Q&A in the small group meetings regarding the Medium-Term Management Plan
(Medium-Term Plan)
Date: May 31 and June 11, 2019
≪Digital Solutions Business≫
Q ： How do you enhance the added value of the business to the degree of providing
consulting-oriented solutions from offering places and tools in order to respond to demandassociated with work-style innovation?
A：To address demand related to work-style innovation, we think it is necessary to revisit therequirements that we should focus on, taking the situation of the time into consideration.
From this perspective, it is important that we put such innovation into practice internally. With
this in mind, we will work on establishing new work-styles for ourselves on a full-scale basis
while also keeping an eye on any requirements that may arise in the future. We will review
the process of our operations, and by practicing them, we will demonstrate work-styles that
produce the expected effects in terms of business performance, which we consider important.
Our stance is to propose solutions that we find successful through internal practice. In doing
so, we may experience failures, however they will be used as hints for future solutions.
When we undertook the initial work-style innovation after moving to the current head office,we shared what we achieved in terms of reductions in the amount of paper and electricity
used with our customers. In the new business model, we will continue analyzing theoperations that we will undertake in the future, and we will establish and promoteachievement metrics that customers can easily understand.
Q：You have said that you intend to increase sales from consulting services. Have you everoffered any such services?
A：We have been offering solutions related to work-style innovation for more than 10 years, since2007, and we have been undertaking consulting services while doing so. However, theservices that we have been offering are aimed at achieving office efficiency improvements.
Going forward, we will enhance the consulting services that help transform businesses andincrease competitiveness based on new technologies.
Q：What is the current status of the resources that are required for making the business model
more consulting-oriented, as well as the measures for enhancement?
A：We do not intend to engage in business consulting. Rather, we will strengthen our consulting
services as they pertain to systems. To do so, we need to enhance the capabilities of oursalespeople to ensure that they can undertake sales engineering and offer consulting
services. We will also strengthen our human resources through collaborations with external
parties. In addition, in order to develop our engineers and increase their numbers, wecreated the Business Design Operations Unit in April, which will be utilized to increase thenumber of specialists that are able to offer consulting services from approximately 20 atpresent to around 60.
Q：What is the cloud concept that NESIC aims to establish? Do you intend to offer specificapplications rather than providing data center services?
A：With the importance of products expected to diminish as they are incorporated in the cloud
scheme, we will provide solutions by integrating a range of cloud services. Today, users havedifficulties using cloud solutions if different cloud services, which are all excellent, are notlinked to each other. We will therefore offer services that link them through our platforms,
while at the same time working to create environments that facilitate such linkages. As longas they use our platforms, they will be provided with services continuously.
Q： In the Digital Solutions business, sales from hotels have been increasing significantly in thepast few years. Is there any risk that the decrease in reaction to such increases will offset
sales growth in other businesses after the Olympics?
A： We do not expect that sales from hotels, which had been growing at a significant pace until
last year, will maintain this trend going forward. Having said that, hotel needs are expected
to remain steady in response to inbound demand. Furthermore, there are other industries
such as education for which we will be able to increase sales even if sales from hotels are
sluggish. With the business repositioned as a unit in a large operationunit, we will be able toutilize our engineers more effectively.
≪Network Infrastructures Business≫
Q：What do you expect to result in increased sales of the Network Infrastructures business over
the Medium-Term Plan period?
A：We expect that the joint venture (KNSI) that we established with KDDI last year will make asignificant contribution to the business results. In addition, we aim to achieve our plans byincreasing sales with respect to the so-called migration that secures traffic in the core
networks for the full-fledged deployment of 5G-based services, as well as other businesses
related to ocean, broadcasting/cable TV services, etc.
Q：In what order do you expect business opportunities to be created in conjunction with 5G?
A：First of all, we expect that demand will be created for upgrades. There will be the so-called
migration demand. Similarly, submarine communications will require dealing with traffic
increases and vacating frequency ranges for the 5G service. New plans are being discussed
one after another for businesses with respect to 5G and the utilization thereof. Althoughmatters are still not clear in terms of timing, we are looking forward to these new opportunities
because we have the capability to deal with a wide range of work including design,
construction and services. Our stance is to deal with migration first while also making
preparations for the full-fledged introduction of the technology thereafter.

Q：With respect to 5G, are there any differences from the assumptions in the Medium-term Plan
that are becoming apparent in terms of the assessment of market conditions such as thetiming of deployment and speed in the progress thereof?
A：With changes such as the introduction of local 5G taking place since the start of this year, weare beginning to feel that we need to rebuild organizational structures as soon as possible toensure that we are prepared for 5G as a whole. Although the actual timing of the launch is nottotally clear, our stance is to work on the preparations so that we can implement measures
promptly when demand starts to pick up in the market, taking into consideration an increase in
the number of applications in the future and the migration-related demand that is expected toexist for the time being. If nothing else, we expect demand to grow faster than anticipatedonce it begins to pick up.
Having said that, as far as 5G is concerned, it is only sales from migration that are reflected in
the Medium-Term Plan, which is focused on strengthening the existing businesses in
preparation for the introduction of this new standard.
Q：Is there any guarantee for the tasks that will be undertaken at KNSI? Are sufficient humanresources secured despite the recent shortage of manpower?
A：Naturally, not all tasks are guaranteed. We share an aspiration for the creation of the joint
venture, based on which we will make the expected achievements and expand the business.
KNSI has not secured all the human resources that will be necessary for future projects,
although progress is being made as planned.
Q：I hear that constructing base stations is an unprofitable business. What are your thoughts?
A：There was such a case previously, but the situation has been changing. What matters mostwith regard to the base station business is how the operation rate should be increased undersignificantly fluctuating demand conditions. One of the advantages of operating joint ventures
is that the progress of investments is relatively visible at an early stage. We will prepare plans
based on this progress.
By the way, while 5G base stations are becoming smaller and smaller, a certain number need
to be secured. Accordingly, construction should be implemented in a manner that reflects thisreality.
Q：Is it possible to use LPWA (ELTRES), a standard that you are promoting together with Sony
Network Communications and ORIX, for 5G?
A：LPWA is different from 5G. ELTRES, which provides small data at an extremely low cost, isparticularly excellent in terms of its coverage, power consumption, and support for devices
that move at high speed. We believe that it is possible to use it for totally different applications
than those served by 5G.

Q：Which markets will be targeted with the deployment of ELTRES?
A：A variety of applications is possible, including the monitoring of social infrastructure, use infactories and use inside moving things such as vessels. For example, rental items can be
managed easily if they incorporate the standard. We expect that business opportunities will becreated in systems integration associated with the technology.
Q：Please elaborate on the ocean business.
A：There is demand for the undersea communications network in response to an increase intraffic. We offer services such as route design and on-site management as they pertain to
installation work. In addition, we undertake operations such as the establishment ofearthquake observation systems that utilize submarine cable networks. As a result, byleveraging the expertise we have developed through this experience, we may be able toengage in tasks such as submarine resources observation businesses. As a matter of fact, weare a participating member of a development project being undertaken jointly with Scotland.
Q: There is almost no reference to the social infrastructure businesses in the new Medium-Term
Plan. Which area are you keeping an eye on?
A ： In the social infrastructure business, we have been focusing on areas such asbroadcasting/cable TV and disaster prevention, and this stance basically remains unchanged.
We have, however, implemented a restructure and merged the business with the carrierbusiness to ensure that proposals can be made from a broader perspective. For example, wewill make proposals on solutions that include technologies such as IoT, and in the future, thoseusing 5G.
≪Engineering & Support Services (ESS) Business≫
Q：It appears that mega solar projects play an important role at this point in terms of sales in the
ESS business. With sales from mega solar projects expected to decline, however, there isconcern that you have no option but to win orders in other projects to maintain the sales
targets in the Medium-Term Plan, even if their risk levels are high. What are your thoughts?
A：We wish to develop new energy businesses. That said, we are not projecting any increase insales, factoring in an expected decrease in mega solar project sales. As far as the ESS
business is concerned, as the solid sales indicate, we believe that it is being operated onstrong business foundations, despite maintenance services facing tough business conditions.
Q：Do you intend to keep up the efforts of expanding sales from overseas businesses going
forward?
A：We wish to drive growth on a long-term basis. For now, however, our thinking is that we don’t
have sufficient resources or appropriate organizational systems. We have positioned the next
three years as a period during which organizational systems should be reestablished. With
overseas businesses mainly focused on construction work, we included them in the ESS

business organizationally, and will develop resources while at the same time carrying out
projects for which we have received orders.
≪Search for New Technologies≫
Q：You have said that you will adopt new technologies in partnership with startups. What
technologies are you looking for? Are you focused on those related to work-style innovation?
A：We are searching for them in a broad range of areas because we feel that superior
technologies and services that can be used for operations are being created one after anotherbased on new ways of thinking. Use is not limited to areas related to work-style innovation. On
the other hand, we expect that the same technology can be used for a variety of applications
including the automation of hotel services and the monitoring of factories.
Q：What is the extent of your investments in startups?
A：We invest several tens of million yen per project, which amounts to several hundreds of million
yen in total to date. We aim to provide their technologies after nurturing them and making
them more user-friendly.
Q：What scheme is established to adopt new technologies such as those developed by startups?
A：We are mainly searching for them in the United States, and we are in the process ofestablishing channels for searching. These currently include our own CVC and Sozo Ventures,
which makes investments in relatively mature technologies developed by startups. In addition,
we are increasing the number of our staff members stationed in such facilities. As the successof Zoom shows, we have made good progress in developing local channels. On the Japaneseside, we have established the Business Design Operations Unit to improve our evaluation
capabilities. The Operations Unit are staffed with external members.
Q：With respect to CVC’s investment destination, what is the objective of investing in Ale, ashooting star-related company?
A：Progress is being made in the privatization of space businesses. We have been engaged inbusinesses related to the operations of space probes such as “Hayabusa” and space satellites.
Accordingly, we have invested in the company to facilitate the privatization of such BPO
businesses.
≪Improvement of Profitability≫
Q：Please elaborate on your intention to achieve profitability that equals the level of your industry.
A ： The nature of our businesses is characterized by services offered by both oftelecommunication construction companies and system integrators. Even so, we are awarethat we are inferior to our competitors who engage in those businesses in terms of
profitability. We will solve the relevant issues, achieve the targets in the Medium-Term plan tomark the first milestone, and seek to make further improvements.

Q：Your plan shows that profitability will improve in the respective businesses. What are thecontributing factors?
A：Needless to say, we must raise our level of competitiveness. In addition, the improvement ofefficiency is an important factor. By implementing an organizational realignment, we haveconsolidated internally dispersed resources to ensure that they are managed centrally fromthe perspective of total optimization, and that our efforts in terms of the development ofmulti-skilled operators are advanced. We are confident that the initiatives are effective
because significant improvements have been witnessed through the consolidation of
resources undertaken by our subsidiary. Another significant factor is the elimination of
unprofitable projects that has been preventing the recovery of our business performance inrecent years.
Q：I think that consolidating resources is the most difficult initiative because it may lead todisadvantages arising from large-scale operations. What are your thoughts?
A：We don’t see it as such a difficult initiative. We achieved positive results in a companywide
cross-departmental project that was carried out last year. The necessity of being aware of theissue of dispersed resources is suggested and shared by on-site staff members as well. For
example, we can strengthen our position by consolidating businesses such as security andvideo-related businesses that we have been operating in different departments on a small
scale.
≪Other≫
Q：It looks like the business environment will be favorable for the Medium-Term Plan period.
Even so, are there any matters that you consider to be risk factors?
A：The economic conditions pose the greatest risk. Besides, there is the possibility of thetechnologies developed by startups ending in failure. We basically understand that not all ofthese technologies will be successful, and it is prohibitive to rely on calculated success ratios.
Another risk factor is the occurrence of unprofitable projects. That said, with countermeasures
working effectively so far, we will continue our efforts to prevent the occurrence of
unprofitability in any new projects. In particular, we need to pay attention to overseas projects.
Given the recoveries in orders received, we will work on such projects carefully to avoid any
miscalculations.
Q：Please elaborate on your financial strategy. Which risk factors are driving you to accumulate
your cash holdings, which appear to be high on a net amount basis?
A：In consideration of the impacts of large projects, we strive to reserve working capital of
approximately 50 billion yen, which is almost equivalent to two months’ sales. Excluding thisamount, we don’t have a large amount of cash and deposits that we can spend at our own
discretion. In fact, as a result of revitalizing our growth investments, the amount of net cash
has been declining slightly for the past two years.

Investments are important for future growth. We will therefore undertake borrowings if weneed to make large investments.
Q：What are your thoughts about the collaboration with NEC over the next three years?
A：We intend to make the collaboration even closer. NEC’s technologies for digital applications
such as face recognition, not to mention 5G, are attractive and can be used easily thanks tothe excellent relationship within the NEC group. In retrospect, we should have made greater
efforts to utilize NEC’s technologies effectively.

*This material is a summary of questions and answers exchanged between the Company andsell-side analysts at two meetings held separately on May 31 and June 11. To help readers gaina better understanding, the content has been edited by omitting overlapping questions andrearranging the order of the questions.