Japan's telecommunication markets

1. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’STELECOM MARKETS Version 66 of July 6, 2015 by Gerhard Fasol PhD, Eurotechnology Japan KK http://www.eurotechnology.com/ fasol@eurotechnology.com this is a preview version with selected pages from the full report. download the full report here: http://www.eurotechnology.com/store/jcomm/ 1

2. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 EXECUTIVE SUMMARY: JAPAN’STELECOM MARKETS 2 • Japan is the most exciting and the most advanced, and very large telecommunications market globally. • Japan pioneered and brought to market a very large number of technologies, business models and ideas, long before anywhere else in the world, including mobile internet, mobile music, cameras in phones, mobile advertising, mobile commerce, 3G, and more. • In the past, NTT and NTT’s wireless subsidiary, now named Docomo, and KDD (which very successfully restructured via a series of acquisitions and is today named KDDI) had monopolies on Japan’s telecommunications. However, today SoftBank is the most rapidly growing Japanese telecommunications company, and has recently overtaken NTT-Docomo and KDDI in terms of revenues, operating income and net income, and many other KPIs. • While SoftBank continues to grow aggressively both internally by turning around and growing existing business, and by acquisitions, NTT-docomo recently withdrew from the Indian market, selling NTT-docomo’s investment in India, and further withdrawing into Japan • Japan’s fixed line internet services globally have the highest bandwidth (in many areas 1Gps) at lowest prices and the highest FTTH penetration. Japan has more FTTH subscribers than all of EU+Iceland+Switzerland+Norway. • This report explains Japan’s telecom market landscape and its key players quantitatively and qualitatively, displaying data from our statistical data base graphically in easy to understand figures, and with our analysis. • We show and analyze latest financial results, subscriber market shares and many other key market data and trends.

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4. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’STELECOM MARKETS-VERSION OVERVIEW 4 Subscribe to this report, and we will regularly send you the latest versions. subscription, monthly payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU58870246995 subscription, annual payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU84043119788 Version Date Comments 8 September 19, 2004 10 October 28, 2004 14 May 28, 2005 15 June 21, 2005 17 January 15, 2006 20 August 4, 2006 22 October 10, 2006 23 January 4, 2007 27 June 12, 2007 30 January 17, 2008 31 August 7, 2008 32 August 22, 2008

5. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’STELECOM MARKETS-VERSION OVERVIEW 5 Version Date Comments 33 August 27, 2008 37 January 19, 2009 38 January 21, 2009 39 January 31, 2009 40 February 8, 2009 41 February 12, 2009 43 March 15, 2009 44 April 2, 2009 46 May 18, 2009 50 May 6, 2010 51 December 10, 2010 52 December 13, 2010 Subscribe to this report, and we will regularly send you the latest versions. subscription, monthly payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU58870246995 subscription, annual payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU84043119788

6. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’STELECOM MARKETS-VERSION OVERVIEW 6 Version Date Comments 54 December 15, 2010 55 January 6, 2011 56 January 20, 2011 57 January 28, 2011 58 October 1, 2012 59 January 15, 2013 60 February 19, 2013 subscriber numbers updated 61 May 6, 2013 Financials for FY2012 added 62 May 12, 2013 63 July 19, 2013 63 March 16, 2014 subscriber data updated 64 May 1, 2014 Docomo results Subscribe to this report, and we will regularly send you the latest versions. subscription, monthly payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU58870246995 subscription, annual payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU84043119788

7. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’STELECOM MARKETS-VERSION OVERVIEW 7 Version Date Comments 65 May 6, 2014 ﬁnancial data FY to March 2014 66 July 6, 2015 updates and corrections 67 68 69 70 71 72 73 74 75 76 Subscribe to this report, and we will regularly send you the latest versions. subscription, monthly payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU58870246995 subscription, annual payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU84043119788

8. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 AGENDA - LIST OF CONTENTS 8 - Japan’s telecom industry – overview, key trends for 2015 - e-Japan, u-Japan and national policy - globalization vs Japan’s “Galapagos Effect” - the “post Galapagos working group” and its recommendations - Evolution of Japan’s telecom landscape - landscape overview and major M&A transactions - The main players: NTT, KDDI and Softbank - Financial overview: annual revenues, operating income, net income and investments - Quarterly ﬁnancial data: quarterly revenues, operating income and net income - NTT Group, NTT East, NTT West, NTT Communications, NTT Data and NTT docomo - KDDI - UQ Communications - Softbank - eAccess and eMobile - Willcom - Wireless City Planning - Wireless markets - Wireless spectrum allocation - Mobile phone base station deployment for each operator - Market shares and subscriber numbers and trends for each operator - Prepaid mobile market - From birth of internet to legacy: i-Mode, EZweb,Yahoo Keitai - 3G and 3.5G and LTE in Japan - From Galake to Smartphones: Mobile phone handset market, monthly sales statistics, and recycle time - The AU design project: IIDA - Sweets for teenage girls  Raku Raku phones for the silver market,Tuka-S: pioneer for the silver market - Mobile music, LISMO! - Mobile payments and keitai credit - FeliCa wallet phones - MobileTV - Fixed line markets, FTTH - FTTH market - DSL market - Optical network - Transition to NGN - Business cases - Japan’s telegram market - Summary

9. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 KEYTRENDS FOR 2015 9 • Softbank is aggressively expanding market share in Japan, and global market share. Masayoshi Son said:“I am a man, and I want to be number one”. Clearly Masayoshi Son is aiming for Softbank to become one of the top, if not Number 1 globally in the telecommunications sector.With his customary midas touch, Masayoshi Son may well achieve, what NTT- docomo did not achieve with i-Mode: global success based on Japan’s mobile communications developments. Softbank is reported to aim for additional acquisitions, e.g.T-Mobile of USA, and European operators have also been mentioned. • Smartphones (ie phones using Apple’s iOS or Google’s Android operating systems) are set to dominate Japan’s mobile communications market, with currently about 70% of all domestic mobile phones shipped. If iPhones, Samsung, htc, LG and other non-Japanese mobile phones are included the smartphone shares of handset sales are even higher. Docomo, KDDI and Softbank offer iPhones. • With the rapid adoption of smartphones data trafﬁc rises dramatically, leading to accelerated LTE roll-out, and off-load of data trafﬁc to WiFi networks wherever possible. • With Softbank acquiring eAccess/eMobile and having become sponsor of Willcom’s rehabilitation and combining both asY!Mobile, and KDDI acquiring 50% of cableTV company J:COM there is a clear trend to market consolidation with three players: NTT, KDDI and Softbank. Japan’s General Affairs Ministry hoped to encourage new entrants, however all new entrants have either failed, or were acquired, or operate with investment and under the wings of one of the three dominating companies. • eAccess/eMobile and Willcom will be combined, formingY!Mobile, and sold toYahoo KK, thus eAccess/eMobile and Willcom will remain within the wider Softbank group.

10. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 MAJOR RECENT M&ATRANSACTIONS (1) 10 Acquirer Acquired company Value Date Comments Softbank Vodafone-Japan US$ 15 billion March 17, 2006 accelerated Softbank’s entry into mobile communications Softbank SPRINT US$ 20 billion Oct 2012 Softbank acquired approx. 90% of SPRINT (subject to negotiations...) Softbank eAccess/eMobile US$ 2 billion Oct 2012 Softbank preempted acquisition attempt by KDDI KDDI and Sumitomo J:COM (Jupiter Telecom), JCN US$ 7 billion Oct 2012 KDDI, Sumitomo switch from competition to cooperation

11. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 MAJOR RECENT M&ATRANSACTIONS (2) 11 Acquirer Acquired company Value Date Comments Yahoo KK eAccess + Willcom YEN 324 billion (US$ 3.2 billion) summer 2014 Yahoo KK is part of SoftBank group. YEN 55.7 bill gain for SoftBank SoftBank GungHo Softbank increases shareholding from 33.6% to 58.5% March 25, 2013 Tender Offer SoftBank and GungHo SuperCell US$ 1.53 billion for 51% share holding October 15, 2013 SoftBank: $ 1.224 million (80%) GungHo: $ 306 million (20$) SoftBank BrightStar US$ 1.26 billion for 57% shareholding Oct 2013 CEO Marcelo Claure appointed to SoftBank Board

13. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 E-JAPAN ANDTHE IT STRATEGY HEADQUARTERS • Until the end 1990s, Japan’s internet pricing and availability was behind the US and Europe: internet access was with dial-up, ISDN and priced per minute, leading to huge monthly bills even for moderate internet use, preventing the development of internet. • Japan had the highest internet access charges compared to almost all developed countries. • Japan’s leaders recognized that national competitiveness was at stake and took action. • In July 2000, the “IT Strategy Headquarters” were formed, which produced the “e-Japan” policy goals within three months and announced them in September 2000: • provide low cost internet access within 1 year (i.e. 2001) • build the world’s most advanced internet networks within 5 years (i.e. 2005) • These goals were achieved in time. • Japan is not resting on these laurels, but instead is raising the bar; encouraged by the successes of the “e- Japan” policies, Japan has formulated even more ambitious “u-Japan” goals (“u” stands for ubiquitous IT). 13

14. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 I-JAPAN 2015: DIGITAL INFRASTRUCTURE • Measures • Broadband infrastructure • national broad band mobile access in excess of 100 Mbps • Universal connections (individuals, families, libraries, schools etc).Adoption of IPv6 protocol • Devices for easy access • National Strategy on Information Security • Infrastructure for distribution and utilization of digital information • Development of digital fundamental technologies 19

15. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 IPHONE AS ATURNING POINT • Before the iPhone, Japan was clearly the global leader in mobile internet and wireless communications, lead by the early introduction of iMode in 1999, by heavy investments in the ﬁrst global roll-out of 3G, and early roll-out of GPS, and mobile payments and mobile cash. • Much of this innovation was closed inside Japan, and did not succeed to gain global acceptance. • Japan’s telecom industry was blind-sided by the introduction of the iPhone and iPad. • Japan’s telecom industry is still very advanced with some of the best networks and the best roll-out and integration into society of advanced services, however, the momentum for the moment has passed to iPhone/iPad and Goggle’s Android system and other players such as RIM/Blackberry, and also NOKIA. • Japan’s momentum passed from technology driven NTT and KDDI to business driven SoftBank, which has now overtaken both NTT and KDDI by most KPIs. 20

16. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN-THE MOBILETIME MACHINE (PRE IPHONE) 21 Services, technologies Japan EU 3G 2001 2003/2004 HSDPA (3.6 Mbps, 7.2 Mbps) Nov 28, 2003 2006 Packet Switched Networks March 28, 1997 (DoPa = DoCoMo Packet) 2000 Mobile internet (i-Mode) on packet switched network February 22, 1999 2005/2006, true penetration after iPhone release 2007 SMS 1997 1995 Mobile email 1999 2002 Camera phones November 2000 2002 Clamshell phones 2000 2002 Apps on mobile phones (JAVA) January 2001 true penetration after iPhone release 2007 DigitalTV for mobile phones November 2005 (OneSeg) Mobile money, wallet phones January 2004 maybe 2013 or later Full songs for mobile phones 2002 2004, true penetration after iPhone release 2007 QR, 2D bar codes for mobile phones August 2002 2007-2008 LTE December 24, 2010 (DoCoMo) 2010 iPhone disruption -> smartphones 2008 USA (Apple + Google/Android) 2007 USA (Apple + Google/Android)

17. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 HOW DID JAPAN’STELECOM INDUSTRY BECOME ONE OF THE WORLD’S MOST COMPETITIVE? (1) • Until not so long ago: • National telecommunications monopoly: • NTT -> “Push-Phone charge”(for the upgrade from mechanical rotating wheel phones…) was collected by NTT well into the 2000s, many years after the last mechanical phone and mechanical exchange has disappeared • Everyone needs to buy a “Telephone-right” to use a ﬁxed line phone, price of telephone right =YEN 72,000 (US$ 700) • International telecommunications monopoly: • KDD -> ﬁrst minute =YEN 500, second minute =YEN 300 etc • Call-back companies undercut KDD’s monopoly • Japanese government asks US Embassy to stop the “crime” of undercutting KDD’s monopoly • US does nothing • Monopolies starts to crumble • People predicted the bankruptcy of KDD, however, KDD (now KDDI) became one of the most amazing turn-round stories (for details see: http://www.eurotechnology.com/store/kddi/ ) 22

18. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 HOW DID JAPAN’STELECOM INDUSTRY BECOME ONE OF THE WORLD’S MOST COMPETITIVE? (2) 23 Internet • Japanese government ‘s telecom policies, and NTT’s plans for linear and traditional telecom development, were interrupted by the sudden appearance of the internet • First Japanese ISP license to a foreigner • (Roger Boisvert:“it is easier to take away the license from me as a foreigner”…) • Individuals took the initiative • Internet recognized as driver for growth - national plan to introduce local optical ﬁbre access • Today Japan is at the forefront of internet development, Softbank/YAHOO is driving broadband local access initially against NTT’s ISDN interests • The “E-Japan” initiative brought Japan to the forefront of internet and ecommerce globally and is followed by the “u-Japan” initiative Foreign direct investment as additional driver • Early investments:AT&T forms AT&T-JENS, BritishTelecom and AT&T invest in Japan-Telecom and later sell these stakes to Vodafone • Cable & Wireless acquires IDC -> Cable & Wireless IDC (later acquired by SoftBank, now SoftBank-IDC) • Vodafone acquires JapanTelecom (including J-Phone) from the JR-Railway companies • Ripplewood acquires Japan-Telecom fromVodafone and sells it to Softbank • Carlyle and Kyocera acquire DDI-Pocket from KDDI (now renamed Willcom) • SoftBank acquiresVodafone KK, endingVodafone’s engagement in Japan

20. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’S “GALAPAGOS EFFECT” • “Galapagos effect” is a term which has been used since about 2005 even by Japanese Government to describe a situation, where Japanese companies develop new technologies, and bring new services and business models to Japan’s market, but fail to capture global value. • The term “Galapagos effect” is often used to characterize Japan’s pioneering development of mobile internet and mobile internet phones starting with DoCoMo’s i-Mode in 1999, while Japanese mobile phone handset makers failed to capture global market share. • Another similar example is electronic money and mobile payments, which Japan introduced much earlier than other countries, but where Japanese companies failed to make global impact or capture global value. • Recently this term is used much more broadly in many areas, and is also used to characterize the current crisis of Japan’s electronics industry, especially SONY, SHARP and Panasonic. 25

21. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’S “GALAPAGOS EFFECT” • DoCoMo’s pioneering mobile data service i-Mode started on February 22, 1999, about 14 years ago, and was soon followed by KDDI/AU’s Ezweb and J-Phone’s Jsky mobile data services. Japan’s mobile phones at that time were far in advance of mobile phones anywhere else in the world, and a wide range of mobile data services emerged. • DoCoMo attempted to build a global business based on i-Mode, and Japan’s mobile phone makers and content businesses hoped to build on DoCoMo’s global expansion.This attempt collapsed and failed, and DoCoMo wrote off about US$ 10 billion (investments in AT&T Wireless, KPM-Wireless, Hutchison Whampoa) during 2002-2003 as a consequence, leading to net losses of US$ 10 billion. Japan’s mobile phones where the most advanced during this time, while Japan’s handset makers failed to capture global market share with these “galake” phones.Today Japanese makers global market share is 5% or less, and essentially restricted to Japan. • It took until about 2008 – about 6 years – for this situation to sink in, and today even Japan’s Government and many press articles and books are discussing the “Galapagos Effect”. • “Galapagos effect”: on Galapagos islands many fantastic exotic species exist, which cannot survive in other parts of the world. Similarly, when people talk about the “Galapagos effect”, they refer to beautiful technologies and business models such as i-Mode, where globalization has been attempted but which failed. 26

22. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 REASONS FOR JAPAN’S “GALAPAGOS EFFECT” • Reasons for Japan’s “Galapagos effect” include: • Domestic Japanese companies focused on Japan only:“created by Japan, for Japan and of Japan, and Japan is the crux of the issue” (JunkoYoshida, Journalist for EE-Times about Renesas and Renesas- Mobile in the article entitled “Free Renesas from its golden cage called Japan”) • (Temporarily) protected markets in Japan. e.g. Japanese mobile phone makers were almost exclusive suppliers to Japan’s mobile phone operators. Missed the paradigm shift from “Galapagos Keitai” (= Galakei) feature phones (using mainly Nokia’s Symbian OS) to smart phones (iPhone and Android phones). Missed opportunities to grow business outside Japan. • Lack of focus. Japanese electrical makers are spread very thinly over very many business areas at very low or zero margins, and do not achieve global impact on any. • Lack of diversity. Boards, management and employees are almost exclusively Japanese, therefore cannot understand markets outside Japan in depth, and therefore miss important market trends, such as smart phones. Lack of diversity reduces creativity and management quality. IMD President DominiqueTurpin said “You can argue that the strength of Japanese culture, in terms of homogeneity, is also a weakness” 27

23. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 THE “POST-GALAPAGOS WORKING GROUP” • The “Post-Galapagos Committee” has been convened and is chaired by one of the three creators of i-Mode,Takeshi Natsuno, and the author of this present report is the only non-Japanese member working on this committee. • Purpose of the “Post-Galapagos Committee” is to call attention among Japanese leadership on changes necessary in industry structure and thinking to enable more global business to be built based on Japan’s advanced technologies and content, and to encourage entrepreneurship. 28

24. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 “POST GALAPAGOS STUDY GROUP” 25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT” 29 see the article from ACCJ-Journal http://www.eurotechnology.com/2013/10/07/galapagos/

25. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 RESULTS OFTHE GALAPAGOS WORKING GROUP • Recommendations to: • telecom operators • equipment makers • content companies 30

26. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 FIVE RECOMMENDATIONSTOTELECOM OPERATORS • Japan’s telecom sector should recognize the global business potential of its advanced technologies • Japan’s communication terminal makers should acquire global marketing power and cost competitiveness • Japan’s communication terminal makers should understand that hardware, software and services cannot be separated • Japan’s communication industries should introduce diversity in their management ranks • Japan’s communication carriers should decide whether they expand overseas depending on their long term strategy 31

27. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 SEVEN RECOMMENDATIONSTO ELECTRONICS MANUFACTURERS • Reshape the conglomerates • Structural reform: withdraw from unproﬁtable business, focus on growth businesses • In cases of overwhelming Japanese market share, make best use of cost reductions, and create a strategy for overseas business development • Strengthen the branding of Japanese technology • Because of increasing modularization it is difﬁcult to enclose (black box) technology. It is necessary to integrate technology and create services. • It is necessary to create mechanisms and markets to evaluate and support novel technologies • For innovation to emerge, it is necessary to educate and develop intermediaries (connectors) between research and business 32

28. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 RESULTS OFTHE GALAPAGOS WORKING GROUP:VISION OF RESTRUCTURING JAPAN’S ELECTRICAL COMPANIES 33 company A company B company C company D company E TVs batteries solar cells power stations rice cookers white goods air conditioners base stations mobile phones trains For historic reasons combined with a low acceptance of M&A, Japan’s electrical conglomerates (Panasonic, Hitachi, Fujitsu etc) each are thinly spread over a very large number of business areas. None of these business areas is typically large enough to have global impact, and the necessary global market share to achieve high margins. We believe it is necessary to restructure Japan’s electrical sector, from thinly spread conglomerates to narrowly focused companies. Such restructuring has been done successfully for many companies in Germany, e.g. Germany’s chemical and pharmaceutical sector.

29. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 RECOMMENDATIONSTOTHE CONTENT SECTOR • Globalize • Value real life, make real life more pleasant • Improve and strengthen market communication and branding • Soft power strategy • Create global soft-power from Japanese lifestyle • Keywords:“interesting high-tech”, fashionable high-tech” • Create platforms similar to Disney 34

32. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’STHREE MAJORTELECOM OPERATORS FY 2014 43 Tokyo Stock Exchange Code FY 2014 sales (ends March 31, 2015) FY2014 net proﬁt (ends March 31, 2015) market cap (July 3, 2015) NTT 9432 ¥ 11095 billion US$ 90 billion ¥ 518 billion US$ 4.2 billion ¥ 10,190 billion US$ 83 billion NTT docomo 9437 ¥ 4383 billion US$ 36 billion ¥ 410 billion US$ 3.4 billion ¥ 9852 billion US$ 80 billion KDDI 9433 ¥ 4573 billion US$ 37 billion ¥ 428 billion US$ 3.5 billion ¥ 7966 billion US$ 64.8 billion Softbank Group 9984 ¥ 8670 billion US$ 70.6 billion ¥ 764 billion US$ 6.2 billion ¥ 8603 billion US$ 70.7 billion

33. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 ANNUAL NET INCOME 49 • Clearly visible is the huge US$ 10 Billion hole in DoCoMo’s net proﬁts around 2002, due to DoCoMo’s failed attempt to build a global business by investing in several companies around the globe including AT&T, KPN, and Hutchison/Three.Almost all of Docomo’s international investments had to be written off. NTT-Docomo also withdrew from theTATA investment in India. • SoftBank’s operating proﬁts have overtaken both NTT-Docomo’s and KDDI’s in size. Softbank’s successful acquisition (2006) and turn-round ofVodafone-Japan is clearly visible.With the integration of Sprint, Gung-Ho, and SuperCell, SoftBank’s net income has risen dramatically over the recent years.  1997 1998 1999 2000 2001 20022003200420052006200720082009 2010 2011 2012 2013 2014 2015 0 500 1000 1500 2000netincome(YENbillion) US$ 5 billion US$ 10 billion US$ 15 billion Annual net income of Japan's mobile operators DoCoMo SoftBank KDDI Vodafone (c)2015EurotechnologyJapanKK www.eurotechnology.com

34. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 NET INCOME 52 • SoftBank has overtaken both NTT-Docomo and KDDI in terms of net income ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ▲ ▲ ▲ ▲ ▲ ▲ ▼ 1995 2000 2005 2010 2015 2020 -200 0 200 400 600 800 annualnetincome(YENBillion) Annual net income of Japan's mobile operators (in YEN Billion) DoCoMo KDDI SoftBankVodafone Japan US$ 2 Bill US$ 4 Bill US$ 6 Bill US$ 8 Bill iPhone SoftBank July 11, 2008 iPhone 4S KDDI Oct 14, 2011 i-Mode Feb 22, 1999 iPhone 5 Softbank+KDDI Sept 21, 2012SoftBank acquires Vodafone KK March 17, 2006 (c)2015EurotechnologyJapanKK www.eurotechnology.com

36. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 NET INCOME 59 • SoftBank’s net income (after tax) is positive since the July-September 2005 quarter. SoftBank’s net income was held back by servicing the substantial debt from theVodafone-Japan acquisition.With the introduction of iPhone on July 11, 2008, and with the pay-down of the debt from theVodafone-Japan acquisition, Softbank’s net income is increasing steadily, and has overtaken both Docomo’s and KDDI’s net income on an annual basis. • Back in 2005-2007 NTT-docomo’s net income was continuously falling, and NTT-docomo risked to fall into losses if the trend continued. NTT-docomo succeeded to stabilize the net-income situation via cost-cuts (including equipment costs), as well as increasing proﬁtability via additional services such as mobile ecommerce services. ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ □ □ □ □ □ □ 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 -100 0 100 200 300 netincome/quarter(YENBillion) iPhone SoftBank July 11, 2008 iPhone 4S KDDI Oct 14, 2011 Quarterly net income/loss of Japan's mobile operators DoCoMo KDDI SoftBank Vodafone-Japan US$ 1 Billion US$ 2 Billion iPhone 5 Softbank+KDDI Sept 21, 2012 SoftBank acquires Vodafone KK March 17, 2006 (c)2015EurotechnologyJapanKK www.eurotechnology.com

38. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 NTT 64 Founded April 1, 1985 as a result of privatizing the nationally owned telephone operations One on of the world’s largest telecommunications companies Largest share holder:The Government of Japan Discussions about reform of the group structure are continuing Major NTT Group companies: • NTT Communications (100% owned by NTT) • NTT East (100% owned by NTT) • NTT West (100% owned by NTT) • NTT DoCoMo (65.3% owned by NTT) • NTT Data ( 54.2% owned by NTT) • Other NTT Group companies • NTT Business Associe • NTT Electronics • NTT AdvancedTechnology • NTT Facilities • NTT Leasing • NTT Urban Development • NTT Advertising • NTT Comware • NTT Software • NTTAFTY • NTT Resonant • and many more

40. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 201571 NTT docomo docomo = do communications over the mobile network Founded August 14, 1991 as NTT Mobile Communications Planning Co. April 1992 named NTT DoCoMo, July 1993 split from NTT Founder Headquarters Tokyo Stock Exchange TokyoTSE 9437 (IPO: October 22, 1998), NYSE: DCM (IPO: March 2002), LSE: NDCM (IPO: March 2002) Consolidated sales YEN 4240 Billion (US$ 47.5 Billion) (FY2011, ended March 31, 2012) Number of employees 23,289, consolidated (March 2012) Major share holders NTT (66.65%) (since Japan’s Ministry of Finance owns 32.6% of NTT, the Ministry of Finance owns 21.7% of NTT docomo via NTT) Major business areas mobile communications

41. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 DOCOMO 72 For details see our report on NTT-Docomo: http://www.eurotechnology.com/store/docomo/

42. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 KDDI + OKINAWA CELLULAR 73 For details see our report on KDDI: http://www.eurotechnology.com/store/kddi/

43. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 KDDI DESIGN STUDIO 81 On March 4, 2005 KDDI opened the “KDDI Designing Studio” in Tokyo’s fashion district Harajuku. The purpose of the “KDDI Designing Studio” is: •Promote the KDDI brand •Collect customer feedback 

46. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 201588 Softbank Founded September 3, 1981 Founder Masayoshi Son Headquarters Tokyo, Shiodome Stock Exchange TokyoTSE 9984 (IPO: July 22, 1994) Consolidated sales YEN 3202.4 Billion (US$ 35.9 Billion) (FY2011, ended March 31, 2012) Number of employees 21,858, consolidated (March 2012) Major share holders Masayoshi Son (21.4%) Major business areas ﬁxed and mobile/wireless communications and data services

47. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 MASAYOSHI SON 89 • Similar to Bill Gates’ role as Founder and long-time leader of Microsoft, Masayoshi Son is the founder and leader of the SoftBank Group of companies. • Masayoshi Son was born on August 11, 1957 inTosu (Saga-Prefecture Japan) with Korean nationality and of Korean origin. Son became a naturalized Japanese citizen later in life. • According to FORBES Magazine, Masayoshi Son is worth about US$ 7 Billion, and it is largely Masayoshi Son’s reputation and track record, which was essential to obtain the US$ 15 billion ﬁnance for SoftBank to acquireVodafone KK in March 2006. Short personal history • August 11, 1957, Born inTosu (Saga Prefecture, Japan) with Korean nationality • Around 1972: Met with McDonald’s Japan Founder and CEO, Den Fujita, who recommended Son to learn English and to study in the USA • 1973, at age 16 moved to San Francisco, went to high-school in San Francisco • Enrolled at University of California in Berkeley in Economics • Invented and patented translation device, and sold patent rights to SHARP Electronics for US$ 1 million (later used by SHARP for the Wizard series of SHARP PDAs) • Imported Space Invaders arcade game machines from Japan to the UC Berkeley Campus. • 1980 Graduated with BA in Economics from Berkeley • Founded Unison in Oakland, CA (acquired by Kyocera) • 1981 returned to Japan, and founded SoftBank Capital • 1995 acquired 37% ofYAHOO, buildsYAHOO-Japan, and acquires controlling interest in e-Trade • 1996 acquired COMDEX and KingstonTechnology • 2001 based on acquisition ofTokyo-Metallic, foundsYAHOO-BB, which becomes Japan’s leading ADSL broadband internet provider • Campaigns for several years to obtain mobile operator license in Japan, which he is granted in December 2005 • March 17, 2006: agrees withVodafone plc to acquireVodafone KK • October 1, 2006:Vodafone KK renamed SoftBank Mobile KK and trading under the brand “SoftBank”. • October 2012: acquired eAccess/eMobile and SPRINT for Softbank

48. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 VODAFONE JAPAN > SOFTBANK MOBILE 98 •On Friday, March 17, 2006 SoftBank andVodafone announced the sale ofVodafone KK (Vodafone’s Japan operations) to the SoftBank group. •On Monday, March 20, 2006 SoftBank moved Headquarters fromVodafone-Japan’s former Atago-HQ to Softbank’s Shiodome HQ, and started the turn-round •During Summer 2006Vodafone’s brand was changed to Softbank. 

49. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 VODAFONE JAPAN > SOFTBANK MOBILE 99 •On Friday, March 17, 2006 SoftBank andVodafone announced the sale ofVodafone KK (Vodafone’s Japan operations) to the SoftBank group. •On Monday, March 20, 2006 SoftBank moved Headquarters fromVodafone-Japan’s former Atago-HQ to Softbank’s Shiodome HQ, and started the turn-round •During Summer 2006Vodafone’s brand was changed to Softbank. 

50. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 EACCESS, EMOBILE (NOW MERGED WITH WILLCOM AND RENAMEDY!MOBILE) 100 more about eMobile and eAccess: http://www.eurotechnology.com/store/emobile/

51. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 DR SACHIO SEMMOTO 101 While SoftBank is driven by Masayoshi Son, eAccess and eMobile are driven by serial mega-entrepreneur Sachio Semmoto. In contrast to SoftBank’s Masayoshi Son who was financially independent since his student days by selling a patented invention, Sachio Semmoto intially worked several years at Japan’s telecommunications giant NTT, before becoming an entrepreneur as co-founder of the new telecommunications company DDI, which today is part of KDDI. Semmoto had a leading role in building DDI in record time, leading to an IPO. DDI was later acquired by KDD - the resulting merged company changed the name to KDDI, reflecting the merger of KDD with DDI (for an overview of KDDI, including the M&A history, see: http://www.eurotechnology.com/store/kddi/ ). Short personal history NTT: developed fibre optic systems 1974-1980: Japan’s representative to the ITU on optical fiber and ISDN Kyocera Corporation Co-Founder of DDI Corporation (today part of KDDI), IPO onTokyo Stock Exchange Merged with KDD, the resulting company named KDDI Professor at Graduate School of Business Administration of Keio University November 1999: founded eAccess October 2003: IPO on Mothers November 2004:Tokyo Stock Exchange, First Section

53. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 PHS ANTENNAS 110 •Photo shows a PHS base station used by the now defunct ASTEL PHS operator. •PHS was initially developed around 1989 by NTT Laboratories as a wireless local loop access system for IDSN type circuit switched local loop access. •at it’s peak PHS was used in Japan by DoCoMo,Astel, and several other operators, in China for low cost mobile communications and in several countries in South America.

55. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015114 Wireless City Planning Founded June 11, 2010 Founder Masayoshi Son Headquarters Tokyo Stock Exchange - Consolidated sales - Number of employees - Major share holders Advantage Partners 50% Softbank 30% Major business areas mobile communications based on 110Mbps AXGP (Advanced eXtended Global Platform) 4G network, compatible withTD-LTE

58. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 RADIO SPECTRUM ALLOCATION FOR MOBILE COMMUNICATIONS 119 Radio spectrum allocation in Japan is decided by the General Affairs Ministry in process including public input through open submission and advisory committees of experts. Recently the General Affairs Ministry has decided on a policy of ﬂexible frequency band re-allocation to react to changes of usage and technological advances and in particular the new needs for 3G, 3.5G, 4G wireless communications an other kinds of wireless communications such as wireless LAN etc. The ﬂexible policy includes the principle, that underused frequency bands should be reallocated, and the costs of transition of previous users shall be paid out of a type of tax on new more needy users, who present a better social an economic case than previous users. In principle, several sections of the spectrum are under review. In particular, at present (during 2004-2005) the 800MHz band allocation is under review. Preliminary announcements have been made by the General Affairs Ministry and lead to strong worded discussions between the different interested parties. In particular,“new entrant” Softbank is arguing strongly to obtain more radio spectrum in the “Platinum” 800MHz band for new 4G services - Softbank was recently awarded “Platinum band” spectrum.

59. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 NOTE. 120 Note that the radio spectrum and base station data are of November 2010, and there have been some changes in spectrum allocation and base station roll-out since that date. We are currently working on updating this section, and the updated data will be included in one of the following editions of this report shortly. Make sure you subscribe to this report series, then we will send you the updated versions while your subscription is current. Subscribe here: subscription, monthly payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU58870246995 subscription, annual payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU84043119788

60. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 SPECTRUM ALLOCATION AND BASE STATIONS FORTHE 1.4-2.7 GHZ BANDS 123 •This ﬁgure shows the number of base stations deployed by Japan’s mobile operators in different licensed spectrum bands •Width of bands shows actual spectrum widths, for both up- and down-link. Height of bands shows the total number of base stations deployed in all of Japan. Note that details of spectrum usage differs for different geographic regions of Japan with the highest number of base stations deployed in the Kanto (Tokyo) region. •Willcom’s next generation PHS system has been transferred into Softbank controlled Wireless City Planning Corp.  1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 2500 2600 2700 100 500 1000 5000 10000 50000 100000 frequency MHz Basestations Base stations vs spectrum allocation status Nov. 2010 DoCoMo wCDMA DoCoMo wCDMA LTE KDDI AU SoftBank SoftBank eMobile Wireless City Planning local WiMax UQ PHS c2011EurotechnologyJapanKK www.eurotechnology.com

62. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 HOW MANY REPEATERS AND BOOSTERS ARE INSTALLED? 137 •End 2006, SoftBank started to roll-out about 120,000 boosters and repeaters to improve coverage.With ramp-up of full base-stations SoftBank is reducing the number of boosters •DoCoMo and KDDI use a much smaller number of repeaters and boosters  Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 0 20000 40000 60000 80000 100000 120000 boosters,repeaters Cellular boosters, repeaters, IMCSs in Japan c2011EurotechnologyJapanKK www.eurotechnology.com DoCoMo KDDI AU SoftBank 3G eMobile

63. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 FEMTO-CELLS 139 Softbank announced femto-cells on March 28, 2010. As of Sept 2010, Softbank had 54,000 applications for femtocells. Softbank’s femto-cells are produced by Ubiquitisys. Softbank gives the femto-cell equipment free of charge to customers. Calls and data services handled by the femto-cell are routed through the customers ADSL or FTTH connection, thus effectively extending Softbank’s network. Customers pay for there wireless data and voice connection, so Softbank can expect to receive increased air charge revenues because customers will use the network more often with better connection.

64. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 HOW MANY PHS BASE STATIONS ARE INSTALLED? 140 •Willcom (formerly DDI Pocket) operates about 180,000 PHS basestations •Willcom is the only operator still using the PHS system. DoCoMo used to operate a PHS system with another 200,000 base stations, however DoCoMo’s PHS system was shut down in 2008, and the base stations were dismantled and are not included in the ﬁgure above. •During 2010 Willcom came under bankruptcy protection:Willcom was facing declining subscriber numbers and pressure on prices, while at the same time having to invest heavily into next generation PHS systems. •Softbank has been appointed the bankruptcy rehabilitation partner, so effectively Willcom has become part of the SoftBank Group. For more details see our Softbank report: http://www.eurotechnology.com/store/softbank/   1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 50000 100000 150000 200000 numberofPHSbasestations PHS base stations in Japan DDI Pocket, Willcom does not include DoCoMo's terminated PHS system c2009EurotechnologyJapanKK www.eurotechnology.com

66. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 MARKET SHARES FEB 2014VS.APRIL 2013 149 •Current market shares are: •DoCoMo: 40.8% (decreased from 42.0% in April 2013) •Softbank (including eMobile,Willcom,Wireless City Planning): 30.3% (vs. 29.3% April 2013) •KDDI (including UQ): 28.9% (vs. 28.7% in April 2013)  DoCoMo 42.0 KDDI UQ 28.7 UQ SoftBank eM Willc WSP 29.3 eMobile Willc.WSP Mobile Operator group market shares April 30, 2013 DoCoMo 40.8 KDDI UQ 28.9 UQ SoftBank eM Willc WSP 30.3 eMobile Willc.WSP Mobile Operator group market shares February 28, 2014

67. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 MONTH-TO-MONTH BATTLE FOR SUBSCRIBERS 153 •Since 2010, Softbank won the race for acquisition of new subscriptions almost every month. •DoCoMo currently (2013) does not offer iPhones, so subscribers who want iPhones need to leave DoCoMo for Softbank or KDDI.  Net growth month of subscriptions DoCoMo KDDI SoftBank eMobile Willcom UQ WCP iPhone 4S SoftBank KDDI Oct 14, 2011 iPhone 5 Softbank KDDI Sept 21, 2012 c2014EurotechnologyJapanKK www.eurotechnology.com Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 100000 0 100000 200000 300000 400000 500000 600000 700000 netgrowthmonth

69. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’S PREPAID MOBILE PHONE MARKET 158 While in Italy about 90% of mobile phones are prepaid phones, in Japan less than 1% are prepaid mobile phones. Prepaid phone users are predominantly “credit challenged” people DoCoMo has only 36,400 prepaid users, less than 0.2% of all subscribers, and DoCoMo has announced that it will discontinue prepaid services DuringVodafone times, Japan’s government coalition has announced that it is working on a law which will forbid prepaid phones.This plan was then softened down, and more strict identity checks for people registering prepaid mobile phones were introduced. It was made illegal to pass registered phones to others. Prepaid phones are said in Japan to be much used for crimes such as the “ore-ore” crime, where someone phones pretending to be a relative in dire need with severe consequences, unless an amount of money is paid into a certain bank account (usually an account where the account holder cannot be identiﬁed easily) 

70. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’S PREPAID MOBILE PHONE MARKET 159 Japan’s prepay market is very small, less than 1% of the total mobile phone market, and shrinking. Currently SoftBank has the largest part of the prepay market, but places no importance on increasing the prepay market A large part of SoftBank’s prepay users had 2G phones.Therefore there is a sharp decrease of prepay users in April 2010, when Softbank switched off the 2G network. Prepay user numbers have slowly recovered since April 2010.The slow recovery shows that those prepay users who’s 2G phones became useless from April 2010, did not miss these phones very much, otherwise there would be a much faster recovery of prepay phones  Jan 2007 Jan 2008 Jan 2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 0 500000 1000000 1500000 2000000 2500000 3000000 prepayphones c2014EurotechnologyJapanKK www.eurotechnology.com Prepay phones in Japan eMobileSoftBank KDDI TuKa KDDI AU DoCoMo

71. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’S PREPAID MOBILE PHONE MARKET 160 Softbank has the largest share of the very small and shrinking prepay market in Japan  2007 2008 2009 2010 2011 2012 2013 2014 2015 0 500000 1000000 1500000 2000000 subscriptions Prepaid mobile phones in Japan DoCoMo AU TuKa SoftBank eMobile c2014EurotechnologyJapanKK www.eurotechnology.com

73. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 I-MODE IN A NUTSHELL 164 •i-Mode was an essential part of Japan’s social and economic infrastructure - until smart-phones and app’s, and social media (FaceBook,Twitter etc) replaced it. •Most Japanese people depend on a DoCoMo, KDDI/au/EZweb, Softbank) phone for a big part of their everyday communication, information, transaction and entertainment needs and pleasures. •i-Mode was the model forVodafone Live! (nowYAHOO!-keitai in Japan), KDDI’s EZweb services, and today’s iPhone and Android app-stores have many elements of i-Mode. Menu-List Weather & News Weather i-Menu (Macromedia Flash Format) inside Camera for video-calls and self/group-portraits (c)2004EurotechnologyJapanKK www.eurotechnology.com

76. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 TRANSITION FROM 2G/PDCTO 3G 171 Japan’s last 2G phones were shipped in December 2007. Since January 2008 no more 2G handsets have been shipped in Japan. All 2G networks have been switched off, and all mobile phones in Japan today are either 3G or LTE phones, or PHS handsets.  3G subscr. total 2G subscr. total 3G phones shipped total 2G phones shipped total 10 20 30 40 50 60 70 80 90 100 c2010EurotechnologyJapanKK www.eurotechnology.com Jan 2001 Jan 2002 Jan 2003 Jan 2004 Jan 2005 Jan 2006 Jan 2007 Jan 2008 Jan 2009 Jan 2010 Jan 2011 Jan 2012 shipmentssubscriptionsasoftotal mobile phone shipments and subscriptions in Japan

78. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 CELL PHONE SALES (JAPANESE MAKERS ONLY) 175 Figures shows monthly sales of cell phones in Japan (Japanese makers only are included here: NEC-Infrontier, NEC-Casio Mobile Communications, Casio, Kyocera, Sharp, Sony, Panasonic-Mobile Communications, Hitachi, Hitachi-International, Fujitsu) Non-Japanese makers (Samsung, htc,Apple, LG, etc) are not included in the ﬁgures above (we are planning to include foreign makers in future editions of this report). Change of the sales models (conversion to installment payment plans) led to a drop of sales in autumn 2008 down to 1 million phones/ month, followed by partial recovery to between 2-3 million phones/month currently.  Due to the success of Samsung and other Android phones, and Apple’s iPhone, the number of Japan-made cellphones and smartphones is rapidly shrinking and may disappear altogether in the near future. Between 2008 and 2014, the number of Japanese cell phones and smartphones sold dropped from about 5 million devices/month to about 1 million devices/month. cellphones PHS smart phones c2014EurotechnologyJapanKK www.eurotechnology.com Japan: mobile phones delivered per month Japanese makers only Jan 2002 Jan 2004 Jan 2006 Jan 2008 Jan 2010 Jan 2012 Jan 2014 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 mobilephonesdeliveredmonth

82. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 PHONES FOR MARKET SEGMENTS.“SWEETS” FOR TEENAGE AND SUB-TEENAGE GIRLS 191 Colors: cassis mousse vanilla beans mango pudding “Sweets” include software for 13-15 year old school girls, e.g. school and homework time tables etc 

90. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 MOBILETV - ONESEG 212 •About 80 million handsets with mobileTV have been shipped by summer 2010 •More: http://www.eurotechnology.com/store/mobiletv/   total of mobile TV phones shipped in Japan total number of mobile TV phones shipped in Japan sales started October 2005 c2011EurotechnologyJapanKK www.eurotechnology.com Jan 2005 Jan 2006 Jan 2007 Jan 2008 Jan 2009 Jan 2010 Jan 2011 Jan 2012 0 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000 90000000 100000000 110000000 120000000 totalmobileTVphonesshipped

93. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 SPLIT MARKET FOR FTTH: (1) FTTH/FTTB (2) “MANSION-TYPE” 220 Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 0 10000000 20000000 30000000 FTTHsubscriptions FTTH FTTB vs Mansion type FTTH FTTH FTTB mansion type FTTH c2012EurotechnologyJapanKK www.eurotechnology.com Source: http://www.eurotechnology.com/store/jcomm/

95. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 DSL WAS PROPELLED BYTHREE FACTORS 229 1.Deregulation (June 2001): unbundling and collocation •howeverTokyo Metallic entered the market in 1999 and went bankrupt.Was “too early”. •Was acquired by Softbank, and represents the entry by Softbank into telecommunications 2.Competition between ADSL operators (especially Softbank attacking NTT) 3.Technology development enabling 12-24Mbps

96. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 DSL MARKET (34 COMPANIES) (STARTED BYTOKYO METALLIC, NOW SOFTBANK, IN 1999) 230 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 0 5000000 10000000 15000000 DSLsubscriptions DSL subscriptions SoftBank 38.8 eAccess 23.6 NTT East 16.9 NTT West 17.7 Other 3 c2012EurotechnologyJapanKK www.eurotechnology.com Source: http://www.eurotechnology.com/store/jcomm/

97. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 DSL MARKET 231 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 0 10 20 30 40 50 60 70 80 90 100 DSLmarketshares DSL market shares in Japan SoftBank 38.8 eAccess 23.6 NTT East 16.9 NTT West 17.7 Other 3 c2012EurotechnologyJapanKK www.eurotechnology.com Source: http://www.eurotechnology.com/store/jcomm/

99. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 SPLIT MARKET FOR FTTH: (1) FTTH/FTTB (2) “MANSION-TYPE” 234 Figure shows utility poles typically used in most of Japan except in city centers. Poles carry electricity wires, telephone wires, optical ﬁber cables, CATV cables, various transformers, branching equipment and local wireless access base stations.

104. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 JAPAN’STELEGRAM MARKET 262 •Japan’s telegram market has been decreasing but still has a size of approximatelyYEN 52 Billion (= approx. US$ 500 Million) •Telegrams in Japan are sent mainly by businesses for congratulations, condolences, to debtors or for other urgent communications where correspondents cannot be reached by phone, and for personal congratulations at weddings etc. •Until April 2003, Japan’s telegram market was a 100% monopoly of NTT (= NipponTelegraph Telephone), and still today NTT has about 90% of the telegraph market •Currently there are about 12 companies offering competing telegraph services, among them KDDI, and Softbank (from 2009/2010). •Telegrams are often sent through the special 115 number, which is currently operated by NTT.The Ministry is considering to open 115 service to competitors of NTT, such as Softbank.

106. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 SUMMARY: JAPAN’STELECOM MARKETS 264 •The size of Japan’s telecom operator industry alone is about US$ 200 billion in annual sales, and annual investments are on the order of US$ 30 billion •While Japan’s Government took some steps to encourage new entrants, these either failed or were acquired.As a consequence Japan’s fixed and wireless telecommunications services markets are totally dominated by three groups: •NTT - the former monopoly operator, and still today 32.6% owned by Japan’s Ministry of Finance •KDDI - with major shareholders Kyocera (12.76%),Toyota (11.09%) •Softbank - driven by founder Masayoshi Son, who also is the major shareholder, owning 21.4% •Japan introduced many services and technologies first globally, the global mobile internet revolution started with DoPa and i-Mode on February 22, 1999. However, Japan did not succeed to capture global value from this innovation, and today global leadership has been taken over by Apple’s i- Phone and Google’s Android, and Samsung has become the global handset market share leader.This effect is now generally known as Japan’s “Galapagos effect”. •Japan has more FTTH (fibre to the home) subscriptions than all of Europe, and NTT has announced to switch completely to optical Next-Generation-Networks, and to switch off traditional copper based telephone and ISDN networks. •One of the most important questions for the success of Japan’s telecom sector on the global platform this year is, whether Softbank’s acquisition of SPRINT can be successful.

108. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 EUROTECHNOLOGY JAPAN KK FOUNDED: FEBRUARY 1997 INTOKYO 266 Services and products - focus areas are high-technology, telecommunications, software, middle-ware, environmental technology and medical equipment: - Market entry to Japan for European and US high-tech companies, turn-round, reshaping, planning and building of distribution networks - European business development and strategy for Japanese companies - M&A (European and US companies acquiring Japanese companies, Japanese companies acquiring or investing in Europe) - Turn-round preparations and management of foreign business in Japan - Market research and strategy - Due diligence of high-tech companies, environmental due-diligence - Advisory services for investment fund managers and investors in technology ﬁelds - we publish a series of market reports for about 10 years, which are purchased world-wide, distributed direct and via distribution partners: http://www.eurotechnology.com/store/

109. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 EUROTECHNOLOGY JAPAN KK 267 - Leading high-technology business development boutique inTokyo, working globally - Founded in 1996/1997 - 14 years experience, relationships, cooperations and success record. - CEO works with Japan’s high-tech / telecom sector since 1984 - 27 years experience, resources, cooperations. - Wide network of cooperations in Governments, Embassies, trading companies, distributors, ﬁnance, VCs, traditional corporations, venture start-ups, industry associations - Experience: market-entry, restructuring, M&A, acquisitions, due-diligence Customers include: - More than 100 investment fund managers - Industrial customers: - NTT-Communications, SIEMENS, DeutscheTelekom, Cubic, Unaxis (now: Oerlikon), CITI Group, CLSA Asian Markets, Genscape, Google, IKEA, Isabellenhuette, Landis+Gyr, National Instruments, Swisscom,TechnoCom, - Government - NewYork Police Department, European Union,TEKES (Technology Research funding organization of the Government of Finland) Deep Japanese technology market knowledge - we publish a series of market reports for about 10 years, which are purchased world-wide.You can purchase our reports on Bloomberg: https:// www.bmart.com/search?&nuts%5B%5D=WIRE%3AEUT, and via eSellerate: http://store.eSellerate.net/ s.aspx?s=STR0576176470 and from http://www.eurotechnology.com/store/

110. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 GERHARD FASOL PROFILE: HTTP://WWW.FASOL.COM/PROFILE/ 268 - Worked successfully with Japan’s high-tech sector since 1984 - 27 years. Came first to Japan in 1984 to help build NTT’s first international R&D cooperation on semiconductor lasers - Entrepreneur inTokyo since 1996, Eurotechnology Japan KK worked with many large corporate groups (e.g. SIEMENS, NTT, DeutscheTelekom,Asahi Glass...), more than 100 investment fund managers - Assoc. Professor of Electrical Engineering atTokyo University. Record of Fasol-Laboratory atTokyo University: http://www.fasol.com/tokyo_university/ - Elite “Sakigake” (Pioneer) R&D project on Spin-Electronics of Japanese Government Science and Technology Agency.This work was evaluated by US National Science Foundation and US Department ofTrade: http://www.wtec.org/loyola/erato/ch7_5.htm - Co-initiator of spin-electronics device research in Japan, one of the first to start work on spin- electronics in Japan in 1991 - Tenured Faculty member at Cavendish Laboratory/University of Cambridge. - Assoc. Professor of Electrical Engineering atTokyo University - PhD in Solid-State Physics (Cambridge University,Trinity College, UK) - Diplom-Physiker, Ruhr-University Bochum (Diplom-Thesis on Superconductivity) - Publication list (Books, patents and publications, several publications are specifially concerning electron-spin and spin-electronics): http://www.fasol.com/profile/publications.shtml - Languages: English, German (native), French, Japanese, and some Swedish

112. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 “POST GALAPAGOS STUDY GROUP” 25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT” 270 see: http://www.eurotechnology.com/2013/10/07/galapagos/

113. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 “POST GALAPAGOS STUDY GROUP” 25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT” 271 see: http://www.eurotechnology.com/2013/10/07/galapagos/

114. (c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s telecom markets (Version 66) July 6 2015 CONTACT AND MORE INFORMATION 272 Contact •Gerhard Fasol PhD •Eurotechnology Japan KK,Tokyo, Japan •http://www.eurotechnology.com/ •Mobile +81-90-8594-6291 •fasol@eurotechnology.com •gfasol@gmail.com More information: •reports:http://www.eurotechnology.com/store/ •twitter: http://twitter.com/gfasol/ •website: http://www.eurotechnology.com/ •personal site: http://fasol.com

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