) loss attributable to noncontrolling interests | (141 | ) | — | 17 | — | (124 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance as of September 30, 2017 | ¥ | 73,783 | ¥ | (158 | ) | ¥ | (3,534 | ) | ¥ | (41,491 | ) | ¥ | (28,600 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
32
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NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
Changes in accumulated other comprehensive income (loss), net of applicable taxes, for the three months ended September 30, 2016 and 2017 were as follows:
Millions of yen | ||||||||||||||||||||
Three months ended September 30, 2016 | ||||||||||||||||||||
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 June 30, 2016 | ¥ | 49,806 | ¥ | (290 | ) | ¥ | (1,622 | ) | ¥ | (52,658 | ) | ¥ | (4,764 | ) | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) before reclassifications | 6,506 | 1 | (23,708 | ) | (88 | ) | (17,289 | ) | ||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (1 | ) | 13 | 77 | 587 | 676 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) | 6,505 | 14 | (23,631 | ) | 499 | (16,613 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: other comprehensive (income) loss attributable to noncontrolling interests | 2 | — | 218 | — | 220 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance as of September 30, 2016 | ¥ | 56,313 | ¥ | (276 | ) | ¥ | (25,035 | ) | ¥ | (52,159 | ) | ¥ | (21,157 | ) | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Millions of yen | ||||||||||||||||||||
Three months ended September 30, 2017 | ||||||||||||||||||||
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 June 30, 2017 | ¥ | 76,157 | ¥ | (158 | ) | ¥ | (7,736 | ) | ¥ | (41,654 | ) | ¥ | 26,609 | |||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) before reclassifications | (2,234 | ) | 34 | 1,160 | (307 | ) | (1,347 | ) | ||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (34 | ) | 3,057 | 470 | 3,493 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) | (2,234 | ) | 0 | 4,217 | 163 | 2,146 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: other comprehensive (income) loss attributable to noncontrolling interests | (140 | ) | — | (15 | ) | — | (155 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance as of September 30, 2017 | ¥ | 73,783 | ¥ | (158 | ) | ¥ | (3,534 | ) | ¥ | (41,491 | ) | ¥ | 28,600 | |||||||
|
|
|
|
|
|
|
|
|
|
33
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (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 statements of income for the six months ended September 30, 2016 and 2017 were as follows:
Millions of yen | ||||||||||
Amounts reclassified out of accumulated other comprehensive income (loss) (*1) | ||||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | Affected line items in the consolidated statements of income | ||||||||
Unrealized holding gains (losses) onavailable-for-sale securities | ¥ | 1,373 | ¥ | (237 | ) | “Other, net” of “Other income (expense)” | ||||
62 | — | “Equity in net income (losses) of affiliates” | ||||||||
|
|
|
| |||||||
1,435 | (237 | ) | Pre-tax amount | |||||||
(451 | ) | 71 | Tax benefit (expense) | |||||||
|
|
|
| |||||||
984 | (166 | ) | Net-of-tax amount | |||||||
|
|
|
| |||||||
Unrealized gains (losses) on cash flow hedges | (35 | ) | 33 | “Equity in net income (losses) of affiliates” | ||||||
|
|
|
| |||||||
(35 | ) | 33 | Pre-tax amount | |||||||
11 | (10 | ) | Tax benefit (expense) | |||||||
|
|
|
| |||||||
(24 | ) | 23 | Net-of-tax amount | |||||||
|
|
|
| |||||||
Foreign currency translation adjustment | (111 | ) | (15,383 | ) | “Equity in net income (losses) of affiliates” | |||||
|
|
|
| |||||||
(111 | ) | (15,383 | ) | Pre-tax amount | ||||||
34 | 5,062 | Tax benefit (expense) | ||||||||
|
|
|
| |||||||
(77 | ) | (10,321 | ) | Net-of-tax amount | ||||||
|
|
|
| |||||||
Pension liability adjustment | (1,707 | ) | (1,375 | ) | (*2) | |||||
|
|
|
| |||||||
(1,707 | ) | (1,375 | ) | Pre-tax amount | ||||||
536 | 432 | Tax benefit (expense) | ||||||||
|
|
|
| |||||||
(1,171 | ) | (943 | ) | Net-of-tax amount | ||||||
|
|
|
| |||||||
Total reclassified amounts | ¥ | (288 | ) | ¥ | (11,407 | ) | 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. |
34
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NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
Amounts reclassified out of accumulated other comprehensive income (loss) to net income and affected line items in the consolidated statements of income for the three months ended September 30, 2016 and 2017 were as follows:
Millions of yen | ||||||||||
Amounts reclassified out of accumulated other comprehensive income (loss) (*1) | ||||||||||
Three months ended September 30, 2016 | Three months ended September 30, 2017 | Affected line items in the consolidated statements of income | ||||||||
Unrealized holding gains (losses) onavailable-for-sale securities | ¥ | 1 | ¥ | — | “Equity in net income (losses) of affiliates” | |||||
|
|
|
| |||||||
1 | — | Pre-tax amount | ||||||||
|
|
|
| |||||||
(0 | ) | — | Tax benefit (expense) | |||||||
|
|
|
| |||||||
1 | — | Net-of-tax amount | ||||||||
|
|
|
| |||||||
Unrealized gains (losses) on cash flow hedges | (19 | ) | 50 | “Equity in net income (losses) of affiliates” | ||||||
|
|
|
| |||||||
(19 | ) | 50 | Pre-tax amount | |||||||
6 | (16 | ) | Tax benefit (expense) | |||||||
|
|
|
| |||||||
(13 | ) | 34 | Net-of-tax amount | |||||||
|
|
|
| |||||||
Foreign currency translation adjustment | — | — | “Other, net” of “Other income (expense)” | |||||||
(111 | ) | (4,456 | ) | “Equity in net income (losses) of affiliates” | ||||||
|
|
|
| |||||||
(111 | ) | (4,456 | ) | Pre-tax amount | ||||||
34 | 1,399 | Tax benefit (expense) | ||||||||
|
|
|
| |||||||
(77 | ) | (3,057 | ) | Net-of-tax amount | ||||||
|
|
|
| |||||||
Pension liability adjustment | (855 | ) | (685 | ) | (*2) | |||||
|
|
|
| |||||||
(855 | ) | (685 | ) | Pre-tax amount | ||||||
268 | 215 | Tax benefit (expense) | ||||||||
|
|
|
| |||||||
(587 | ) | (470 | ) | Net-of-tax amount | ||||||
|
|
|
| |||||||
Total reclassified amounts | ¥ | (676 | ) | ¥ | (3,493 | ) | 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. |
35
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
4. Segment information:
DOCOMO’s chief operating decision maker (the “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.
DOCOMO has three operating segments, which consist of telecommunications business, smart life business and other businesses.
The telecommunications business includes mobile phone services (LTE(Xi) services and FOMA services), optical-fiber broadband services, satellite mobile communications services, international services and the equipment sales related to these services. The smart life business includes video and music distribution, electronic books and other services offered through DOCOMO’s “dmarket” portal, as well as finance/payment services, shopping services and various other services to support our customers’ daily lives. The other businesses primarily include “Mobile Device Protection Service,” as well as the development, sales and maintenance of IT systems.
Accounting policies used to determine segment operating revenues and operating income (loss) are consistent with those used to prepare the consolidated financial statements in accordance with U.S. GAAP.
Segment operating revenues: |
Millions of yen | ||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | |||||||
Telecommunications business- | ||||||||
External customers | ¥ | 1,856,239 | ¥ | 1,870,119 | ||||
Intersegment | 384 | 657 | ||||||
|
|
|
| |||||
Subtotal | 1,856,623 | 1,870,776 | ||||||
Smart life business- | ||||||||
External customers | 243,488 | 221,605 | ||||||
Intersegment | 6,880 | 8,592 | ||||||
|
|
|
| |||||
Subtotal | 250,368 | 230,197 | ||||||
Other businesses- | ||||||||
External customers | 188,617 | 208,407 | ||||||
Intersegment | 4,788 | 6,770 | ||||||
|
|
|
| |||||
Subtotal | 193,405 | 215,177 | ||||||
|
|
|
| |||||
Segment total | 2,300,396 | 2,316,150 | ||||||
Elimination | (12,052 | ) | (16,019 | ) | ||||
|
|
|
| |||||
Consolidated | ¥ | 2,288,344 | ¥ | 2,300,131 | ||||
|
|
|
|
36
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
Millions of yen | ||||||||
Three months ended September 30, 2016 | Three months ended September 30, 2017 | |||||||
Telecommunications business- | ||||||||
External customers | ¥ | 961,580 | ¥ | 946,085 | ||||
Intersegment | 119 | 375 | ||||||
|
|
|
| |||||
Subtotal | 961,699 | 946,460 | ||||||
Smart life business- | ||||||||
External customers | 121,327 | 112,245 | ||||||
Intersegment | 3,792 | 4,413 | ||||||
|
|
|
| |||||
Subtotal | 125,119 | 116,658 | ||||||
Other businesses- | ||||||||
External customers | 96,767 | 105,105 | ||||||
Intersegment | 1,827 | 3,511 | ||||||
|
|
|
| |||||
Subtotal | 98,594 | 108,616 | ||||||
|
|
|
| |||||
Segment total | 1,185,412 | 1,171,734 | ||||||
Elimination | (5,738 | ) | (8,299 | ) | ||||
|
|
|
| |||||
Consolidated | ¥ | 1,179,674 | ¥ | 1,163,435 | ||||
|
|
|
| |||||
Segment operating income (loss):
| ||||||||
Millions of yen | ||||||||
Six months ended September 30, 2016 | Six months ended September 30, 2017 | |||||||
Telecommunications business | ¥ | 524,737 | ¥ | 474,384 | ||||
Smart life business | 36,975 | 33,491 | ||||||
Other businesses | 23,885 | 40,901 | ||||||
|
|
|
| |||||
Consolidated | ¥ | 585,597 | ¥ | 548,776 | ||||
|
|
|
| |||||
Millions of yen | ||||||||
Three months ended September 30, 2016 | Three months ended September 30, 2017 | |||||||
Telecommunications business | ¥ | 254,327 | ¥ | 232,966 | ||||
Smart life business | 19,772 | 16,825 | ||||||
Other businesses | 12,207 | 20,686 | ||||||
|
|
|
| |||||
Consolidated | ¥ | 286,306 | ¥ | 270,477 | ||||
|
|
|
|
Segment operating income (loss) is segment operating revenues less segment operating expenses.
DOCOMO does not disclose geographical information because the amounts of operating revenues generated outside Japan are immaterial.
37
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
5. Contingencies:
(a) 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.
(b) 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.
38
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
6. Fair value 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 includeavailable-for-sale securities and derivatives.
DOCOMO’s assets and liabilities that were measured at fair value on a recurring basis at March 31, 2017 and September 30, 2017 were as follows:
Millions of yen | ||||||||||||||||
March 31, 2017 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Available-for-sale securities | ||||||||||||||||
Equity securities (domestic) | ¥ | 83,974 | ¥ | 83,974 | ¥ | — | ¥ | — | ||||||||
Equity securities (foreign) | 95,680 | 95,680 | — | — | ||||||||||||
Debt securities (foreign) | 5 | 5 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totalavailable-for-sale securities | 179,659 | �� | 179,659 | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives | ||||||||||||||||
Foreign exchange forward contracts | 0 | — | 0 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total derivatives | 0 | — | 0 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ¥ | 179,659 | ¥ | 179,659 | ¥ | 0 | ¥ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Derivatives | ||||||||||||||||
Foreign currency option contracts | ¥ | 1,336 | ¥ | — | ¥ | 1,336 | ¥ | — | ||||||||
Foreign exchange forward contracts | 11 | — | 11 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total derivatives | 1,347 | — | 1,347 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ¥ | 1,347 | ¥ | — | ¥ | 1,347 | ¥ | — | ||||||||
|
|
|
|
|
|
|
|
There were no transfers between Level 1 and Level 2.
39
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
Millions of yen | ||||||||||||||||
September 30, 2017 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Available-for-sale securities | ||||||||||||||||
Equity securities (domestic) | ¥ | 82,665 | ¥ | 82,665 | ¥ | — | ¥ | — | ||||||||
Equity securities (foreign) | 86,606 | 86,606 | — | — | ||||||||||||
Debt securities (foreign) | 5 | 5 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totalavailable-for-sale securities | 169,276 | 169,276 | — | — | ||||||||||||
|
| �� |
|
|
|
|
|
| ||||||||
Derivatives | ||||||||||||||||
Foreign exchange forward contracts | 0 | — | 0 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total derivatives | 0 | — | 0 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ¥ | 169,276 | ¥ | 169,276 | ¥ | 0 | ¥ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Derivatives | ||||||||||||||||
Foreign currency option contracts | ¥ | 836 | ¥ | — | ¥ | 836 | ¥ | — | ||||||||
Foreign exchange forward contracts | 1 | — | 1 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total derivatives | 837 | — | 837 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ¥ | 837 | ¥ | — | ¥ | 837 | ¥ | — | ||||||||
|
|
|
|
|
|
|
|
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, these securities are classified as Level 1.
Derivatives
Derivative instruments are foreign currency option contracts and foreign exchange forward contracts, which are valued based on observable market data. Therefore, these derivatives are classified as Level 2.
40
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(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’s assets that were measured at fair value on a nonrecurring basis for the six months ended September 30, 2016 and 2017 were as follows:
Millions of yen | ||||||||||||||||||||
Six months ended September 30, 2016 | ||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Gains (losses) (before taxes) | ||||||||||||||||
Assets: | ||||||||||||||||||||
Receivables held for sale | ¥ | 646,101 | ¥ | — | ¥ | 646,101 | ¥ | — | ¥ | (7,053 | ) | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Millions of yen | ||||||||||||||||||||
Six months ended September 30, 2017 | ||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Gains (losses) (before taxes) | ||||||||||||||||
Assets: | ||||||||||||||||||||
Receivables held for sale | ¥ | 605,124 | ¥ | — | ¥ | 605,124 | ¥ | — | ¥ | (4,278 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
DOCOMO’s assets that were measured at fair value on a nonrecurring basis for the three months ended September 30, 2016 and 2017 were as follows:
Millions of yen | ||||||||||||||||||||
Three months ended September 30, 2016 | ||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Gains (losses) (before taxes) | ||||||||||||||||
Assets: | ||||||||||||||||||||
Receivables held for sale | ¥ | 500,890 | ¥ | — | ¥ | 500,890 | ¥ | — | ¥ | (6,278 | ) | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Millions of yen | ||||||||||||||||||||
Three months ended September 30, 2017 | ||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Gains (losses) (before taxes) | ||||||||||||||||
Assets: | ||||||||||||||||||||
Receivables held for sale | ¥ | 482,122 | ¥ | — | ¥ | 482,122 | ¥ | — | ¥ | (4,193 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
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.
41
Table of Contents
NTT DOCOMO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
7. Subsequent event:
Resolution of share repurchase up to prescribed maximum limit —
On October 26, 2017, the Board of Directors resolved that NTT DOCOMO, INC. may repurchase outstanding shares of its common stock. Related information is disclosed in “Note 3 Equity.”
Tata Teleservices Limited —
Tata Teleservices Limited (“TTSL”) is a telecommunication operator in India and a privately held company.
As of September 30 2017, DOCOMO held approximately 21.6% of the outstanding common shares of TTSL and accounted for the investment under the equity method.
Under the shareholders agreement (the “Agreement”) entered into among TTSL, Tata Sons Limited (“Tata Sons”) and DOCOMO when DOCOMO entered into a business alliance with TTSL in March 2009, DOCOMO shall have certain shareholder rights, including the right to require Tata Sons to find a suitable buyer for DOCOMO’s entire stake (1,248,974,378 shares, or 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 ¥127.6 billion*1), or at fair value, whichever is higher, in the event that TTSL fails to achieve certain specified performance targets by March 31, 2014. The right became exercisable on May 30, 2014, and DOCOMO exercised 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 regarding the sale of DOCOMO’s entire stake in TTSL pursuant to the Agreement. Accordingly, DOCOMO submitted a request for arbitration to the London Court of International Arbitration (“LCIA”) on January 3, 2015.
DOCOMO received a binding arbitration award from the LCIA on June 23, 2016. The award ordered that Tata Sons pay damages to DOCOMO in the amount of approximately $1,172 million (or ¥132.6 billion*2) for Tata Sons’ breach of the Agreement, upon DOCOMO’s tender of its entire stake in TTSL to Tata Sons or its designee.
On July 8, 2016, DOCOMO submitted an application to the High Court in India (“the Court”) requesting enforcement of the LCIA Award in India. On February 25, 2017, DOCOMO and Tata Sons submitted a joint application to the Court requesting that the Court declare the LCIA Award enforceable in India. On April 28, 2017, the Court delivered a court decision approving the joint application.
On October 31, 2017, DOCOMO received ¥144.9 billion*3 from Tata Sons as payment of the arbitration award amount in accordance with the Court decision regarding DOCOMO’s stake in TTSL. As a result of this transaction, DOCOMO expects to include the award amount of ¥144.9 billion in other income on the consolidated financial statements for the three month period ending December 31, 2017.
Concurrent with the receipt of the above award amount, all shares in TTSL held by DOCOMO have been transferred to Tata Sons and companies designated by Tata Sons. Upon the transfer of DOCOMO’s shares in TTSL, DOCOMO no longer accounts for investments in TTSL under the equity method. As a result, DOCOMO expects to include a loss on transfer of investments in affiliates of ¥29.8 billion, equal to the reclassification adjustments of foreign currency translation adjustments, in other expense on its consolidated financial statements for the three month period ending December 31, 2017.
*1 | 1 rupee = ¥1.76 as of October 31, 2017 |
*2 | $1 = ¥113.16 as of October 31, 2017 |
*3 | The amount received included interest earned and other costs awarded. |
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