Kddi Corp Unsp/Adr

Thank you for waiting. Now we are starting KDDI's earnings release event for the second quarter of fiscal year ending March 2026. Later we will have Q&A session as well. Thank you very much for taking part despite your tight schedule. I'll be serving as moderator. I am Miyakawa from IR department. This event is being live-streamed with simultaneous interpretation between English and Japanese, and also this event can be viewed on an on-demand basis on the website of our ILO department. Let me introduce our participants. Representative Director, President, CEO Matsuda. Representative Director, Executive Vice President, Executive Director of Business Solutions Sector, Kuwahara. Director, Senior Managing Executive Officer, CFO, Saishoji. Director, Senior Managing Executive Officer, Executive Director, Personal Business Sector, Takezawa. Managing Executive Officer, CSO and CDO, Katsuki. Executive Officer, Executive Director, Corporate Management Division, AKETA. We have three types of documents regarding earnings posted on our IRO site and also please refer to our disclaimer regarding the content of the presentation as well as the targets such as number of contracts that may be referred to in the Q&A. Matsuda President will give a summary of presentation and then after that we will have Q&A. President Matsuda, please.

Let me start my presentation. Earnings results for the first half financial for fiscal year ending March 2026. I would like to explain the following four points today. First, I will discuss consolidated financial results. These are the highlights of consolidated results. We increased both revenue and profit. We are making progress toward achieving the EPS target as planned. Operating revenue was 2 trillion 963.2 billion yen, a 3.8% increase year-on-year, 46.8% of the full-year forecast. Operating income was 577.2 billion yen, up 0.7%, progress rate of 49%. Net income or profit for the period was 377.7 billion yen, up 7.6%, with progress rate of 50.5%. Second quarter year-over-year growth was strong with operating revenue up 4.1%, operating income up 2.9%, and income up 18.6%. As a topic, I would like to explain the queue-on-queue situation of the performance in Q2. During Q2, we saw the effects of our price revisions become apparent and achieved a solid growth. Quarterly operating revenue increased 6.3% Q on Q. Quarterly operating profit increased by 11.8%. Our profit during the quarter grew by 20.7%. Next, I would like to explain the factors behind the changes in consolidated operating income. Each business grew, offsetting the impact of prior sales promotion expenses. Mobile in the personal service segment increased 11.1 billion yen year over year. And income from finance and energy business and also equity method profits combined increased by 12.7 billion. TX increased by 3.9 billion yen. Technological structural reforms up by 9.6 billion. we the impact of prior sales promotion expenses negative 3d 1.2 billion was overcome and we're expecting to see accelerated growth These are the key points of consolidated operating profit in the second half of the four-year targets. The mobile business is to accelerate growth with our target of value enhancement through service revisions with second half year-on-year growth exceeding approximately 19 billion yen over 2020. for the full year. Combining DX, finance, energy and Lawson Equity Method profits are being aimed for an addition of approximately 30 billion yen. Finance, which is key, will shift to a strategy with greater focus on loan-to-deposit ratio, while DX will be placed on a growth trajectory through initiatives including a turnaround of BPO business. and positive impact of technological reforms approximately 13 billion, second half increase up 55 billion to achieve four-year target. The negative impact from premier year sales promotions will end in the first half. Next, mobile structural transformation. This is about virtual cycle created by Power to Connect. Amid rising prices, we aim to create a virtuous cycle of growth, providing new value to earn revenue, returning that value to stakeholders and reinvesting it for the next era. We're able to create value because of the past investment, and that cycle is starting to kick in, I feel. This virtuous cycle growing together with our partner will be continuously implemented. In this cycle, I would like to talk about our mobile business. Our mobile business is undergoing structural reforms, so focused on lifetime value, as is in the diagram. Our focus is to make sure that each brand of ours meets such customer needs so that they will continue to use our offering over the long term. For UQ mobile customers, we would like them to see the value and the attractions of AU as a brand, and we are recommending migrating to AU. We will review plans and sales approaches that would induce short-term change by customers who are only after incentives and benefits. In the process of structural reform, some customers who have not used our service for long may choose to cancel There are subscriptions, we are aware of that, but we would like to focus on the long term to drive ARPU growth through value creation and reduction in churns by increasing longer contracts so that we can have a leaner business foundation. The announcement of capability to offer connected experience and communication quality formed the foundation of value creation. According to OpenSignals user experience analysis, following February global number one ranking, we achieved number one in Japan for the third consecutive time last month. So based on this best network that we offer in the industry, we are enhancing our capability to offer a connected experience, and we are supplementing it with AU Starlink Direct, which began data communication business in August. Many customers are already using this service. So we would like to expand this value based on connected experience. AU5G lane, even in crowded areas, you can have a sense of security, being able to connect smoothly. And for AU unlimited data overseas, this is free of charge for 15 days, and it has contributed to a rising awareness that you don't need a Wi-Fi router overseas. We have an investment in Lawson, so we would like to pursuing initiatives to enhance engagement by proposing savings and a sense of security in daily life, Ponta Pass, and earthquake preparedness support. Together with IODOA, we will provide a service within the year that deposits 30,000 yen into AUP balance of bank account of customers. This is all part of the price plan. the effects of structural reforms are beginning to materialise. The initiatives we have explained so far have borne fruit, leading to growth in mobile ARP, which contributes to LTV, and churn rates are showing an improving trend. On the left, mobile ARP has steadily increased this quarter, reaching 4,460 yen in Q2, accelerating growth with year-on-year increase of 140 yen, and smartphone churn rate improved Q1Q year-on-year increase, so also narrowed from 0.17 points in Q1 to Now as a part of further effect, one of our indicators is a switching between brands. So brand switching Not from AU to UQ Mobile, but brand switching from UQ Mobile to AU saw a positive reversal finally in September. This continues into October. So this is as a result of our transformation, making our main brand AU more attractive and steadily changing the plans and sales approaches. And on the right hand side for UQ Mobile, there are initiatives to extend the contracts. As a testimony to that, there have been improvements in home set discounts and hand set bundle rates. So these are the kinds of initiatives that we are implementing. Deeply. Through such structural transformations focused on LTV, mobile revenue on a personal service segment basis has significantly surpassed last year's year-on-year growth, in the first half reaching a positive 12.5 billion yen, accelerating growth. And in the second half, we expect further improvements in churn rates and RP growth driven by progress in structural transformation, brand mix and expanding contribution from service revisions and the impact of service revisions on mobile is expected to exceed initial forecasts.

Next, I will explain the initiative to achieve the three-year target and we aim for 55 billion yen increase in profit is our target, and as in the focal area, we aim for a 30 billion yen scale increase in profit. The focal area, the energy and law firm are progressing well. On the other hand, finance and DX are recognized as challenges due to changes in the business environment since the beginning of the fiscal year. I will later explain the initiatives for these two later. First, finance. Peace. We are now in the world with interest rates, so the competition is intensifying over deposit. We, instead of depending on the housing loan, we will shift our strategy, mindful of loan-to-deposit ratio, and individuals' deposit balance has grown by 1.3 times. But in order to strengthen deposit procurement power, we will be working on initiatives such as Bank Securities Alliance. As for credit card membership, The expansion is urgently needed, especially for gold card. 1.72 million membership is what we would like to achieve. As for the business segment performance, in the first half operating income was plus 3.4% year-on-year. It's a somewhat slow result. Mobile IoT and data center did well. On the other hand, BPO business and SI related business had a temporary profit decrease factors. So compared to the initial projection at the beginning of the year, we are behind the projection. However, we could identify, we have a clear outlook for resolving those one-off factors, so we have addressed the risks. And one of the businesses is BPO business or Outuse Link. Now, since the first half, we are working on initiatives to defend the share of existing service and expanding services using AI. And in September, we could turn the tide and deliver increasing revenue and profit. And as a result of activated sales, new orders increased by 2.8 times year-on-year, and the number of ongoing projects increased by two times year-on-year. And also, we are proceeding with integration of internal systems as part of our efforts to improve efficiency, and we are seeing results. And by maintaining the momentum, we would like to deliver a turnaround in the second half of year. Also, in the second half, as the driver for growth, mobile and IoT are going to deliver a double-digit growth year-on-year. In addition, facility solutions such as drones and new services are going to make a contribution to growth gradually. Next, I will explain the initiative for the next stage of growth. Six months have passed since the launch of the new management structure and the construction of our future business foundation is progressing, including the execution of fee revisions. Considering this progress, we will discuss the new key themes we are focusing on for the next mid-term management strategy starting next year. On the left, theme one. In the era of AI, in addition to transforming infrastructure, including telecommunications, into a next-generation model, we will further expand our value-added and growth areas by leveraging digital data and AI. On the right-hand side, another key point. Moving forward, centering on the communication, we are now in the phase of delivering growth. So together with growth, return-based capital allocation is what we would like to do while being mindful of capital efficiency. For that, being mindful of the credit rating, we will use leverage and we would like to maximize the investment capital and growth investment will be made in a disciplined manner and we would like to make investment in areas where we can expect high returns in medium to long term. Conversely, for areas that do not meet the criteria, we will consider review of business portfolio including withdrawal. In conjunction with these ideas, we intend to implement flexible share buybacks alongside our commitment to stable dividend increases. By deepening our strength of sustainable growth in the AI era and pursuing quality with an awareness of capital efficiency, we aim to enhance corporate value. Regarding the enhancement of network, in an open signal, our ranking is number one. So in addition to sub-6, we are creating communication in the area where we overlap millimeter wave on sub-6. And as for data center, this is the case of tele-house. So tele-house accumulated know-how both in Japan and overseas will be applied. As we do so to prepare for AI age, we are expanding data centers and in London we will be constructing six data centers in London, spending total project cost of 60 million yen. So real-time processing such as inference AI could be supported with a power supply of about 57 megawatts at this London DC to come. As for domestic AI data center, telehealth know-how will be utilized and AI data center in Japan proceeded quickly and Osaka Sakai data center will go into operation in January 2026. By providing sovereign AI development environment in addition to training functions, we would like to build a distributed computing platform in various locations to meet the expanding demand for inference. This is consumer services based upon the strategic tie up with Google Cloud. So now there are issues that contents are used without consent. This service provides a peace of mind to content providers and also the accurate information can be provided to customers. So since our announcement, we've received inquiries from many content providers. As the key strength of KDDI, we are advancing initiatives to create new value by combining real world and digital. With Lawson, we are working to continue our initiatives to generate value by utilizing technology. We will work to address societal challenges in Japan by utilizing the site here in Takanawa. And based upon the explanation, in the next phase, we will be moving on to the second round, the third round of the value generation cycle. So we will have a 6G to follow 5G. So high quality network and high value added services need to be created for that we will conduct disciplined efficient investment and we will strengthen partnership and here is the summary at the end be mindful of our lifetime value for mobile now the structural reform is a progressing and then on a full year basis we have outlook for increasing profit by more than 30 million yen for finance and dx we have identified challenges and in the second half we will be executing a strategy So consolidated performance and mobile business is progressing in line with our projection at the beginning of fiscal year. And for us, management, we are growing more confident about delivering results. So the interim The dividend is going to be ¥40, which is a half of ¥80 of the dividend which we announced at the beginning of fiscal year. And today I talked about initiatives for the next stage of growth, but for the next medium term plan, We will be proceeding with infrastructure advancement and partnership for service deployment. And in the age of AI, we will be aiming to generate corporate value and sustainable growth. Thank you for your continued support and thank you for your attention.