Network Infrastructures Business Webinar Briefing Q&A
NEC Networks & System Integration Corporation
Date: Friday, March 19, 2021
Questions and Answers
Questioner A
Q: Regarding the impact of lowered cellphone fees, you said that it would not be a risk but anopportunity. I suspect that it will generally have a negative impact. Tell us how you will reapa benefit from it.
A: It is anticipated that carriers will work to increase the efficiency of maintenance and operation
costs after the reduction of fees while the construction of telecommunications infrastructure
will be as planned. Possible actions include the introduction of automation to reduce
expenses and the concentration of outsourcing in corporate partners capable of efficient
operations. In this, we believe there will be an opportunity to grow our business byleveraging our understanding of their business, our ability to provide systems and thestructure of our operations.

Questioner B
Q: You mentioned that the next medium-term management plan would aim to develop
businesses of between 30 and 40 billion yen in priority areas. Am I right to understand thatyour goal is to increase net sales by 30 to 40 billion yen? What impact will this have onprofitability?
A: We will strive to boost sales in priority areas. However, sales will fall in some existing areas.
We will take both into account in the development of a business plan. Regarding profitability,
we believe that we can improve the sales mix by increasing the percentage of DX-related
businesses in place of the construction businesses.
Q: I feel that you will have more opportunities to work with NEC in businesses related to theSuper City concept. What is your thinking on this?
A: We are increasing our collaboration in the field of social and public infrastructure field,including local 5G networks, through discussions built upon the idea that it is vital for ouroperations to benefit both companies. We believe that NEC's knowledge and expertise will
be utilized broadly in the active use of AI and other DX technologies.
Questioner C
Q: Will KNSI not be engaging in businesses for companies other than KDDI? Do you have anidea that the local 5G, DX utilization and other businesses will be run by KNSI?
A: KNSI is a company doing business exclusively for KDDI. We believe that it will engage injoint projects involving KDDI and SoftBank, but nothing else is planned. We will push ahead
with utilization of DX in the context of increasing KDDI's business efficiency.

Questioner D
Q: It is said that for the introduction of offshore wind power generation and other renewableenergy power generation it is necessary to strengthen the connection to the power grid.
Today, media are reporting about a policy for the strengthening of transmission networks
using submarine cables. I suspect that constructors affiliated with wire companies will alsobe engaging in installation in this sector. Will this be a business opportunity for NESIC
enabling you to leverage your knowledge in the submarine network field?
A: As you said, we think that there is an opportunity for us to utilize our know-how in the marine
business in the area of offshore wind power generation. We are working to analyze thismarket and operations. We are paying attention to it as, in addition to cable installation, wemay be able to provide monitoring network and many other services.

Questioner E
Q: You explained that you would expand the scale of business by 30 billion yen in priority areasin the medium-term future while at the same time expected some decreases in existing
businesses. I feel that fire fighting, disaster prevention and other businesses will stay strong.
What businesses do you expect to shrink?
A: One example is that the replacement of CATV cable with fiber-optic cable is approaching a
final stage. We are considering moving into the area of utilization, but I think that theinfrastructure business related to this will peak out. We also estimate that the infrastructurebusiness related to broadcasting will be weak due to the online distribution of content. We
need to identify the areas where business will diminish and the impact of this.
Q: Is there any risk that the collaboration with NEC will negatively impact other businesses?
A: None. As an independent company, we will run our business to make sure that there will be
no such impact.

Questioner F
Q: You said that you would increase the number of 5G engineers to four times the current
number. According to your plan, how much will the entire network infrastructure business
staff grow?
A: At the moment, we are unable to give you specific figures for the staffing plan for the next
three to four years. Basically, the key point will be internal education to develop engineers.
We recruit approximately 50 new engineers each year and also hire mid-career andexperienced personnel. In addition, we will provide transitional education to existing
employees to secure the necessary number of engineers.
After the ubiquitization of local 5G and other technologies, price competition may intensify.
We believe it is important to not only increase engineers but also streamline processes sothey can be done by a smaller number of engineers. We aspire to employ around 400 5G-

related engineers companywide.

Questioner G
Q: Currently, SoftBank is planning to operate a business under the private 5G concept. NTT
DOCOMO and KDDI may follow suit. How do you, NESIC, view this move in terms ofbusiness opportunities and other aspects?
A: The services that will eventually be offered by carriers to end users will be vital. So as forour business opportunities regarding private 5G, a collaborative business model withcarriers in the service area is a possibility.
In terms of its impact on our local 5G business, we understand that it is difficult for carriers
to construct new base stations for the purpose of providing private 5G services forprofitability reasons. In other words, we suspect their basic position will be to operate
private 5G services within areas covered by active 5G base stations. From this perspective,
we believe that our local 5G business will have advantages in some domains.

Questioner H
Q: From your perspective, what progress have your principle customers made in core network
virtualization? As more and more core networks are virtualized, the hardware unit price will
fall. Companies are engaging in system integration (SI) mainly for control by software. Will
the dropping unit price impact profitability or the unit price of your SI business?
A: We believe that the virtualization of core networks is still underdeveloped. Basically, we are
not engaged in the sale of goods, so it will have little direct impact and it will not affect theprofitability or the unit price of our SI business. Rather, virtualization will provide an
opportunity for the growth of our business, since we are capable of providing support basedon our deep knowledge of carriers' businesses.
Questioner I
Q: In your response to the earlier question about the impact of the carriers lowering theircellphone fees, you said that construction of telecommunication infrastructure would be asplanned. Does this mean that it will increase as planned, decrease as planned or stay flatas planned?
A: We believe that it will increase as planned. Individual carriers have 5G base station
construction targets that they promised the Ministry of Internal Affairs and Communications.
We hear that they are ahead of their construction schedule. Therefore, we believe that thereinforcement of networks supporting these base stations will increase in proportion to thebase stations.
Q: Have there already been price reduction requests from carriers regarding maintenance? Or
are they what you anticipate? Regarding this, what companies will be your competitors?
A: The move towards the reduction of maintenance service charges is still a matter ofspeculation. However, we feel that it is gradually becoming more likely. Competitors willinclude the communications constructors and system integrators in field service andnetwork system integrators in the operations within centers. In the future, more and moresystems will be open. Then, our advantages in our ability to efficiently provide multi-vendor
services will be fully displayed in more extensive areas.
Questioner J
Q: On one hand, we can imagine that NESIC would have an advantage in local 5G services
because of its two facets of network construction and the provision of solutions. On theother hand, solution providers may contract network constructors. How will you operate inthis business to ensure an advantage?
A: 5G is classified as a radio technology. When constructing a network, highly technical skills
are necessary to apply for a license, deal with radio wave interference and coordinate withneighboring operators. With our proven skills and track record, we are confident that wehave a competitive edge.
In the solutions business, we will target the markets we are strong in. In the network
infrastructure business, targets include local governments and CATV operators, forexample. In the digital solution business, we will focus on utilization in offices and on
providing solutions in the domain of work style innovation. In other domains where special
business expertise is needed, such as factory automation and remote medicine, we believe
we will need to operate businesses in collaboration with system integrators and systemcompanies with technical knowledge in these fields.

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