Rakuten Group Inc S/Adr

Good afternoon and thank you for joining Rakuten Group's 2024 Second Quarter Financial Results Meeting. We have disclosed the latest consolidated financial reports at 3 p.m. today. You can view this data on our corporate website's page for investors, along with the presentation documents used in this meeting. And if your voice is cut, you can use the different IC servers. And then now, Mr. Mikitani will give a presentation. Mikitani-san, please go ahead. Good afternoon, everyone. Some hot days are continuing and 2024 Q2 financial results meeting is held today. And first of all today, so I'm sure you are paying attention on here, Rakuten Mobile. So looking at the total subscribers, 7.7 million. And then MNO plus NO, and it's 7.26 million. And this is as of August 7th data. And then looking at the subscribers number of this Q2, and the B2C subscribers are increasing drastically. And then this is what area that you have to pay attention to. So the Rakuten mobile non-consolidated pre-marketing cash flow, this is before marketing means acquiring customers or retain customers and the marketing cost related to that. If we exclude that marketing related cost and then in QT Rakuten mobile non-consolidated basis pre-marketing cash flow achieved profit. So this is more detailed information. As you can see, this graph started from 2022, and then this was a quite challenging and exciting Rakuten Mobile project that we kicked off. And Rakuten Mobile's contribution to the entire Rakuten group, Rakuten Ichiba, or Rakuten Travel, and Rakuten Card, And then given that entire group, so at the group level, the cash flow already turned into positive. So this project itself, looking from the entire group perspective, it's already turned into positive from cash flow perspective. And I think you can read it from this chart. And then let me talk about the Q2 highlight.

First, on a consolidated basis, the revenue is shown here against last year. Year-on-year, 8.1% plus. So the record high, $537.3 billion was the consolidated revenue. And the internet segment and also overseas EC, or international EC and contents basis have been expanded and contributed to revenue growth. And in the fintech segment, each of the services or the segments are doing well. And the mobile segment, we have subscribers increase and so boosted revenue by 15.6 billion yen year on year. Now, looking at the operating income, dramatic improvement. So improvement of... 27.6 billion yen year-on-year. It was minus 11.8 billion, but EBDA, we actually had 66.8 billion in EBDA, and also non-Fintech posted EBITDA profit of 9.9 billion yen as well. And as for the financial situation in the first half, because of the foreign bonds being issued, the liquidity gap until 2025 have all been addressed. And we will explain this later, but the finance lease fundraising of Rakuten Mobile has been announced, and with this funding, self-funding in the mobile business is already established. And therefore, with this Going forward, internet services, in other words, shopping and travel, or fintech businesses, generated cash can be, or cash flow can be used to reduce the interest-bearing debt at Rakuten Group Incorporated. So you can see there's a tremendous improvement in the financial situation as well.

So this is by segment business update and the internet segment. First of all, internet service segment. So the revenue was 303.9 billion yen. And then this is the plus 3.1% YOY basis. And then the operating income, which was increased by 30.3% YOY, which is 18.9 billion yen. And this is because the SPU revision was made and also There were SPU improvement, and then we are implementing the measures to our heavy users with the domestic EC revenue growth rate, and revenue went up, and also the profitability recovered because of these measures. On the other hand, so minority investment, So there is a variation loss that happened last year. So that portion was shrunk drastically. And then looking into detail of this business segment, first of all, EC business. So there are many changes. Also, the nationwide travel support happened last year, but that does not happen this year. So these various conditions, if we annualize them, and then comparing to the year before, plus 3.1%. So the fundamental became strong. And then also the good transaction and on the good customers, we are dealing our businesses with good customers. And then Rakuten travel and domestic hotel checkout GTV is plus 34% while for 30% comparing to the FY 2019. So this is comparing to the pre-COVID. And then as for the advertising business, plus 8.4% growth. And then looking at the overseas businesses, first of all Rakuten TV, number of users is 112.1 million and plus 44.2% YOY, Rakuten Kobo, all really making a profit. and the users registration is 66.6 million which is plus 6.2% YOR and Viva this is also making profit and number of users 1.5 billion plus 5.3% YOR and VK this is also profitable business and then about 90 million users are using this service So the overseas businesses overall, we are performing pretty well. And looking at the domestic AC, I mentioned some one-time factor, and if we exclude those one time, we mentioned it was increased by plus 3.8%. So if we exclude them, we have grown by 25%, as you can see from this chart. And then next is for the GMS. It's steadily recovering. And the last year, we did the SPU05 revision. There are some impact of these revisions, but the total Ichiba GMS remained steady. So Q3. So the last year we had the home tax, the revision, the last minute demand happened. So how will it be impacting into this Q3 is something we need to worry. And then these four overseas businesses overall, they're steadily growing and they're making a big profit out of this business. And then last but not least, internet service-related topic here, as you know. So Rakuten Group, thinking of the empowerment of the local government, and these are the hometown tax so that we can contribute to the regional and the community growth. And then we are actively working on to support regional economy increase. And then a point were burdened on our company, and then grant them to our users, but from MIC. So they made this notice. And they did not obtain our consensus, but they went announcement of this. And then about 2 million people signed about this petition. And then we will ask to revoke this notice strongly.

Fintech segment. So 202.7 billion in revenue, so that was plus 12% year-on-year. And operating income, 42.3 billion Japanese yen, 28.1% positive year-on-year. So very steady. And for the different fintech segments, these are the highlights. Rakuten Card, Shopping GTV. was 5.9 trillion yen, a little less than 14% increase. And Rakuten Securities General Accounts is increasing 11.33 million accounts. And Rakuten Securities Deposited Assets has grown to be large at 32.3 trillion yen. And Rakuten Bank's accounts, almost 16 million now. Approaching that and on an independent basis, standalone basis, the deposit balance of the bank is 10.9 trillion yen. So starting with Rakuten card, continuous growth is seen. 13.9% year-on-year growth has been seen. And that's in a shopping GTV. And operating income is improving. 19% is the margin and non-GAAP operating income, 15.8 billion. Therefore, this is an increase of 18.4% year-on-year. Now, Rakuten Securities, the number of general accounts, as I mentioned, is grown to 11.33%. million, and so there has been some impacts from the commissions, the zero commission. It did plummet once, but it has recovered quite well. And Rakuten Bank, there has been independent announcements made, but ordinary profit is Or rather, ordinary income, 40.8 billion, 25% year-on-year. And our ordinary profit, 15.2 billion. And ROE, 16.4%. And therefore, this is an increase of 2.5 points year-on-year. And as for the capital adequacy ratio, 11.3%, which is quite high enough, I would say. Now, the number of accounts, 15.8 million accounts of the bank. Actually, it's already above the 16 million mark right now. And Rakuten payment, again, very strong. Revenue, 22.5 billion, which is a plus of 23.5 year-on-year. That's percentage. And operating income, 1.2 trillion, finally. So it's in the profit-making area. So it's a competitive sector. Now other companies are struggling, but for Rakuten Payment, we have already become profitable. And as you know, in January 2025, we're going to have this reorganization of fintech come into effect.

So moving to the mobile segment. For Rakuten Mobile, we have more subscribers coming, and then Symphony, and then focusing on the existing project, and then increase revenue, and then try working hard to make this profitable as early as possible, and Rakuten Energy, and achieve the increase in the revenue substantially. And as shown on this table, for example, EVDA, comparing to the year before, on quarter basis, plus 25.3 billion yen improvement was made. And then this is a graph in time series, chronical way. And as you can see from this chart, our business has been growing steadily, as you can see here. So among that, MNO, the major business, MNO. And this is about the subscriber's number, 7.7 million, and also the adjusted MNO churn rate. so targeting point and become a new subscriber to us, and they have become our users only for a short period and then churn the service, and then we have not granted our points to those subscribers, so it can be counted as part of churn. So if we exclude the cancellation and then that adjusted annual churn rate had become the 1.04%, so it's below, It's almost getting closer to below the 1% we are getting there. And the ARPU is 2,331 yen. So this is about number of subscribers. So it's growing steadily, as you can see from here. And the next page. And I think this is very important index. So continuing the same number, which is MNP. So we now have this data available. So Rakuten, starting from January, and we have net increase of this MNP. So these people are using our line mainly, and they are contributing to pushing up our ARPU. And then this is after the adjustment, and MNO churn rate went down to 1.04%. And also, we are improving our communications quality, network quality, and we haven't heard that it will not be connected, but we have to have the strongest one, so we will be applying the platinum bond. and also the interference with the satellite communications to be mitigating so-called sub-6 5G area coverage to be expanded. And also the software improvement will contribute to push up the quality, and that is what we would like to do. So this is a unique software. We have a unique software development capability. That's why this is possible initiative to be taken.

So good connection, really good connection. But we will become the strongest and the best connected network of all. so this is the low band platinum band effectiveness being shown and of course we had connection that was quite good already but we will have even bigger coverage in small alleys or deep indoors the so-called deep indoors really inside buildings still there will be signals and So this is the rollout plan of the platinum band, and we have front-loaded this by more than one year against the plan. And we would like to front-load it as much as possible, 1.7 gigahertz, that original area. had this front-loading earlier deployment by three years against the plan. So we would like to do the same or similar things with the platinum band as well. And therefore, we will be quite aggressive in installing or establishing the necessary infrastructure. And 5G, which is really much talked about. Well, 5G, there are two parts to that, or two kinds. The conventional 5G antennas, That is 44R. What I mean by that is the antenna that will send and receive antennas, it will be 4x4, that means 16. But beamforming is another one, which is called the massive MIMO, which is another type. And the power is tremendously different. the distance it can travel is much longer, and also the quality is different as well. So in case of Rakuten Mobile, you can... actually say that MIMO's proportion is much, much larger, and therefore we can have better coverage and stronger signals. And so the question is, once 5G is connected, what is it going to be like in terms of improvement? People who are connected to 5G, Compared to the previous time, the number, the traffic has been increased by 2.3 fold, and there are increasing number of unique users connected to 5G as well. And this is not only about Rakuten and others carriers as well, but we were able to increase the quality by mitigating the interference. And so this is the data that is being used. So on the average, 30 gigabytes per month, almost approaching that level of 30 gigabytes. And so we will soon go beyond that 30-gigabyte mark. And in addition, the indoor signal qualities improving quite dramatically as well at a very fast speed. And on the other hand, we are trying to increase the users. And of course, within the group, we have joint campaigns with Ichiba and also Rakuten Card. And these campaigns made a great contribution. to the increased subscribers. And this is a new data that we're disclosing for the first time. And quite impressive, I would say, what you can see here. Now, please take a look at the fact that the mobile and internet heavy users are in certain age segments, 23 to 29, 30 to 34, and 35 to 39, and 40 to 44. These are the different age segments. For example, 30 to 34 years old, the share is 10.2% already. They're using Rakuten Mobile. And for 23 to 29 age bracket, 8.6% is the Rakuten Mobile share. in that age bracket and in the past half a year 1.5 fold increase has been seen and within this year I think this 23 to 29 age segment will likely go beyond the 10 percent And so I think the penetration will go up by 2 to 3 percent. In other words, the heavy users are joining Rakuten mobile user base, and they will use more of the Rakuten's services.

So next is about increasing ARPU and Rakuten group. And first of all, Rakuten mobile non-consolidated basis profit generation. But we are looking at the entire group performance and then including contribution to the entire group. And we calculated this ARPU based on that, which is about 3030 yen. So two and a half years ago, which was 1546 yen, it already went up by double. And then as we move forward, so the advertising revenue, advertisement revenue, what was sold in AR use new service to be rolled out through all these efforts. And to users, we can make them delight, and then they can pay to our services. That's how we would like to roll out our services to them. And then this is about the ARPU increase chart. So, last but not least, the Rakuten Mobile contribution to the Rakuten ecosystem. As you can see from this graph, and I'm sure you understand here, first of all, they are coming to our ecosystem, which started from zero. And comparing to this, and then, first of all, to become our subscriber, and then, 1.25 services are being used by that new subscribers. And when they joined us, and then it will be increased up to 3.21 in two years. So how Rakuten Mobile is contributing to create value to our Rakuten ecosystem users, and that can be read from this graph. And for example, Rakuten Ichiba, 49.7% subscribers are spending more GTV comparing to non-subscribers. And also Rakuten card, 25.9% increase of subscriber basis, as you can see from here. So the synergy impact from this, so if we consider this by quarter basis, it goes beyond 1 million yen, and the profit contribution is done to the entire group by that, and annualized basis, it's 4 million yen. So that will be including up to the 100 billion or 200 billion, 300 billion. I am expecting that to happen, last but not least. and as I mentioned the hometown tax issue and this is about NTT law and this is very important. Japanese citizens telecommunications and also Japanese people's human right which is the communications and it is regulated. And this is very important law, essential law for that purpose. So now more than 180 telecommunication operators are against this abolishment, and then we will be strongly object this. for this entity though, and this is about the business side explanation. And now, so let me repeat what I mentioned. The first one is that Rakuten Mobile is steadily growing, and the second one is internet services. So quality improvement. It's something we have focused on, and then the GTV is growing steadily, and also the revenue recovered drastically, and the fintech business overall, and in all business segments of fintech. performing pretty well, and overseas businesses, the revenue started to be generated. And these are the four highlights from the business perspective. And that's all from myself. And then I will hand this over to Hirose-san about the financing.

Good afternoon, ladies and gentlemen. Hirose is my name. I'm the CFO. I would like to present on the finance. So this is a repeat. This is our commitment, disciplined financial policy. We're going to aim for financial soundness in the midterm. And so profitability improvement and efficiency improvement and financial soundness is what we are striving to achieve. Now, as for the refinancing risk in 2025 and 2025, they have been addressed, as Ms. Miktani mentioned. And so we already have 2024 addressed, and also the senior notes. we have already taken measures to address them. And the first call will come for the 2025 domestic hybrid bonds, and we are going to use the products that receive equivalent equity certifications. And we have various measures of fundraising, so we will make sure that we address this first. And also, this sales and release back financing was announced yesterday, and this is a major finance lease. And this period is 10 years, and for the time being, Rectum Mobile's funding needs will be satisfied. And therefore, for our company, we believe that the liquidity of the capital will improve. And therefore, the cash flow coming from Internet services and fintech businesses, among others, can be utilized to reduce the interest-bearing debt. And this is the self-funding strategy. As you can see here, graphically represented in this fiscal year, internal cash flow can be used for mobile businesses as well as interest payment. We will be able to establish a mechanism to enable us to do that. In addition, we have the sales and at least back, added on to that. And therefore, the cash flow can be leveraged to pay back the debt, for example. And these are something that the market has been receiving positively. And this is the graphs that shows the yield and also the price trends in the secondary market, and you can see that the market is taking this as a positive. In other words, the yield has been coming down, and therefore, this is a positive for procurement going forward. for fundraising forward, and international cash increasing. This year, we targeted 50 billion from non-fintech business, but we already surpassed that, and we have already reached 57 billion, and we intend to do further so that the financial base will be further strengthened. And so this concludes my presentation on the finance.

And the next is about Explain by Tim.

Good afternoon, everyone. Konnichiwa. Today, I'm very excited to share an update on our AI strategy and how it delivers meaningful impact to our employee, customers, and partners. Rakuten is on the highest level. Rakuten is becoming an AI empowerment company. We are uniquely positioned to become a business leader in AI. Our approach of deploying Rakuten AI is practical and cost effective. We try to understand the fundamental technology. We build things from ground up and therefore we can amplify our impact across the Rakuten ecosystem. And we're also very focused and prioritized towards delivering our business objective, that is triple 20, improve 20% operation efficiency, marketing efficiency, and client efficiency. Let me share a few reasons on why we believe Rakuten is well positioned to become a business leader of AI. Since Optimism Conference last year, we laid out our vision to augment human creativity with the power of AI. We want to leverage our unique data asset, including trillions number of transaction data. In addition, we have behavioral data, conversation data, and by leveraging these data, we can make our model higher quality with more efficiency. In addition, we have ubiquitous channel, online and offline, so we can help the technology to reach millions of customers across almost every categories from FinTech, mobile, and commerce. In addition, since we did English navigation many years ago, we can attract global talent, and in fact, our large language model team, including talent from many countries, from Singapore, Tokyo, India, and the US. And lastly, we have a unique culture once we determined to Focused and objective, we can conquer any challenges. And let me share with you a couple of things we are doing, how we are making our Rakuten AI practical and cost-effective. First, we're focusing on fundamentals reviewed from ground up. For example, we build embeddings for every entity in our system, from people, place, and scenes. With that fundamental understanding, we can uncover new insight, make new connections across the entire Rakuten Group ecosystem. And number two, we leverage our domain expert, human intelligence, plus artificial intelligence, so we can train the best model and leverage our expertise in so many categories from so many professionals and deliver the best services for our customer. And lastly, we ride the wave. And as you probably noticed, all the large language model performance improving, cost is reducing, and we can take advantage of this market improvement for free. And strategy is nothing without execution. Since last year, we have been steadily moving forward, executing our strategy in three waves. Number one, we are scaling our deep learning application through our fundamental understanding of embedding deep learning and language model technology. And number two, we launched Rakuten AI for business, and we're also incubating Rakuten AI for consumers. Let me give you a few examples. So our deep learning application helps customers to discover what they want. It's not only applied to semantic search, but recently we have deployed technology to recommendations, help people to find related items, and also we can, through transactions, we learn user profile, we can recommend more relevant ads to our users. We launched Semantic Search on Fashion last year and Ichiba this year, and we are on the roll launching Semantic Search to all of the Rakuten Group services. In fact, a couple weeks ago, we launched a Semantic Search on Rakuten Rakuma. And the usage patterns and the improvement are consistent across the board by reducing zero hit ratio, increasing user engagement, using our searching more, coming back to our services more, and therefore generating more benefit and revenue to our merchant and business partners. And another example is recommendation. We're applying the same semantic technology to recommendation. We deployed a state-of-the-art recommendation system In Rakuten Ichiba, we observed that user engagement, click-through rate in particular, improved 92% on Rakuten Ichiba. And the GMS from our recommendation system increased to 9% from the top feed on Rakuten Ichiba. And we also launched Visual Search, a new way for user to discover our product. And this is an example. On the left, you see a picture I took at a karaoke party. I couldn't even read the label on the soda can, but AI can help us. And in the middle, you see the visual system we had before deep learning, and we used the third party system. But the results are less relevant than after we deployed our latest Rakuten AI deep learning system. With the latest visual search capability, we can not only deliver better quality for our customers, but also reduce operation cost by 43%. And on the business front, we launched Rakuten AI business services for each of our customers earlier this year. But everything we deploy to our external customer, we try and test ourselves. Since the beginning of this year, we launched Rakuten AI for Rakutenians, And 25,000 Rakutenians have used the service. On every day, on a daily basis, 7,000 people within Rakuten are using Rakuten AI. And they use Rakuten AI for a variety of tasks, such as coding, translation, knowledge inquiry, summary, and meeting recap. There's so many tasks that we are helping Rakuten employees to improve their productivity. On the consumer front, we are also continuously incubating new technology. We announced that we are working on universal concierge that deliver unique, personalized services to our customer. User can interact with our service in multi-modality, whether it's image, conversations, or search, so we can help them to discover what they want. And lastly, they can use this service to discover all of the services across Rakuten Group. Lastly, we are also going to launch Rakuten Mobile AI Assistant very soon. So you, our potential customer, can ask this AI agent questions about Rakuten Mobile 24 by 7. We can recommend services based on user's history with us and deliver the answer they want without any delay. Thank you very much. We are on the road to deliver material impact to our employees, partners, and customers. Thank you very much.

This concludes the briefing session for the results of Q2. Thank you very much.

Thank you for joining our live question and answer session on Rakuten 2024 second quarter financial results. So now we would like to take questions from the media. And today's presenters are these seven members on the screen. So let me talk about this Q&A protocol. And this Q&A session will be conducted using simultaneous English and Japanese interpretation. Please select the language you would like to hear in your audio feed from the Zoom Navi bar at the bottom of your screen. And please do not select mute original audio. When the interpreter speaks, the original volume will be lowered and you will hear the interpreter's voice overlaying the speaker. The presentation materials shown have been aligned with Japanese. If necessary, please download the presentation materials from the investor page on the corporate site. Please raise your hand to ask a question for those joining from their PC. Beneath the participants' gallery view, you will find the Zoom navi bar. and please click raise hand to ask a question. If your name is called, please make sure your microphone has been unmuted before asking your question. Please note that we can only accept questions regarding the results. In order to answer as many questions as possible, we ask that you please keep your questions to two questions per person. so there is a person already with the hands matsuda san from nihon kenza newspaper please start your question thank you very much for taking my question i have the questions and the first of all about mobile subscribers it's growing steadily and expanding and then KDDI SoftBank financial results, and they are quite aware of your growth, and there were some statements related to that. And then the MMB steadily increased, and comparing to the other competitors, why are you able to grow your subscribers steadily? What are the reasons? And the second question, and BOJ... announced interest rate increase, and then is there any impact onto your financing from that perspective? These are the two questions I have.

Thank you.

And, first of all, mobile. I really think it is a valuable service. And then, first of all, network quality and coverage. We became on par with competitors and also maybe we are better than, first of all, the 5G speed. So we have improved our quality. That is very important, the first reason. And the second one, we only have a single plan, which is easy to understand from subscribers' perspective and our competitors. So if you don't use, then you pay this much. But if you use above this, then there will be some additional cost. And I think many services are charging additional cost. And on the other hand, unlimited, there is no limitation to use the data. And then... and then they have to pay a lot with other carriers, and maybe roaming fee, if you go overseas, you have to pay that, and even for the domestic calls, and there might be additional cost to be paid. And then we have to democratize that and make a fair pricing to our subscribers. That is the second reason. And the third one is Rakuten Group ecosystem. Pushing up the Rakuten Group ecosystem, that is another big reason. So we announced today what has been said from all days, F1, M1, M2, M1. So for those segments, our subscribers are above 10% for those age segments. So this is quite powerful data, I believe. So hopefully we want to have a fair price and faster and then have wider coverage. And then from 2026 and then through ACT, the satellite mobile will be coming. So the Rakuten mobile will become more compelling services and we want to grow this business more compelling and attractive. That's all. Thank you very much. Okay, as for the financing, let me talk about the interest rate increase impact onto our financing to be answered by Hirose. And as for our debt, more than 90% is based on the fixed interest rate financing. In that context, there is almost no direct impact from the interest rate increase. And as spoken in my part, by 2025, refinancing by 2025, it's already financed. So there is no need to do further financing for that purpose. And domestic hybrid replacement. And then at the same day, the capital funding must be considered, but as I mentioned before. And then the secondary bond market price is turned into a positive. So the spread is improved. So the finance improvement and our business performance improved. The growth can be expected. Therefore, this basic interest rate increase will not be impacted onto our future financing. And I think we will be able to finance in a favorable condition. Thank you very much. MS.

Thank you very much. Next, Mr. Ishikawa-san, a freelance journalist. My name is Ishikawa, freelancer. In the past, I think Rakuten Mobile was focused more on internet marketing, but Platinum Band is now launched. And so, internet, what's the percentage of those people coming through internet? That's my first question. And Takahashi-san, Miyakawa-san, I think say that maybe there is SIM-based contracts for the most part, but what do you think about that? Is there any impact of that? in charge of marketing of Rakuten Mobile via the internet promotion or customer acquisition via internet. Well, in the past, we used to have more digital marketing activities. But today, we showed you the TV commercial and the digital promotion. Well, that has stayed as our main focus as well, but platinum band is something that we would like a broader audience to know. Therefore, we will, of course, select the right channel or media, but we will conduct promotional activities accordingly. And via the internet and also via the Rakuten shops, we do not really give the breakdown. But in the internet, of course, Rakuten's ecosystem is used and also Rakuten shops. There are face-to-face connections with the physical people coming to the shops. So both are growing, I would say. Okay, thank you very much. And I would like to address your second question. The SIM alone, actually, yes, MNP included, it is easier to switch, and therefore the MNP bundling included, there's quite a bit of volume. So I wouldn't say SIM alone is not the only one that is growing, but bundle type is also increasing.

Thank you very much. MS.

So we have limited time. So from MEDI, the next question will be the final question from MEDI Q&A session. And then from Yomiuri newspaper, Ono-san, over to you. So I have the question, the first one. This might be overlapping with the first question from Nikkei newspaper. MNP net increase, net user increase, and then from the other carriers, well, very simple question. They do have a simple plan against your plan. And then looking at the competition with other carriers, what do you say about the impact of this plan in other carriers? And the second one, sorry, this is not related to the financial statement. And then the government announced about the Nankai Trap earthquake. And then from the Foreign Affairs Minister, first of all, the immediate recovery measure needs to be taken or follow the guidance from the Ministry of Foreign Affairs. So this kind of the information given from the government, what is your initial response? And I would like to know that. So impact from other carriers. We don't deny the possibility of the impact happens, but the Rakuten cycle plan... Maybe other careers cannot copy or mimic this. So 980 yen if they don't use. And no matter how much you use, maximum price is 2,980 yen. And if you use Link, it is free of charge. And even in overseas, up until 2 gigabytes, it's free of charge. So this is very, very important thing. And then I think this is really attractive. And with that, the Rakuten's other services, there are a lot of benefits can be attached with that. There might be some small impact, but it's not so big impact. That's how we view this competitive situation. Then we will try to improve our quality in a consistent manner and coming up with the overwhelming quality and try to make best efforts for that person. And then second one is about earthquake-related thing. And Yazawa-san, would be answering to the question. Yes, yesterday the government announced about the Nankai Trap earthquake information, and when we received the announcement, we've already set up the department to follow this. And then for the time being, we need to wait and see the situation, monitor the situation. But assuming the Nankai Trap big earthquake, we've already set up the environment for, for example, devices. If the disaster happens, and then we can control the antenna output and then batteries, the life to be extended and that can be managed by our software so we are preparing for that just in case. And then we already did this preparation for the Nankai draft, but receiving that government announcement and battery or power generators and the portal devices, now we have been moving those equipment to the earthquake subject areas. Thank you very much.

So this concludes the Q&A session with the people from the media. Thank you very much for your participation. Thank you for joining our live question and answer session on Rakuten Group's 2024 second quarter financial results. We have the entire management team here ready to answer your questions, namely the investors and analysts, and these are the seven members. and I would like to explain how we will carry out this session. The Q&A session will be conducted using simultaneous English and Japanese interpretation. Please select the language you would like to hear in your audio feed from the Zoom Navi bar at the bottom. Please do not select mute original audio. When the interpreter speaks, the original volume will be lowered and you will hear the interpreter's voice overlaying the speaker. The presentation materials shown have been aligned to the Japanese. If necessary, please download the presentation materials from the investor page on the corporate side. Please raise your hand to ask a question. For those joining from their PC, beneath the participant's gallery view, you will find the Zoom navi bar. Please click raise hand to ask a question. When your name is called, please make sure that your microphone has been unmuted and then ask So we would like to welcome any questions from the analysts and investors. Okay. From JP Morgan. Mori-san, please. JP Morgan Securities, Fujimoto-san, excuse me. Please unmute yourself and then start your question. Thank you. Credit Research, JP Morgan Securities. My name is Fujimoto. I have two questions. First is about rating. Now, three rating agencies have been giving you ratings. S&P Stable was the new rating at the end of May, and the domestic rating agencies are keeping their negative look. And JP Morgan, I think it's negative still. And so that means that there is a... possibility or high possibility of the rating being lowered in the future and mobile business has been improved and also the fundraising or financing has made progress and therefore I would say that that is rather awkward and so Japanese rating agencies are set to take slower actions compared to overseas rating agencies but downgrading direction I think is something that is rather awkward. And so, JCR, when you talk with them, what have they told you as the reasons for possible downgrading, and what do you think about that stance by JCR? That's the first question. And the second question is about FinTech reorganization. Whatever you can update us on the discussion that is underway, please do so. Towards January, you are, of course, making arrangements and is it possible that you will postpone it further? because investors are looking forward to this reorganization of the financial businesses of yours, and I think the bond situation was impacted by that as well, so please respond to this question. Thank you. Okay, thank you for the two questions. I'd like to answer them. My name is... And so rating. Well, of course, it is ultimately up to the decision by the rating agency, so... There is confidentiality that prevents us from disclosing any information, but we do have very close contacts and discussion with the rating agencies on a daily basis, and so we will do our utmost. to ensure good ratings. But overall, the dollar denominated and yen denominated bond procurement, so the liquidity improvement has been well received, and that's a general statement. sentiment. And S&P, for example, WB negative to stable, that has been the change that they have given us in terms of rating. And JCR, single A minus negative has been kept. Well, again, the decision is up to the rating agency. But for us, the liquidity gap has been addressed and also there has been improvement towards second half. So we don't know the reasons for their decisions. However, maybe a mobile business causing some issues outflow of capital might be one of the concerns that they have. But we have the self-funding mode of the mobile business with this sales and lease back. We will make sure that we will have improvement in the financial front, and we already have embarked on that, and we would like the rating agencies to see them in a positive light. Okay, and then fintech reorganization. As we informed you in our press release this time, postponement by three months was realized. And it was the three-month extension in order for us to ensure enough time to look at the necessary elements and factors. But of course, we need to be speedy in our decision. Therefore, we will make sure that we live up to this timeline of January 2025. The reason is that for us and Rakuten Bank, we have to think about enhancement of the business as well as the legal considerations and Rakuten Bank's minor shareholders benefits, among others. We need to consider all of these factors so that we can optimize And therefore, we have come up with this decision, and we don't expect to postpone this further. Thank you.

Okay, the next, from Okazawa Securities, Okumura-san, over to you. Thank you very much. And Okamura from Okazawa Securities is speaking. I have two questions. And the first question is about the FinTech reorganization. So with this reorganization, ecosystem would be expanded. I understand this direction will happen. On the other hand, depending on the scheme, the profit might be out from your companies to outside. And Rakuten Bank, if it is center of this reorganization, then it is less likely to be invested into your company. So there is a risk of discounted conglomerate. And in this reorganization, So these are their concerns. And I would like to know your opinion. Is there anything that you can share with us? And that is my first question about this. And the second one is about the mobile business pricing strategy direction. It's something I want to ask. And then the subscribers, you are still increasing, but the APU amount is not well growing. So including fintech reorganization and also the mobile pricing plan, what would be the synergy impact between the two so that you can turn around the APU trend? Do you have this idea? And also your future pricing strategy, what are you thinking of that? And I would like to know your direction on this. So as Rakuten Group, the reason of making our group company go listing, and there are several reasons. The first one is as for the flow of the capitals financing, and that can be completed within that listed company. And also Rakuten Bank, as you know, and they are performing very well today. And the factors, I think there are three driving factors here. And then first one is Rakuten Group ecosystem synergy, and it's working pretty well. So even they went listed on a non-consolidated basis, as long as they are a group company, they can keep this ecosystem or rather it has been strengthened. And the second factor is, so as for the financial related thing, well, the capital is very heavy. That will become really important as long as the financial industry sector in this context is strong. By listing, we can have a capital heavy, and then we can expect the further growth of the finance business. And the third one is the finance must have the finance unique accountability. That's my understanding, and given that context, and Rakuten Bank, to be honest, or Rakuten Bank's other performance, so comparing to other group company, they are surpassing other group company's business performance with that. So overall, the Rakuten Group, some of the parts are set value to be visualized, and then So Rakuten mobile is running toward the profitability path. And then once it is profitable and Rakuten service, internet services including Rakuten travel are performing very well. There is another point. Therefore, from a perspective, although a group company is listed, but it is a subject for the consolidated basis and stay within the group. And then ecosystem is working together. And we are maintaining that ecosystem situation. And then from the compliance governance perspective, each entity needs to fulfill their responsibility. So the Rakuten group, some of the parts, and if you evaluate based on that, maybe you will come up with different valuation than today's valuation of that group. That is what I think. And the second one is about mobile pricing strategy. what we are performing very well today. Therefore, rather than simply increasing pricing, we have to add value through the services to push up the output. That is what we have to do first. So the link is performing well. So we can make money there. And the second point. Maybe we can attach AI to these services. So Rakuten AI to be bundled with Rakuten Mobile is our future plan. So we will be implementing this and securing a certain market share. And then we will be thinking of pricing after that. But, well, the time passes, as you know. So this is very sensitive strategy. And very important analyst investors, I understand, but I cannot show everything in my hand. So I would like you to understand the situation. Thank you very much.

Thank you very much for your thorough answer. Thank you. We have limited time. Therefore, we would like to have just one more question from an investor or analyst. HSBC, Neil. Mr. Neil, please.

Good afternoon. I'd also like to ask about ARPU, referring to the slide on page 47. So it looks like specifically on data up, it's been flattish around 1700 yen for the past six quarters. And what I would have expected with the revised roaming agreement is you attract more high usage customers on the B2C side. And that trends up towards your higher range, which is closer to 3000 yen. So I'm wondering why that's not happening. Do you think the message on the improved network quality is still there? you're getting through to the market, or is it being offset by the corporate accounts? I'm wondering if the corporate accounts use a lot less data, and if you can give any details on the data usage by consumers compared to corporate users.

Thank you. Of course, as far as data is concerned, the consumer is much higher than 1,700 yen. But now, when we started enterprise form, up was relatively low, but it's coming up right now. So I think you will see uplift from next quarter.

Thank you. Thank you very much.

This concludes our Q&A session with the investors and analysts.

One thing. So now the advancement AI is going to be key for all Rakuten businesses and also for Rakuten Mobile. The fact that we are software-based network will be very, very advantageous for adoption of AI into our network services, not just to reduce the cost, but adding more AI onto our network and make it very, very... affordable AI to our end customers. For example, we may be able to do simultaneous translation when you're talking on a network level rather than depending on the mobile. So I think Rakuten is very, please consider we are very, very different level of mobile service from our competitors. Thank you.

Thank you very much. This ends Q&A session to investors and analysts. And before closing the session, I ask Mikitani-san to deliver the speech.

A comment, but I think I'll go.

Deliver the speech. So well, finance, and we did this, and the 150 to 300 billion yen, so the fintech reorganization. And then the financial related risk that you are concerned, I think we almost addressed that issue with this. And Rakuten Mobile. network quality improvement, and also the number of subscribers increased, and also the enterprise. So DX partners, through the form of the DX partner we have launched, and then this has been performing pretty well. And finance, fintech, and bank card securities, and also insurance. including payment, it's performing pretty well and steadily moving. So Rakuten ecosystem. So this is parallel, only end one existence in the world. So we used to use a point to connect, but now we are going to use AI to connect so that we can add more value to our users. With that, so mainly on AI-based, AI-centric ecosystem growth is something we want to achieve. And I ask your cooperation, thank you very much. Thank you very much. And then now we will like to finish this 2024 second quarter financial statement. Thank you.