June 12, 2014 2:00 am JST

Docomo to retire 560 billion yen of own shares in fiscal 2014

TOKYO -- NTT Docomo will retire 320 million of its own shares at the end of fiscal 2014, aiming to sweeten its remaining stock amid a string of disappointing earnings.

     The figure corresponds to about 7% of total outstanding shares and over 560 billion yen ($5.41 billion) at the current price, making it the largest share retirement ever for the leading Japanese mobile carrier.

     Docomo is buying back up to 500 billion yen of its own stock from the market this fiscal year. If the whole amount is purchased, treasury stock will represent about 12% of all shares outstanding. The mobile carrier will then retire those treasury shares to allay investor concerns that the company might dilute the share value by unloading them.

     Docomo is girding itself for another disappointing year. Group operating profit is expected to sink 8% to 750 billion yen in the year through March 2015, a third consecutive year of profit declines. Earnings will likely be weighed down by the cost of discounting plans for smartphone users.

     Despite these troubles, Docomo will reward investors by raising value per share through buybacks and avoid cutting dividend payouts. As a result of the share retirement, return on equity, or the amount of net income returned as a percentage of shareholders equity, is seen rising 0.3 percentage point on the year to around 8.7% at fiscal year's end.

     Share retirement reduces equity capital on a company's books, boosting capital efficiency. Docomo's ROE has been on the decline since peaking at about 20% in fiscal 2004. The company aims to raise the figure to 10% by staging a turnaround of its core operations.