Kddi Corp Unsp/Adr

We are now going to start the KDDI Corporation's press conference on financial results for the fiscal year ended March 2024. I am the facilitator today. My name is Nakoji from KDDI Public Relations Department. The press conference today, in addition to this hall, there are multiple deliveries such as the YouTube. As for the materials, today, three documents related to financial results, Two documents of TSE disclosure are posted on the KDDI's website. Please take a look at them. Now, let me introduce the members on the stage. President, Representative, Director and CEO, Mr. Makoto Takahashi. Managing Executive Officer, CFO, Executive Director, Corporate Sector, Ms. Nanae Saishoji. Executive Officer, Executive Director, Corporate Management Division, Corporate Sector, Mr. Kenji Akita. General Manager, Accounting Department, Mr. Shigeru Izoe. These are the four members. President Mr. Takahashi, over to you.

Thank you. Let me share with you the business results for the fiscal year ended in March 2024. The presentation, the deck, tends to be a little longer than usual. Now, today, as you can see, I'd like to focus on these four points today. First, on consolidated results. Highlights of the consolidated results for the fiscal year March 2024. Revenues increased while the income decreased in the consolidated results. There was a temporary impact from leased receivables, provision for Myanmar telecom business, and impairment of provision for removal of low-utilization telecom equipment. But other than this, the progress was on track. The left shows the revenues, 5,754,000,000 yen, up 1.5% a year only. The center shows the operating income, which was 961.6 billion yen. Without the temporary impact, it was 1,080,000,000 yen. The right shows the net income attributable to the owners of the parent, which was 637.9 billion yen. Next, let me explain about the factors for change for the consolidated operating income. ARPU revenues for multi-brand communications rebounded and were up 5 billion yen. DX areas, there are three grow areas, but DX areas, which were one of the three growth areas, so 20.4 billion yen. Financial resource business was 14.2 billion yen. Energy business was 16 billion yen, growing steadily. including a decrease in Rakuten roaming revenue and an impact from accounting treatment of financial business, the substantive operating income was 1,080,000,000,000 yen, and we were able to achieve the forecast made at the beginning of the term. With provisions for Myanmar telecom business and other temporary impact, which was minus 119 billion yen, the operating income was 961.6 billion yen for the fiscal year ended March 2024. Next concerns the topics for the FY March 2024. The left communications are the revenues, as I said, rebounded year on year. In focus areas, namely DX, finance and energy businesses, we achieved, as you have seen, We achieved double-digit income growth year on year. Moving to the right, 5G base stations. We completed 5G rollout, opening 94,000 stations, the highest in the industry. Towards sustainable growth, we are making a steady progress, focusing on those major business lines. The review of the progress of the mid-term strategy announced in May 2022. The left shows the target looking back the two-year progress until March 2024. While there were telecom price reductions and fuel market impact, key measures enjoyed steady progress. Moving to the bottom, for financial policy, the progress towards the target has been well for all the measures. Next, on EPS progress, which is one of the important targets in the mid-term management strategy. In addition to the key measures already described, we've been promoting businesses to raise EPS towards the target of 1.5 times increase by the FY March 2025 versus FY March 2019. As shown on the right, we have been steadily working to achieve sustainable growth and return to our shareholders. As The graph shows, however, we're behind in the progress due to unexpected factors. I'm pretty sure you're familiar with these unexpected factors, unfortunately. On our part, about 1.5 times increase of EPS, our initial target, we were adhering to this target. By extending the period for the mid-term management strategy by one year, we'll update the strategy and increase Continue to aim, achieving 1.5 times increase in EPS by FY March 2026. Help you understand our strategy. Let me share with you our efforts looking at 2030. We crafted KTDI Vision 2030, refining our core business, telecommunications, evolving power to connect. Now communications are integrated in every scene of the society. They're simply indispensable. Going forward, AI will be integrated to create new values of the next era. By evolving the power to connect by AI, we aim to create new values and solve these issues. Towards the era of integrated AI, we will promote digital twins with our partners, creating new values. We can process our customers' physical activities as data and simulate them with digital and AI and can give feedback. And by so doing, we can make the physical society better. And that's related to a management policy. First, Let me explain. Building infrastructure for AI era as digital initiatives create added values by AI and data. First, on generative AI platform development, you can see the large-scale computing infrastructure necessary for AI development that requires enormous computation. And on the platform, utilizing expert technology held by startups and others will build generative AI models. Moving to the right, the application platform for AI utilization that requires low latency by allocating computing resources in our 5G MEC will develop comfortable AI utilization environments. Next concerns computing infrastructure supporting AI. The left shows building of data centers that can support large volume computation for LLM development. While utilizing 10.2 billion yen grants from the METI with capex of about 100 billion yen in the mid to long term will integrate GPU and other computation resources. We'll invite startups and our partners to use them and accelerate co-creation of businesses and services using generative AI. Moving to the right by utilizing eight telecom centers we have nationwide, we contribute to comfortable AI services. Next is about DX expansion with AI. The computation infrastructure and environment we build will be fully utilized in house refining networks, enhancing customer response and operational efficiency. Next, as physical initiatives, let me share with you our strategy of convenience stores and AI. Retail business, including Lawson, are expected to respond to diversifying customer needs and labor shortage. And to accelerate the growth, the AI and DX utilization is essential. The right shows Lawson's performance, which has been really brisk, as I heard, and we believe that their growth can be accelerated further with AI and DX. Lawson envisions, and they already made an announcement for short-term realization of real tech convenience stores, shown on the left, and for mid- to long-term Lawson Town initiatives, as shown on the right. In the center of the new smart city, convenience stores requiring new decks is placed, and the great, excellent new Lawson Town should be created. In addition to real tech, expanding to various values outside stores is consistent with the direction of digital twins. And in areas of real, digital, and green, three companies cooperate to realize the world Lawson envisions supporting the sustainable society together with Mitsubishi Corporation and Lawson. Let me elaborate new value co-creation. Together with Mitsubishi Corporation, we want to do these three things at the risk of repeating real tech convenience utilizing AI and DX left-hand side. By utilizing DX, we want to accelerate the Lawson's growth even more. Secondly, creation of new added values with convenience stores as a starting point. I will come back to this later. Number three, further expansion of PONTA economic zone. We would like to keep working on this next page, please. First concerns realization of real tech convenience towards frictionless convenience stores utilizing AI and DX. Look at the left, please. By speedily linking laws and small trade area data with location information and customer data KDDI have, we'll realize DX by utilizing AI. Moving to the right. For customers, we intend to offer frictionless payment and optimal recommendations. And to store staff by reducing their workload, we aim to realize more resources for customer responses. And through these, we will contribute to sales expansion and profitability improvement by store. This is a major indicator. And on these, we want to share the same vector together with Lawson and to make a contribution. Next slide. We will create new added values with real tech convenience stores as a starting point. The bottom shows physical contact points such as AU shops and digital contact points like Smart Pass and AU Pay. And in addition, there are 14,600 Lawson stores nationwide and remote customer services. which is a wide expansion of new contact points. With these as multi-contact points, we can enhance functions and values with our partners. And as you can see on the top, left-hand side, communications, added value, value-added services, and 14,600 locations, remote customer services. If they are established, Not just limited to smartphone contracts, receiving drugs, drug taking, and advice for finance and quick commerce. Right-hand side, this is utilizing platform service using the location, 14,600 users. as the base stations or drone bases, they can be utilized to crime prevention, disaster prevention, and green energy bases, if you can utilize them as such. With the initiatives to further away from the conventional convenience stores, we can offer new services using those store locations. Next, please. Number three, further expansion of the Ponte Economic Zone. With the equity contribution as an opportunity, we will strengthen our relations with loyalty marketing. Strengthening relations including the equity contribution together with Mitsubishi Corporation and other partners will be working to expand the Ponte Economic Zone. Moving to the right, we will have AU Smart Bus premium subscription-based membership, we will rebrand AU Smart Pass Premium as Ponta Pass, enhancing services and aim to increase the members from current 15 million to 20 million members. Want to see this expansion? So far, we were the only one who sold the Smart Pass at Lawson. If Losung can sell them, then up to 20 million members will want to expand the services. So the further expansion of Poncha economic zone. These are synergies from these three initiatives. In addition to Lawson's organic growth, by realizing real-tech convenience, we will promote sales increase and high efficiency, thus accelerating the further growth of Lawson. In addition, by utilizing stores as multi-contact points and expanding economic zone by Ponta Pass and others, KDDI will work on maximizing synergies by revenues from added values, DX growth, and boosting retention and increasing cost efficiency so maximizing synergies is what we intend to realize we have a strong passion to do so as a model to work on these initiatives we're planning to open a lawson store in a new office building as we will move to our new office in takanawa gateway next year We have a plan to open two stores in these stores to realize a real tech convenience store where we'll be collaborating with Takanawa Gateway City, creating various values. The plan is ongoing. Co-creating the world Lawson envisions is very valuable, and it is consistent with our satellite growth strategy, and we believe we can realize sustainable growth, which both of us aspire to achieve. To realize physical and digital initiatives described so far, we will promote optimization of balance between investment and cost levels with a mid- to long-term view, as shown at the top, so that we can make advanced technology investment actively to build digital infrastructure. We will improve core technology efficiencies, such as infrastructure sharing and reviewing low-utilization equipment, as shown in the middle, thus controlling CapEx and OpEx levels.

Among those, one of the most effective initiatives is infrastructure sharing. This is already mentioned by SoftBank. We established 5G Japan with SoftBank and have been working together to share antennas, radios, and transmission lines that have been developed by each company. We will further accelerate these efforts, aiming to build a cumulative total of 100,000 base stations by FY2030 and reduce capex by 120 billion yen. Now, Let me change the subject and let me explain the updated new satellite growth strategy. First is the telecommunications business for the AI era. The left, smartphones and IoT, which are the starting point of data, will become the source of competitiveness in the AI era. To first expand our base, we aim to increase the number of main subscriptions to over 82 million by the end of the fiscal year and in March 2025. On the right, we will provide value-added via data-driven leveraging communications platform at customer contact points. So this is our new satellite growth strategy. To strengthen our communications and value-added strategy, we have updated our previous strategy and formulated a new satellite growth strategy. Based on... Our core value of adding data-driven and generative AI to telecommunications, we have defined Orbit 1 as a growth area that adds value when combined with telecommunications, and Orbit 2 as a growth pillar towards the future. First is our core initiative. It is a growth strategy for the core personal segment. Going forward, it will be important to create value for customers to increase revenues and retention. The vertical access, AI and data-driven, will provide communication customers with services that are more beneficial than ever before. Of course, convenience store is included. And of horizontal access, we have also focused on expanding IDs by utilizing partner contacts such as Lawson. By promoting growth strategy, we will increase both communication and value-added ARPU revenues. On the right, we will focus on value-added creation to achieve sustainable growth in electricity and double-digit CAGR growth in value-added ARPU, such as settlement loans, product supports, and content, while leveraging synergies with Lawson. Let me introduce our efforts to create value-added products. On the left, the AU money activity plan has been well received by many customers, and there were over 700,000 contracts signed within seven months of launch. In addition, the churn rate improved by about 25%, and ARPU increased communications, ARPU increased by about 10% when subscribers join the EU money activity plan contributing to higher engagement and ARPU. So, by adding value-added service to our service, we will aim at achieving such effects. And on the right, we will further strengthen the provision of such value-added services in cooperation with Lawson in the future and enhance engagement in the future. Next is 5G. 5G communications will also utilize the new frequencies to increase the network competitiveness of the left sub-6. We have opened 39,000 base stations, the largest in the industry. In addition, the sub-6 area will be approximately doubled in the Tokyo metropolitan area due to the relaxation of satellite interference conditions. In April, there were So from April to the end of May, power of control will be concluded. So sub-6 area is expanding drastically and will be doubling. In such a short period of time, such a large expansion of area was never seen in the past. So this is one area that we are focusing. On the right, sub-6 data traffic is expected to increase by about 20% after the relaxation of satellite interference conditions. In addition, the slicing technology allows different networks to be used for different services, leading to improved quality of experience. The full-scale use of 5G will contribute to the improvement of communications and value-added ARPU. Orbit 1 of a new satellite growth strategy is to focus on DX finance and energy businesses. Each of these businesses is targeting double-digit CAGR growth. Orbit 2 LX has been redefined into five areas for future growth. This is the growth strategy for DX and corporate business. Like the personal business, we will build on our network infrastructure base to create AI and digital value-added growth areas, such as IoT and data centers. We also aim to expand IDs by strengthening our approach to the SME segment. In order to promote this growth strategy, we have redefined our business segments, as you can see on the left. We will promote the telecommunications plus value-added model in two areas. The basic communications revenues and growth areas consisting of value-added revenues We aim to achieve double-digit CAGR growth in revenues in growth areas centering on IoT-related services, data centers, and digital BPO, which are our strengths. On the right, the business segment operating income. We aim to achieve double-digit CAGR growth and to achieve an operating income over 20% of KDDI Group's consolidated operating income. There are three strengths in the growth area. On the left, the number of IoT connections, including Soracom. This is targeted to exceed 100 million by FY2030. We have recently established a specialized company in North America to further expand our connected business. In the middle, the data center aims to capture demand in the AI era and achieve operating revenue of 200 billion yen by FY2030. On the right, Altius Link has announced its new digital BPO platform service, Altius One. Based on Japan's largest data set of 500 million calls per year, Altius Link will develop problem-solving businesses through the use of AI and data. We have also launched a new business platform which is Wacom Cross, to accelerate the creation of added value in the AI era for corporate customers. Based on the communications customer contact points we have developed so far, we will contribute to customer growth and problem solving in each industry by providing the networks, data analysis, and industry-specific DX solutions required in the AI era. Next is the financial business. On the left, our performance has been strong. mainly due to our membership base in the bank and credit card businesses, which are our strengths. We will continue to aim for double-digit CGR growth in both revenue and operating income. On the right, this is the AU Jibun Bank, which enjoys the support of the customers. We will continue to expand our customer base while maintaining a balance between deposits and loans. In the energy business, operating income for the fiscal year ended in March 2034 was 2%. 11.7 billion yen as a result of efforts to stabilize the business and the number of AU Dinky contracts also is increasing. We aim to achieve double-digit growth in operating income by strengthening synergies with telecommunications and re-promoting the sales of AU Dinky. On the right-hand side, through our group companies, we will strive to both contribute to carbon neutrality and grow our business. Orbit 2. life transformation LX area. We aim to scale our business by combining our assets with those of our customers. On the left, partnering with SpaceX is now in its third year, and the partnership has deepened. We will continue to expand the range of services we provide as an infrastructure that supports society. On the right, the LX sector also has synergies with Lawson. In the entertainment area, the electronic ticketing platform and Lawson's entertainment services will be to expand the number of events handled and create value through customer traffic. In addition, by combining KDDI's mobility-related services with Lawson's stores, we will contribute to improving the convenience of regional transportation and shopping. This is a summary of a business portfolio of a new satellite growth strategy. In order to achieve sustainable growth, we will first expand the growth of each business through synergies from partnering with Lawson in addition to the growth of core and each orbit. Next, our initiatives to strengthen the management base. On the left, a new net zero target including Scopus 3 has been established to achieve carbon neutrality. We will move each initiative forward to achieve KDDI Group's net zero target by FY2040. On the right, our company will move its headquarters to a new office in Takanawa in FY2025. We will create a culture of co-creating new ideas in a new environment and promote transformation into a human resources-first company. Next is the cash allocation policy. we will strive to achieve both expansion of operating cash flow and shareholder returns through growth investments. At the top, operating cash flow excluding financial business is targeted at 3 trillion yen over the two years from the period ending March 2025 to March 2026. In the middle, we will allocate the generated operating cash flow to capex of 1.3 trillion yen and strategic business investment of 200 billion yen. At the bottom, shareholder returns. We will aim for sustainable dividend increase and achieve a dividend payout ratio of over 40%. In addition, we will conduct share buybacks in a flexible manner. This is a consolidated financial forecast for the fiscal year ending March 2025. On the left, operating revenue 5,770,000,000 yen, up 0.3% year-on-year. In the middle, operating income 1,110,000,000 yen, up 15.4% year-on-year. On the right, profit for the year is targeted at 690,000,000 yen, 8.2% increase year-on-year. This is a consolidated financial highlight for F5 March 2025. We aim to increase income through an increase in communications ARPU revenue and double-digit growth in focus areas. The communications ARPU revenue organic growth is expected to increase year-on-year by 14 billion yen, and ARPU revenue is expected to decrease by 14 billion yen because of the impact of revision of excess charge, but the impact on profits will be limited due to decreased costs. So organic, 14 billion, and DX, 23 billion, finance energy, 10 billion, and Lawson, consolidated impact. These are the basis for growth. For shareholder returns, DPS for FY March 2025 increases by 5 yen to 145 yen. We aim to achieve increase for 23 consecutive years in addition the company approved to cancel treasury shares over 5% of a number of shares issued and outstanding the company also resolved to acquire treasury stocks up to 300 billion yen in total by the end of October and of this amount a tender offer of up to 213.4 billion yen was also approved lastly today's summary towards KDDI Vision 2030, promote digital twin, and create new value using AI and data. In addition, we will promote optimization of balance between CAPEX and OPEX levels through profit structure reform for technology. The company has now revised its mid-term management strategy, extending the period by one year and announced a new satellite growth strategy. EPS is targeted to increase 1.5 times the FY March 2026 compared to FY March 2019. In addition, we aim to achieve both an increase in operating cash flows through growth investments and shareholder returns, as well as sustainable growth for RPO revenue and double-digit growth of operating income in focus areas. For the fiscal year ending March 2095, we aim to increase consolidated operating income through increased communications output revenues and double-digit growth in focus areas. For shareholder returns, the company resolved to achieve DPS growth for 23 consecutive years and to acquire up to 300 billion yen of treasury stock, of which up to 213.4 billion yen will be purchased through a tender offer. We will continue to promote our growth strategy. Thank you very much for your attention. And we sorry for speaking so long. Thank you very much.