Annual Report 2007 Year Ended March 31, 2007 From “Communication” to “Lifestyle” NTT DoCoMo, INC. CONTENTS ANNUAL REPORT 2007 YEAR ENDED MARCH 31, 2007 BUSINESS BASE OF DOCOMO AND OUTLINE OF CSR P36. Financial and Capital Strategy P37. Intellectual Property P 1. Lifestyle Infrastructure P38. CSR FINANCIAL SECTION P 2. Financial Highlights P39. Internal Control P 4. Daily Life X DoCoMo P40. Corporate Governance P18. To Our Shareholders P42. Board of Directors & P20. Interview with CEO (Q&A) Corporate Auditors P1 P23 P35 P43 P49 P112 OVERVIEW OF OPERATIONS P24. Segment Information DoCoMo in Figures P26. Network P44. I. Performance of DoCoMo in the P28. Handsets Mobile Communications Industry P112. Corporate Data P30. Services P46. II. DoCoMo's Operation Data P113. Stock Information P31. International Services P32. Rate Structure and After-Sales Service P33. New Business P34. Research & Development Unless specifically stated otherwise, information in this annual report is as of July 2007. 5. The W-CDMA technology that we use for our 3G system and/or mobile multimedia serv- As used in this annual report, references to “DoCoMo”, “the company”, “we”, “our” , “our ices may not be introduced by other overseas operators, which could limit our ability to group” and “us” are to NTT DoCoMo, Inc. and its consolidated subsidiaries except as the offer international services to our subscribers. context otherwise requires. 6. Our domestic and international investments, alliances and collaborations may not pro- duce the returns or provide the opportunities we expect. DEFINITION OF TERMS 7. As electronic payment capability and many other new features are built into our cellu- “Fiscal 2006” refers to our fiscal year ended March 31, 2007, and other fiscal years are lar phones, and services of parties other than those belonging to our corporate group referred to in a corresponding manner. are provided through our cellular handsets, potential problems resulting from malfunc- tions, defects or loss of handsets, or imperfection of services provided by such other SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS parties may arise, which could have an adverse effect on our financial condition and This annual report contains forward-looking statements such as forecasts of results of oper- results of operations. ations, management strategies, objectives and plans, forecasts of operational data such as 8. Social problems that could be caused by misuse or misunderstanding of our products expected number of subscribers, and expected dividend payments. All forward-looking and services may adversely affect our credibility or corporate image. statements that are not historical facts are based on management’s current plans, expecta- 9. Inadequate handling of confidential business information including personal information tions, assumptions and estimates based on the information currently available. Some of the by our corporate group, contractors and other factors, may adversely affect our credibil- projected numbers in this report were derived using certain assumptions that are indispen- ity or corporate image. sable for making such projections in addition to historical facts. These forward-looking 10. Owners of intellectual property rights that are essential for our business execution may statements are subject to various known and unknown risks, uncertainties and other factors not grant us the right to license or otherwise use such intellectual property rights on that could cause our actual results to differ materially from those contained in or suggested acceptable terms or at all, which may limit our ability to offer certain technologies, prod- by any forward-looking statement. Potential risks and uncertainties include, without limita- ucts and/or services, and we may also be held liable for damage compensation if we tion, the following: infringe the intellectual property rights of others. 11. Earthquakes, power shortages, malfunctioning of equipment, and software bugs, com- 1. As competition in the market becomes more fierce due to changes in the business envi- puter viruses, cyber attacks, hacking, unauthorized access and other problems could ronment caused by the Mobile Number Portability, new market entrants, competition cause systems failures in the networks required for the provision of service, disrupting from other cellular service providers or other technologies, and other factors, could limit our ability to offer services to our subscribers and may adversely affect our credibility or our acquisition of new subscribers, retention of existing subscribers and ARPU, or may corporate image. lead to an increase in our costs and expenses. 12. Concerns about wireless telecommunications health risks may adversely affect our 2. The new services and usage patterns introduced by our corporate group may not devel- financial condition and results of operations. op as planned, which could limit our growth. 13. Our parent company, Nippon Telegraph and Telephone Corporation (NTT), could exer- 3. The introduction or change of various laws or regulations or the application of such cise influence that may not be in the interests of our other shareholders. laws and regulations to our corporate group could restrict our business operations, which may adversely affect our financial condition and results of operations. Our actual results could be materially different from and worse than as described in the 4. Limitations in the amount of frequency spectrum or facilities made available to us could forward-looking statements. Important risks and factors that could cause our actual results negatively affect our ability to maintain and improve our service quality and level of cus- to be materially different from as described in the forward-looking statements are set forth tomer satisfaction. in Item 3.D. and elsewhere in this annual report. NTT DoCoMo, INC. HISTORY ANNUAL REPORT 2007 OF DoCoMo YEAR ENDED MARCH 31, 2007 (’06/10) Mobile Number Portability (MNP) system began (’06/08) HSDPA compatible handsets released (’06/04) Mobile credit service“DCMX” launched (’05/12) iD service launched (’04/07) “Osaifu-Keitai” service launched (’03/06) “World Wing” service launched (’01/10) “FOMA” service launched (’99/02) “i-mode” service launched (’98/09) “WORLD CALL” service launched (’97/06) Short-mail service launched (’93/03) Digital mova service launched (’93/03) Voice Mail service launched (’91/04) Analog mova service launched Type 100 Type 803 mova D Digital mova P 1979 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 50million 40million 30million 20million 10million F903iX HIGH-SPEED N201 F501i P2101V SH901iC Kids’ PHONE N900i SA800i SH903iTV 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 LIFESTYLE INFRASTRUCTURE From “Communication” to “Lifestyle” Send e-mails and make phone calls, set your alarm clock, check the news or play games—all on one device. The mobile phone has become an indispensable part of peaple’s live, a tool you use from the time you wake up until the time you go to bed at night. Now almost everyone carries one, and it is the closest piece of the “commu- nications infrastructure” for most people. We are moving forward to provide services that are even further tailored to people’s lives. DoCoMo is striving to transform mobile phones into a part of users’ “lifestyle infrastructure” by providing lifestyle assistance services such as electronic money, credit card and ticket functions, and services including audio and video clip downloads and search functions that can be used with flat-rate packet billing plans, international servic- es that have become even more accessible and other services. Flat-rate Services Life Style Assistance Int’l Services Video contents Osaifu-keitai Music Movie Auction GPS iD e-wallet CONEXUS Chaku-Uta Chokkan Full Games Search/Ads One-Seg Lifestyle ® Infrastructure Music Game Search/ads broadcast DCMX Toruca i-mode Alliance STEP UP i-channel Communication Infrastructure From “Telecommunications Infrastructure” to “Lifestyle Infrastructure” 1 NTT DoCoMo, INC. FINANCIAL HIGHLIGHT (U.S. GAAP) ANNUAL REPORT 2007 NTT DOCOMO, INC. AND SUBSIDIARIES YEARS ENDED MARCH 31 YEAR ENDED MARCH 31, 2007 Millions of U.S. dollars*1 Millions of yen (excluding per share data) (excluding per share data) 20032004 2005 2006 2007 2007 Operating Results Operating revenues ¥4,809,088 ¥5,048,065 ¥4,844,610 ¥4,765,872 ¥4,788,093 $40,729 Wireless services 4,350,861 4,487,912 4,296,537 4,295,856 4,314,140 36,697 Equipment sales 458,227 560,153 548,073 470,016 473,953 4,032 Operating income 1,056,719 1,102,918 784,166 832,639 773,524 6,580 Net income 212,491 650,007 747,564 610,481 457,278 3,890 Financial Position Total assets ¥6,058,007 ¥6,262,266 ¥6,136,521 ¥6,365,257 ¥6,116,215 $52,026 Total debt*2 1,348,368 1,091,596 948,523 792,405 602,965 5,129 Total shareholders equity 3,475,514 3,704,695 3,907,932 4,052,017 4,161,303 35,397 Cash Flows Net cash provided by operating activities ¥1,584,610 ¥1,710,243 ¥1,181,585 ¥1,610,941 ¥ 980,598 $ 8,341 Net cash used in investing activities (871,430) (847,309) (578,329) (951,077) (947,651) (8,061) Adjusted free cash flows (excluding irregular factors and changes in investments for cash management purposes)*3 *4 468,915 862,934 1,003,583 510,905 192,237 1,635 Other Financial Data Capital expenditures*5 ¥ 853,956 ¥ 805,482 ¥ 861,517 ¥ 887,113 ¥ 934,423 $ 7,948 Financial Ratios*6 Operating income margin 22.0% 21.8% 16.2% 17.5% 16.2% EBITDA margin*7 38.2% 36.8% 33.6% 33.7% 32.9% ROCE*8 22.1% 22.9% 16.2% 17.2% 16.1% Equity ratio 57.4% 59.2% 63.7% 63.7% 68.0% Debt ratio*9 28.0% 22.8% 19.5% 16.4% 12.7% Per Share Data*10 (Yen and U.S.