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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for waiting. Thank you very much for attending today despite your busy schedule. We would now like to start the briefing of NTT financial results for the 6 months ended September 30, 2019.
I'm Fujiki from the IR office, and I will be serving as today's facilitator. First, I would like to introduce today's attending members. President and CEO, Member of the Board, Mr. Sawada. Mr. Sawada, very nice to meet you. Senior Executive VP, Member of the Board, Mr. Shimada; Senior Vice President, Head of Finance and Accounting Department, Member of the Board, Mr. Hiroi; Senior Vice President and Head of Corporate Strategy Planning, Member of the Board, Mr. Kitamura.
Before we start, there are 3 housekeeping announcements. First of all, regarding the distributed materials. Up till now, we have been distributing the presentation material and results briefing materials on your seats. However, as announced beforehand, in order to promote a paperless, from today onwards, they will be stopped to be distributed. You'll be able to confirm the content and the materials at our company's IR website. I think you understand furthermore, today's presentation will be streamed live on our company's IR website and also will be streamed on demand on later dates also.
Lastly, the content of the presentation materials and the forecast numbers and the future outlooks will be included in the explanations and Q&A, there were points to be noted for within the material, so please read through them. Now Mr. Sawada, the President and CEO, will be explaining the results outlined and receive questions later on. Mr. Sawada, please?
Good afternoon, ladies and gentlemen. Thank you for joining us despite your busy schedule. We appreciate your kind attendance. So we'd now like to start representing to you the financial results of the first half for fiscal year 2019 for NTT. Let's start with Page 4. In a nutshell, we experienced increase in operating revenue, but decline in operating income. As far as operating revenue is concerned, we recorded second quarter levels for 3 years in a row. As far as operating income is concerned, there was a decline in operating income due to drop in mobile service revenue at DOCOMO as well as costs related to reorganization of our global business. So that being the case, we realized -- we experienced rather a drop in operating income on a year-on-year basis. But -- although we have not disclosed our internal guidance, both operating revenue and operating income actually exceed our internal business plan. And so we are making very positive stride. In terms of net profit or profit, there's a decline year-on-year. This valuation gain from consolidation of ENNET as a subsidiary firm in the first quarter, however because of the impact of the decline in operating income, we saw a declining net profit on a year-on-year basis as far as overseas sales and operating margin is concerned, since -- this concerns with the timing of the reorganization and operating -- correction, oversea sales remain very strong. And the impact of foreign exchange is about JPY 30 billion. We've been able to absorb the foreign currency impact and still realize an increase in operating revenue. However, as far as operating income is concerned and focusing on income margin per se, it's negative JPY 9 billion for one thing, we are making investment for expanding our digital offering. And also as we have consistently been pointing out, we want to shift to high value, high-margin services, such as managed services, but there is a delay in such a shift. And also, we require cost for rebranding. So that being the case, operating income margin declined by 0.9 percentage points.
Let me now focus on the consumer factors by segment. Top shows operating income and the bottom right shows increase in operating revenue per se -- correction, on the top. Long distance, international communication data and other business, in particular, the other business. Because of the consolidation of ENNET subsidiary firm, we saw increase in operating revenue as a result. So the drop in regional and mobile communication was offset by increase in those aforementioned sectors -- segments. As for the bottom part, this relates to the operating income. In the case of DOCOMO, there was already announcement by DOCOMO, there's decline in operating income as regional communications segment. It seems as though there's a slight decline in operating income. However, on a full year basis, we anticipate an increase on a full year basis. So this is in line with our plan.
As far as Long Distance and international Communications segment is concerned. If we focus on this particular segment. Yes, there is about JPY 10 billion related cost for integration purposes. So that impact is there. And furthermore, as I mentioned earlier, we are spending money on branding, but these are all one-off cost as far as we're concerned. Going forward, we would like to further pursue structural reform in this segment.
So next page. If you could focus on the next page. This is the financial results forecast for fiscal year 2019. As far as DOCOMO is concerned, there is impact of better-than-expected net increase in mobile in the first half. And then also, there's increase in handset sales. Although the [ net sales ] is lower than the previous year, however, the actual sales is stronger than our initial expectations. So that being the case, we are going to revise the forecast for operating revenue by JPY 60 billion. On the other hand, as far as operating income is concerned, yes, there's increase in handset sales. However, the gross profit from handset sales is not that high. So therefore, the increase in handset sales does not contribute too much to the increase in operating income. And also, there is expenses related to disaster countermeasures. And also at the same time, we have to consider the possible measures that [ Dokton ] will take when they enter the market. So we need to be prepared for that. So that being the case, as far as operating income is concerned and as far as the profit is concerned, we're not going to revise our forecast -- full-year forecast at this juncture. Naturally, we're going to make effort so that we'll be able to exceed our annual guidance.
Let me now turn to topics as there are many items. So I would just highlight some of the major points, if I may. I would appreciate your understanding. First relates to digital -- support our customers digital transformation, B2B2X projects. I mentioned, in 3 years, we'll have 100 projects in full. This year, we've been able to achieve 54 such projects. So therefore in terms of the number of projects we are making very strong strides. We have been expanding such projects. For example, support the offering of new lending service for financial institutions and also supporting the [ VoC ] customer data analysis for contact center industry. So we've begun to offer such services.
Next relates to the 5G services. I think this is familiar. From September 20, we begun the 5G pre-commercial services and as far as the investment is concerned, we are talking about 10,000 stations deployed by the end of June 2021, which means there's more than 8,000 stations increase.
Let's turn to the following page. Accelerating our own digital transformation. First relates to Global. This year, we're -- in June this year, we launched NTT Ltd. And we intend to complete the whole process by December this year, but in relation to the company in terms of the company names in each region, we want to make sure that we'll be able to change all the names so that they will include NTT. And all the logos of the subsidiary firms will be changed to NTT logo. And the company names will also be changed to include NTT. So this is the stage -- characterized as day 2. And we will -- sorry, day 1, day 2, day 3. So by day 3, we'll complete this whole process.
Also, as I mentioned earlier, we want to change from product sales to manage sales. We want to accelerate transformation to such managed sales services. And also, we want to realize implementation of unified ERP, cloud version of unified ERP. We want to introduce a unified ERP based on cloud within 2-year period.
And next, with regard to extended partnerships to strengthen our branding. Please look at the following page. In September, we signed a -- we rather entered into a technology partnership with Major League Baseball in September this year. This represents a technology partnership. So it's not just about a straightforward sponsorship, we'll also be providing technology, which means that this is a bilateral relationship. And before we already had that for INDYCAR Series and Tour de France, and also J League here in Japan and also for Major League Baseball, we are going to be expanding such a partnership. So we want to leverage NTT's technology and make sure that we'll be able to experience new type of experience for the brands. We want to support that. So as a result, we believe that the brand awareness will be enhanced as a result of this initiative.
In terms of the digital transformation of our own, the IT systems that are not integrated need to be integrated. The first part is the operation or service operation side, from accepting the subscription, providing the service to the billing of a service and we are making Intercloud-based IT service. And we'd like to automate the process, and we're scheduled to complete it by 2024. So excluding DOCOMO's consumer service -- for DOCOMO, it's only going to be corporate customers. But excluding certain services, we are going to integrate all of the services, and we have started the initiative already. The second is the unified ERP. On the global site, we would like to complete that within the next 2 years. But for the domestic site, it is going to take longer. And in the global site, S/4HANA, a platform that will be implemented overseas, we are going to implement it in Japan too. But we would like to spend the next 4 years to create this unified integrated ERP. As for RPA, 17,000 robots already have been implemented for the business processes, last year it was 500, and it tripled to 1,500. And more than 4,000 customers, we are providing the win after, which is the RPA service. We are providing it for the group too.
Next is utilizing the people, technology and assets. IOWN Global Forum has been established in partnership with Intel and Sony. We would like to bring in the photonics structure within the platforms, and we have started this forum. And IOWN W, which is W, we have announced it today, the wireless site, together with JAXA. We are working on the research and development of ultra-high speed large capacity communications infrastructures between the ground and space, which is going to be a seamless link. And also into the city, we are planning to have a field demonstration test of the DC power transmission. Chiba actually was impacted by the typhoon. And they want NTT Anode Energy to provide the disaster power as soon as possible. So we are accelerating this initiative.
Next page. It's now regarding the smart infrastructure platform we are building. We have created NTT Geospace Corporation to come under the NTT Internet. And we would like to reorganize it and complete it at December 2019. Real Madrid, as written here, the Real Madrid Foundation, which is a foundation for the football school, Japan. We are going to participate in this as an executive sponsor. And within the community building, that will be going on nationwide, we are going to participate with them so that we can utilize this as part of the community building. Next is regarding the community and economy. One is towards food and manufacturing business, or school or a local government that will be using that network. We would like to create [ aid ] system or cloud-based system to develop the community. And also in Vatican, they have the archives created. But in Japan, with NTT East, we would like to utilize this technology to preserve and succeed the local culture and art resources utilizing this digital art archived technology.
And next is regarding disaster countermeasures. The impact of typhoon #15 and 19 was large and quite serious. I'm sorry, it's in small letters, but typhoon #15, 35,000; and in typhoon 19, 45,000 subscribed networks went down; and for base station, 1,900 and 1,600 specifically for each typhoon has gone down, and we have been largely impacted by the typhoon. So regarding these countermeasures for disasters, as shown in the next page, we would like to strengthen the equipment in our facility. And also, we would like to accelerate the recovery process. From the government perspective, all the base stations should operate 24 hours, 7 days a week. But it's actually better to incorporate this medium-zone base stations. One is 1 million, if we have 160,000. It's 1 million times 160,000 base stations, so think about the large amount. So we would like to actually utilize that EV, the 8,000. We were going to renew it every 7 years. Actually, the electric vehicles, cost-wise, it's going to be lower compared to the conventional gasoline running vehicles. And actually, these electrical vehicles can be used as a power source. Therefore, we would like to accelerate or front-load the implementation of it. And regarding the mobile power generation vehicles, currently, we have 400. But we would like to manage it in a centralized manner and utilize it more. And also regarding the cables, we would like to bring it underground to -- as countermeasures for natural disasters, but it's costly. So we would like to prioritize the areas. And also acceleration of the recovery support through the typhoons that we have just experienced, Miyakojima or Miyako Island. There was -- we found out based on the big data communication that the Miyako Island was going to be impacted by the typhoon. So we have implemented recovery countermeasures beforehand with full preparation. So we have done that. So we would like to utilize [ a eye ] to generate damage forecast.
And also, we would like to further [ enforce ] a recovery system and secure personnel, and we would like to strengthen support to the customers. In the public phone [ numbers, ] we would like to have a Wi-Fi station or storage batteries, so that we will be able to cover the communications in these areas and enhance disaster countermeasures.
And next is regarding return to shareholders. And the first part is regarding the share buyback. For the share buyback, we would like to strategically and flexibly conduct it. But what I would like to explain today are the 2 measures written on the next page. This will be mainly for the individual shareholders. But the first one is according to the original guideline. The share price has gone up to JPY 5,500. So in the investment unit, it will be JPY 150,000. So we would like to split the stocks. And through this, we would like to expand the number of younger investors that will become our shareholders. And the other thing is the distribution of d POINTS. Right before 2 years, many shareholders seem to be selling their shares. So we would like to retain these shareholders. So in 2 years, we would like to provide 1,500 points and second year onwards 3,000 points. Of course, if all the shareholders will be subjected to this. So up to 2 years, is of 1,500 and 2 years or more will be 4,500 points. So this will also lead to the expansion of the d POINT members by distributing this. And the record date of the stock split will be 2019, December 31. And through these measures, we believe it is going to be quite effective countermeasures to secure shareholders. It's been long, but that will be all for my explanation. Thank you very much for your kind attention.
[Operator Instructions] the first question, please?
Masuno from Nomura Securities. I have 2 questions. The first question relates to the short-term performance. And the second question relates to the outlook for the coming year. Earlier, you talked about structural reforming global business. Also you talked about strengthening your brand in overseas business, and JYP 10 billion for reorganization also -- additional extra for rebranding. Going forward, you mentioned that this will continue until December, meaning that -how much will this be? How much branding and structural reformulated costs will be expended for the full year? And also based on that spending, what positive impact you see on your operation? If you could talk about the outline of your structural reform, I would appreciate your elaboration.
Well, thank you for the question. I mentioned JPY 10 billion for structural reform. I think in the second half, we anticipate JPY 8 billion further for such a reform. Now in the immediate sense. I mentioned that there's delay into transition to managed services. So therefore, JPY 2 billion impact from lack of sales and security and other sectors. So in the second half, it is likely that similar impact will be felt. So for the full year, I would mention -- I would believe that there's still further JPY 10 billion impact in the second half. But they will be pursuing streamlining and rationalization. We're talking about JPY 60 billion over a 3-year period. We are anticipating JPY 30 billion -- sorry, correction, JPY 60 billion for a 3-year period. We're talking about the figures, 3 years from now. So I think it will be heavily skewed toward the second half, if you will, in terms of 3-year plan. But the impact of the streamlining, I think, and structural reform will be that level. Also, as a result of JPY 60 billion impact from shifting to managed services. That will be profit in revenue impact [ too ] as a result of transitioning to higher-margin managed services. Now this will take 5 years -- roughly 5 years. But the target for 2023 will be margin of 7%, so that will be JPY 190 billion -- that will be JPY 190 billion thereabout. So JPY 130 billion, the gap from now will have to be covered by the 2 aforementioned pillars. So that is the plan we have.
Let me confirm. So in 3-year period, JPY 60 billion for 3-year period. You're talking about cost reductions, JPY 60 billion, right, okay? And the remaining JPY 60 billion, that's a profit increase to the increase in revenues?
Yes, that's right.
So impact on profit. You're talking about the impact on profit. Okay. Thank you for that clarification. My second question. Digital communication, you had the impairment loss in the previous first -- second half last year. You were able to cover that. And also structure reform is underway. So for this fiscal year, as a result, I [ can hear ] the process of those various initiatives, both the medium to long-term and 3 years or 5 years from now. Well, what about next fiscal year? What will be the situation, if you will, for next fiscal year? If you could talk about each segment and your outlook for the next fiscal year. DOCOMO will be recovering into the -- in the positive profit territory. But what about other segments? What will 2020 be like for each segment? So in the context of 3 years, 5 years from now, what will be position of the next fiscal year?
Thank you for the question. With regard to DOCOMO, as you mentioned, Mr. Masuno, next year will be the bottoming year. We are anticipating a recovery for DOCOMO starting for next fiscal year. So we want to make sure there will be the general profit in DOCOMO. As for NTT East and West. The first optical fiber back-end system, integrated system, will begin its operation towards the second half of this fiscal year. And the impact of the unified network will be roughly JPY 10 billion, perhaps that positive impact, that is going to be felt. And aside from that, with regard to digitalization, we're trying to change processes to enable digitalization. So as a result of those activities NTT East and West, will likely be able to have -- be in the positive territory relation to the operating income. Now turning to Global business. We want to separate into 2, NTT Ltd and NTT Data. We would separate into 2. As for NTT Data, very strong performance right now. I'll be very frank. Our order taking is very, very substantial. We anticipate further in the pipeline for the third quarter, very large contracts. So for next fiscal year, NTT DATA will be very, very strong performance in terms of the global performance. That potential is very high. As for NTT Ltd, they have just begun their streamlining and rationalization efforts. So in 2-year period, they will be carrying out its migration process. So also, not as much as this fiscal year, but expenses will be much lower next year. But they will -- of course, they will be expanding their operating income, but facing a lot of challenges. That's the type of year it will be. As far as operating revenue is concerned, as I mentioned earlier, it's not dropping, it is increasing. So that being the case, what they need to do is to further make sure that they translate the marketing activities into actual profits. Now as for other business, be it power business or be it Urban Solutions, building real estate are concerned, it is not [ clear ] who is able to reap benefits from the various initial activities. So we will not likely see substantial profit from the other business segment next fiscal year. Thank you for that.
Thank you very much. The next question, the second row from the front.
SMBC Nikko Securities. My name is Kikuchi. The Global business is my question. For NTT Ltd. I have a question. The structural reforms, you're spending JPY 10 billion. And you're in the process of doing so, is what I think. The first quarter and second quarter profit, when I look at it, is it costing more? Or if you exclude the structural reforms, it's not performing as planned? And during the structural reform period, it seems that there's a downsizing or the business worsening, we don't have to think about those factors, meaning that it doesn't seem like it is doing very well. And the Global NTT Ltd. business environment or the operations current situation, can you share that with us?
Yes. First of all, United States at the center, the market itself is rapidly moving towards digitalization. The NTT Data group and for NTT Ltd., both will be impacted by this. And NTT Data Group, they provide -- they have to provide the solution by industry. That's their mission. And NTT Ltd., they will have to provide a managed service. That is the mission. So the missions are separated. But both sides, they are consulting to do the digital offering or hiring talent or preparing. In total, they are using the JPY 4 billion. That is a fact. It's about JPY 2 billion, JPY 2 billion each. In addition to that, NTT Data, the recent order receiving situation is good, but Limited side, the security or the managed service, it is not telling us what we have originally planned. It is they're continuing the product sales. And with just that, we're not able to gain much of gross profit. And therefore, that impact is about JPY 2 billion. Therefore, as the growth investment is JPY 2 billion, and the struggling part is JPY 2 billion. So that -- those are the expenses other than the structural reform, and the previous JPY 2 billion, that I mentioned, I did say that it's going to continue onto the second half. So as Mr. [ Kikuchi ] would say, if you look at the end numbers, you may think that there is structural reforms, but the numbers may be larger. I think that's where you want to ask about. But in reality, well, the management of business is done -- doing it together with Jason. And we think that we'll be able to clear that.
My second question is a simple question, maybe. The regional communications, I believe, on the West side, it seems that expenses is increasing. Is that a onetime temporary increase within the regional communications? It seems that -- well, the west, especially is declining in profit. So can you explain about that?
Well, this -- the first half, from that point, you can -- it looks like the expenses are accumulating. That is because the disasters from last year and the response and countermeasures of those disasters are included. And also, till now, we changed the depreciation method. The ones that were in the floating profit that we had, there were various depreciations or amortizations or there's a special amortization and loss that we have recorded, and there's some removal of the -- or disposal of assets. At this time, the cable depreciation, we have the reverse return from last year. So that is from last year, so overall this year it is going to turn into positive.
I have the third question. In order to have a more advanced group management, as for SAP for HANA, you're going to integrate those systems. Can you share with us the meaning of doing so? Meaning that right now in the existing business, that part, you're using SAP, and there are some conversion migration, but there are some new areas, too. So you've changed the database to HANA and everybody goes to S/4HANA will be integrated into S/4HANA. I believe that there is going to be quite of a cost.
Yes. As you have mentioned, currently, the global site subsidiary companies, they're on SAP. But they're all stand-alone SAP systems. So there is a connecting system. So for the consolidated connected type of work, there is problem, but the codes that they're using is not consistent. So we are making it into one consistent one this time. And also, by implementing S/4HANA, the Concur or Ariba or SuccessFactors, which were the external system, all of that is going to be commonized. And based on that, the database is going to be integrated into one. And through that, we're going to seek higher efficiency. The existing license, when those are replaced, whether it's going to be higher or lower, it's going to be maintained the same. That's depending on the negotiations. But basically, we think it's going to be the same. So it is going to impact efficiency. And also it will become more visible.
So the Japan site, too, you're going to integrate all that too, right?
Yes.
So to what extent are you going to do that integration? The financial accounting, the managed accounting, all of that is going to be consolidated to the holding company, and you can look over it? Are you going to go that far? Or if you're not going to that far, but is it you're doing it to make the group structural reform easier in the future? If you do have an integrated system, you're able to freely do things?
Well, but it's a holding company. All the domestic subsidiaries companies and overseas companies and the general accounting and the managed accounting, all of that, you're going to integrate that into one, and you want to manage that under the holding company. Is that what you're thinking of?
Well, on a consolidated basis, well, it's all integrated. But we'd like to make it -- the codes that are used for the system, the employee IDs were all integrated too into one. So we're starting it. But there's a system -- accounting system called
Active. That's Communications and DOOCOMO are not included. And for the subsidiaries, they have a different system. So we want to replace all those systems because we have to renew the system at some point. So at that time, we'd like to replace them with the cloud-based IT system. I think that's the better way of looking at this. And with this, we'll be able to see all the KPI performances at a real-time basis, will be realized. Thank you very much.
Thank you very much. We'd like to go into the following question. The gentlemen in the front row, please.
Tsuruo from Citigroup. I'd like to follow on Mr. Kikuchi's present question. So in the medium term, how much investment will this require [indiscernible] as I said before, both the domestic and overseas operations? I know that you have counterparts you have to discuss, maybe you won't be able to respond to all. But over the medium term, how much investment do you think this will require in relation to introducing SAP? Or will this have a major impact?
Well, thank you for the question. First of all, NTT, when [ I was the President ] of NTT Security, S/4HANA was introduced in 1.5 years, that took about JPY 3 billion. So we're talking about 1,500 people. So the basic functions were the same, but the IDs -- because of the license in question, well, let's say, we are anticipating tenfold increase, JPY 600 billion for twentyfold. So I think we're talking about tens of billions of yen for global operations. So tens of billions of yen for the global site of the operation. But then that's not all. I think we need to finalize the details. So that's the overseas operations. As for domestic operations, it's more complicated. To be quite candid, we don't have clear set of numbers for CapEx for domestic site. But as far as the outline is concerned, annually, we spend about JPY 200 billion for the NTT Group as a whole. So if you exclude overseas business, it will be above JPY 200 billion. So ERP, CRM and other processes include [ one-third of ] CRP, let's assume. So we're talking about JPY 100 billion max. So this includes the P&L. So as far as initial investment is concerned, the maximum -- we have already had maximum numbers. So it should be -- the actual number should be lower than the ceiling.
My second question relates to the medium-term outlook. At the [SCUBA] Expo the other day, you talked about the common usage of towers. I understand that there are discussions underway. So you're investing in J tower. So can you give us an update as to the common usage and sharing of tower? What are your thoughts at NTT? I would appreciate your response.
Well, we have consistently been involved in various initiatives, for example, within tunnels or within Buildings, introducing common antennas for those areas. This was already being carried out without any forceful move on our part. Now the second part. 4G and existing telecom specs, such as 4G where J Tower already had common usage. So placing antennas outside of common usage part for 4G, that's what we have to accelerate. We have 3 operators and with Rakuten coming into the marketplace, it will be 4 parties involved. And hopefully, we will be able to accommodate those -- all those 4 parties. So this regards engineering and also, we need to come up with prototypes. So that's what we are discussing right now. The discussions have already begun. And the final part relates to 5G per se. We have to do this on an antenna by antenna basis. So it's not just limited to 5G, but we need more cognitive type of antennas. We need to consider the possibility of more competitive antennas. So it's not so much NTT per se. The initiative is with J Tower.
If there's an idea, let's say, in the case of 5G, how many towers do you think this will require? Or how much towers can be commonly used for 5G? Any ideas?
Well, we can't tell. In the case of signaling, you can't place 4 antennas at the same time. So -- but if you use the J tower, we can cover all that? We're talking about 200,000 towers, no, 800,000 towers. Sorry, I forgot the actual number. I think it was a 200,000 towers. Yes, 200,000 towers. That will be the basis, I understand. And if you can achieve such antennas, it will be on utility poles.
So JPY 20 million for power and JPY 12 million for NTT. So how much of the towers do we have can be accommodated, whether it's 10%, 3 million -- 30,000, correction. So the scale we're talking about, is the point of reference, but it's not yet visible, sorry.
You don't have to respond to this, but I appreciate this number. But primarily, we talk about CapEx for our fixed line business, right? So CapEx will be in the fixed line business. In the case of how will base station related CapEx be allocated?
Well for base stations, it will be J Tower. But then the network to connect that will be in the [indiscernible] business, so that's going to be quite large.
Thank you very much. Any other question from the floor? Third row from the front. Please go ahead.
SBI securities. My name is Moriyuki. On Slide #9, you have the current status mid-term management plan. You did explain part of it. But there's 54 the B2B2X projects and making that -- capitalizing on that. What is the percentage of that? And also, the 2 -- the 2 points, the second and third quarter point you see on this page. When are they going to contribute to the profit? Sorry, it's a very vague question.
Well, I cannot tell what percentage is being monetized. And at the proof-of-concept stage, I don't know what percentage that is yet. But I'm told that there's no numbers to be disclosed. Several ten billions in the yen level, I think, at profit level. No, no, no, at revenue levels -- sales level. Our profit, though, is at the struggling level still, this 54 projects. It's not 54 companies, but partners. The managing [ cows, ] that's one project. We would like to expand that to ten -- several hundreds. So even though the project is same, by -- as the time passes, many of them, the number increases. And by repeating those, the margin is probably going to increase. Therefore, the numbers that I can share with you right now, I don't have in on hand, but in terms of revenue, that is steadily going up, is how you can understand that. For example, the first line, the first 2, in the second and third point, the lending platform has already started. So the money is already coming in. That is Shinsei Bank. That is our partner. Well, it will depend on the bank's business plan, so I cannot share with you solid numbers. However, it is going to increase more. And the third one, at the call center, NTT West has already implemented this service to their customers. So this also through sales activities, this model is going to be implemented and increased. So for both 2, they are not at an experimental stage. They are already implemented. The same one, the DOCOMOs bus -- AI bus. Those buses in areas in Japan has already been implemented. So even though it's 1 project, but it has been deployed in various locations and increasing.
Understood. And my second question is regarding our disaster countermeasures, you said you're going to increase your efforts in that area. You will wait for the revenue coming in, but this is like an insurance for contingency. But what is going to be the ending expenses that you will be looking at? You're going to expand gradually, right?
Well, this all depends on how you think about this? For us, how are we are going to respond during a disaster moment is what we have been thinking because we cannot cover everything. So the breakdown maintenance, meaning that even though it breaks down and we repair it, in terms of economies, when you compare it, which is better, depending on that, we decided the formulation. The past experience is up to now, for example, to bringing in the cables underground, it's about 100 million per kilometer. And that's not going to pay off, but it breaks down once a year in a certain zone. It's 10 million, 20 million. If it breaks down or cuts off every year, it's going to be 100 million in 10 years. In the past, it wasn't so, but we have to compare the economies based on the probability, because meaning that the probability is going up. And that is what we are targeting at is that the scope that we can manage within the current cost and that cost itself, we would like to reduce that through digitalization. So the question you asked, meaning that the additional investments for disaster countermeasures, how much is that investment going to be a burden on us? We don't look at it from that angle. We are looking at from the angle to not increase the cost, but be able to manage within the current situation and how are we going to compare the economies and make the decision as how we are looking at this.
I just want to confirm once again. So this fiscal year, the expense is going to go out in advance, and that's going to flatten out throughout the years?
We have a vast number of equipment and facilities. And to make them all resilient and robust, looking at the Chiba Prefecture and looking at the typhoon #19, they're still at the level that they will be damaged. And we cannot make it all strong, all of them. So it's going to go out as a maintenance and repair expense. And this year, we have already spent JPY 8 billion. And next year, it may be JPY 8 billion again. So those -- that amount, in a sense, is the additional spending. But in the next several years, we would like to make the core equipment and facilities a robust and resilient, so that we will not have this additional expense. We have so much of the equipment and facilities. So I cannot give you all specifics because we also have batteries, too. So it were all depending on the wise decisions based on which will be the core. Thank you very much.
Thank you very much. Next question is, the gentlemen in the second row from the front.
Tanabe from JPMorgan. I just have one question, sir. It's about the medium-term outlook related question. Earlier, Mr. [ Tsuruo ] asked this question as well. So as you head towards 5G, with regard to -- you mentioned the CapEx for fixed facilities will not increase that much to accommodate 5G. But aside from DOCOMO, be it NTT East/West or NTT Communications, in relation to fiber, how much CapEx will be required for 5G? And also, with the increase in 5G traffic, do you think there'll be increase in revenue for fixed line portion? And also with regard to local 5G, I think NTT East/West and Communications, how do you -- how will NTT group companies to be involved in local 5G, so they'll be able to realize the increase in profit? That's my question.
Thank you. Yes, I'd like to go back to the questions raised by Mr. [ Tsuruo ] earlier. It's not so much 5G specific. But in relation to common antennas, CapEx for common 5G antennas, I think that was the question. So if you're talking about 5G specific investment, certainly by next fiscal year NTT East/West, we'll be offering backbone as a service to accommodate 5G. So that investment, yes, will be required. But with regard to fiber per se, considering utilization rate for fiber, this can be covered from the macro perspective. But then at micro level, there are some shortfalls, so we'll have to address that. We're talking about 800,000 base stations 5G among the 4 parties. So we -- 800,000 subscription fiber. Yes, we already have fiber to accommodate that. So that being the case, on the fiber side, we don't expect the need for substantial need for investment into fiber to support 5G. But as I mentioned earlier, in order to deliver background service, we need to invest in certain level of nodes. That is the situation. But if there's further congestion going forward, if, for example, people begin to download video at a very rapid pace. If that's going to be required on the mobile phone side. And then it isn't just fiber course, but the transmission efficiency will have to be improved. So that will involve and until additional investment down the road, that is a possibility. But for the current circumstance, we do not believe there's a need for substantial increase in investment. Actually, we're trying to cut back on the investment per annum, and we believe we will be able to accommodate this even in a decline in CapEx. In local 5G, we have a lot of expectation for local 5G. NTT East/West, if they are connected, integrated, then it would be like DOCOMO -- the second DOCOMO, so that's not allowed. But if it's a closed circumstance, that's all right. I know that the competition is making a lot of noise, but we're able to be involved in certain elements. For example, in the Yamanashi Prefecture, we created a joint venture. It's an agriculture-related house, [indiscernible] or 4G was used, but we want to introduce 5G and connect that from -- connect with the network. If that's the case, then the image data and more detailed data can be accessed on a real-time basis, which means that the system for the farms, we'll be able to deliver and sale such farm-related systems much easily. So how much scale are we talking about? We have to formulate the business plan, but we have a lot of expectation for local 5G. Thank you.
Thank you, very much. The person in the third row from the front.
Ando from Daiwa Securities. This is a question for confirmation. Just before, you said that overseas business or global business, you said 7% and JPY 190 billion. What is the calculation formula for that? So I just wanted to confirm with -- under what calculation you have reached those numbers?
JPY 2 billion revenue; profit margin, 3%. That is fiscal year 2018's current situation. JPY 2.5 billion revenue target, 7% margin, 2020 -- fiscal year 2023. That's the target. When you compare those 2 years, fiscal year 2018 is JPY 60 billion approximately. 2023, I can't calculate right away, but it's about JPY 190 billion, I think, and that difference is about JPY 130 billion. That is what I have said. On the profit base, in 5 years, JPY 130 billion when we want to generate that, half is going to be cost; the other half is going to be increasing revenue and profit. That's how we would like to compile this number. That's what I mean.
Okay, because I wasn't able to calculate. That was very helpful. Sorry about that. And related to that, the increase in revenue, this is after you shift over to managed service, is what you have explained. So you're going to increase the revenue through mainly managed service. Is that the correct understanding?
No. There's about 4 key points. The first is the digital solution of NTT Data. And on the NTT Ltd. side is the managed service. In addition to the managed service, they have data centers, which are performing very strongly. Moving forward, there will be a continuous increase of data. We have [ GAFA ] as our customers. Therefore, in each area, we believe that the data amount is going to increase in various areas. And next will be security, including equipment and devices. There are a lot of factors that can experience growth. So digital solution, managed service, data centers and security, these 4, those will be the drivers for the increase.
So the order that you mentioned, is that the order of your priority or expectations? Or you just did it at random? You just said it at random order.
It's not in the magnitude, but it is the order of expectations. The highest expectation will be digital solution. And next, maybe data center. The third is managed service and the fourth will be security. Well, that may change -- interchange. Magnitude, the profit is at 20% with data solutions, data centers, about the same. Security right now is not doing that well, so we have to improve that point.
So -- if that is so, the effect -- positive effect of the structural reform, if that is generated. So those points are going to be easier to increase or through hiring new talents and others? You think that, that's going to bring in more addition and you have expectations towards that through efforts at work?
Of course, we need to put it in our efforts, including recruiting people. But for the security side, we have acquired Secure 24 last year, and they are performing quite strongly, and their capabilities is quite high. So how are we going to expand that in the same managed service, the NTT Global Network, this is the form of Virtela. They have a 20% of margin, and they have -- their scalable, their SDN, and they still have room to expand. So in conventional thinking, we had people hired in the front side. But in the special company, having a special sales and special SVEs, I think it's more important. So we're going to hire those type of people. So on the other hand, on the front side, like NTT Com's, local subsidiaries and the [ NDDs, ] each region's people, the people who are selling the product. And the people who want to do security, and there's those people, we will have them shift over to that side. But on the other hand, if the productivity doesn't go up, that needs -- the efficiency in those areas need to be improved is what we are thinking of.
Thank you very much. Next question, please? Yes, Please.
Q Research [[indiscernible] . I just have 1 question. It's about B2B2X. You provided us with an update. It seems much stronger than initially expected. But just one thing, I would appreciate. You talked about Las Vegas. That case or you have already introduced the cases in Las Vegas, for example. But right now, here in Japan, what about the models for B2B2X model? Do you think they can be transplanted outside Japan? Do you have models for B2B2X model here in Japan that can be applied directly outside Japan? I would appreciate your insights.
Thank you. As far as the current situation is concerned, we don't have any firm orders per se. But the trial is underway. On this page is the contact center. Obviously, offering VoC data and also support. Foresight mining, this is the basis of this model. And [indiscernible] is selling a R&D technology. This is a contact center solution and we are trying to apply that outside Japan. We're in the 12 phase. NTT Ltd. will be the one marketing selling this particular technology. But as far as the product is concerned, we believe that it will be more than viable in European markets as well as in the North American market. So that's one possibility. But this is something down the road?
Well, up until now, this was not -- this wasn't the case for your company. But now this type of model is becoming viable. What is the backdrop? What has led to you -- what has led to situation where it is possible for you to market this type of technology? What change took place in your company? What is the change that took place in your company? And what has enabled you to take this technology outside of Japan? Or is this simply the case that this particular model is a very outstanding one, so NTT Ltd. is trying to expand that? So do you have a system in place whereby you'll be able to extract fiber models from Japan and then transplant that outside Japan?
Well, I can't say anything. Okay. I can't say anything with great confidence. But we're trying to create such a system, and the driver will be NTT Ltd, NTT DATA, overseas companies. They want to sell whatever products that are viable outside Japan. And when they do benchmarking in the marketplace, call center solutions, that we just talked about and also multilingual translation services and engines, this is where you're being delivered by COTOHA. We get the sense that these are properly viable outside Japan. Actually, our global side and non-Japanese marketing reps take a look at -- are very focused on such technologies. So this is a very natural outcome. So there's a request on the part of the sales team. So it's important -- so we don't have a systematic delivery. That is because the vendor-related functions are still weak. So be it Japanese just product or non-Japanese product, it's important that we need to deliver those products to customers throughout the world. When the customers place orders, the invoice and the delivery, and they do the fine tuning. This type of systematic pipeline is not yet fully established, which means that the same applies when we want to introduce non-Japanese product from outside Japan into Japan. So I think we've just begun this process to create the system. But I think -- structurally, I think it's very positive that we now have the will to address this. There's an attention emerging.
Thank you very much. Any other questions from the floor? No more questions from the floor. With this, we would like to conclude the briefing session for today. Thank you very much for attending despite your busy schedule. Thank you very much. I had a cold today, so it may be difficult to hear my voice, so very sorry about that. [Statements in English on this transcript were spoken by an interpreter present on the live call.]