Unidentified

Company Representative: Thank you very much for waiting. We would now like to start the financial results briefing of KDDI Corporation for the first quarter of the fiscal year ending March 2021. Thank you very much for taking time out of your busy schedule to attend the meeting via the internet. I am Hongo [ph] from the IR department and I will serve as the moderator today. This meeting will be a live internet streaming with Japanese English simultaneous interpretation to prevent the spread of COVID-19.

It will also be distributed on demand on our IR website later. I ask you for your understanding. Let me introduce the participants today. To your left, first row from the center, Shinichi Muramoto, Executive Vice President and Executive Director of corporate Sector; Takashi Shoji, Executive Vice President and Executive Director of Personal Business Sector. To your right, first row from the centre, Keiichi Mori, Senior Managing Executive Officer and Executive Director of Solutions Business Sector; Kazuyuki Yoshimura, Executive Officer and Executive Director of Technology Sector.

Lastly to your left second row, Nanae Saishoji, Executive Officer and General Manager of Corporate Management Division. Three financial results related materials, presentation, financial statement and detailed materials and one TSE disclosure material are posted on our IR website. Please refer to the disclaimer in the materials regarding statements made in the documents, performance and subscriber targets explained in the Q&Q session today. First, Muramoto will first explain the financial results followed by Q&A. Mr.

Muramoto, please

Shinichi Muramoto: [Interpreted] Thank you very much for joining us in the KDDI business results meeting out of your very busy Schedules. Let me share with you the first quarter results for the fiscal year ending March 2021. First of all, I'd like to express my heartfelt sympathies to those who have been affected and their families by the torrential rain in July. KDDI group continue to exert all out efforts for the reconstruction of the affected areas. First, on entering the era of new normal, let me explain about our approach towards the era with COVID-19 and beyond.

Please look at the left with the spread of COVID-19 a new normal living style is promoted, digitalization of real events and expansion of interactive ecommerce, the workplace diversification, higher needs for remote monitoring technology and other major changes unlikely in the business environment surrounding our company. The right says, but in order to simultaneously achieve the prevention of the spread of infection and the sustainable economic activities, it's indispensable to build a resilient social infrastructure. Towards the era of new normal, we are utilizing 5G, IoT and AI to further promote the digital transformation. To enhance the resilience of companies, the high level of autonomy and growth of employees and on organization is indispensable. We have been advocating Human Resources first in the management based on which we communicated internally that we'd like our employees to be highly self-driven and continuing to grow.

Now we have made the declaration of new work styles realizing work style stative results not tied to any particular times and places. To support this we will promote a personnel system reform on the internal digital transformation as well. In the area of new normal, we are accelerating the reform to be a human resources first company and moving towards a management base that can adapt to drastically changing environments. Under the state of emergency declaration, about 90% of employees utilized to teleworking. Analysis has been made on to teleworking effectiveness and issues by an employee survey.

Going forward we intend to make a new hybrid work style enrooted using teleworking to further enhance the operation efficiency. Specifically, based on the declaration of new work styles, to further improve its effectiveness work styles and roles have been categorized into four model cases. As a company we do and we'll support each employee in finding and realizing the optimum work style solution depending on the model case or the living environment. Look at the left please we're introducing the KDDI Version, jobs style under the new personnel system. By clarifying the job boundaries and evaluation and reward based on performance, ambition and capabilities, we make the most of the job style and provide diverse growth opportunities and KDDI Group's business fields and support self-driven career development.

The right shows In-House DX. To realize the hybrid work style of teleworking and commuting to office, we are upgrading the office and IT environment. We are accelerating organizational permeation and environmental upgrades for the new work style. In May, we announced the basic policy towards COVID-19 based on which various measures have been taken. Through our businesses we continue to contribute to the stability of society and living.

Now I'd like to introduce you to some of our efforts from the next page. The left shows startup support by KDDI MUGENLABO. MUGENLABO Support Program 2020 has been started where 46 partner companies offer each asset. Going forward, we'll be using startup companies' technology among others to prevent the spread of the infection. Going to the right, by collaborating with CAMPFIRE and in the city by the KDDI Open Innovation Fund, we supported waiving fees with Crowd funding for those businesses experiencing major difficulties in management.

We're encouraging solutions to social issues by supporting startups and operators. Next concerns our undertaking at AEON. We are supporting young children and students who cannot attend classes due to school shut down for the prevention of the spread of infection. We provided English conversation lessons for free to 10,000 high school students. For elementary school pupils whose English language learning is changing due to new learning guidelines, we are distributing English conversation video content free of charge.

We're supporting DX of education environments. Next, in entertainment and sports, we are exploring means to live with COVID-19. The left Sound's VR, Time's au 5G shows an interactive audio and video technology that allows you to freely focus on what you want to see and listen to in a 360-degree video. We provide a new platform that connects artists to fans, the right shows supporting TEAM au comprising top notch climbers in the world. Tokyo Olympics are delayed for affecting athletes practice environments.

We are building a CLIMBING WALL using the cutting-edge technology of AI and IoT to continue to support athletes. Let me share with you the consolidated results for the first quarter of the fiscal year 2021 ending in March. Highlights of the consolidated results for the first quarter; the consolidated operating revenue was JPY1.2427 trillion. The full year progress was 23.7%. In the middle, the operating income was JPY290.7 billion.

The full year progress was 28.2%. On the bottom, the profit for the period attributable to owners for the parent was JPY182.3 billion. The full year progress was 28.5%. We are carefully analyzing the impact on operating results from the second quarter onwards and maintaining the full year forecast unchanged. Next, let me focus on the factors for change of the operating income.

From the left life design domain and business services segment, which are growth fields totaled 20.6 billion increase in the income with steady progress. On the other hand, due to COVID-19 the sales volume of mobile handsets decreased significantly which led to a sales cost reduction, resulting in an increase of the operating income by JPY24.1 billion. Further, a decrease in the gross margin by mobile handset sales and others contributed to a JPY9.8 billion decline in the income. The first quarter operating income saw the increase partly because of the poor results in the first quarter last year. Handset sales decreased to 450,000 units year-on-year.

Migration from 4g to 5g is not on track compared with our plan. On the increase of the operating income, we are not pleased, we're feeling rather anxious. We intend to continue to work on the early deployment of 5G. This slide summarizes the performance impact of COVID-19. In the first quarter we enjoyed the temporary increase in income due to a decrease in cost of mobile handset sales in personal services segment and an increase in demand of teleworking in business services segment.

From second quarter onward, we are thoroughly examining the impact on our performance, promoting businesses and using costs in growth areas to achieve the initial plan. Next is business strategy. As we explained in our full year results briefing in May, in order to maximize Group ID, times engagement, times total ARPU, we place engagement at the core, prioritize the trusting relationship with our customers and promote business strategies across the entire group. Let me explain them from the next page. First is double brand strategy, to your left, to cater to our customers who wants to use large data volume comfortably, we started offering Data MAX 5G All STAR pack from June 25.

On the other hand, to your right, for the customers preferring middle volume UQ Mobile started offering SUMAHO Plan R on June 1, au and UQ Mobile together will provide services chosen by a wide range of customers. Next is Group ID status. The number of Group IDs is led by UQ Mobile and is growing steadily to 27.2 million as of the end of June. Right side, UQ Mobile number of net increase grew by 1.5 times year-on-year in first quarter and by 2.4 times year-on-year in the single month of June when the SUMAHO Plan R sorted. It has gained strong popularity.

Next is au Pay that is positioned in the centre of higher engagement left side and au Pay a QR code payment that started in April last year is growing steadily in number of payments as a result of the campaign in February and March this year, many non-au customers used it. The awareness and the number of payments increased significantly. The growth is continuing even after the campaign. Right side, we started Ponta Point, the long-awaited common point from May 21. Lawson launched a campaign to increase points return and we aim to enhance the engagement by encouraging the youth further.

Next growth driver of au Total ARPA, left side, first quarter au Total ARPA was JPY7790 up 4.6% year-on-year. The growth of au Denki ARPA was especially prominent. With the steady increase of the number of au Denki subscribers and the extended time at home due to the spread of COVID-19, au Denki ARPA was JPY640 in the first quarter, up 31% year-on-year. Right side, number of au Smart Pass Premium members is growing favorably and exceeded the 10 million mark. The number of Life Design service users is increasing steadily.

Next is Business Services segment, regarding the increasing demand for telework. Left side, the number of KDDI service applications increased cloud applications by five times, remote access by four times and video conference by eight times. Right side, KDDI Matomete Office that offers one stop solution to companies also increased in April. During the state of emergency declaration the number of net contracts for smartphones increased by 1.6 times, tablets by 1.8 times and mobile routers by 1.9 times. Measures to prevent the spread of infection triggered the expansion of the contactless methods and digitalization including teleworking from big companies to small and medium sized companies.

Next is DX that supports a new way of working including teleworking. Left side, we started offering a new highly secure security system based on zero trust concept. We will propose optimal solutions for our customers work styles and system configurations. Right side, our corporate division will be relocated to a new office in Toranomon. The number of seats will be 40% less than the number of staff.

Web conference tools will be enhanced and internal, external networks and multiple cloud services will be utilized. We will practice DX for way of working by ourselves. Next is 5G for corporate customers. Left side, SORACOM will launch MVNO business adapted to au 5G network by the end of this fiscal year. Furthermore, in order to create use cases leveraging 5G together, we began pilot test, demonstration tests of ultra-low latency application environment using AWS wavelength from July 2020.

Right side shows office solution offerings utilizing 5G to resolve issues at office buildings and support work style reforms. We will promote the DX leveraging the characteristics of 5G through partnership with Mitsui Fudosan. Next is au 5G infrastructure layer. We plan to deploy approximately 10,000 base stations by the end of March 2021 and approximately 50,000 by the end of March 2022. We will accelerate an early 5G nationwide expansion and promote 5G consumer use and IoT market penetration in each industry.

My last slide is a summary for today. Based on our basic policy towards COVID-19, we aim to expand our role in the society across a wide range of fields surrounding telecommunications. As we enter the era of new normal, we will accelerate DX to help build resilient social infrastructure, and move toward a management base that can adapt to drastically changing environments by promoting new work style. Regarding our financial results and business strategies, in the first quarter, the impact of COVID-19 has become apparent, we will carefully analyze the impact on our operating results from second quarter onward and aim to achieve the initial plan. The growth fields, namely Life Design domain and business services segments are both progressing steadily.

We will keep promoting initiatives for social stability and solid management. Thank you very much for your attention. A - Unidentified

Company Representative: [Interpreted] Now, we would like to entertain your questions. We would like to ask as many of you as possible to raise questions so we would like to limit the questions to two questions per person. If you have two questions, please wait for the answer to your first question and then ask your second question.

We would like to take questions from those of you who have been registered in advance and connected as you have already been informed of. Let me explain about how to ask a question. [Operator Instructions] The first question, Nomura Securities, Mr. Masuno. After the guidance please state your question.

The floor is yours.

Daisaku Masuno: [Interpreted] Masuno from Nomura Securities, can you hear me?
Unidentified

Company Representative: [Interpreted] Yes, we can hear you sir.

Daisaku Masuno: [Interpreted] I have two questions, first question, from June the operation has resumed, from July to September sale – regarding sales promotion as was usual or I think you are planning to boost it. But there is some affected by the current state of infection, but you UQ Mobile new prices I understand that you have been increasing – enjoying the increase. I think you can sell even more now about the au, 4G and non-limit plan.

The shift to do high volume I think is very important, but the UQ growth and au a promotion of the high-volume plan. In the second quarter, July to September, what is your outlook for the second quarter?
Unidentified

Company Representative: [Interpreted] Thank you for your question. From July to September, sales promotion, how are we planning to grow UQ? And on the au side the shift to high volume plan, promotion of that. I think those are the questions. I'd like to ask Takashi Shoji to respond to your question.

Takashi Shoji: [Interpreted] This is Shoji speaking. Allow me to address your question. First of all, as we explained to you the with the COVID-19 effect in the month of April and May, sales volume decreased significantly, but from June there has been some recovery and as for the month of July, it's actually the higher than the internal plan. So using this as a kind of a spring for second quarter and always we need to keep making efforts. That's – given that's a kind of a prerequisite.

Now, against this backdrop about 5G, we already announced in March because of the COVID-19 start was affected as Muramoto said in his presentation. We have a huge sense of crisis here about au 5G for the sake of the entire job and we have to make sure that 5G will be penetrated in the society. We want to boost 5G. About unlimited plan, about this Data MAX centering on 5G, for the time being, it'd be Android. But centering on a Data MAX will be aggressive in selling this.

As for the UQ, as you pointed out Plan R has been doing very well. Plan R, we want to again promote Plan R. With the double brand strategy – formally it starts on the month of October, but with double brand strategy which content can be used with no limits, even with a little – slightly high price for such customers au 5G. But for those customers who are really conscious about the price, then we would like to promote UQ. We would like to do a good job in promoting both of them in terms of sales promotion.

There are no changes to those strategies.

Daisaku Masuno: [Interpreted] Just to clarify, higher than July, I think you were mentioning the sales of the handsets the net addition of contract that I think that actually contributes to the results for the UQ, are you really focusing on net addition? As for the 4G, I think there is a data no limit plan what about the promotion of those.

Takashi Shoji: [Interpreted] So much for my first question au and UQ, au and VNO, of course they we would like to acquire net addition, no mistakes about that. Data MAX as you pointed out with 4G, people can use it even with 4G depending on the customers whose Data MAX is with 4G. There are many such customers.

So we again we would like to promote sales. Android sales ratio, totally we need to enhance the 5G more. So there was a rather slow start in April. Then in May it was better in, July – June and July, the ratio of Android 5G is increasing and we would like to do more of this. Thank you.

Daisaku Masuno: [Interpreted] Regarding the second question about 5G March 2020 fiscal year, the 50,000 stations I think that you will have better results, but make with the low latency you can do this for per plans and industry they would like people to use this. But again this can be used by consumers. But in terms of the speed for consumers how fast it will be, we don't know for sure. For consumers, how are you planning to utilize them? Would you like to elaborate on that please?
Unidentified

Company Representative: [Interpreted] It's more or less related to area of Yoshimura who is overseeing technology. Yoshimura.

Kazuyuki Yoshimura: [Interpreted] Allow me to answer your question. As you already heard 4G-LTE network, making it more sophisticated for the compared with the frequencies dedicate for 5G in terms of the speed. It's a slightly lower in terms of speed, but as you're really heard in the presentation and also Shoji mentioned, with regard to 5G network, we would like to deploy them early and we would like to deploy them in the area not just in sales. That's important. So prices, measures, handsets, we would like to have a good lineup.

We also have like a good line of services. So for consumers – 5G smartphone consumers, we would like to offer them broadly. We believe that's important and making it NR and we would like to doing that as well, making it NR. About 5G handsets within this fiscal year, more than 2 million units, so that's our plan for consumers. So we would like to deploy the area and we also would like to focus on sales.

Did we answer your question? Thank you. Unidentified

Company Representative: [Interpreted] So, next question. Daiwa Securities, Mr. Ando. Please ask the question after the voice guidance, please.

Yoshio Ando: [Interpreted] This is Ando from Daiwa Securities. Can you hear me?
Unidentified

Company Representative: [Interpreted] Yes.

Yoshio Ando: I have two questions too. Page 12 presentation material, so this is the higher performance in the area, the business area. First question Life Design domain will be up to 12 billion in profits.

From what you said previously, the area that is impacted by COVID like the ones that have to shut down we were seeing how the impact will turn out. But if you have a breakdown of the higher income, what does it look like? What led to this higher profit? What are the components? And in terms of revenue for your higher than first quarter last year, but lower than second, third and fourth quarter. So how can I interpret this? So if you could break this down into the factors, components, please. Thank you. Unidentified

Company Representative: [Interpreted] So let me answer that question.

Life Design as you correctly mentioned why increase worth12 billion? The biggest driver was energy business. Energy business was the biggest driver, accounted for the largest portion. And in the first quarter of this year, the stay at home led to higher electricity consumption at home. And in terms of procurement, the procurement price was lower than our plan. So from those two aspects, we had higher profit.

This contributed to the higher profit and the next big component was the Smart Pass we paid members, Smart Pass, we were able to increase profit there. Now, revenue, we have not looked into this detailed session, but from the first quarter on the accounting term and there is sales, accounting treatment changed. Until then, things that were posted as sales is now knitted and it's now posted on the profit side. [indiscernible] could you explain?
Unidentified

Company Representative: [Interpreted] So what was recognized in sales previously is now minus of cost. And so the revenue goes down profit remains unchanged, but revenue goes down.

Yoshio Ando: [Interpreted] Yes, thank you. And second is also the growth area. So Business Services segment is 8.6 billion, so looking at this business services segment, this quarters highlight is teleworking. I think that is the big factor. So this increase of 8.6 billion was teleworking cost big and what kind of form did that contributes to higher your profit? And this teleworking is sustainable, it's a promising business that can be expanded going forward.

And what kind of route will it go through to become a promising business, please. Unidentified

Company Representative: [Interpreted] So Mori will answer that question.

Keiichi Mori: [Interpreted] This business segment, increase in profit. The point that you mentioned is the impact of teleworking due to COVID-19. Of course that is included here.

However, our original growth area, the IoT that we've had pre-COVID and the growth that I've realized through various measures is bigger. It's a bigger contributor. And teleworking portion was added on to that. So the contribution of teleworking the biggest part is mobile, the handsets, mobile routers, number of ID increased – exceeded our plan. When the state of emergency was declared the impact was largest and then the upside became smaller.

But overall, this number of ID pushed up the numbers and the data usage and cloud type application usage are increasing. So if you multiply all these factors, we see this increase. And in mobile, mobile handset and PC – PCs are taken outside to join – go into the company's network, the remote access is increasing. So that's also a positive factor. And another question was, how we will trend going forward? The company network until now was connecting – connection between office and office or the network in the offices, those were the mainstream.

But now as I mentioned earlier, there are more usage going outside and use from outside. So we will focus on that to grow this business in a sustainable fashion. That's all. Thank you.

Yoshio Ando: [Interpreted] Just one point of clarification, so other than teleworkings, you said that the IoT and others had a bigger contribution on the higher profit this fiscal year or this first quarter, what were they?

Keiichi Mori: [Interpreted] One is mobile handset net addition and cloud applications, we are extending the sales of cloud applications to be used on that.

So the associated sales is also increasing. And IoT number of lines is growing as a net addition, so that's another contributor. And other than that, in Japan, our domestic group companies are helping the shift to IT – the SMEs. This is now progressing and this telework is added on to that. And we also do call centre business.

So customers inquiry to the call centers or sales matters are handled at call centers, so that's another positive factor.

Yoshio Ando: [Interpreted] Thank you very much. Unidentified

Company Representative: [Interpreted] Next question please. UBS Securities, Takahashi, after the guidance please state your question. The floor is yours.

Kei Takahashi: [Interpreted] UBS, my name is Takahashi. Two questions, firstly, first of all about the effects of COVID-19 versus communications revenues. What were the actual impact on the service? For instance, the increase on the voice and by the data they decreased, could you give us some breakdown about the communication service?
Unidentified

Company Representative: [Interpreted] Right, you actually answered your question sir. Regarding the effect on ARPU as you rightly said, sound – voice ARPU to increased data – the Wi-Fi offloading decreased, that's about the mobile communications is almost the plus minus zero about in terms of the effect. As for the rest, as was already mentioned, sales of handsets decreased significantly in terms of the sales volume.

And about the business, the teleworking increased. On the negative factors overseas, economic activities decreased and because of that there are some negative effects. About the voice and the data trend from April to June on a monthly basis, what about the trends on a monthly basis? I would like to ask a Shoji to respond.

Takashi Shoji: [Interpreted] This is Shoji speaking. As you rightly said, the state of emergency was declared and movement of people.

I think there was close link to the movement of people. You could understand it in this way. As people stay at home then the voice or the upside and the data traffic have the downside as you already heard. In May, when there was a lifting of the emergency state declaration gradually its coming back, the voice decreased data is recovering. That's the situation.

And what was symbolic is this – the fixed line network, the telephone or internet, fixed line networks and it's the same for both of the individuals and corporates. For the fixed line, our acquisition was pretty good because the people use them more. Did I answer your question, sir? Thank you.

Kei Takahashi: [Interpreted] My second question, Page 13 please, second quarter and onwards on the growth areas you are planning to spend more cost. Here promotion of the cashless settlement of payments and making education online and promotion of the DX, there are several items listed here.

In terms of total amount, how much are you planning to spend and what about the breakdown of the cost that you will be spending on these? What's the allocation that you have in your mind? That's my question. Unidentified

Company Representative: [Interpreted] About the detailed numbers, I'm afraid I may not be able to share those with you, but in terms of policy and approach, Shoji-san.

Takashi Shoji: [Interpreted] On this consumers personal handsets – first about those handsets, in a way it's legacy, but on the other hand, it's a growth. 5G, as I said at the outset, in the first quarter, our starts was rather spoiled. So we need to recover this.

So on this the necessary promotional cost – promotion cost is something we have in our mind we would like to be aggressive here. But the encompassing 3G users because of the COVID-19 including our internal plan, we were not able to clear the internal plan. So again we need to do better than this from July about this 3G encompassing. Yes, we have been strengthening our promotional activities. So we need to spend cost on these as well.

About the cashless businesses again, as you already know, minor points really started – the minor points. Yes, we do feel that au payments is working, but with au payment on that we would like to again spend unnecessary cost on this personal in the sales area. This is what I wanted to share with you. About the COVID-19 educational measures and others, again, I would like to pass the microphone to Muramoto-san.

Shinichi Muramoto: [Interpreted] In the presentation material we mentioned this page 13 as you can see –no, not on page 13, but at contribution to the society.

Obviously, we need to do a mission. So as I already said, with AEON, we have some programs and other than that those – the society is suffering from COVID-19, we would like to use our capacity to support the society. I hope I answered your question.

Kei Takahashi: Thanks for clarification. But 5G in terms of utilities law that's JPY20,000 per unit other than such discount, are you planning to spend costs on those other than that?
Unidentified

Company Representative: About the business law, telecommunications business law dictates certain commission and others of course we have to comply with what is stated by the law, but in the months of April and May, I'm so sorry to say this, but about shops, okay.

Your shops aren't GNS. They had to make sure that they would not attract the customers. So promotional activities to attract customers was not possible at all, sending direct mail or doing SMS promotion activities, those were not really done properly. That's the situation, so including those we need to spend the cost that is necessary July and onwards. About the Android we're using [indiscernible] program in a nutshell this JPY30,000 yen ties to terminals, handsets will become available.

So we would like to again promote sales and we would like to see the increase of the sales of handsets. Thank you. Unidentified

Company Representative: [Interpreted] Next question, please. Merrill Lynch Securities, Mr. Kinoshita, please.

Please ask your question after the voice guidance.

Yoshiyuki Kinoshita: [Interpreted] This is Kinoshita from Merrill Lynch. Thank you very much. I have two questions. First, 5G, you SoftBank until the end of August – if you sign up by the end of August, the price will be the same as 4G, you can enjoy 5G plan at the price of 4G.

So I think that campaign continues until the end of August. So you said you are off to a slow start in 5G, but in order to raise the demand do you plan on postponing this campaign or extending the campaign? Extending the campaign, but under the current circumstances maybe you may feel hesitant to gain or get more, but what is your idea on the campaign? That's my first question. Unidentified

Company Representative: [Interpreted] So Shoji will respond to that.

Takashi Shoji: [Interpreted] So thank you for the question. This campaign – yes, you're right.

If you apply until the – by the end of August, you can enjoy the – 3,460 is the lowest price or you can enjoy the 4G price for two years? So what after this? Maybe many things may happen, iPhone that is launched in fall may be one factor. We don't know what will happen, so we are trying to think of various factors. So as of today, I'm sorry, I cannot clearly say our plan.

Yoshiyuki Kinoshita: [Interpreted] Understood. So the factors are the penetration or the network coverage and the handset, iPhone.

So, those will be the important factors?

Takashi Shoji: [Interpreted] Yes, I would say so. But regarding network as Yoshimura-san mentioned, at the beginning of this fiscal year, we said that – we are building the network as we announced. And so it's not that this schedule is delayed. We are doing this as scheduled, but as you correctly mentioned, between April and June 5G lagged behind. And I'm sure – I'm confident that we can recover, but – and we will think of what to do with the plan on the comprehensive manner.

But as of today, we have nothing to clearly announce. Thank you very much.

Yoshiyuki Kinoshita: [Interpreted] Next is about your idea going forward in performance. You said you will scrutinize and aim to achieve the target that you had at the beginning of the year. So 5 billion increase in operating profit in the first half or the first half, you already exceeded that and will your profit decline somewhere because you will take off – you will use cost.

So what I would like to know is in the business services segment going forward this higher profit exceeding the plan, can we expect that you will exceed the plan or will you use the excess to invest in the medium to long-term growth in the personal segment? Is that your thinking?

Takashi Shoji: [Interpreted] It's a difficult question to answer, but two and a half months ago we announced the forecast for the fiscal year and it's been two and a half months. So it is still too early to say something in a determinant factor. From the first quarter result, yes, it seems like we have some leeway, headroom, if you will. Last year was very bad and so now the profit is the same level as two years ago in the first quarter, so – and we could not use the cost we wanted to. So in each segment, we will start using cost as we planned at the beginning of the fiscal year.

So there are gaps from our plan and this allocation will be studied from the second quarter onward. So I would like to refrain from saying anything clear today.

Yoshiyuki Kinoshita: [Interpreted] Understood. So it's not just personal segments, but also in Business Services segment you may use cost aggressively. That's a possibility.

Takashi Shoji: Yes, not just short term. We are aiming for mid to long-term growth. So we will take measures accordingly. So please understand as such. Thank you.

Unidentified

Company Representative: [Interpreted] We don't have much time left. So we would like – next will be the last question. Next question please. SMBC Nikko Securities, Mr. Kikuchi.

After the guidance please state your question. The floor is yours, sir.

Satoru Kikuchi: [Interpreted] Kikuchi speaking, I have two questions. First question, about the double brand strategy, how you're planning to deploy this double brand strategy. The similar strategy has been taken by SoftBank.

So using SoftBank as an example, how are you planning to actually deploy this? This is my question. What's your – what are your focal points now about SoftBank, number of cases past two years or so, they have been focusing on this as a background, the monthly discount that actually decreased, so the communication revenue will be okay even if the number of contract decreases. But again, there are no hitting the limitations. So that's the real issue. The monthly discount effect is disappearing in your case you are focusing on double brand strategy.

Are you really focused on the number of contracts about communication revenues? Would you like to keep them or both? As for the communication revenues you're not really focusing on this, are you planning to grow Total ARPA? So are you going to focus on the number of subscribers’ contracts? I think many people in the industry have really paying a lot of attention they might be really feel threatened by what you might do. But what are your focal points? What's your focus? That's my question, my first question. Unidentified

Company Representative: [Interpreted] Shoji-san?

Takashi Shoji: [Interpreted] This is Shoji speaking. About the double brand strategy, in the previous question. I touched upon this.

Speaking of customers, there's the polarization about the customers who want to use various services or want to pursue a higher quality, want to have the higher volume of data then the Data MAX, the 5G Data MAX is something that we can – they can use. And in terms of prices, there are some who want to the cheaper prices, but still want to have good quality such customers could use UQ. This is the basic stance. About the SoftBank, this is about the different company, so I don't really know. But the number – I think you mentioned the IDs they were – IT is important or ARPU is important.

Naturally, both are important, both are important, but the IDs how are we going to go about the IDs? At the moment, the market has such a low fluidity. So against this new fluid market if we wanted to increase it even by a little and just stem the flow of outflow with the double brand strategy, prepare a lineup of plans so that customers will remain in the KDDI group, that's most important. From au to UQ the type R because it's relatively cheaper, but as the data usage becomes higher then coming back to au Data MAX, that's the likely scenario. With the double brand strategy this is going to be just an upgrade of the handset. Very easy procedure, very easy clerical procedure and quick little impact on us as well.

So we've indicated your group we would like to keep the number of IDs and about the communication ARPA how best we can keep them, keep it appropriately. And also, we've been doing this business for such customers. Total ARPA is what I'm talking about. Life Design, goods and services, we would like to offer them, we would like to offer them various customer experiences so that they can find our services convenient. I hope I answered your question.

Thank you.

Satoru Kikuchi: [Interpreted] So this is how I understood, looking at the past years of your strategy, the number of IDs that's very important with 5G going forward. You have au Denki electricity service. So in the long-term, you need to ensure the revenue, so in keeping the number of IDs in the next one or two years that will be very important for you. That's how I understood your comment.

Sorry, I –excuse me to maintain a number of IDs, anything will go, anything will go that's not what I mentioned. That's not what I mentioned. We need to strike a good balance because with au – with regard to ARPA of au we would like to have the net addition. We would like to keep it that's what we feel. But having said that because of what customer wants, they may go to UQ, but they may come back to au in the future.

So here 5G Data MAX included, we need to combine various strategies. So for the customers, the best thing, we really want to offer what's best for customers. You mentioned this, not just in communications but electricity. If the customer used au Denki then the cost, customers' costs will go down by one to 5%. In the total aspects they can use au services and products.

Thank you for your answer. Second, the commission paid to agents or agencies. I think there has been a decrease of JPY7 billion or so. On the carrier's selection of agents or agencies, I see some differences among the carries. About the fee paid to agencies, are you planning to review them in the second quarter about au Shop, including your policies towards au Shop, would you like to explain about them, please?
Unidentified

Company Representative: [Interpreted] Again, allow me to address your second question.

I couldn't really understand what you asked about the agents or about the policies. This is about other companies. I don't really know what are the differences? I couldn't really understand what you asked.

Satoru Kikuchi: [Interpreted] The management support for the agent or agencies or fixed costs for instance. But your support actually is lower compared with what other state or do you think the other companies did too much? Because I don't really know what other companies are doing, now that everything has been disclosed.

Unidentified

Company Representative: [Interpreted] No, we are not doing anything extraordinary that's okay. First, if you're talking about to the support under the COVID-19 I can't disclose detailed numbers as necessary because agencies suffered so much it would be, we are extending necessary support. And second quarter onwards to agents and agencies, about policies on fees we do not have a plan to change them drastically from the second quarter and I'm sorry about the other companies. I don't really know. That's all.

Thank you
Unidentified

Company Representative: [Interpreted] Now time has come so we would like to end KDDI financial results briefing for the first quarter of the fiscal year ending March 2021. Thank you very much again for your attendance.