Kddi Corp Unsp/Adr

Let me start the explanation meeting. My name is Hiraoka from Public Relations Department of KDDI. I serve as MC. Today's meeting, as is disclosed on a timely basis, to present preliminary results of the third quarter of the year ending in March 2026 of KDDI. Today's presentation is being distributed on YouTube and other media in addition to the on-site. And we have put up three related materials on the KDDI website. Please refer to the materials at hand. This is a message for the people in the on-site audience. Today's attendees are as follows. Hiromichi Matsuda, President, Representative Director, CEO. Senior Managing Executive Officer, CFO, Executive Director, Corporate Sector, Nanae Saishoji. Managing Executive Officer, Director, CSO and CDO, Executive Director, Corporate Strategy Division, Tomohiko Katsuki. Executive Officer, Executive Director, Corporate Management Division, Corporate Sector, Kenji Aketa. These four are in attendance. President Masuda, please.

Thank you very much for gathering here today despite your busy schedules. First and foremost, we sincerely apologize for the significant inconvenience and concern caused to our customers, business partners, shareholders, investors and many other stakeholders, including our employees, due to the suspected improper transactions at our subsidiary. We recognize this matter as a serious issue that could potentially undermine the trust in the entire KDDI group. As the top management, I feel a profound sense of responsibility for the occurrence of this matter and for failing to prevent it. Today, I will carefully explain the details available at this time and sincerely answer your questions. Please be assured that this matter relates solely to transactions within the advertising agency business and has no impact whatsoever on the provision of communication services, including BigLogue. I will explain the purpose of today's preliminary results explanation. As the Special Investigation Committee's inquiry into inappropriate transactions is ongoing, the impact on our financial statements remains undetermined at this time. Therefore, we have decided to postpone the disclosure of our Q3 FY March 26 earnings release. Therefore, today's explanation is titled Q3 FY Preliminary results explanation. We will report on the facts currently recognized by the company, the outline of the financial impact and separate from this matter, the business progress for the third quarter and initiatives for future growth. Please note that the Q3 preliminary results, prior year results, and financial impact figures related to this matter presented today are reference values based on facts currently recognized by the company. These figures may be subject to revision based on the findings of the Special Investigation Committee and the audit results of the accounting auditor. Final figures will be reported promptly upon completion of the investigation. At this time, we plan to receive and disclose the investigation report from the Special Investigation Committee by the end of March. Based on this assumption, we will plan to announce the Q3 results at the end of March, and we currently intend to proceed with FY March 26 financial results announcement without delay. I will now outline the key points of today's business performance briefing and preliminary results explanation. First, the inappropriate transactions that occurred at our subsidiary. Then, the growth of our core business foundations, including mobile and our key focus areas, and the growth in the AI era. First, regarding the improper transactions that occurred at our subsidiary, This was disclosed on January 14th. It has been discovered that improper transactions were allegedly conducted by employees of Big Loathe, a consolidated subsidiary of the company, and its subsidiary G-Plan within their advertising agency business. Regarding the advertising agency business... The possibility that sales and other figures had been overstated came to light following delayed payments from certain agencies in December 2025. To clarify the facts and causes related to this matter, we determined it necessary to conduct a more specialized and objective investigation accordingly we established a special investigation committee composed of external attorneys and certified public accountants on January 14th. Next, an overview of the fictitious transactions we have identified. Both... So this is the left side which we have anticipated. Usually, from the advertiser, advertiser approaches us. Usually, there is a request to the advertising agency. And the web media becomes multiple, so there is another existence, publishing agencies. Big Globe and G-Plan are in the upstream. Advertising agencies and publishing agencies, they are the intermediary. Around 2017, G-Plan launched this business and Big Globe later entered to develop new ventures. you can see the flow here within this business the money is also flowing subtracting the fees and the advertisement fee is paid Within this business, we confirmed suspicions that subsidiary employees conducted fictitious transactions for advertising agency services despite the absence of actual advisors, advertisers, resulting in the recording of fictitious sales revenue and other figures over multiple years. Now, let me use the right side to explain. First of all, the discovery process. the transaction volume increased. So, following an internal investigation, KDDI instructed Big Globe and GPlan to reduce orders to downstream agencies to strengthen management systems and manage business risks. This led to delayed payments from upstream agencies. Within the structure where upstream agencies deducted commissions from payments related to Big Lobe and G-Plans transactions and returned them to upstream agencies, a reduction in payments from both companies decreased the funds flowing to upstream agencies. Therefore, upstream agencies became unable to make payments to both companies. So this transaction volume snowballed and reaching hundreds of billions of yen per month in recent periods beyond the publishing agencies there is number three and number one the upstream agencies we understood that those one and three are identical and through this fictitious transaction Big Globe and G Plan. Posting of revenue was excessive and because it's fictitious transactions, the fee was flowing outside and the impact is on the next page.

At the top, as of today, these are the impacts that we recognize. As I mentioned earlier, because of fictitious transactions, we need to cancel booked revenue, part of the booked revenue. And this is before FY24 March, about 96 billion yen, and for FY25 March, 82 billion yen, and FY26 March, 68 billion yen, the total of 246 billion yen. Below that, operating income. Reversal of recorded income about 8 billion yen or 17 billion yen and about 25 billion yen. These profits are to be cancelled. In addition, as I mentioned earlier, the commissions which are outflow and we have reasoning for that 5 billion, 11 billion and 17 billion yen. And as to 33 billion yen, approximate number, we are going to make efforts to recover this amount. In addition, including the prior years, there is a possibility of recognizing impairment losses. At the bottom, next steps, as I mentioned earlier, At the end of March or beyond, we are going to publicize the report of investigation as well as financial results without delay. In addition, in a parallel way, doing and strengthening the company group's governance and examining the recurrence prevention measures will be taken. Now, this is our commitment to future actions. First, We are fully committed to cooperating with the Special Investigation Committee, diligently uncovering the facts and thoroughly analysing the causes. I myself will take the lead in actively addressing these issues to restore and strengthen the trust for our group. Our company upholds the KDDI philosophy which embodies the shared values and code of conduct that every individual should uphold. We will create an environment where transparency and fairness underpin our work, ensuring that these principles are communicated throughout the entire group and practiced consistently. By doing so, we aim to foster a culture that enhances both human capabilities and ethical standards. to meet the expectation and to regain trust. Of course, we will make efforts to do everything to avoid any reoccurrence of similar matters. At the same time, it is indispensable for us to continue to develop our business for sustainable business operation. So from now on, I would like to communicate to you specifically what initiatives or measures we will take. Now, this is as reference figures. I present consolidated results for the third quarter of 2025. And we have revised both prior year and this year because of the impact coming from the matter. Please refer to the bottom column. and we have cancelled the revenue and income associated with fictitious transactions. And on the right-hand side, we are showing the numbers as reference values after the provisioning of external outflow. So in year-on-year comparison with the actual results, The cumulative results for the first three quarters are as follows. Operating revenue plus 3.8%, operating income plus 2%, and the profit for the period plus 5.3%, we are performing well. So that is the cumulative-based consolidated results. Change factors from the left hand side that we have the mobile personal services segment base plus 27.2 billion yen and the finance energy lossen. plus 18.2 billion and DX business services segment plus 8.5 billion technological structure reform plus 12.9 billion yen and impact of prior years promotional expenses minus 28.9 billion yen and based on those numbers the total of plus 17.4 billion yen positive and also the mobile related revenue grew and it's expanded and the finance and the DX are moving on smoothly. And this is the Q3 alone consolidated operating income and factors for change. In addition to each business domain growth, negative impact from prior years promotional expenses has also subsided, so we are seeing positive growth. And now I would like to explain about UCS topics.

The mobile business is making steady progress in structural transformation, building a stable business foundation that will serve as a pillar for sustainable growth. Mobile revenues bottomed out in FY March 24 and growth accelerated on a nine-month cumulative basis in FY March 26 with an increase of 29.9 billion yen year-on-year. Right side, we are shifting away from excessive promotional competition and focusing on LTV. Structural transformation is also progressing and we are building a lean and mean operational base with ARPU growth driven by value creation and churn rate reduction through longer contract duration. These are the key points of structural transformation of the mobile business that we explained in our Q2 financial results. We are promoting initiatives to secure long-term contracts by creating value that motivates customers to sign up shown on the left and refining AU's communication quality and differentiated value services shown in the center. This shows creating value that motivates customers to sign up to maximize LTV. Left side, at EUQ Mobile, we are focusing on promotions that suggest the optimal device to customers and device bundled contracts which have higher ARPU and contracts retention rate are on the rise by 4 percentage points. Right side, we are also working to differentiate our plan and services and money activity plan to Contapass and Netflix are all performing well, which has increased ninefold. We are enhancing the value of the connected experience, which is the source of our competitiveness. We aim to expand the 5G SA area, which provides more stable communication with standalone 5G to over 90% population coverage by the end of the fiscal year, which will be one of the highest in the industry. Right side, AU Starlink Direct was launched in April 2025 and has expanded to over 80 devices, 10 million units in less than a year, with a number of connections reaching approximately 3.5 billion, 3.5 million units. Recently, there was a report of a fall while ice climbing in Hokkaido, and one of them used this service to send SOS, which led to a rescue. Last week, the coverage area doubled, now covering the Ogasawara Islands and all major ferry routes. And in March, the service will be available outside of Japan, in the U.S. as well. This shows the result of ARPU growth driven by value creation, which is a factor towards leaner and meaner operation base. Our value creation efforts have been successful, as shown on the left, and regarding brand migration, UQ mobile to AU migrations finally surpassed AU to UQ mobile migrations on a quarterly basis. These factors also contributed to the significant growth of mobile ARPU by ¥190 year-on-year, as shown on the right. The second factor towards leaner and meaner operation base is churn rate reduction due to longer contract trend. Left side, AU contract retention rate is improving as customers are finding the value they receive during sign-up attractive. These trends are accumulating and the momentum remains strong as shown on the right. The smartphone churn rate in Q3 of FY March 26 fell by 0.01 percentage points year-on-year showing steady improvement. We are making progress in addressing the financial business which was identified as an issue in Q2 financial results. In Q3, credit card business mainly drove profit growth with operating income up by 30.5% year-on-year on a cumulative basis. As shown on the right, The bank's deposit procurement capability, which had been a challenge, has improved steadily, and the personal deposit balance expanded by 1.3 times year-on-year, and number of gold credit card members also increased steadily by 24.5% year-on-year.

Another challenge for us, namely the business services segment. Here, growth was seen in each business area. As shown on the left, the growth of the third quarter alone was plus 7.7%, showing a strong momentum. In particular, the BPOSI-related business, which had been identified as an issue in the first half, turned around and increased profits in the third quarter. On the right hand side, IoT drove growth, increasing about double digit year on year. And especially IoT, including the silicon, the connections exceeded 66 million. On the left hand side, we have the Lawson. and Ikeda City in Osaka. We are working on the development of the town where you can live in a secure and safe manner. And on the right-hand side, we are using a drone to instruct the other disaster related the location and that we have more 1000 locations where we have the drone ports and we'd like to construct very agile and safe system for the disaster and now the other management of the platform and how to strengthen it. In light of inappropriate transaction of our subsidiaries, we will be even more conscious of the importance of governance. And as you can see on the other left-hand side, we have the KDDI philosophy which emphasizes the human capabilities and KDDI version of its job-based personal system has created a mechanism to enhance expertise and it shows With the shift to a new management structure, we will further strengthen our core competencies by combining these with our aspiration to be a company that inspires challenges. To take on challenges, we will introduce systems and programs that celebrate challenges and promote collaboration and advance human resource development in line with our business strategies for growth. Now I'd like to talk about our efforts towards growth in the AI era. As a social infrastructure provider, it is our responsibility to support Japan's digital society and contribute to strengthening industrial competitiveness with both our cultivated communications infrastructure and our new AI infrastructure. As AI becomes more widespread in a variety of settings, an AI infrastructure that can process data securely with low latency will be important. Left side, with an eye towards such era, we ensured sovereignty and began operations at the Osaka Sakai Data Center in January as a data hub for securely processing corporate data. We have achieved efficiency gains by utilizing the existing space. And following Sakai, we plan to launch the Miyazaki Network Center in February as a communication hub, leveraging the knowledge gained at Sakai to expand into an AI data center. So we will expand operations in the Kanto region and Kyushu and so on, and utilize our existing land stations to connect AI data centers with a strong communications network, building an AI digital belt, a nationwide low latency network and AI computational infrastructure. We will also utilize the landing stations and submarine cables across the country to enhance the value of the AI digital belt. And we are going to create a hub by connecting landing stations and submarine cables. KDDI possesses some of Japan's leading know-how and assets, covering everything from submarine cable installation to maintenance with over 60 years of experience, 360-day availability, and landing stations across the country. We also strengthen universal joints connection technology for optical marine cables and possess world-class technological capabilities. By leveraging these assets, we will develop landing stations near AIDCs and expand accessibility by air computational infrastructure to overseas locations, thereby capturing global demand. Today, at the board of directors meeting, we decided, we resolved to launch a new AI integration business corporation. The communication platform, on top of that, we need this AI platform. We have lots of contacts with customers, so the AI's In order to deliver AI as part of the labor force, it is very important to have solid platform. And for that, we are going to utilize our expertise and technological prowess. And also, we will integrate consulting professionals from the headquarters. And based on that, we established KDDI IRED. And going forward, we will also call upon more engineers from outside targeting at about 3,000 personnel by fiscal year 2028. Lastly, today's summary. First of all, The Special Investigation Committee will continue its investigation into the inappropriate transactions while the company reviews and strengthens its group governance and examines recurrence prevention measures as to the impact amount. It is expected to include the reversal of fictitious sales and profits as well as provisions for amounts that flowed outside the company. The company will make every effort to recover the externally flowed portion. As to the schedule, as I mentioned earlier, targeting at the end of March, Special Investigation Committee is going to issue report on the investigation and based on the results of the investigation, corrections to prior financial statements and FY26 March Q3 results will be disclosed by end March and FY26 March full year results will be disclosed without delay. In the third quarter, core businesses performed very steadily, especially mobile structural reforms progress has planned and the business foundation including focus areas continue to grow solidly. AI social implementation initiatives including the AI digital belt and the AI development platform are making steady progress. Even with the impact coming from inappropriate transaction, business is performing well. And also, there is no revision to the dividend forecast for fiscal year 26 March. Thank you very much.

We will now move on to the Q&A session. We will take questions from both this venue and the Zoom webinar. When asking a question, please state your media name and affiliation and your name before your question. In order to receive questions from as many people as possible, please limit your questions to two per person. If you have two questions, please ask your second question after the first question is answered. If you have questions, please raise your hand. And if you are participating by Zoom webinar, please press the raise hand button. So row C, third from the front towards the exit door, please. Thank you. NHK Toma is my name. So about this fictitious transactions, I do not have the full understanding, so let me ask you a question. So about the amount. So maximum amount is this amount that you have shown here? Thank you for the question. As of today, the amount that we have confirmed, the impact on revenue is this amount, and the profit impact is minus $50 billion. And there's a possibility of additional impairment, but the Special Investigation Committee and the audit firm will confirm, and there may be a possibility of revision going forward. Thank you. And this external flow of $33 billion, if you could explain the scheme once again. So this external flow... So upstream advertising agency and the three subcontracted party, was this external outflow to those parties or was there an embezzlement by the employees? Yes, if you could turn to the scheme diagram. Basically, this was a fictitious transaction. The agencies received the commissions of the transaction it subtracted the fee so the amount is this external outflow recorded as fees I see so this shown here so to five companies the fee was provided in this fictitious transactions The advertising fee that goes to the publishing agencies was also returned. G-Plan and Big Globe commission was also external outflow within the group. G-Plan and Big Globe fees that were deducted fees was posted But that was fictitious. And so the sales and profit was reversed. So that's shown in orange on the upper half. Thank you very much.

Thank you.

Any other questions? D3, on the entrance side please. Kobayashi from Yomiuri newspaper. I want to clarify some facts. There's no period at the booking. When did it start? And also, how many employees have been involved? May I ask those questions? It's a multiple number of years, that's our recognition. As a result of an internal investigation, G-Plan, this business started in 2017, and Big Globe, they started this business from FY 2022. This time, there are some fictitious transactions and non-fictitious ones, but the amount shown in the materials, they are all fictitious. based on it all of them are fictitious transactions and as to the number of employees involved G plan 2 I understand that the other two are involved from the G plan and these two are seconded to the big globe and do these transactions were conducted by them That's our current recognition. So these two people, 2017 and onward, they booked inappropriately. And the total is 246 billion yen. Am I right? from the very beginning when the advertising business was started it is included in that amount but from when and from where the Investigation Committee is still investigating it. And those numbers are as far as we recognize. So more precisely, the Committee will receive the report. Am I right to understand that the employees of the KDDI are not involved? Right. As to this commercial flow, we have already confirmed that no employee from KDDI has been involved. Thank you. Thank you.

Please raise your hand if you have questions. Row D, fourth from the front to the exit, please. Sankei Newspaper Taki is my name. First question. So when it started, this overlaps with the previous question, but the business started in 2017. And since then, this has been conducted. So from before the business started, the scheme was anticipated and started the business based on that? Or did the business start first and then this fictitious transaction started? What do you think? what does the investigation look like so far? According to our understanding, the amount started becoming big in recent years and so we said we have to have a tighter control, tighter control internally. So until when the transaction was authentic and correct, this is still being investigated by the Investigation Committee. One more question. with this scheme 1 and 3 were the same entity and these agencies had to be part of the collusion so the recovery of 33 billion will you request for the damage compensation to the agencies or will they be sued for criminal lawsuit. Thank you for the question. First of all, we will wait for the result by the Special Investigation Committee, and according to that, we will take appropriate measures.

Thank you.

Any other questions? D1, please. Fujita from Asahi Newspaper. I would like to clarify some facts here. So this diagram of the fictitious transaction 123, the advertising agency, is this just a single agency? Only number two is a different agency. Multiple number of agencies are involved. One and three are the same. There's a note on the right hand side. So that one, three are the same entity. It's just one company, you mean. Yes, we have just confirmed one and others are yet to be investigated. JPLAN from 2017 and BigGlobe from 2022 1 and 3, so it's not about this 1 and 3, the same entity. The 2017, when we calculated the amount, we just assumed that from the very beginning everything was fictitious. So back then this entity is the same entity, we are still investigating it. So going forward, there's a possibility that there is non-fictitious transactions might be detected. That's right. Now, so the amount to be cancelled. So about those amounts, it's not that everything is based on fictitious transactions. Well, basically... when the amounts started to be bigger we thought that they were because of fictitious transactions but as you can see at the footnote it is either on the total sales amount or the pure sales amount so recently the other The profit that is getting more and the transaction itself is getting bigger. Next question please.

So A4 towards the MC. Nikkin Otsubo is my game. In the last financial results briefing, it was telling, as you mentioned, of the deposit procurement capability. I have a question on that. And then about AI-related question. First, on the deposit procurement capability, you said you are enhancing the capability. Could you elaborate on that? Thank you. Thank you for the question. So Jibun Bank... program we are trying to enhance the benefit but not only that the channel there are multiple channels and so we're trying to appeal and working with securities brokerage partners enhancing that to expand the deposit and the other is plan benefit so money activity 2 is launched On the bank side, we are focusing on this plan, and so the individual personal deposit is increasing on that side. Thank you. Next, a new AI company. You're working on the implementation, you said, and trying to establish the development infrastructure. In the financial industry, the AI is used more and more. So in the financial industry, What kind of implementation are you working on or planning? Thank you. Katsuki-san would like to respond. Thank you for the question. AI implementation. In various industries, there are common areas. First, contact center and the fraud detection. AI will start from those areas. In our financial group, we are studying, examining the possible implementation and working with other financial institutions to conduct the POC proof of concept. Thank you. So SoftBank has been working on that, the contact center. So if you could say a little more about what you're trying to do in the new company, what is the significance of this new company? Well, this new company is not solely for financial industry. And as we announced at Sakai last time, pharmaceutical companies and others, the data, internal data, and know-how that Japanese companies have will be used, managed for AI analysis purposes. So we are being approached by pharmaceutical and other industries. Katsuki-san just talked about the financial industry, but that is the initial step. A call center is the first step. So thank you. I hope you could understand. Thank you.

Next question, please. D2, please. As to an appropriate transaction, the two people from G-Plan and they were seconded to Big Globe from when? And these two are rank and file employees or their managers or executives? Thank you for the questions. It's related to their privacy, so... I'd like to refrain from answering those questions. Sorry. So, B3, please. About this matter of inappropriate transaction, these two people, they were seconded to diplo That means that they had authorities to work both for the GPLAN and Big Globe. They were seconded from GPLAN to Big Globe, entered the Big Globe, launched this new business, and these two were working on that new business. And during the secondment period, they will also be able to work for GPLAN as well? Yes, usually, yes. As to KDDI, to reduce the downstream ad publishing, they request to reduce it. When did it happen and why? It was the mid-December last year, back then. In order to strengthen the control, because the mounds were getting larger, and also we need to identify the risks for business. So, as to these two companies, we issued such instruction to reduce the volume. That means, back then... you knew that there had been some fictitious transactions. The specific doubt, we reduced the orders, and the payment was delayed from upstream. When that happened, we thought that we had some doubt, were beginning to have some doubt about those transactions. In October, the auditing firm pointed out some potential fictitious transactions and this is the table of the research so we involved the outside auditor and the internal auditor together started the investigation but back then they could not get any specific evidence

Thank you. Next question please. We will move to the online for now. Mamoto-san, please unmute yourself and ask your question. Can you hear me? Yes. Thank you. So about the fictitious transactions. So the external outflow portion. This is number one and number three companies. Is the amount that is paid to number one and three, is that what you mean by external outflow? Or were there a possibility of outflow to other parties as well, other than one and three? Thank you for the question. So you can see this on the screen. On the right side, it says external outflow. This is the gray area. So number one and number two, well, number three and one are the same. So number one and two paid as fees of the transaction. But this transaction turned out to be fictitious. So this is the area that is outflowing, outflow externally. Thank you.

Another question from online. Sayama from Toyo Keizai. Please unmute yourself. Sayama from Toyo Keizai. Question about inappropriate transaction. At this moment, why did it happen? How are you looking at the reason the Investigation Committee is yet to come up with the conclusion, but at this moment, what is your thought? Thank you for the question. As to the reason why, of course we are doing an investigation about it, and at the same time, the signs for example are there any signs for such a matter to happen we need to avoid the occurrence of similar matters so in October 2025 there were some points made but as to the documents the billings and the receipts which are the evidence of the transaction existed and there were no problem about the in-payment and out-payment and we were told that there was no problem from the big group as well and in this advertising business there are lots of people involved from downstream to upstream and we didn't look into a very extreme of the floor So I think that's part of the reasons this kind of matter happened and that's something that we need to make improvements. Another question. So there is a governance issue. You have many subsidiaries and your business is diversified. So company, what kind of governance issues do you recognize and what kind of actions you would like to take about them? Thank you for the question. We have been expanding our business, including outside directors. The corporate ethics There should be better actually that we received at a such point from the other directors and since last year we have been working on that and still this kind of matter happened and I feel very sorry about it. I think there are two things. We have KDDI philosophy and to raise a spirit to improve our mindset the KDDI and group companies together we would like to make repeated efforts so that the philosophy will be well embedded in the organization and also how to prevent such a matter That process for that is yet to be established. We need to brush up our detection capability to see any signs. Thank you.

Thank you, Chayama-san. Please raise your hand if you have questions. Line B, row 4, towards the MC, please. Yomiuri newspaper, Ono is my name. So my question is also on fictitious transactions. So in this scheme, number one and two agencies, so it was elucidated because the payment was not done. Did you contact these companies Is the business continuing? So that's my first question. And number two in the scheme. How involved is this company in the fictitious transactions? In this business flow, were they used or did they collaborate? Did they contribute to the fictitious transaction? Thank you for the question. The transaction is, of course, stopped. It's suspended. With some agencies there were collaborations. But we think, but this accuracy is now being investigated by the Special Investigation Committee. So, number two, so you think some of them were collaborating, but you don't know the big picture. The big picture is now being investigated by the Special Investigation Committee. Thank you.

Thank you.

Any other questions? Person at B2, please. As to detection process, 250 billion yen. the fictitious transactions. Why was it possible, I wonder? What kind of supervision did you take in the past? You mean the supervision on the results? Yes. The billing and other slips, the documents were there. based on the documents they did the issue results. In this, the commercial flow, so two companies, the parent and subsidiary, were involved. Is there any particular reason for that? The Big Globe came into the picture not from the very beginning. So compared to GPLAN, because of the level of the trust and the credibility, the Big Globe started its operation as a new business. Thank you. Thank you.

Next question, please. B3, third row, towards the exit, please. Sankei Newspaper, Fujiya is my name. So my question is on fictitious transactions. So it's cumulative, but 246 billion yen impact on sales. So this is quite large. Each individual transaction was large amount, or... It just accumulated to be this big. So number of cases or the transaction volume, value. I know you cannot go into much detail, but just a rough image. If you could elaborate for us to get a better image, please. Thank you. So as I mentioned earlier, recently, few tens of billions of money have been circulated back. And the scheme, based on the assumption that the amount goes up month after month, and so it gradually increased and amounted to a few tens of billions of yen. So, including previous years, 246 billion. So this is the size of the transaction. How much per case? If you explain this, it may be too much detail, but the advertisement, how, what's the size per case of transaction? So it's, I understand that it was circulated back and it snowballs, I understand that, but still the amount is large, so. You are right. basically there was the report the so we validated the validity of the transaction but this is the fee for the posting of the advertisement and paid to each advertisement agency so it was not for each individual advertisement

Any other questions? Let's send it to B1, please. Two questions. Yesterday, Mr. Maida, President, said that there is a very intensified competition. But previously, at the announcement of the results, You made a shift to the LTV from the excessive competition. As to new customers and the competition for new customers, are you slowing down your efforts? Are you slowing down your speed a little bit? As I mentioned in my presentation, the mobile revenue is increasing and the promotional cost, I said the last time, the year-on-year basis promotional cost is flat. So it's not that we are using a lot more compared to the previous year. And the impact, as to the impact, for example, the handset replacement program, there should be a good balance there. But in the third quarter, the SMTK plan, the year that is producing the good benefit for this year. Thank you. My second question. Like the mobile, they exceeded 10 million out of the other contracts to the end of last year. And I think roaming, I think that there are some difficulties, but could you please talk about the direction and your thoughts on this area as well? I cannot talk about the other companies, but the The competition and collaboration for roaming included, and we are also competing with them as well. So in September this year, we are discussing with them for the roaming for September this year. The other day, the Rakuten was faced with some communication failures. And that pushed a lot of traffic toward us. The areas, in other words, are overlapping. And that should be sorted out. And we are going to suspend that part of the communication in the due course. Thank you.

Line A, row 1, towards the exit, please. Keitai Watch, Sekiguchi is my name. I have a question on your business. On page 17 of your presentation, you talk about the Netflix, the differentiated service subscriber. It's now nine times bigger. So the pricing plan, subscription, how much track record do you have as AU? And regarding Netflix, LYP Premium, Ryan Fu is now launching a new plan so Netflix can be used. So how do you see the impact there? Thank you very much. Thank you. So the original Netflix... It's not the original Netflix bundle. It's subscription. So 20% point back if you subscribe. In maximum five months, you get free. So that's the campaign. AU and UQ customers... And of course, there's the product appeal of Netflix that attracts these users, but we want this to be used. So from March and April onward, we will continue. And as I showed, this will lead to the long-time usage. So this is a bit different. The users may be a bit different from our peers program. Thank you. One more question is on your capex. You're thinking on capex. In yesterday's NTT Docomo briefing, they said in their capex, they're increasing from last year, and FY26, they will build the base station quite aggressively, and by next year, they said they will catch up with the other competitors. So not all base stations will directly lead to the communication quality, but you will be caught up. So based on that assumption, what is your thinking on your CapEx? Any changes there, or will you just keep your CapEx plan unchanged? If you have any questions, please, if you have any comments, please. So we think this area expansion is the source of competitiveness. So we will continue executing and continue being the winner by the outside rating evaluation companies. Regarding 5G, we did quite a big investment last year. And so it's well built and it has peaked out. So instead, we are now moving, focusing on AI infrastructure. and thinking of keeping the capital expenditure flat.

Thank you. Thank you. Any other questions?

The person at C1, please. Ishikawa, freelance journalist. The net increase in smartphones Compared to the last time, it seems that the number is rather low. Are you satisfied, Mr. President? Thank you. This is related to structural reform. There are pros and cons. We need to strike a good balance. The smartphone, the numbers, conditions. the year and June and September the 30 plus 20 and this time plus 70,000 and in the fourth quarter we will see more growth rather than taking successive increase we would like to focus on the other contribution to lifetime value and So those numbers alone are not the basis for us to increase the number. Yesterday, Docomo talked about the performance aggravated because too much competition for the handset. As to the replacement, do you have good control on the replacement program or the purchase support program? And the MIC is also revisiting the issue. Are you changing any thoughts? As this slide shows, we think that we have a very well-balanced control. In the past, we struggled a little bit. and that is because why we are controlling it better way and because new functions and new concepts we would like to deliver those new things to the customers and striking good balance. When you say control, exactly what are you doing? From the customer's point of view, I want something new and after 24 months it gets more expensive. If that's the case, of course the customer comes in to replace it with the new one. In the past we did not understand what could happen correctly, but we made some adjustments. And based on the plan, we are building the scheme of control. Thank you.

So next question please. Line D, row 2, towards the exit please. Kyodo Nakao is my name. So I would like to go back to the fictitious transactions. Earlier, you talked about the two members from G Plan, so I have a question on those two members. So these two were originally in G Plan, or when this intermediary business was launched, they joined? So my first question is that. I am sorry we have identified the two, but I'd like to refrain from mentioning that because it has to do with their privacy. So those two, from around 2017 till this was discovered, they were in this intermediary business throughout. We want to wait for the investigation result on that as well. Basically, as I said earlier, from 2017 onward, It's been recorded. So we are trying to understand how much of that was correct and how much is fictitious. So this needs to be elucidated through the investigation. My last question is, those two for the disciplinary action, are they G-Plan staff or are they already fired? Are they former employees? We are still contacting them. So they are staff employees. Thank you.

Any other questions?

Please raise your hand. A person at C3, please. Toma for NHK. So number one, number three, or number two, the external flow. To whom or to what kind of company? like sector or business form, size? Is it possible to share some information? As to the other companies that the flow went to, the committee is investigating it and I'd like to refrain from talking about specific names. It is not, but it is not large ad agencies. The anti-social organization was suspicious of the kind of status is involved. And that also is being investigated at this moment. There's nothing we can talk about it. Thank you.

Next question, please. Row A1 towards CMC, please. Gigi News. Nakamura is my name. Thank you. I have a question on the fictitious transaction case. So the two that are suspected to be involved, what was the motive or reasons or trigger? Have they talked about that? We want to not impact the investigation of the Special Investigation Committee, so allow me to refrain from mentioning that today. Yes, one more question is going forward. So where a large amount of money is involved, if there was a falsification of the document, that may be another crime. So have you submitted the damage to the police or have you taken actions? Yes, we are aware of that. We have not consulted with the police yet, but depending on the progress of the investigation, we will consider that and take appropriate actions. Thank you.

Any other questions?

As to money coming in, The advertisement and the fees move together and recently it's the level of dozens of billions per month, including fees. And the fees are the ones which are counted as revenue. Thank you. So it's about the gross amount or net amount. So it looked like the revenue cancelled, decreased, but it is based on net basis. So, as you said, it's correct that the fees are counted as revenue. I think there should be some fund, the initial fund for advertisement. Right, the amount increased dramatically to a very big amount. Biclope and GPLAN, they had a fund at hand. And also, we have group finance mechanism. For the whole group, we have surplus. And the KDDI kind of concentrate it. and at headquarters, and from the headquarters, we lend money to the other companies. So the group finance was executed for Big Globe. The telecommunication-related investment, and last year, 57.9 billion yen or so lending was extended to Big Globe last year, last fiscal year. in the group financing. And so group finance might have been used as part of this incoming money. And as to these two employees involved, both of them were seconded Big Globe, but they are GPLAN employees. And at this moment, you have not confirmed any other employees involved. Yes, your understanding is correct. At this moment, we have not confirmed any other employees involved. But that is also subject to the investigation by the committee. Thank you.

Next question, please. Line D, row 2, towards the MC, please. Kyodo News. Kowashima is my name. So fictitious transactions. Number one and number three. There's number two in the middle. So number three, unless the order goes to the number three, the money does not circulate. But with the scheme such that the money will always go from two to three, is there one company in two? Usually I think it's multiple. But in this fictitious scheme, was there one particular company that was in charge? Thank you. From Big Loaf and G Plan, the upstream company's contract and the contract with the publishing agency. There were two types of contracts. And I mentioned the business practice, commercial practice. And what's beyond this downstream publishing agency, we usually don't see that. We were not looking at what was beyond the publishing agency. Now, the money stopped coming in from the top, and so we heard from the employees, and after we heard from the employees, we found out that it was subcontracted from number two and three, and number one and three were identical.

Is this okay? Thank you. Any other questions? The person at B1, please. Sato, Freelance Channel. Sterling, related question. This year, other carriers are going to start the satellite communication service within this year. You had a lead time about one year. What is the advantage? Do you think that there is an advantage for you? And how are you going to differentiate yourself this year? Are there any specific measures? Thank you. There is something that you can look forward to. I would say starting direct or area. We would like to deliver it right away. And with that in our mind, we have been developing area and starting direct as well. The sooner, the better for customers. As to the reach time advantage, without thinking about other companies. As a frontrunner, we would like to work on something new. Not just an area, but starting direct, we would like to make advancements with something new all the time. Please count on us. Thank you.

Line B4 towards the MC, please. You'll mute the newspaper. Oh, no. Sorry for asking you another question. Just one clarification. So fictitious transactions, the impact on your financial results. Earlier, you said from 2017, the business started and sales, you mentioned full amount. But as the investigation progresses, the fictitious portion and the actual transactions will be clearer. So this amount is the current estimated amount? or this amount is subject to change as investigation progresses? Thank you. For now, this is the maximum amount that we are expecting. But the fictitious transaction started increasing in recent years, so we think a fictitious portion will account for a large portion. So now, So this is the amount that will be reversed. Is this already fixed? Of course, it depends on the Special Investigation Committee and the audit firm's audit. So this is subject to change. But we understand that this is the maximum amount. So we are showing you the approximate amount. Thank you.

Thank you.

Question from online. Koyama-san, unmute yourself and start your question. Here is Koyama. Jibun Bank and the deposit funding and the improvement and the impact of the money activity too. You talked about other reasons as well, factors as well. What is the impact coming from the money activity? You talked about the reimbursement, if it is over $500,000 and so on. Any impact there you've seen? And also card business is also growing. Is also driven by the money activity or any other factors? Thank you. Katsuki-san, anything? Thank you. As to deposit funding, there are two factors, as I mentioned earlier. The deposit-bundled plan, the Money Activity 2, and AU Jibun Bank's own campaign. during the bonus season, for example. Such deposit collection campaign worked. And as you can see later, the operation data, you can look at page 36 of operation data. Volume Y, deposit increased significantly. Especially retail see so it's not really the growth coming from the money activity 2 we do not disclose it please bear with us and the credit cards especially for money activity 2 the growth of gold card is the paying off as you can see on the screen We are seeing a good effect coming from that. Are you okay with that? Yes, thank you.

So, another question from online. TV Asahi Shimada-san, please unmute yourself and ask your question. TV Asahi Shimada. Can you hear me? Can you speak up a little, please? Can you hear me? Yes, thank you. Thank you. I think this question has been raised a few times, and I'm sorry about the impact of the fictitious transactions. So 2024, March. So $96 billion before March 24th. so G Plan started since they started the advertising business this has been posted so the fictitious transaction started from the start of the business is that how this was recorded or there was a starting line when this started and you summarized the amount up to March 24 so what is the timeline thank you very much for the question This is an internal investigation. We found out that before air ending March 24, each company... So all transactions since they started the advertisement business has been summarized. So in case of G-Plan from 2017 and Big Globe 2022, they started the advertisement agency business. So it's a summary of all the amounts. so so it started from not from there onward but from the very beginning the fictitious transaction was likely to have happened from the beginning of the business will the authentic correct transaction and fictitious transactions are now being separated but now we're seeing an increase of the fictitious transaction portion so We are looking at all the transactions with a view that there's a possibility of fictitious transactions. Understood. So, including those cases that were correct in the past, you are checking all, all cases. You don't know when the starting line was, but you're including everything. Yes. including the ones that may be correct. So the maximum amount is a revenue of $246 billion, and $33 billion, the external outflow, is this maximum or at least, or this is the maximum amount? So this time this is the external outflow, so we are provisioning this amount shown on the table. We think this is the maximum amount. Understood. Thank you very much.

One more question online. Horikoshi-san, Urban Nikkei Business. Please unmute yourself. Here's Horikoshi speaking. Can you hear me? Yes. Two questions. First, inappropriate transaction. So within this scheme diagram, it could be involved from the very beginning with number 1 and 3 or that it could be involved later. So in the supply chain as a whole, my question is why you did not detect the transactions? I think it is because of failure of the control scheme So could you please share with your thoughts? So the group governance and it is related to the responsibility of supervision. So monthly transaction itself has the vouchers and the slips, accounting slips which verify that the transactions occurred and they were continuing this business as normal transaction and the big globe also gave us some information about the appropriateness of the transactions as well. Objective evidence was not detected about inappropriate transaction so it took time for us to detect all that so as I mentioned earlier group finance is part of the picture ad network accounts for most of the ad amount that is currently being investigated so I do not make any comments on that Second question is about the Miyazaki Data Center. Two years ago, you did some other construction work. What is the size of the investment and what is the size of data center? As you can see on the screen, AI Digital Belt concept or initiative. You have about, well, there are about three big data centers. Are you going to open three big data centers in Japan or what about Tohoku and Hokkaido area? Is there any possibility for you to go to those areas as well? Thank you. the belt diagram is showing that there is no coverage in the north but actually we are constructing the belt in the north as well setting aside whether it's big size or not what kind of air center should be there that is in our mind the AI processing will be happening in the different locations so It's not that everything will be concentrated on big data centers. So the connection like mesh and as a whole The belt which covers the whole Japanese archipelago, that's what we are thinking about. In Miyazaki, we have secured the adjacent land so that we can easily expand this location as well. Watching closely the demand level, we are going to make next moves. In the next mid-term strategic, mid-term strategy, we are going to give you more details. Thank you.

So next question, please. Row D3, towards the exit, please. Yomiuri Kobayashi is my name. Sorry to ask you. So 33 billion external outflow is my question. In Q3, up to Q3, $17 billion has been provisioned, if my understanding is correct. And maximum $33 billion has flown outside. So in KTDI's P&L, how much will eventually be posted as lost? So that's my first question. Thank you for the question. So... This year, impact... We need to wait for the result by the Special Investigation Committee for the amount to be fixed. But for now, this amount that is shown vertically will be posted on our P&L. So $33 billion and maybe additional impairment. For this fiscal year, $17 billion is provisioned. So reversal of profit is 25 billion. And other than that, there is a possibility of impairment in addition. So then, 33 billion may not be your loss. So of the 33 billion and 17 billion, I'm not understanding the difference between the two. Are there prior year portions? So how can I sort this out? Thank you. So this table is grouped into three. First, March 26 is up to Q3, the provision up to Q3. This is $17 billion and $33 billion to the right is including the prior years. It's the total of prior years. So including that, it is $33 billion. And this is assuming that we cannot recover the entire amount, so we will provision this for once for now, but if we can recover, of course we're trying to recover, and if the amount can be recovered, the recovered portion will be added to the profit in the following years. Then at this point, 17 billion yen loss is provisioned, or is assumed for this fiscal year. Yes, this is the expected loss. One more question please. So there are a few advertisement agencies. So those that were involved in the fictitious transactions, do you know how many advertising agencies were involved? We only know that multiple are involved. But we don't have the exact number or the names that is left in the hands of the Special Investigation Committee. Is it two or three or maybe ten agencies? I'd like to refrain from mentioning that as well. Understood.

Thank you.

Any other questions? Since there are not many questions left, the two people are raising their hands. So starting with A4, the person at A4, please. First week, Dokomo. Using Docomo shop, they will give support for financial business. I think they already started it actually. But your company, for example, they did opening account for their e-smart securities. Are you planning to use the shops for providing similar support? Could you please talk about your thoughts? Thank you. EU Jibun Bank and we have been providing support and using the EU shops as the agencies for the EU Jibun Bank. In addition, we have credit card business as well. So I think your question is about based on the securities and the salesperson qualification. For that, online intermediary securities, so SBI securities using the bank, that kind of alliance is our current focus. So when it comes to the securities sales step, which requires a special qualification in development of such personnel on real world, we are not thinking about it at this moment. Have I answered your question? Thank you. It's not only about securities account, for example, the various services of the European bank or mortgage loans. In those areas, what is your thought? And of course, always we are reviewing every potential possibility. There are various financial services and some new emerging financial services, especially AU Financial Holdings. As to their operating other areas, we would like to give serious thought. Have I answered your question? Thank you.

So the last question, C3, towards the entrance, please. Sorry, NHK Toma, again. So regarding the fictitious transactions, so the two employees were involved, you said. So if I could put this in perspective, the two or so seconded to Big Low? They are, yes, G Plan employees seconded to Big Globe. So seconded to Big Globe. And there are multiple, so they belong to G Plan. So they're seconded to G Plan. But why, despite the absence of the two, can this transaction continue? So they're not in GPLAN, but why can they operate GPLAN's transaction or can be involved in GPLAN's transaction? So they're dual-headed. They're seconded, but there is a proportion between the seconding destination and the source company. So they are dual-headed. I see. So the two employees... So they were not checked, the transactions that the two were involved. So the transactions that only two of them were involved were fictitious. So this fictitious transactions We have elucidated up to now, this much fact is already clear. There are authentic or correct transactions as well. So we're trying to draw a line between the two. And for the ones that the two were involved in, Big Globe and G-Plan, They are fictitious transactions. That is our understanding. So we're trying to have the Special Investigation Committee check the accuracy of that. Number one and number three were identical companies. That's one company. So yes, NTT, we want to refrain from saying how many companies they were. But the hearing or the entry withdrawal money and digital forensic is utilized. And understood that one and three are the same. That's what we're saying today. And last question. So in your investigation so far, have you... heard any motives or reasons the two did this? They were pressured to have large sales or were they just trying to embezzle the money? The Special Investigation Committee is investing that. It's their scope, so I want to refrain from saying anything here. But, of course, Big Loaf is a business operating company. So the development of the business plan and the target management is done. But from our company, we have a medium-term plan. We are in the final year of the medium-term plan. So communication and financial or DX and enterprise business, energy, these are our main businesses. So this advertisement agency business... is not a driver for us to achieve the medium-term plan target. Now, the amount that you found out this time in each year, Big Globe and G Plans, what is the proportion of this in Big Globe and G Plans revenue? Big Globe and G Plan are consolidated. consolidated Big Globe revenue is around 230 billion. And this is last fiscal year, and of which this is 82 billion.

Thank you. Thank you. With that, we would like to conclude the Q&A session. Lastly, I'd like to say a few words. Again, we are very sorry for this matter. And, of course, we are going to avoid reoccurrence and strengthen our governance. And at the same time, we are going to solidify our business platform to grow our business. And that is the path that we need to take to take our responsibility. And I will take the lead in making efforts, and we will continue to make advancements. Thank you for your continuous support. We will conclude this meeting. Thank you very much for joining us today.