Ikuko Hongou: Thank you for waiting. We’d like to start meeting on KDDI Corporation’s Financial Results for the First Quarter of the Fiscal Year Ending March 2022. We appreciate your participation via Internet, despite a busy schedule. I’m Hongou with the IR Department, pleasure to have you all. To prevent the spread of COVID infection, this meeting is held live on the Internet with simultaneous interpretation of English and Japanese.

Please be advised that the meeting will be made available later on our IR website for on-demand distribution. Let me introduce today’s participants. Muramoto, Executive Vice President, Representative Director, Executive Director, Corporate Sector; Shoji, Executive Vice President, Representative Director, Executive Director, Personal Business and Global Consumer Business Sector; Mori, Senior Managing Executive Officer, Executive Director, Solution Business Sector; Yoshimura, Managing Executive Officer, Executive Director, Technology Sector; Saishoji, Executive Officer, General Manager, Corporate Management Division. We have posted three items for the business results presentation, [indiscernible] and detailed materials on our IR website. Please refer to the disclaimer in each material concerning the content of the deck, our performance mentioned in today’s question-and-answer session, and to target subscriptions and others.

First, Muramoto, Executive Vice President will share with you the business results followed by the Q&A session. Mr. Muramoto, please.

Shinichi Muramoto: Thank you very much for taking time out of your busy schedules to view KDDI’s earnings briefing. I’ll explain KDDI’s financial results for the first quarter of fiscal year ending March 2022.

First, I would like to provide the highlights of the consolidated financial results for the fiscal quarter. During the first quarter, we made steady progress toward achieving our full year forecast. We will continue to strive to achieve our full year forecast through expansion of our business in growth fields and others. Next, I will discuss the operating income in the first quarter of the year ending March 2022, including factors behind the increase in our operating income by ¥8.5 billion year-on-year. Starting from the left of the side was the forecast at the beginning of the year.

Multi-brand communications ARPU revenue dropped year-on-year by ¥11.7 billion. On the other hand, a ¥7.5 billion rise in income from the growth fields, including the Life Design Domain and Business Services segment contributed positively to the operating income overall. Business Services segment actually saw a decline of ¥1.5 billion in operating income year-on-year on its own, but if we exclude the impact of a temporary profits posted in the previous fiscal year, the segment effectively grew and it’s continuing to grow smoothly in line with the full year forecast. Based on what I have just delivered, let me once again discuss the main points of our financial forecast. We need to firmly address the important issues in our telecommunications business, which is to provide returns to our customers and to promote 5G.

We will work hard toward realizing what we have committed to. In terms of our business performance, drop in revenue resulting from making returns to our customers through reviewing a charge plan and our business offset by the positive impact of growing data usage. All in all, the net decrease in the revenue from telecommunication charges is expected to be around ¥60 billion to ¥70 billion. We will continue to push for further expansion in the growth fields, cost reduction and structural reform efforts, including discontinuing the 3G from a medium-term viewpoint with the aim of achieving sustainable growth. From this slide, I will explain about our initiatives for achieving sustainable growth.

In the view of the environment for a telecommunications business that I have just described fiscal year ending March 2022 is going to be a very crucial year in terms of attaining the current medium-term management plan and building the foundation for sustainable growth going forward. KDDI’s growth strategy is to position our existing conventional businesses, including our multi-brand strategy and 5G at the center, while cutting costs continuously and to expand in the growth fields. As is described at the bottom of the slide in the diagram, at the root of achieving sustainable growth is the need to enhance customer engagement. And this is our top priority. To enhance customer engagements, we will strengthen contacts with our customers and make sure to continue to add value and improve our offerings.

For our retail customers, we’ll grasp how they are using the au economic zone and offer convenient and easy to use comfortable services. For our corporate customers, we will work with our clients to search for the issues that they may be facing onsite in their business operations and propose DX solutions to help them transform their business models. As a result, our customers hopefully will keep on choosing us and we’ll be able to build relationships based on strong trust with our customers, which in turn will enable us to achieve sustainable growth of our business. This fiscal year to launch the activities I have just outlined on a company-wide basis, we augmented our organizational structure, the Personal Business sectors to promote the integration of telecommunications and life design through strategic marketing, so a marketing division was set up. In the Solutions Business sector with the aspiration to strengthen our brand design capabilities that contribute to our customer success, Business Design Division was established.

To create fresh innovations across the whole of the organization, Business Exploration and Development Division was launched. Under this new organizational structure, we will redouble our efforts to listen to the voices of our customers earnestly and to offer a value added propositions. Now, I will explain the initiatives to enhance customer engagement for which – for each of our strategies. First on our multi-brand strategy. We will aim at bringing UQ mobile close to our customers’ lives as a brand.

As is on the left, we have launched discount plan with Denki or electricity service package with a mobile telecom service, which will allow our customers to enjoy discounts regardless of whether they’re alone or with their families. au economic zone services that are very popular with our customers. au customers will be extended to UQ mobile customers as well. Shown on the right is how we’re going to provide full support and information to our UQ mobile customers in all of our au shops and au style outlets with broadened smartphone line ups. Next is on the 5G network.

As it’s on the left-hand side of the slide in June all the 30 railway stations of JR-EAST Yamanote Line and all the 19 stations of JR-WEST Osaka Loop Line, KDDI launched 5G service. Further with the aim of offering 5G coverage to all the railway stations, we declare that we want to convert all the stations into 5G capable stations by the end of FY 2021. Our plan – for FY 2022, our plan is to install 5G services onto the station platforms and inside the station buildings as well as along the main trunk lines of 21 routes in Kanto and five routes in Kansai region. Next is an exciting 5G experience. We will continue to advance our initiatives with our partners, so that people can enjoy cutting-edge technology and what the 5G area has to offer.

Next is on smartphone contracts. As shown on the right, the total cumulative number of 5G units sold at the end of June, exceeded 3.4 million, in just three months it was up by 1 million units moving upward steadily. Next is on the life design domain, the core services of our life design domain, which we track as KPIs continue to grow smoothly. Financial business is the growth driver of the life design domain. As the last traded on the left, transaction volumes of settlements on loans are exhibiting robust growth.

The results in the first quarter of this fiscal year were up by 1.3 times the year before achieving ¥2.5 trillion. au Jibun Bank mortgage loan disbursements reached ¥1.5 trillion in June, a very substantial increase. au Mobile, our preferential discounts that was launched as well as other partnering initiatives have been successful rising by 1.5 times in the last nine months with accelerating speed of increase. Next on the expansion of au Economic Zone, the central shows customer contact, which is au PAY smartphone settlements were the membership exceeded 33 million. To provide new added values, food delivery and healthcare services have been launched further expanding services in the scoop of au Economic Zone.

The left is about promoting wider point circulation, au PAY campaigns, including the one allowing users to earn more Ponta points, which started in July. We also boost in collaboration with many applications and financial services. The right shows of our capital business alliance with menu concluded in June to make food delivery more common. We aim to expand to au Economic Zone by newly offering experiential services, including eating and drinking. The next is regarding healthcare services.

Since June, functions of au Wellness, a total health care application have been expanded. We strive to offer total health care support from daily health management to medical experience anticipating the expansion to medication guidance as well. Next is on business services segment. Regarding the operating revenues of the business services segment, the NEXT Core business that drive growth enjoyed a significant increase of 18% year-on-year, each of Corporate DX, Business DX and business infrastructure services have been steadily expanding operations. Let me summarize the strength of the business services segment, which is a backdrop of our business growth.

From the left, in addition to extensive IoT results and the experience, we can offer comprehensively various value outside telecommunications, such as cloud and data analytics that’s shown in the center. And our strength resides in business co-creation with customers on the global basis as depicted in the right. Looking at the 5G era, as customers promote DX, people want the world to be connected and we have necessary and rich capabilities. Next on KDDI, IoT World Architecture, which supports DX of customers, global DX IoT by optimal combination of localization and global standardization, the scope of support is not to limited to connected cars shown at the center. Rather the range is broadening to the left, DX of customer services basis, and to the right, providing a platform for a wide range of industries.

To realize the provision of a platform, we started offering global IoT access in June shown on the right. By integrating global carrier relations, KDDI’s strength with IoT technologies such as SORACOM SIM management of strength lies in affordable rates and coverage involves service in the world. Our track record in supporting customers DX and IoT environment has been increasing as well. Next is about the new collaboration for mobility society to achieve high precision positioning with a margin for error of a few centimeters. We concluded a business partnership contract with Swift in June.

As shown on the left, drones, autonomous vehicles, and various other development in the mobility sector is expected by actively utilizing this service, we aim to create new markets and businesses. Moving to the right, we intend to launch the commercial service in the spring of 2022. Next I’d like to focus on KDDI sustainable action. Let me introduce to you our initiatives to conserve the global environment. As shown on the left, we revised the KDDI green plan to achieve zero CO2 emissions equivalent by 2050.

We will reduce 50% emissions by 2030 compared to fiscal year 2019. Moving to the right, au Denki works with a subsidiary innovates and launches a new eco plan. It’s equivalent to use 100% renewable energy. In addition, 2% of electricity, bill is donated for environmental conservation activities. Regarding our efforts to reduce CO2 emissions, we promote initiatives to reduce power consumption at base stations and data centers, which have a significant share of over power use.

The left shows that we agreed to conduct Japan’s first demonstration of AI controlled power consumption reduction up to 50% with Nokia. Moving to the right, we have developed a demonstration experiment with Mitsubishi Heavy Industries and NEC Networks & System Integration Corp. to realize a small data center utilizing a immersion cooling system accommodated in a container. Looking at the 5G era, we aim to strengthen initiatives with our partners. Lastly, to date summary, regarding financial results in the first quarter operating revenue and profits increased by offsetting the effects of lower telecommunications revenues, mainly through growth field steady progress.

It was achieving the current medium term management plan and full year forecast towards sustainable growth. We aim to provide services that customers can feel closer to such as the declaration of au Rail Lines 5G conversion, and the enhancement of the overall strength of UQ mobile in multi-branded strategy. Promote strengthening customer contact points and providing new added values in Life Design Domain. And we support Customers’ DX on a global basis in business services segment and promote KDDI group initiatives for de-carbonization. We continue aiming to enhancing engagement with customers.

Thank you so much for your kind attention.

Operator: At this moment, we would like to take questions from the viewers. And we will wait to take as many questions as possible from as many people as possible. So we would like to limit the number of questions to two questions per person. If you have two questions, please wait until the answer is given for your first question before asking the second question.

As we have informed beforehand, we will be taking questions in order from those of you who have been pre-registered and have connected to this system. So allow me to explain how to ask questions. [Operator Instructions] First question. Mr. Masuno of Nomura Securities.

Daisaku Masuno: Masuno from Nomura Securities speaking. My first question is as follows, in terms of mobile telecom service revenue, I have a question with respect to the multi-brand strategy, a reduction of ¥11.7 billion. I think that’s within the full year expected a reduction of ¥60 billion to ¥70 billion. ARPU is within a certain level, but group IDs are down. So what’s your view on that? On the other hand, if we look at mobile telecom revenue it’s ¥10 billion overall.

So it’s doing very well. What is the background? So first about the question that I asked earlier, please. Thank you.

Shinichi Muramoto: From my side multi-brand strategy, revenue mobile telecom revenue, I would like to explain the relationship between the two. As you rightly pointed out, multi-brand strategy, telecom revenue is down in revenue.

Mobile telecom revenue mainly has the roaming service revenue, so on a net basis, it’s up, it’s increased. To address your first question, declined by ¥11.7 billion and the number of IDs has gone down. And how does that relate to ARPU? You asked. Shoji may I turn it over to you?

Takashi Shoji: Yes. Shoji speaking, allow me to respond to the question.

With respect to ARPU, as you pointed out, what has happened mainly is since last year, I think the middle zone has become the main part of our business. So UQ mobile, povo customers are migrating toward those sub-brands and that is underway. So because of that revenue is down in terms of ARPU. ARPU revenue is down. That is the main factor behind it, but then of course, 5G usage is increasing and use – unlimited plan usage is also up.

And at this moment, there are customers who prefer lower prices because of their migration to lower price brands. Our revenue is down, but this is more or less expected by us. On the other hand, with respect to IDs, the number of IDs in the first quarter, it was weak to be frank with you since the last fourth quarter into this first quarter – in the last quarter, in the fourth quarter last year, iret came up with a new price plan and they continued their free of charge campaign until early April and all sorts of carriers provided online services, online plans. And so competition increased and it was difficult. It was tough.

But for the first quarter overall, 0.8 plus percent churns turnover. But after April month-after-month there’s been improvement, although not in this slide in the month of June, the churn or the turnover was a 0.6%. So that’s been marked improvement since April. So for the full year and our sales plan as well, while given the current pace of churns, we believe that we can manage this. And so we would like to continue to press it down, bring it down.

So for the full year we shall be able to attain the full year forecast. That’s all.

Daisaku Masuno: Thank you. My second question, other than the revenue, ¥70 billion of cost reduction for the full year, I think that was part of your plan. What is the progress so far and life design and others are growing, looking at the full year plan.

There must be increases and decreases depending on the domain or the area. So please give us a breakdown.

Shinichi Muramoto: So I will respond to the cost reduction part of your question. As I said, we made an announcement of a performance last time. Marketing costs, which is a large factor, and it had a big impact on marketing costs when we integrated with UQ mobile, and we have been addressing the need to increase network efficiencies.

And so we’re on our plan in terms of the progress. Our progress is on plan. And so the cost reduction that will continue to achieve this fiscal year with discontinuation of 3G service costs is up. So I think we need to focus on that. And it may not show in the form of increased income, but operationally we are making progress.

And I did have that would be understood. With respect to the income from life design domain, shall I turnover to you?

Takashi Shoji: Well, allow me to respond. As it was in the presentation slides life design domain, ¥9 billion of income increase was seen. Well, there must be increases and decreases you asked in your questions, but I may be sounding boastful, but actually almost all the areas, all the segments increased actually. So value added services including Smart Pass, it was very good.

Smart Pass Premium as well and settlements business was performing very well with respect to the financial business as was presented even bank and credit card business, they were all doing very well. And in terms of electricity power, there is seasonality attached. So Q-on-Q, of course, in the months of April, May and June electricity usage is low, but year-on-year, it’s growing. So electricity service was very good. So for the Life Design Domain overall, it was very good.

Daisaku Masuno: Thank you. That’s all for my questions.

Shinichi Muramoto: We are ready for the next question. [Operator Instructions] Next question, UBS Securities Takahashi is on. Please unmute yourself, and to give us your question.

Please go ahead.

Kei Takahashi: UBS Securities, Takahashi. Can you hear me?

Shinichi Muramoto: Yes. We can hear you.

Kei Takahashi: I have two questions.

First question about churn rate. As you explained, I’d like to ask you to be – to elaborate on that regarding churn rate the last first quarter, because of the COVID, I think it was abnormal. But one year before and the two years ago in the comparing that to the first quarter, I think there was a slight increase, but as I look at the substance, smartphone users, I think it’s increasing but the 3G users, perhaps it seems to be that there was an outflow that going forward. I think you’ve mentioned you’ll be taking some measures to improve the channel rate specifically. What kind of measures are you planning to carry out?

Shinichi Muramoto: Shoji, will answer your question.

Takashi Shoji: Shoji speaking. First of all, about the churn rate, generally speaking, as I already mentioned, well, I already addressed that smartphones or feature phones about those matters, we don’t disclose that information. I hope you will understand. In that sense generally speaking, from the previous quarter to this April, partly because of reductions campaign, generally speaking, it was a difficult situation. And then of course, campaign ended from various companies.

The numbers are becoming more or less stable. And from June, UQ campaign for electricity Denki set to discount, and it has been very popular and enjoying a steady increase. UQ is becoming such a main player in terms of such prices, certain data, usage band that becomes kind of a main stream. And we’d like to continue addressing these areas at the same time. If you look at UQ, it was – people could buy only at the UQ spots, but starting from the last fiscal year at au shops, people can buy UQ.

And there has been expansion of that service and mostly adult, most of the – utmost of the au shops, people can buy UQ services, throughout Japan at au shops and the UQ spots multi-brand strategy, it’s something we would like to explain carefully to the customers. And we would like to help strengthen the sales operations in September in the order various services of iPhone new models will be introduced. So we’d like to really boost our sales activities. Thank you. About the churn rate, 0.6 I think it has come down to 0.6 or so.

The strengthening of the UQ sales, the effects being failed, am I correct? Right. There are – now the campaigns from other companies, they have now entered in addition to UQ’s new service has been received very warmly by the people. I think that’s a major factor. And also if you look at au itself, the unlimited use and Netflix with Amazon Prime, such services or products again have been popular and there have been any new subscribers of au. I think so there have been some synergistic effects.

Thank you.

Kei Takahashi: Thank you. My second question, other factors of the increase or decrease of income about the business services segment in the – there was a kind of a one-time income in the last term. Could you please elaborate on that?

Shinichi Muramoto: It’s about the business services, Mori will handle your question.

Keiichi Mori: Regarding this overseas, we do data center businesses, real estate transaction occurred, and last year about to occurred, data center business – to expand the data center business, we have been looking for better locations.

And so there was this going to be one-time sales, what’s the sale of several billions. Thank you.

Operator: Let us move on to the next step questions. [Operator Instructions] So here are the next questions by Kikuchi of SMBC Nikko Securities. Please unmute and insert your questions, please.

Satoru Kikuchi: Kikuchi speaking, thank you. I have two questions. My question number one, multi-brand value added ARPU and ARPU revenue increase, I would like to ask for clarification of factors behind that. Year-on-year, it’s a positive increase on a quarter-on-quarter basis. There’s a decrease and that’s because of the impact from the electricity business, other than the electricity business.

I would like to know what the other factors are. Smart Pass Premium was doing very well, you said. The number of members is not up all that much, but the number of premium members is increasing. So in terms of the breakdown, electricity has earned this much. Other businesses have earned this much.

If you could give us a breakdown, if breakdown is difficult on a qualitative basis, this business is growing this much, and next year, this will be the area that will be leading our performance and so forth is if you could share your forecast with us.

Shinichi Muramoto: So may I respond to that? Well, a value added ARPU. We cannot disclose individual numbers. I hope that’s understood. But on year-on-year basis, what is growing most is settlements business, financial settlements business.

Now what is growing quite substantially is Smart Pass. Smart Pass is growing quite substantially. Netflix related bundled content is also doing quite well. Repair service, handset repair service is also growing quite considerably when smartphones are sold in large numbers we’ll have the subscribers participate in the service program. And so in the first quarter repair service for smartphones grew.

So if there’s any addition.

Nanae Saishoji: Saishoji speaking, as Muramoto just said, year-on-year, electricity Denki is also growing actually. On a quarter-to-quarter basis, we compare between January through March and April through June. So electricity is down because of seasonality but why is it down in terms of the base fee that’s because of electricity.

Satoru Kikuchi: Thank you.

My second question. Group IDs and churn rate, I’m concerned about that. So I may sound persistent, but allow me to ask a follow-up question. So group ID numbers are down, but not too much, but given that the churn rate is up, au is down slightly. You have offset that with the UQ mobile.

Apparently that seems to be what’s happening, but what is the breakdown of group IDs and MVNO and au, the breakdown between the two, how has the composition changed and how did that lead to the churn rate and how is it rebounding? You were disclosing that before. So what is concerning is UQ, well in terms of Huawei mobile is pretty aggressive, and it seems that you’re trying to follow Huawei mobile and you’re not necessarily succeeding. So how are you going to control the balance between au and UQ mobile going forward? If you have a policy that you can share with us? Well, sorry for asking several questions. So what is the composition? How is it changing? And what is the target composition? What is going to be the balance between au and UQ mobile several years from now?

Shinichi Muramoto: Yes, there were lots of questions included. It’s hard to ask all of them, but just to share the facts with you first, as we’ve been seeing today the mid zone is where the competition is harshest.

So au is down and customers are migrating toward UQ mobile that cannot be stopped. And that is a fact. On the other hand, UQ mobile is performing very well. The number of subscribers exceeded 3 million. So it’s doing very well.

So what’s going to be the balance between au and UQ mobile going forward, it’s hard to say, but to give you the conclusion, first, we have to grow UQ mobile, povo and we have to grow au as well, and we will aim at growing all of them. That is frankly, what we’re going to do. And another point, what you said upfront, having says, group IDs are not down all that much, but then the decrease is on the order of 80,000 to 90,000. In UQ mobile and povo, IDs are down, but actually this year is the last year of 3G service. So because of that, cancellations have been happening to a certain extent.

So there are customers who no longer require 3G and that’s canceling their contracts and nothing can be done about that. So we’ll try to increase the UQ mobile and povo, while we’re trying to maintain au. I’m sorry for using qualitative trends to explain, but I hope I answered your question.

Satoru Kikuchi: Thank you. That’s all for my questions.

Ikuko Hongou: We are ready for the next question. If you have a question, please tap the raise hand icon of your Zoom application. Next question, please. Daiwa Securities, Ando-san, please unmute yourself. Give us your question.

Yoshio Ando: Ando, speaking. Can you hear me?

Shinichi Muramoto: Yes.

Yoshio Ando: Thank you. I have two questions as well. First, in the presentation material, Page 2, operating income, there is a kind of a stairway type of graph showing the increasing factor, the last ¥12.6 billion others that is the major contributor.

Regarding the breakdown of others, if you could just give me the major ones and the very general estimates for each, what was the increasing or decreasing factor resulting in plus ¥12.6 billion, please. Thank you.

Takashi Shoji: Others ¥12.6 billion, what’s the breakdown? There’s so many things actually covered here. And I’m sorry about the confusing figures. There are many things.

Regarding the positive factors, I hope you will forgive me for not giving you numbers in order of the ranking to give you the big ones. Roaming revenues, that’s a major one. Roaming revenues – regarding these others, subsea cable repair cost, the reversal of the provision regarding the points, again, the reversal of the provision, those also covered under the others. Of course, there are other negative factors as well, but net-net, this is the result. I hope I answered your question.

Yoshio Ando: So I was kind of close, for instance, in terms of roaming mobile telecommunications revenues, multi-brand communications regarding the difference between the two, if I should explore the general picture. Am I correct? And also the subsea cables reversal of the provision segment others, I think that’s also a bulky one. Should I look into that?

Takashi Shoji: Yes. You guessed it right. Please refer to the detailed materials.

Yoshio Ando: Thank you. My second question, Shoji-san has been answering so many questions. The number of IDs has been on the degree. So I think that’s the most, perhaps the depressing part or regrettable part. My question about the churn rate fluidity, EBIT goes down steadily regarding the number of IDs.

Naturally, do you think it’s going to recover naturally or whether you – just like you think you set of discount only when you promote such things only then the number of ID is going to improve. What’s the situation? Give me some nuances.

Shinichi Muramoto: Thank you for your questions. Let me see. As you know this industry, it’s a very competitive market.

If you rest even for a while, you lose customers, it’s a tough industry. I mean, you keep fighting. Based on that condition, let me share with you the following. As I repeatedly said, in the middle volume, we have to fight it. The UQ electricity set a discount, this needs to be promoted even more.

Previously most of – at most of the au shops that people can now buy UQ products and services. I mentioned that already. But having said that, again, in a short period of time, we did all these things depending on the shop, people not really familiar with the operation and by conducting training or those people working very hard selling both UQ and au, we have life designed products and services, especially we have added this UQ, which is a real major one. Once the operations becoming improve, I think we can increase the numbers concerning UQ as I said before. At the same time, multi-brand strategy is something that we explained carefully to customers.

We also will have au unlimited use on Netflix fan and we going to promoting them as well. So this is really down to earth operating activities, sales activities and it really boils down to that.

Yoshio Ando: Thank you.

Ikuko Hongou: Let us take the next set of questions. Those of you with questions, please press the raise hand button on your Zoom app on your device.

So here are the next questions asked by Tanaka-san, Mitsubishi UFJ Morgan Stanley Securities. Please unmute and start your questions. Please go.

Hideaki Tanaka: Yes. Tanaka, speaking.

Can you hear me?

Ikuko Hongou: Yes, we can.

Hideaki Tanaka: Well, then I have two questions I wish to ask. Question number one, earlier when Takahashi-san asked his question about Business Services segment last year there was a one-off factor leading to increase the income because of real estate dealings, billions of yen you said, but how much exactly is it? If I can get a better idea as to how much it was?

Shinichi Muramoto: We’ll just say several billions of yen again. It’s not on the high end close to ¥10 billion, it’s not.

Hideaki Tanaka: Well, going forward in terms of disclosure what I would like to see is Page 6 on the Times report plus report, business report, a decrease factor says that income from handset sales is down.

And so it sounds like a completely different story from the impression that I get. So decrease in gross income from handset sales, how much impact did that have? So you said that there was this one-off factor of real estate transactions. So that was big about actually a decrease in income from handset sales had a pretty big impact but then you are growing the corporate sector. If you can describe it that way, it would be easier for us to follow.

Shinichi Muramoto: Well, the largest factor is as we mentioned earlier the proceeds from the sale of real estate property as is described here the impact from decreased gross income of handset sales that does have an impact – that did have an impact, but at the beginning of the year, last fiscal year and this fiscal year, what we’re selling in terms of handsets mainly is different.

So new models of phones, the sales prices are down for the new models of phones and therefore, it has had an impact on income. But in terms of mobile business, we are growing the number of IDs more so than last fiscal year, and that will be returned to us as network revenue later. As we have explained this time, the so-called next core areas that we’re focusing on and in those areas there has been market increase in income. So by driving this business family, we would like to achieve growth in the future. That would be all.

Hideaki Tanaka: Thank you. My second question is as follows. The Personal Services segment on that segment, mobile revenue and multi-brand ARPU revenue, the difference between the two was explained earlier. Roaming revenue is increased in a marked way. It seems, but other than that, MVNO, J:COM, BIGLOBE, which is an entity within your group.

So online only brands, there are many of them, including yours. So at this moment, what is the competitiveness of these brands? And going forward, they may shrink I would think about what is your view on these other brands that you have within the group?

Shinichi Muramoto: So the intent behind your question is, J:COM, BIGLOBE, MVNO competitiveness what’s the future outlook. Is that what you’re asking?

Hideaki Tanaka: Yes.

Shinichi Muramoto: Then we’ll hand it over to Saishoji.

Nanae Saishoji: Well, first to give you the outline, the overview.

BIGLOBE

and J:COM both are increasing actually in terms of revenue, as well as the number of IDs, they are growing quite successfully, but the percentage of their business in the total business is not very large, but they’re not shrinking at all. They’re growing actually. J:COM, J:COM is unique. They have this unique market of cable TV subscribers, and I’m sure they have a lot of those customers. And so they are making steady growth.

And BIGLOBE on the other hand, well MVNO prices are down BIGLOBE is not having an easy time, but they are launching new price plans. So something different from MVNO’s, something different from MVNO’s online plans. They’re being aggressive offering something that is different. And so customers that we cannot reach, they are trying to reach. So I hope this can be looked at more positively.

Thank you.

Hideaki Tanaka: Thank you. Understood. Thank you very much.

Ikuko Hongou: We are running out of time.

So next question will be the last question. We are ready for the last question – next question. If you have a question, please press raise hand button of your Zoom application. Next question, SBI Securities, Moriyuki-san. Please unmute yourself and give us your question.

Please go ahead.

Shinji Moriyuki: SBI Securities, Moriyuki is my name. Can you hear me?

Ikuko Hongou: Yes, we can.

Shinji Moriyuki: About the factor analysis of the results and I also have a second question. Profit year-on-year is on the increase is that really about revenues or in terms of income is it also on the increase by the energy? I think the procurement changed answered with – deteriorated in the last year, in the second half.

Then there was a decrease and losses, but on full year, it improved about the energy business. I would like you to give me some more information about the business services. You said that was a one-time proceeds by selling the real estate. But in the last year, did it happen only in the first quarter, or did it also happen in other timing? Not just in the first quarter.

Shinichi Muramoto: First about electricity, allow me to address that question.

Right, that was a very incisive question. You are right, as you assumed. In terms of revenues, the number of users increased significantly and revenues, yes, it increased year-on-year. But about income, as was pointed out already last year, JAPEX prices soared at exchange, of course, the ministry is trying to improve JAPEX at the exchange. So I hope and I think it’s going to stabilize.

Having said that, we need to lower the volatility, so the bilateral parcels, the ratio needs to be increased. And in terms of profit, it’s going to be actually pushed. So in terms of income, I don’t really think that it has increased that much, so much for the electricity. Thank you.

Shinji Moriyuki: Conversely, speaking regarding electricity the first quarter last year, it was so briskly in terms of income, the crude oil was cheap, procurement cost was pretty cheap.

So regarding income, it was actually better than the plan almost YOY, year-on-year, if you just look up that decrease of income in terms of size or scale, how much in terms of the size, because it was a decreased income, right? I think life related services could have been better without that. How much?

Keiichi Mori: Okay. The proceeds from the sales only occurred in the first quarter about the real estate compared with that it’s less significant, but the data center related business, you need to obtain that property first and then you need to work on the facilities and equipment. In the last year, when we bought them, then there was the revenue from the rent increased, but now it’s data centers and we don’t have that kind of a rent related revenues this year. So in terms of real estate, it only happened in the first quarter, as far as the significant ones are concerned.

Shinji Moriyuki: Thank you. Second question about UQ. In July the middle of – since the beginning of July throughout au shops nationwide, it’s now being available. About the UQ sales, so it’s increasing linearly. If it’s the linear increase downgrading, is that really actually on the rapid increase, but at the same time, generate is also going to – I think it should improve.

So after July to the extent possible, could you please give me some plus of information us regarding the trends?

Keiichi Mori: Allow me to address that question. Linear increase or not, setting aside the numbers, the number of shops you can see that more shops can handle them. Yes, it’s linearly increasing, but the shops that can deal those, it’s almost maxed to more than 2000 shops. They can now sell UQ products and services. So there has been such an increase, but having said that, does that mean that the more shops that we make it available for the UQ businesses, is it going to be limited, unlimited, but this au shops listening to customers or those customers who come to au shops, what kind of customer they are? I know I often go them.

Many cases, we start with talking about the prices at the moment this is what I pay, and this is the plan that I use. And this is how much I use, but which plan would be most appropriate. Many customers want to give us – want us to give them advice. So it’s not the right thing to just do invite or encourage all of them to use UQ. So this has to be a kind of tailor made service.

So undoubtedly the gate has been broadened to more opportunities to sell UQ’s products and services. But does that mean that we just turn all the traffic visitors to mobile users? That’s not the case. Yes, it’s linearly increasing, but at a certain appropriate balance, I didn’t really say that the extreme cases. But as options you have the option. So I think people would be downgrading from au to UQ, so that the rate of the pace can accelerate.

In the presentation as Muramoto already shared with you, this year with the price decrease ¥60 billion to ¥70 billion that was the revenue decrease in the first quarter, the impact was ¥11.7 billion. So roughly speaking, these are the numbers are almost similar to what we expected initially. That’s how we see this. Thank you

Ikuko Hongou: At this moment, our time is up. So at this moment we would like to conclude KDDI’s first quarter results announcement for the year ending March 2022.

Thank you very much for your attendance.