Kddi Corp Unsp/Adr

Thank you for waiting. We will now begin the financial results briefing and Q&A of KDDI Corporation for the first half of fiscal year ending March 2025. Thank you very much for taking time out of your busy schedule to join us today. I am Miyakawa of Investor Relations Department and will serve as the moderator today. This briefing will be broadcast live on the Internet with simultaneous Japanese to English interpretation. The presentation will be available on demand on our IR website at a later date. Thank you for your understanding in advance. Let me introduce the participants today. Takahashi, President and CEO. Kuwahara, Executive Vice President and Executive Director of Business Solutions Sector. Matsuda, Managing Executive Officer, CDO and Executive Director of Advancing Business Technology Sector. Saishoji, Managing Executive Officer, CFO and Executive Director of Corporate Sector. Takezawa, Managing Executive Officer and Executive Director of Personal Business Sector. Aketa, Executive Officer and Executive Director of Corporate Management Division. three financial results-rated materials, and two TSE disclosure materials. A total of five materials are posted on our IR website. Please refer to the disclaimer in the material regarding statements made in this document, performance targets, and projected subscriber numbers and others explained in the Q&A session today. President Takahashi will first explain the financial results summary, followed by Q&A. Mr. Takahashi, the floor is yours.

Thank you. Thank you for joining us today out of your very busy schedules. Before we entertain your questions, let me briefly review the highlights of a financial performance for the first half of the fiscal year ending in March 2025. Both revenue and income increased in the first half of the year, ending in March 2025. If you look at the consolidated results, the left shows the operating revenue, which was 2,855,700,000 yen, up 2.8% year-on-year with progress ratio of 49.5% against the full-year forecast. If you look at the center operating income, it was 573.1 billion yen, up 2.3% year-on-year with a good progress ratio of 51.6% against the full-year forecast. The key points of the first half performance are communications upper revenues continue to increase building on the first quarter. DX business services segment operating income had double digit growth. Financial and energy businesses achieved an increase in income, all enjoying steady progress in line with the full year forecasts. Next, let me share with you factors for change in the consolidated operating income. Communications upper revenues on major businesses such as DX enjoyed steady growth. From the left, group MVNO revenues and Rakuten roaming revenues was minus 11.2 billion yen year-on-year. Multi-brand communications upper revenues were plus 4.6 billion yen. Financial business and energy business combined were plus 11.4 billion yen. Lawson income with equity method was plus 9.8 billion yen. DX business services segment was up 11.4 billion yen, while there was an increase in technology and sales promotion cost operating income was up 12.8 billion yen. Next on pathway, it was mid-term growth. To achieve our EPS target by the year ending in March 2026 by promoting satellite growth strategy, we aim to grow major businesses and new business areas. In addition to increasing profits in major businesses such as ARPU revenues and focal areas like DX and new areas such as drones, Starlink and Lawson, We will also increase efficiency in technology cost. Regarding ARPU revenues, the left shows total ARPU revenues, which are growing both in communications and value-added. The right shows communications ARPU by brand. For AU, about 3% increase year-on-year. For UQ Mobile, it's about 7% growth year-on-year. As for migration from UQ to AU, it has almost doubled here. It's steady. And brand mix is also improving.

We will promote initiatives to expand our customer base and create added value to maximize total ARPU revenues. Left side, growth strategy of personal services segment aims to increase revenues and retention by creating added value while building on the communication customer contact points. Right side, to strengthen this strategy, KDDI-Lawson collaboration started on a full scale in addition to the announcement of number one network for connected experience and competitive pricing plans. Our customer base in value-added area is steadily expanding through synergy with communications. Left side, the number of AU Jibun Bank savings accounts increased by 940,000 year-on-year. The number of AU Pay Gold Card members increased by 410,000 year-on-year. And right side, the number of AU Denki subscriptions increased by 30,000 year-on-year. Next is on business services segment. Left side, operating revenue in the first half was 672.4 billion yen, with a steady increase of 13.1% year-on-year. The growth area in particular is driving growth, which is up by 29.5% year-on-year. Right side, operating income was 113.7 billion yen, up 11.1% year-on-year, making steady progress toward double-digit growth for the full year. Next is our capital policy for sustainable growth. Left side. We resolved the reduction of investment unit through two-for-one stock split in order to attract new individual investors who can support our sustainable growth. As shown on the right side, we resolved additional share repurchase up to 100 billion yen of owned shares through market purchases, including the 100 billion yen. The total amount of repurchase for FY March 25 is up to 400 billion yen. This is today's summary. The consolidated results for the first half of FY March 25 show an increase in revenue and income and steady progress in line with the full year forecasts. In personal services segment, total ARPU revenues increased and ARPU by brand and number of migration to AU progressed steadily. Towards strengthening of the momentum, we are promoting attractiveness of KDDI with our multi-brand strategy and high-quality network. Collaboration with Lawson started. We will contribute to solving social issues through the power of real tech. In business services segment, growth area is driving growth with double-digit growth in both operating revenue and income. We will promote Wacom Cross initiatives and construction of AI infrastructure to support it. Capital policy is as I just explained. That concludes my presentation. We will now move on to Q&A session. Thank you.

Mr. Takahashi, thank you. Now we would like to entertain your questions. kindly identify yourself by your name and affiliation at the outset to give an opportunity to ask questions to as many of you as possible limit the number of questions to two per person if you have two questions please wait for the answer to your first question and then ask a second question if you have a question please raise your hand a one in the back please Nomura Securities Masano. I have two questions. I'm so sorry to say that it's not really about the business result, but about shareholders' return. 100 billion yen, the purchasing from the markets. So, honestly, this has nothing to do with cross-shareholding. So, regarding this approach towards the next fiscal year, together with the first half of the year, the 400 billion yen, that's the total amount, and purchasing from the markets and markets, purchasing not from the markets, that's like 50%, 50% each. So Kyocera, in five years, they are going to divest. So it's really about, depending on the share price, about 100 billion yen per year times five years. So given that 400 billion yen total amount, will it continue? No. regarding the total amount, and also cross-shareholding and purchasing from the markets, the balance between the two. I think the specifics will happen next year, but in terms of the approach, how should we look at it? And beyond that, perhaps your mid-term plan, that would be two years next, after that, as Coursera said, five years. So looking at the basic approach, if you could sort of elaborate on that, please. I'll be giving you a brief explanation. First, basically, it was yesterday Kyocera approached us in five years, making it one-third. Simply put, every year 100 billion yen, but in this fiscal year... It seems unlikely that they're going to do this, so likely to start from the next fiscal year. So this time, 100 billion yen additional share buyback. It's just only the repurchasing from the markets. Now, Kyocera and Toyota, about the cross-shareholding, the expectations are pretty demanding. Toyota already made it to about 10% or so. We haven't been approached for additional divestment concerning Kyocera, just one-third, so five years, and then we'll be 10% on our part. Of course, we strongly want them to hold it, but for Toyota and for Coursera, we would like to assert a synergy so that they would keep holding them, and we would like to continue to make that request. Next fiscal year and beyond, what's likely to happen from our side? Regarding the target EPS times 1.5, As the next fiscal term, this is a major objective. As one of the factors, the share buyback, and Kyocera including 100 billion yen, we would like to design this. At the moment... It's not that a certain amount has been decided last year, the cash allocation. By March 2026, it's been disclosed. In terms of cash flow, two years, 3 trillion yen operating cash flow. CapEx, 1.3 trillion yen. Strategic business investment, 200 billion yen. So other than that, the 1.5 trillion yen. In terms of dividend, it's about 300 billion yen every year. So other than that, That would fall into the others, share buyback or cross-shareholding. Acquisition. Those are the components. Those are the factors. So I hope you can just guess from those. I hope I answered your question. Thank you. Second question about your business. It's more about the future. The Ponta Pass starting in October and Yuki Plant, 30 giga plant that starts in November. What will be the impact on the second half? Ponta Pass, every week I buy coffee and fried chicken. But for new customers, what will be its impact? Yuki Mobile is very competitive in terms of net additional customers. What will be the impact about the net addition in the second half? How do you look at these two businesses? So allow me to share with you kind of a direction, and Takutaba will talk about retail. First, given the market environment, about the meat capacity range that the industry, RAIS is intensifying 30 giga by Docomo was the start, and since then there have been some movements in this middle capacity range. So together with that, we just immediately wanted to respond. There was a system-related issue, so we spent some time, but 33 gigawatts, the pricing remains the same. But unlike others... It's not packaged with fixed line. There are no such conditions. So we believe that we have a competitive advantage. So this one and Povos, it's about 1,980 yen. That's a very strong plan. So for about the middle capacity range, we want to really be competitive. It's a comi-comi pricing plan. So from the lower class, there should be migration to middle class that should have a positive impact on the AAPU. Takizawa can elaborate on this later. In addition, about the second SEM, I think there's some impact. Rakuten, I mean, they will be pretty... Aggressive, in the second sim, we have this weapon called POVO. It's data. This is a new experience. If you POVO and if you visit Lawson, you can get 100 mega. It's not just a Docomo, Rakuten. As the second sim of other carriers, I think it would be pretty interesting, and we want to be aggressive. That's part of our strategy. And point at us. It's extremely good. If you look at the data, this is up until September. Starting from October 2nd, there has been a major change. Regarding the major change, AU Smart Pass seemed like an AU service, but now there's a switch to Ponta Pass. It looks like an open service. So at the channel of Lawson, Ponta Pass is now getting traction. Now that's a good point. And lots of Lawson related benefits available. So at the counter of Lawson, those people who belong to Lawson franchise, they started selling Ponta Pass. So the second half, I think it will have an impact. So it's up to 15 million. We would like to increase it to 20 million. That's our objective. So in this term, Takezawa will tell you how much we can go, but we would like to focus on this area. Takezawa-san, please. Right. So first about point of us. Sorry to say this, 20 million yen target, that remains the same, but in this fiscal year, at the end, how much we can go? Today, we can't really quantify that, having said that. As Takashi said, there are many positive factors. DAU increased by 1.5 times. And there's another thing, the referral of customers to Lawson. At the moment, the data is limited, but customer referral increased by 2.5 times compared with the past, where we had those past benefits. So that's been indicated by the data. Thank you. Daily sales of Lawson, as it increases, together with that, customers use the sponsor pass, and for total revenues, they're likely to make a contribution. That's how we see at this beginning. In addition, when we had smart pass, UQ customers... many of them are pretty price conscious, and customers joining UQ was not really progressing. But this time, I will come back to this later, UQ pricing plan has been really boosted. So those customers, at the same time, If they choose Ponte Pass, then together with communication output and value-added output, they both will have an impact. So we definitely would like to focus on this. In addition, so far, concerning this value-added services, this Ponte Pass is many people buy them in kind of an open manner, but we were not really making this decision really public, maybe next year, using TV commercials and other media, about the existence of Point of Us. Together with Lawson's Convenience, we would like to communicate this broadly to the public. Next, about 30 gigabytes plan of UQ. This is actually coupled with campaign, 33 gigabytes. In a way, we were conscious of Docomo. So 33 gigabytes pricing. UQ, carrying forward, that's an attractive point compared with peers. And 10-minute communications, there's a flat rate for 10 minutes. So in the mid-capacity, coincidentally, with Ahamo and Y-Mobile, they also came up with this e-mobile. Even for rock-dense pricing, I mean, we can respond to all those different price plans in the middle capacity range. We would like to recommend this Komi Komi Plus to customers. Currently, if you look at the ARPU breakdown in this Komi Komi plan, there's still the room for going upwards compared with mini-mini or tokutoku when they go up to komikomi. That will have a positive impact on total ARPU revenues. So by strengthening this pricing, there's likely to be better UQ utilizations for this. We believe this was a direct impact on increasing ARPU revenues. just for clarification about the UQ so for UQ I think that's great but AU to UQ that could happen once again AU to UQ that could happen what do you think we've been having a very hard operation in that area As was announced, many activity plans, one year have passed since then, and during that period, related to the point activity plan, like Peitoku and others, the peers, competitors are doing something similar. So, AU flat rate plan, We are working on boosting that flat rate plan for AU. There isn't much I can talk about today. So flat rate attractiveness of AU by enhancing the attractiveness up to 30 gigabytes if you use it. And as the traffic in general is going up, so beyond that AU unlimited plan to AU unlimited plan, we would like to do the upselling for customers. That's all from me. Thank you. Thank you.

Please raise your hand if you have a question. So C, line two, please. Thank you. SMBC Nicole Securities. Kikuchi is my name. So this is continuation from the earlier question. Recently, for the past few months, Povol has become very attractive. UQ Mobile, you have aggressive pricing plans, so this has high hopes. You have three brands in your product lineup, and I think you are ahead of others. But others can follow. Lime Bowl has not done much. And Irumo, is this a second or third brand? I don't know. But Docomo cannot lose any more market share. And so maybe they will use Irumo for the shortfall. AU's attractiveness. How can you enhance? You have money activity plans. You mentioned the improvement in the brand mix, but it doesn't seem like you're moving in that direction. AU brand renewal. Some aggressive refresh or renewal, I think, may be necessary. And that will lead to your future ARPU. So if you could share with us the general direction going forward. We have a slightly different brand strategy from others. Povol and AU and UQ will not look the same because when we started Povol, it was weighted towards web and it was not handled in AU shops. Other companies, they handle in the same shop. And so we thought hard about that. I have Max Plan. I was not using Povo, but for the first time in a while, I tried it again. The user interface is so much better. So this time, this new channel, Lawson, is utilized. in Povol there. So this is a big difference in strategy from others. AU and UQ are handled in AU shops. So as Takizawa-san said, we are asserting the brand characteristics and go to AU as much as possible and from outside to UQ. So I think we are doing something different from our peers. Takizawa-san, what do you think? Yes, as Takahashi-san just said, POVO, we are not handling this in our stores. POVO had various toppings, one after another, and made it easier for the users to use it. But as we mentioned in today's briefing, POVO... can be second sim of various carriers. That's what we want this povo to be. It's second sim, but network, as you know. This time we have the experiential quality number one. So after second sim, we want them to switch to main. So that's how we plan to cultivate Povol. Next, between AU and UQ, I talked about UQ earlier, but improving the attractiveness of AU, we have to continue that. And the key is money activity plan. AU... uses bundling, has used bundling to offer various value to our users. And going forward, we will work with players and partners to come up with bundled plan and deliver this to our customers. Thank you. I hope this answers your question. Thank you. My second question is, so this Q2... No big movements in the financial results. The waterfall chart was a little different, but other than that, it was similar to Q1. The biggest interest is, as Matsuno-san said, the way of thinking on the shareholder return. This year, as you mentioned, that is your plan, but to put this in perspective, for the past two years... other than the ones you purchased from the large shareholder, you kept 200 billion yen and added the portion of the large shareholders on top of that. So is that the right view for next year? We don't want the expectation to be too high. It may be a problem in the future, but we want to expect to. So your purchase from large shareholders will be handled separately and stable. Dividend and share repurchase will be maintained. Is that the right way to understand that? Or will you have a more flexible plan? There are three components. One is cash allocation policy, which I mentioned earlier. We will keep that. And second, so the medium term was extended by one year. EPS growth 1.5 times will be realized next year, and we are fully committed to that internally. And three, this was not in the material, but the total return ratio 100% will be the upper limit. So these three conditions will be cleared. And that will lead to the level of shareholder return. So to repeat my message, these are the three key points that we are focusing on internally. I hope this answers your question. Thank you.

Thank you. If you have a question, please raise your hand. V1. Daiwa Securities, my name is Tokunaga. I have two questions. First, about the progress. Multi-brand communications up revenues, 4.6 billion for first half and the full year organic 14 billion yen. So in terms of the progress, it doesn't strike me as very high. In the second quarter, mobile ID, that was actually Q on Q net decrease. Maybe that has an impact in my personal opinion. So multi-brand communications up revenues. In the second half, organic 14 billion to put it on that track. Do you have any strategy? Please share with me the strategy. Thank you for your question. Multi-brand communications ARPU, concerning that, in terms of data, unit price 10 yen. It's not really as much as 10 yen in terms of degrees, but unit price. And also, since this is the kind of area we are talking about, as was mentioned, the number of IDs... Sim, standalone liquidity, more than we expected. After spring, June and onwards, each company, the peers, were pretty competitive in terms of the measures that they rolled out. So that's why there was a little bit of dampening as a result. At the risk of repeating myself, to recover upper revenues, that area part, you have to look at that. UQ. In terms of revenues and the current, compared with the price operation structure, we believe that it's likely to increase. So we'd like to focus on that to enhance our competitive edge. Also, as I said before, AUD. Flat rate part, how are we going to do this? The mix in the entire pricing plans, how best we should work on this to increase revenues by doing operations. Somehow, 14 billion yen, our initial target, we would like to make a recovery to be on the track. The second quarter was more or less weaker compared with the first quarter. You give YOY a new price plan. I think it was June last fiscal year. It's partly because of that the second quarter seems weak, but the third quarter and the fourth quarter, we'd like to be on the right track. Thank you. In that case, about mobile communications IDs, in the second half, you have two new plans, you give new measures, they use new measures, they are likely to go up. I mean, multi-brand ID numbers are... Of course, that's one major factor of that area, so we want to be positive so that we can beat others in the competition. We just would like to do good work. Second question. Thank you. It's about the long-term matter, just like others asked. This time, major carriers, 20 giga to 30 giga. increased the middle capacity area because network quality you are confident so this is likely to be good so in this way in looking at the pricing plans increasing data capacity and So to communicate the practice of a network, just like money activity plan and other point activity plan, non-communications, I think there are two axes. So 30 or 33 gigawatts in the mid-capacity area, do you think this is a kind of a milestone in competition? Or if other peers become more aggressive in this middle capacity area, can you actually increase that? Is there such a room? Takezawa-san. 20 giga to 30 giga, so-called middle capacity, we believe this is a kind of a switching point or turning point. On the other hand, if you look at the EU customers, the recent traffic year on year, it increased about 18 percentage points. Also, if you look at the UQ customers, about 6 percentage points, it's increasing. So the convenience on the part of customers, it's increasing. So 30 gigawatts, are we going to increase it to 40 giga or not? In terms of convenience on the part of customers, They are likely to move to unlimited plan, we believe. So UQ, AU, demarcations, you talked about that before. But if it's unlimited use with various value added on the AU plan, we would like to... recommend a new plan so regarding the mid range middle capacity we are not planning to increase the capacity because we do offer unlimited use plan so we would like to guide the customers to that unlimited plan thank you thank you next question please so b line two in the front please

Thank you very much. CD Group Scarities Tsuruo is my name. So first is on network. Open signal number one, congratulations. So on that basis, there's this very harsh network quality competition. How much lead do you have from number two, and how sustainable is this position now? And from the capital expenditure, I talk with the communication companies. They say that it will soon peak out and continue declining going forward. So in terms, what is your CapEx forecast next year and onward? What is your view? Thank you very much. So open signals. We wanted this award. So thank you, Tsuruo-san, for those words. I'm very happy. So we've been taking strategic actions. So replacing 4G with 5G and add sub-6. So this is opposite from Dokomo. This strategy worked. And therefore, first of all, the 5G, the basic frequency, was developed. And with sub-6, we have many, much more base stations than other carriers. And so interference, SkyPerfect, JSAT. was expanded, and therefore the quality was increased, improved significantly, and we think this has competitive edge. Dokomo started from sub-6. So to redo that, they will probably struggle. So we think our position is sustainable. Now, sub-6, just today, SoftBank applied for another frequency. It's only Dokomo and us that has this. And so we think the competitive edge will be effective going forward. One more point. Dokomo is acquiring a new frequency this time. But this frequency, this sub-6 is remote. It's separate. And so it cannot be covered with one equipment. On the other hand, we have sub-6 in close proximity. And so the investment efficiency is good. So... We think we have good competitive edge with our network. And next D to C, the next direct to sell using Starlink is now added. And so since we have number one position, we want to continue, and we are encouraging our experts to work hard to continue this position. So, Matsuda-san, anything else to add there? Yes, this strategy came to fruition this year. I am happy. So by moving to sub-6, the traffic can be accommodated in the sub-6 area. Two to three gigabyte increase in data per unit. And next, SA will come in. So towards the end of the year, sub-6 area will be shifting to SA, and we're taking actions internally. And once we shift to SA, NSA 4G, 5G switching like in NSA will be unnecessary. It will be a seamless movement. And traffic communication will be even more stable. So we hope this will... be effective for our competitiveness going forward. Thank you very much. My second question is on the CapEx forecast. You have a plan for this year, but what is your plan next year and onward? Yes, there's the built-out guideline. We covered that by last year, and so the CapEx amount was peak last year. And from here, we will decline. The amount will decline going forward. Thank you very much. My second question is on Lawson. So 8.9 billion yen increase in profit, or sorry, 9.8 billion yen increase in profit. On a four-year basis, what kind of contribution are you expecting? And you talked about Ponta Pass. In the business services segment, you talked about other areas. And Lawson talked about the system upgrade the other day. So any other synergies and opportunities are you expecting? Can you talk about the full year forecast? Yes, thank you for the question. Based on what we announced at the beginning of the year, Lausanne's portion will have a 10 billion yen contribution to our operating income and 9.8 billion already. So we are very close to the initial plan. So the second half, will 9.8 simply double? Not really. That is our current internal view. So it will be higher than the initial plan, but it's hard to mention numbers at this point in time. So we're doing retail check, retail tech, Lawson. Anything you could talk about, Kuwahara-san? Yes, the status of retail tech. On September 28th, we made an announcement. Oh, was it 18th? Sorry, September 18th. So signage and backyard stocking or the restocking, replenishment. Going forward, Lawson is planning on system upgrade, and we will be involved there. So overall, our efforts with Lawson is going extremely well. The collaboration between the two companies is going very well. Many projects are now up and running. And we're trying to generate synergistic effect. We are working with high enthusiasm, strong passion. So I hope you could have high hopes. We cannot share with you numbers yet.

But we will quantify and talk to you soon. Thank you very much.