Natsuko Fujiki: We will now start the briefing on NTT’s Financial Results for Fiscal Year 2019 First Quarter. Thank you very much for attending today despite your busy schedules. I am Fujiki from the IR office. I will be serving as the facilitator today. First of all, I would like to introduce today’s attendees.

Mr. Shimada, Representative Director, Senior Executive Vice President; Mr. Hiroi; Member of the Board, Senior Vice President, Head of Finance and Accounting department; Mr. Kitamura, Member of the Board, Senior Vice President, Head of Corporate Strategy Planning department. We also have the attendants from holding company’s Corporate Planning department, Finance and Accounting department, NTT East/West, and NTT Communications.

For today’s briefing, we will be explaining in line with the presentation material posted in our company website. First page of the presentation material has the point of attention. So please read through them when you have the time to. Today’s briefing session is streamed live through our company website. We also will have this available through on-demand streaming later on.

We seek your understanding on this point. Regarding today’s schedule, first of all, Senior Executive Vice President, Shimada, will explain the results followed by questions from you. Mr. Shimada, please.

Akira Shimada: Thank you very much.

Shimada is my name. I would like to share with you the financial results for the three months ended June 30, 2019. Let me start with the highlights. If you could please turn to page four of the presentation materials. With regard to operating revenue and operating income, you’ll find these numbers there.

We are seeing increase in operating revenue and decline in operating income. Operating revenue reached record first quarter levels, ¥62.7 billion increase year-on-year. It reached ¥2.9 trillion. As for operating income, primarily due to the decline in operating income margin from customer return at DOCOMO, it declined year-on-year. Declined ¥32.0 billion and operating income reached ¥505.2 billion.

Now, for the plan for the first quarter, we are not disclosing the first quarter plan per se, where both operating revenue and operating income actually exceeds and outperformed the plan. Turning to profit. There is the gain in valuation from integration of NTT consolidated subsidiaries. So therefore, year-on-year, it declined ¥9.2 billion year-on-year, profit was ¥280.5 billion. So year-on-year, declined ¥9.2 billion only.

As for overseas sales and overseas operating income margin, we are continuing to expand ourselves outside Japan even whilst we are integrating our organization. It increased ¥0.1 billion and reached $4.8 billion. As for operating -- as for overseas operating income margin, due to anticipatory investment such as service, development and promotion to enhance our brand, operating profit -- operating income margin went down by 1.0 point and was 1.6%. Please turn to page five. So with regard to there was an increase in revenue at long distance and international communication business.

And second, data communication segment. Other segment increased due to integration of NTT’s consolidated subsidiary firm and expansion of Urban Sales, Urban Solutions. As for Mobile Communication segment, as was announced by DOCOMO, the operating revenue declined. As for Regional Communication segment, it declined. It's regarding shareholders' return, the acquiring amount from the government.

For that, we have resolved the share buyback. Maximum amount of the share buyback is 300 billion and the maximum amount of the shares to be bought back is 500 -- 53 million. The time period of share buyback will be from 2019 August 7 through 2019 September 30. Due to this share buyback this time, the EPS target has been revised. We have increased it by ¥6 from ¥456 to ¥462.

It was very brief, but that's all from my explanation. Thank you. We'd like to take your questions now. A -

Natsuko Fujiki: From SMBC Nikko Securities, Mr. Kikuchi.

Satoru Kikuchi: My name is Kikuchi. I would like to ask my first question. So long distance international communication segment, you saw decline in the operating income in this segment. You talked about expenses related to the integration of your global operations. Suppose this is anticipatory investment, but going forward I would imagine that this expense will actually expand in full-fledged manner? Is that your expectation? You mentioned that you will be pursuing integration of overseas business for the next two years.

I think that was your comment in the previous session. So during this two-year period, will this anticipatory investment be recorded? Can you talk about how much integration expenses you're expecting? And also, in the first quarter, Dimension Data has seen a decline in the operating income, but increase in the operating revenue. Is this due to the impact of the integration expenses including of around integration expenses, what will be the level of operating income at Dimension Data for the first quarter? That's my first question.

Akira Shimada: Thank you very much. Shimada, here.

Thank you for your questions, sir. So let me talk about long distance and international communication segment and the integration expenses for this particular segment. For this fiscal year, the integration expense will be a little above ¥10 billion. That is our plan. And this time around, Dimension Data, we have seen decline in the operating income year-on-year.

But that particular -- that decline primarily is related to integration expenses. So the drop year-on-year is primarily due to integration expenses. Now going forward, for the next 2 years, we will be pursuing integration process. The main part, for example, for this fiscal year, we will be carrying out unification of NTT brand -- under NTT brand, so physical expenses will be required to unify the brand. And also, on top of that, with regard to IT system, we will also be carrying out various integrations.

So that will require some expenses. As for the next fiscal year, we will have to study this situation going forward. But we hope that we'll reduce the integration expenses for the next fiscal year compared to this fiscal year. And also, with regard to Dimension Data, I think I’ve already responded to your question. So the negative -- for the current part, this is primarily due to integration expenses.

Yes, that would be the correct characterization. Thank you for your response.

Satoru Kikuchi: In the first quarter, last fiscal year, operating income was ¥34 billion. No, it’s 25 -- negative 25 this year, which means that there has been decline close to 60. So therefore, maybe integration expense is quite large.

So may I take it that the expenses are constructed in the first quarter? Or do you anticipate that ¥10 billion operation integration expenses will be required for the full year?

Akira Shimada: Well, I think expenses will be incurred going forward. But for the time being, yes, the decline in operating income for Dimension Data is primarily due to the integration expenses. Now when we set up the initial plan for long distance and international communication segment, the operating income plan for this segment, all the factors and the required data integration expenses, now that for the projection of Dimension Data’s operating income, we were not able to factor this in because we could not and divide how the expenses will incur. So for the first quarter results, yes, integration expenses were factored in Dimension Data for the first time. So it’s missing as though there is a gap, but that is the situation.

And also this time around, as far as the integration expenses are concerned, this primarily incurred in Dimension Data. So I think that’s how you should see the situation. So in the case of NTT Communications, the integration expenses are not that are not really reflected.

Satoru Kikuchi: Okay. Thank you.

Let me go on to my second question. Earlier, you mentioned that the actual performance for the first quarter exceeded your internal plans. What is the driver? In what parts are you outperforming your initial book plans? Do you believe that this could actually have a positive impact on your annual plans? And also, as we go into second quarter and the third quarter, maybe this the impact of the new rate plans that DOCOMO may expand, so when you take a look at the current operation at DOCOMO with regard to the new rate plans, what is your assessment? How do you see NTT DOCOMO's response and handling of the new rate plans for the first quarter? That's my second question.

Akira Shimada: Thank you very much for that question. So against the plan, we mentioned that we are seeing upside in the first quarter as far as the actual track record is concerned.

But first of all, at NTT East and West, the operating income was actually higher than our initial expectation. But as you are familiar towards the second half of the year, there could be the potential for expenses during the second quarter. And also with regard to DOCOMO, there is an upside. But as you are aware, as far as the new rate plan is concerned, 70 million customers will be transitioning to this new plan. So that positive impact may be absorbed as more customers migrate to the new rate plans.

Satoru Kikuchi: If I may, generally speaking, from your perspective, from a relative NTT holding company, do you see the NTT DOCOMO's performance and operations is in a very strong situation?
Unidentified

Company Representative: Yes. At this moment, yes, I think they are in a very good situation as was announced by NTT DOCOMO in their financial presentations. Compared to the initial expectation, the migration and tick-up of the new rate plans was not as high. It is -- that is true. Before we consider the potential scenario down the road, I believe that, yes, NTT DOCOMO's performance is very positive at this moment.

Natsuko Fujiki: The next question is from Daiwa Securities, Mr. Ando.

Yoshio Ando: This is Ando. I have 2 questions. And the first question is, this was not explained, but in the back part of the presentation material, for example, Page 9, at the digital -- promoting digital transformation for the domestic businesses, you have several points that are written there.

How should we actually interpret this content? Because at the very end, it is going to have an effect of a cost reduction is that what I assume. However, the path to the final numbers that we will actually see, if you can explain that path, I would like to hear about that. That was my first question.

Akira Shimada: This is Shimada speaking. To promote the digital transformation as the domestic businesses, for example, the telephone inquiries about problems and regarding the glitches and others are written here.

However, the items leading to an immediate cost reduction, I think, out of what you see on this slide, that will be difficult to achieve. These are things that will take certain amount of time; however, how it is structured is that by implementing these systems -- based on those implementations, well, the personnel expenses will gradually go down, are the steps that we are planning to take. Therefore, at that timing, you -- we will start to see the cost going down. And this is a scenario that we are thinking of. That is all.

Yoshio Ando: Okay. My second question is regarding Page 13. It's promoting the smart infra business. And here even though I read thoroughly through this, I cannot see how this can be turned into generating profit. So I will appreciate if you can explain this.

Akira Shimada: Regarding the infra business, this is the pipe conduit or the civil engineering related infrastructures that is -- InfraNet is the company that is in charge of that. So first of all, the NTT Communications civil engineering related facilities work, we're going to transfer that over to InfraNet in October is the current plan. In NTT East and West Civil engineering related facilities, we have no plans to shift it over to InfraNet. But the other equipment and facilities that was under the management and maintenance of other group companies were separately done, but we are going to centralize that to this company as a group in East and West. We will manage it in a centralized manner.

So the separately managed and maintained pipe conduits and others will be managed and maintained in a central manner. And also, we are going to pursue if other equipment and facilities can be handled in the same way. And the digitalization of these equipment and facilities, meaning that where these pipe conduits exist or where the tunnels exist, by digitalizing all this information, we can link that to new business opportunities. Currently, on the ground surface, we have the telephone poles and others. And automatically, trying to find out which telephone pole is tilting and, et cetera, or what are the telephone poles or electricity poles that are necessary or not, we are actually driving on the roads and collecting the data like Google Earth, but we will like to expand that data collection to other equipment and facilities.

And we would like to the underground facilities too. And by making this into a database that we can provide, we would like to link this to create new business opportunities. This is the idea behind this. Thank you very much.

Natsuko Fujiki: Thank you very much.

Next question please. Next question is from Mitsubishi UFJ Morgan Stanley Securities, Mr. Tanaka. Mr. Tanaka the floor is yours.

Hideaki Tanaka: Thank you very much for my question. Tanaka, here. Can you hear my voice? Tanaka here.

Akira Shimada: Yes, we can hear you, sir.

Hideaki Tanaka: I have three questions.

I will ask one by one, if I may. Let me start with the first question. In the beginning, you talked about the profit. You talked about the gain from valuation of ENNET. How much was that? Can you share that with us please?

Takashi Hiroi: Yes, thank you.

Hiroi, Head of Finance and Accounting. As far as this particular issue is concerned, it's roughly ¥12 billion, roughly ¥12 billion. That is the number.

Hideaki Tanaka: Thank you very much. The valuation gain.

Is that reflected in operating income? Is that the case?
Unidentified Company Representative : Well, as far as we’re concerned, no. It's financial loss and gain, that is where we reflect that, not operating income. So this is not a subsidiary firm. But this time around, it helps me to do, but it is a subsidiary firm, so if we had to value if we have the valuation of their stocks. And that is now reflected in the financial profit and loss.

So that is the understanding you should have. Thank you very much.

Hideaki Tanaka: My second question the share buyback. So, I think you’re talking about the excess ownership, the excess beyond 33.3%. But when you consider the maximum, I think there’s still room.

That is my sense. May, so if you so are you going to do buyback aside from the government-based, aside from the Japanese government?

Takashi Hiroi: Hiroi here from Finance and Accounting. Yes, that is the case, in other words. So the government-owned shares -- on top of the government-owned shares, recently, what we have found is that as we go ahead with the government-owned shares buyback, that there's also application from the general public shareholders as well. So in consideration of that -- that is why we came up with the aggregate amount we wanted to offer.

We set up the aggregate amount so that we could buyback all the government-owned shares that were available for this time.

Hideaki Tanaka: My third question. This is in the supplementary data. Page 6 of the supplementary data with regard to NTT Communications Group, Page 6. So let me talk about NTT Communications Group on Page 6 of the supplementary data.

So starting from the top line. So application and content column, that's ¥30.6 billion, but although -- I think annual plan is for downside, for decline; however, the first quarter was very strong. What are the factors behind the positive growth in applications and content? Is there a downside risk in the second half for the applications and content column?

Akira Shimada: It's Shimada here. I would like to respond to your question. Yes, the thing is, in this column, well Plala was integrated with DOCOMO as a subsidiary firm.

So that's why there is a decline. That's the plan was for a decline in the operating revenue. So it will have an impact during the second quarter.

Hideaki Tanaka: I get it now. And also, on a related note, the amount isn't that large, but ¥1.5 billion worth of impairment losses have been recorded.

What is the reason behind that? What is the breakdown of the impairment loss?

Takashi Hiroi: Okay. Hiroi here from Finance and Accounting. I'll respond to your question. Yes, the impairment loss column at NTT Communications, so there's underground cable, they have such assets. So part of the underground cables have been subject to impairment loss accounting.

Natsuko Fujiki: Next, JPMorgan Securities, Mr. Tanabe.

Jun Tanabe: This is Tanabe. I have one question. It's related to Mr.

Tanaka's question regarding NTT Communications application and content. It had a 10% growth. And I believe that the Plala's transfer is after April, so the Plala part is increasing and you brought in DOCOMO site accelerator and also others are also increasing. And whatever the remaining is going to go after the second quarter, is that the plan? Or -- well, let me just confirm on this point. And also for solutions, it has grown for 10%.

So -- and overall, the amount may be small, but is this sustainable? Or is this going to continue, in terms of content, I would like to know that? That was my first question. Unidentified

Company Representative: May I. Basically, for applications and content, basically, the Plala part increase in revenue is all of that is reflected and also the solution compared like keeping right now digitalization is going on near the surrounding environment, and we're able to grasp that opportunity. And it's hard to give you hard numbers, but we believe that positive impact is working throughout the full year.

Jun Tanabe: Okay.

Understood. So regarding Plala, so just for 2 months, it's included, but it grew largely. And it's not that you -- have you implemented new initiatives for Plala?
Unidentified

Company Representative: NTT communications, my name is [indiscernible]. Well, regarding Plala, the FTT -- DOCOMO’s FTTH sales fees that comes into Plala is increasing for the last three or four months.

Jun Tanabe: Let me check.

So even though it will be transferred over to DOCOMO, the pace or the speed of the growth is going to remain the same, is that correct?
Unidentified Company Representative : Yes, on a year-on-year basis. It will proceed in the same level is how we look at it.

Jun Tanabe: Okay. Thank you very much. And my second question, this is the part that was not explained.

And it’s regarding page 10 in the presentation material. This is regarding the NTT Urban Solutions, urban development and facilities were merged for this. And the explanation is about ¥400 billion annual sales. Is that what you are expecting? And you have used the example here is Hakata Station East 1-chome site and Sendai Chuo Building development. Specifically speaking, how are they going to generate the revenue? I would like you to explain the business side regarding that path.

NTT East and West property is going to be redeveloped and come up with a new revenue? Or it becomes one NTT Urban Solutions, so there were changes because of that? You may -- you said you’re going to make it up to ¥600 billion scale by 2025. So in that sense, what’s the contribution from here? And do you have to do 100 or 200 properties to reach that ¥600 billion target? Can you explain on that or elaborate on this?

Akira Shimada: This is Shimada speaking. This will all be a case-by-case basis. The Sendai Chuo Building, this originally was -- is owned by NTT and that is going to be redeveloped and university related facilities database will be linked to this redevelopment and create it into a business. Therefore, this is the so called CRE.

And regarding the Hakata 1, this is a newly acquired lands redevelopment project. And moving forward, Urban Solutions are aiming for ¥600 billion. And regarding the CRE projects, projects are coming along one by one. But as I have explained before, 57 projects will be the platform, and out of that 10 projects will start early ahead of the rest. And regarding the other areas than property, the Urban Development -- former Urban Development’s business will be continually done, which means acquiring new property or overseas, mainly North America, Asia, Australia conduct urban development type of projects there too.

So there will be 3 main pillars as I have explained. And through that, it will generate the ¥200 billion worth of new businesses.

Jun Tanabe: I would like to confirm once it became NTT Urban Solutions, how is it different? Meaning from Urban Development facilities separately, the projects that weren't being able to do separately can now be done?
Unidentified

Company Representative: Well, that's a difficult question to answer. For example, what NTT facilities have, which are NTT's buildings, there's 7,300. And in 2 areas nationwide, they are controlling the power, the AC and others, but that is going to apply to Urban Development projects.

So -- what Urban Development used to do, meaning the building developer's role is being expanded to the community level and then the facility's capabilities will be merged with that, so that they will be able to conduct more variety of redevelopment projects?

Natsuko Fujiki: Next from UBS Securities, Mr. Takahashi.

Kei Takahashi: I have 2 questions. First, about your overseas business and overseas sales, and also operating margins thereof. It's 1.6% for this quarter.

So there was a 1.0 point decline year-on-year. And you mentioned that the decline is accounted for -- primarily by the record anticipatory investments. That is what I presume. So if you exclude anticipatory investment, when you took a look at the 1.6% margin, compare against your annual plan, how do you see the progress to the annual plan? How do you assess the current situation as far as the overseas operating margin is concerned? That's my first question.

Akira Shimada: Thank you, Shimada here.

Let me respond to your question. As you have understood, 1 point -- so decline of 1.0 point year-on-year, this is primarily in relation to

the following: so the overseas sales are ¥4.8 billion. So 1% would be roughly ¥500 million -- so ¥500 million. So this was anticipatory investment and also the cost and expenses with regard to pursuing integration process. And also on top of that, for NTT DATA -- or at NTT DATA, they're developing new business, and some expenses will be required to develop new offerings, specifically from NTT DATA.

But then from second quarter onwards, they will, of course, come into play, so that is the current situation. So that being the case is for sale. The level of operating income and the profit is concerned, this is on par with the previous year. So NTT DATA's order taking in the North American market is still very positive and strong. So we believe that there's going to be a positive contribution to operating income going forward.

So therefore, 3.5% the annual target. As far as annual guidance is concerned, we believe that profit will really begin to recover starting from the third quarter. That is our understanding.

Kei Takahashi: My second question is with regard to the impact of the consolidation of ENNET, especially in terms for so much impact was there in terms of the other business segment revenue and operating income from the consolidation, if you will, of ENNET as a consolidated subsidiary?

Akira Shimada: Shimada here, let me respond. As far as the revenue is concerned, so consolidation -- the contribution from ENNET is ¥61.5 billion.

As far as the operating income is concerned, this is energy business and the profit and the operating margin is not all that high. So it’s a slight contribution as far as operating income; positive contribution, but slight. So that’s how you should interpret this situation.

Natsuko Fujiki: Thank you very much. Next question.

Next, Citigroup Securities, Mr. Tsuruo. Please go ahead with your question.

Mitsunobu Tsuruo: Thank you very much for getting the question opportunity. As of July 1, NTT Inc.

officially has started. Well, within the last three or four months or this quarter, it’s a major event that has occurred and it’s such a good opportunity. So can you please share with me what kind of a business are you thinking moving forward? And you can share your thoughts.

Akira Shimada: This is Shimada speaking. Well, NTT Limited, right? Sorry, sorry, sorry.

I’m very sorry about that mistake. Thanks to everybody’s efforts, July 1, at London, we were able to hold the grand opening party. And the UK government, even though they are in the midst of Brexit, us having the headquarters in London and have a global business deployment from there, we have a message from the Prime Minister -- former Prime Minister, Theresa May, and also we had Margot James, who is the minister of Digital and the Creative Industries have attended, and we had a grand reception. So moving forward, what we're planning to do is that cost-related matters, everything is going to be integrated. Therefore, personnel expenses and related properties and other expenses, we will be conducting cost reductions.

And on the other hand, on the business side or sales side, conventionally, well, Dimension Data in a way was doing the resale of products. And over there, the margin has becoming slimmer and slimmer year-after-year. However, regarding engagement with the customers that they are quite well versed; therefore, to that engagement what NTT Communications has, which is the high margin product of managed service and data center’s product, data center’s service, those will be merged to them as 1 company and provide the product services. Therefore, the managed service and also data center related services, those have 10% or close to 20% margin. Therefore, those products will be brought into the overall sales and network to boost up the margin.

And in order to do that, of course, we need the appropriate skills and capabilities for sales side. And of course, we will probably need to conduct the replacement or improvement of the skill sets that exist. And by doing that and at the same time, improving efficiency, and further enhance the engagement with the customers. Through all that, we would like to push up the overall profitability of the company.

Mitsunobu Tsuruo: Okay.

And related to that is my second question. The managed service or you were transforming this company into a company that has the IT services as a core. And there are several acquisitions that you have listed here already. And the NTT Limited, when they are going to expand their businesses, how much is the M&A strategies going to hold importance? And through that, what kind of money are you going to require? What kind of financial position is that going to be occurring moving forward?
Unidentified

Company Representative: The managed service type of companies that we have acquired up to now is in line with the current trend, which means that in order to respond to multi-cloud, the -- those are companies that have skills that are well-versed in that area. And also, the businesses are starting to transfer over to cloud.

And in order to secure the necessary system engineers, we are conducting these M&As. Therefore, in fact, if we are able to deploy these know how that we have acquired, that will be great. So the large-scale M&A, we do not think that it's necessary to move on to the managed service type of business. However, having said that, within the businesses that we conduct moving forward, if there is something that we need at that point, we can think of leveraging M&A at that time. However, within our strategy that we have conducted up to now, we already have all these things that we needed or lined up till now.

So it's the skills' acquisition that will be the core if you are going to conduct M&A.

Natsuko Fujiki: Next from Nomura Securities, Mr. Masuno.

Daisaku Masuno: Masuno from Nomura Securities. My first question is with regard to the financial numbers and the second related to medium-term investments.

That's -- so those are the questions I wished to ask. Starting from the financial results. In terms of cost reduction, beginning of the year, your annual target was JPY 470 billion -- ¥220 billion. So I think this year, I think it's up by ¥250 billion, because this is the gap between the 2 years. But then in the first quarter, you reduced ¥60 billion, and DOCOMO has already announced ¥30 billion cost reductions.

So aside from DOCOMO, I would imagine that you are also going to be -- you have already reduced ¥40 billion in costs only during the first quarter. Can you give us a breakdown of the cost reduction achievement in the first quarter? And also for the full year, I would imagine that you intent to reduce costs by ¥120 billion ex DOCOMO. So can I check up with the progress rate of the cost reduction for non-DOCOMO subsidiary firms?

Akira Shimada: Shimada here. Let me respond to your question. As you pointed out, for this fiscal year, in the first quarter, ¥60 billion cost reduction, out of which DOCOMO has done ¥20 billion.

So the remaining ¥40 billion, this is primarily NTT East and West contribution in terms of cost reduction. So this is where the cost reduction came from for the first quarter. As far as the breakdown of the cost reduction contribution for the first quarter is concerned, well, let’s say, facility related costs and also marketing, sales, and marketing related costs, these were primarily the cost reduction drivers. Personnel cost reduction was not all that large for the first quarter. But, of course, it is still on downward trend.

As far as the first quarter is concerned though, primarily, facility related costs and marketing-related costs were the main drivers of cost reduction for the first quarter. That’s my response.

Daisaku Masuno: Thank you very much. What about the progress to progress against the annual plan?
Unidentified

Company Representative: As far as the progress to annual plan is concerned, we’re making very strong progress. Thank you.

And actually, the pace is accelerating, that is a recognition I see.

Daisaku Masuno: I see. Okay. Thank you very much for that. With regard to CapEx, in others business, CapEx seems to be increasing.

Is this in relation to real estate business and also may be related to the new companies that joined the group recently, perhaps? So can you talk about CapEx in the other business segment? Can you share with us the current status please? Thank you.

Akira Shimada: Thank you. Shimada here, let me respond. As far as CapEx is concerned. In the others segment, primarily, that would be in relation to NTT Urban Solutions Group.

Well, traditionally it will be NTT Urban Development, so equivalent to the traditional investment made by NTT Urban Development in the past. So simply the extension of the, this is the simply the extension of the existing trend.

Daisaku Masuno: Okay. Thank you very much. And last question with regard to lease, NTT lease.

And I think ¥36 billion depreciation, also lease assets ¥170 billion, I’m checking and so what about the impact of free cash flow? Is this I suppose, is this essentially -- is this the amount of amortization? So, can you talk about the NTT at the lease?

Takashi Hiroi: Thank you. Hiroi from Accounting and Finance. So let me start with the profit and loss related lease impact, impact of the lease. It’s roughly ¥36 billion, its expenses depreciation. This is where the impact of the lease is most felt.

And also -- so we're in the first quarter, so this will have an impact over the rest of the quarters, until the fourth quarter. Now as far as the cash flow is concerned, as far as IFRS is concerned, it's organized as depreciation and amortization. But at the end of the day, the final cash, it doesn't impact the cash. So it’s just so much impact in terms of the free cash flow. So therefore, we do not expect a significant impact on free cash flow.

And so what about debt liabilities? So as far as the liabilities are concerned, well, naturally, the lease liabilities, the increase thereof is there. So that would be roughly ¥70 billion and that is now reflected as the, in the liability section.

Daisaku Masuno: Thank you very much for that. My final question with regard to the long-term outlook correction, medium-term outlook, medium-term outlook. I think you talked about real estate earlier.

You mentioned anticipatory projects of roughly 10 projects. You talked about 10 projects running. So can you share with us the potential size of the 10 anticipatory projects that you'll be handling in real estate? And also, you talked about more greater efficiency in investment. But aside from real estate business, be it data centers, there are sectors whereby investments is likely to increase. So can you share with us potential areas whereby medium-term investment may expand, if you could share that with us?

Akira Shimada: Thank you.

Shimada here. Okay. So areas whereby investments may expand over the medium term, what are the sectors? One would be something that you already cited, datacenter business. That's one case in point. As far as datacenter business is concerned, well, at a fairly early phase, there's need to carry forth with the investment, because there's competition out there.

So therefore, we have to be mindful of the potential competition as we come up with the investment strategy with the datacenter business. At the same time though, as we carry forth with the investment, it's important that we gave the competitive -- the global competitive landscape and also the situation of the customers. But they are cases whereby we have to make haste in certain cases. If that is the case, then we will consider potential partnerships to address projects that require early investment. So we will probably expand the sale -- the size of the investment.

But at the same time, we'll consider the possibility of having collaboration with partners as far as the investment is concerned. And also on top of that NTT Urban Solutions and the CRE-related investment, as far as this particular portion is concerned, actually, also, it has been announced. There are large-scale projects that already cover data in the mass media. It can be, for example, we are giving consideration to the possibility of those projects, but these process could be enormous in scale. So there are those possibilities -- but there are also fairly small-scale projects possible as well.

For example, condominiums and so forth. So there are small-scale projects as well. So this is a mixed bag, if you will, of large-scale projects and small-scale projects. So when we consider the investment down the road, the investment burden could be quite enormous. So as it's the case with the datacenter business, for example, we might consider possible partnerships in those type of investments as well, so that we could reduce the impact from the investment.

And also, in certain cases, once certain level of development has been carried out, then we might translate that to REIT where we might consider possible selloff of those developments. So we want to have a combination of various possibilities, so that we could increase the efficiency of overseas asset portfolio and improve our return.

Daisaku Masuno: Very good follow-up. You talked about the 10 projects that you want to start ahead of the rest. Will large-scale projects be a part of the 10 projects?
Unidentified

Company Representative: Yes, yes, it's part of the -- the first 10 projects.

Natsuko Fujiki: Are there any more questions? With this, we would like to conclude the briefing session of the fiscal year 2019 first quarter. Thank you very much for your participation today.