KDDI Corporation

Thank you very much for waiting. We will now begin the financial results briefing and Q&A of KDDI Corporation for the first quarter of fiscal year ending March 2026. Thank you very much for taking time out of your busy schedule to join us today. I am Miyakawa of IR department and will serve as the moderator today. This briefing will be broadcast live on the Internet with simultaneous Japanese to English interpretation. The presentation will be available on demand on our IR website at a later date. Thank you for your understanding in advance. Let me introduce the participants today. Kuwahara, Executive Vice President, Representative Director and Executive Director of Business Solutions Sector. Saishoji, Senior Managing Executive Officer, Director, CFO, and Executive Director of Corporate Sector. Takezawa, Senior Managing Executive Officer, Director, and Executive Director of Personal Business Sector. Katsuki, Managing Executive Officer, Director, CSO, CDO, and Executive Director of Corporate Strategy Planning Division. Yoshimura, Senior Managing Executive Officer, CTO, and Executive Director of Core Technology Sector. Akita, Executive Officer and Executive Director of Corporate Management Division. We have three financial results-related materials and TSE, timely disclosure material. Total four materials are posted on our IR website. Please refer to the disclaimer in the material regarding statements made in these documents, performance targets, and projected subscriber numbers explained in the Q&A session today. Saishoji will first explain the financial results summary, followed by Q&A. Ms. Saishoji, please. Let me explain our first quarter financial results for the fiscal year ending March 2026. First is our consolidated results. Revenue increased and profit decreased on a consolidated basis, but progress is in line with the initial forecast. Top row, operating revenue was 1,436,3 billion yen, up 3.4% year-on-year. Middle row, operating income was 272.5 billion yen, down 1.6%. Bottom row, profit for the period attributable to owners of the parent was 171.1 billion yen, down 3.3%. Next is factors for change in consolidated operating income. From the left, mobile on personal services segment basis aims for a year-on-year profit increase of 1.9 billion yen and our initial forecast of full-year profit growth of over 30 billion yen. Financial and energy businesses combined were up 6.2 billion yen. Lawson's equity method profit was up 5.7 billion yen, DX was up 2.9 billion yen, technological structural reform was up 3.2 billion yen, and the impact of prior year's promotional expenses, including a 7.3 billion yen one-time expense, was negative 21.4 billion yen. including others such as returns to shareholders, stakeholders, and decrease in rock and roaming revenue. Operating income was down 4.4 billion yen. However, as mentioned here, our core businesses are progressing steadily, and the impact of sales promotion expenses was factored in at the beginning of the year, so it is in line with our forecast. In the full year results briefing in May, I touched on two points on the left regarding our commitment for the next growth. Digital data and AI will generate new values. So as you see on the right, We will focus on growing our foundational power to connect and making it a strong competitive foundation of KDDI. To achieve this, we will provide the value of connected experience and expand the telecom business foundation both to C and to B. As the outcome of these business activities, it is important to grow our mobile revenues, which is communications plus value-added services in both personal and business service segments. To show the progress of our growth to all our supporting stakeholders, we will change and promote our KPI disclosure. The detail on KPI disclosure, please look at the appendix. This shows the mobile revenue status for personal and business services segments combined. Left side, mobile revenues were 550.6 billion yen, up 7.6 billion yen year-on-year. In the center, mobile ARPU was 4,340 yen, up 60 yen. Right side, the number of smartphone subscriptions increased by 450,000 yen. Personal segment basis mobile revenues is promoting the communication and added value services. And year-on-year, it is up $2.3 billion. We're making steady progress. Right side, Q1, mobile approval. and smartphone subscriptions are steadily increasing, and new plans offering connected experience value are well-received and are off to a good start. Both grant migration and churn rate trends have improved. We expect significant growth in the second half, including the impact of service revisions, and will continue to aim to achieve a virtuous economic cycle. Next slide.

The new plans launched in June are off to a good start. On the left-hand side, new value of connected experience such as AU5G Fastlane, Startlink Direct, and unlimited data overseas have been extremely well received. As a result, about 80% of customers choose the AU ValueLink plan and Unlimited Data Max Plus, which combine reliable unlimited data use with the value of connectivity. On the right, at UQ Mobile, due to the increased data usage, about 40% of customers choose KomiKomi plan value, which offers the largest capacity. Due to value of connected experience and data demand, high capacity plan is very well accepted. This is the effect of the multi-brand strategy we redesigned along with our service revisions. It has worked as expected, with both AU and UQ mobile seeing improved trends. On the left, as AU's attractiveness has increased, brand migration trend has improved, and its flattening is in sight for FI March 26. The number of migrations from UQ Mobile to AU continues to increase, expanding 1.4 times year-on-year. We will continue to strengthen efforts to make AU more attractive, aiming for further growth. The number of migrations from AU to UQ Mobile decreased significantly in June. On the right, churn rates have also been positively affected, with that of AU remaining low and that of UQ Mobile showing a significant improvement in June. The trend continues in July as well. Recently, we have seen a trend within the industry toward focusing on contracts with highly engaged customers. We too will transform our structure to the one that is more conscious of lifetime value. While many companies are focusing on finance, I'd like to reiterate the strengths of KDDI's financial services. On the left, KDDI has been a pioneer in creating a synergy model between telecommunications and finance. In the fall of 2025, we will begin collaboration with SBI Securities to strengthen alliance between banking and securities. In addition to Mitsubishi UFJ-E Smart Securities, SBI Securities will join as a partner for this alliance. By using real-time direct debit set up with AU Jibun Bank, customers will receive preferential interest rates. This will also help us increase our bank deposits. we will continue to expand our collaboration with securities firms in order to strengthen our financial functions together with our partners. The financial businesses performance and KPIs are progressing smoothly. On the left, AU Financial Holdings operating income increased 33% year-on-year to 11.7 billion yen. On the right, AU Money Activity Plan, which has now exceeded cumulative number of subscriptions of 1.6 million, has been successful, expanding our customer base, including AU Pay Gold Card members. Next, we will look at the performance of the business services segment. On the left, consolidated operating revenue was 349.7 billion, up 4.5% year-on-year, and operating income was 57.5 billion yen, up 5.4%. For base, revenue grew with growth in mobile revenues, and both ID and APU were solid, resulting in an increase of 3.9 billion, or up 2.5%. In growth area, operating revenue was up 6.2% due to delays in integration progress at Altios Link. Toward the end of the fiscal year, we aim to expand the growth in focus areas such as security and IoT and to bottom out and accelerate BPO performance. Finally, today's summary. As to the first quarter consolidated results, despite the decrease in profit compared to the previous fiscal year, progress is in line with our initial forecast. New plans are off to a good start, and the new connected experience value has been well received. Our multi-plan redesign has been successful, and we continue to aim for a full-year profit increase of over 30 billion yen in mobile in the personal services segment. In the financial services business, we will strengthen bank securities alliance and further expand the value we provide by combining telecommunications and finance. In the business services segment, we will strengthen initiatives in focus areas and accelerate our growth trend. That's all. Now we would like to move on to Q&A.

Thank you, Ms. Saishoji. We will now take your questions. If you have questions, please tap the Zoom raise hand icon or raise hand button in the reaction. When you are nominated, please tap unmute and ask your question after the presenter mentions your company name and name. To receive questions from as many people as possible, please limit your questions to two per person. If you do not have your name or company name, we cannot appoint you, so please mention your name. We will now take your questions. First question is from Daiwa Securities, Tokunaga-san. Please unmute yourself and ask your question. Hello, this is Tokunaga from Daiwa Securities. I have two questions. first is about the sales promotional expenses so one reason profit declined is because the sales promotion was big excluding the one-off basis out there and all players are having strong results so this means that you are you have this result in the pew one And this competition will continue on a full year? Or you're not using much expenses now? It's just this past year factor that is impacting your results this time? Thank you for the question. So I mentioned in the increase decrease of profits, the sales promotion expenses increased, which pushed down the profit. For the one-off factor, $7.3 billion. And for others, was this spent this year or prior years? I think your question is on that point. So this is personal services segment. Takezawa would like to explain. Thank you very much for your question. Takezawa would like to answer. First of all, as you rightly said, $7.3 billion is the promotion expense related gain on the reversal of the provision. So that was one-off factor. It will not be incurred from now on. And for the others... So our smartphone Tokusuru program, the program that we offer, this is the expense increase for the past existing customers. And this Tokusuru program, this started in September 2021. And with the installment receivables, we had the customers who purchased using the installment increased. And so from the device purchase, two years or after three years from the purchase, this benefit is executed. And when this benefit is exercised, the residual value portion tends to rise. And that is where we are now. Going forward, this benefit will end among some customers and the customers who will newly join will become better balanced and so the YOY impact will improve. But for this year, we will gradually improve. So this was factored in at the beginning of the year as we planned for the full year. We will continue our efforts to achieve the target. Thank you. So, this quarter, the smartphone subscriptions net addition is slowing down. It's a bit weak, but the expense was not injected in this quarter. And so, for the new injections, you are being rather restrictive, suppressive? Yes, you're right. Well, we're not really restraining, but... looking at the profit situation and right now we are in the middle of the service revisions so we will watch the market condition and that use our promotional expenses accordingly for now on the payment basis we are not dramatically increasing this year thank you and my second question is about mobile revenues personal segment around 2 billion increase in q1 on the full year 30 billion profit increase I think you said so profit increase means how much mobile revenue increase are you anticipating for the full year and I think it's partially due to the revisions service revisions so this will increase as we go through q2 q3 So are you in line with the profit increase plan? So the 30 billion yen full year forecast for mobile revenues. Thank you for the question. So full year 30 billion profit increase is the target in the personal services segment. Q1 profit increase seems a bit weak. I think that is the gist of your question. So this is, again, personal, business-related, so Takezawa will answer. Thank you for the question. So let me answer. $2.3 billion profit increase, but as you see in the waterfall chart, the profit, $1.9 billion. so the revenue was not converted 100% into profit there was added value revenue included in the mobile revenues that's the reason so 30 billion profit increase on the profit basis we need to increase profit by 40 billion and From August 1st, we started our service revisions and some price revisions. And the new pricing plan started in June is now seeing an upside compared to the plan. So we hope we can maintain our momentum until the end of the year and Net additions of smartphones need to accelerate. So summer to fall and towards the end of the year, we will try to promote and drive this business and keep the momentum so that we can increase the profit by 40 billion to achieve the 30 billion yen target. thank you my follow-up question is so this revision on August 1st the progress given that you are your new pricing is off to a good start second third week mobile revenue value added I think this is a good progress can I see it that way including the subscriptions Yes, the base telecom revenue will rise and the added value will also be offered to our users accordingly. So the mobile revenues overall can grow, we think.