Performance Analysis by Segment

(Years ended March 31)

Personal Services Segment

Overview of Operations

In the fiscal year ended March 31, 2016, operating revenue increased 5.2% year on year to ¥3,503.3 billion. This increase was underpinned by higher au ARPA revenues in line with an increase in au ARPA due to the promotion of multi-device services. Other contributing factors included an increase in revenues from terminal sales.

Meanwhile, operating income rose 20.1% year on year to ¥656.6 billion mainly due to the higher revenue, which outweighed an increase in sales commissions accompanying intensified competition for customers centered on mobile number portability (MNP), higher handset procurement costs in line with an increase in the sales volume of terminals, and an increase in depreciation and amortization.

au ARPA / Mobile Devices per Person

au ARPA rose ¥160 year on year, to ¥5,690, partly due to an increase in the number of devices per customer, owing to the promotion of multi-device services through sales of smartphones bundled with tablets, mobile routers and other devices. Also, the smartphone penetration rate increased 3.9 percentage points to 58.2% reflecting a shift from feature phones to smartphones.

Number of "au Smart Value" Subscriptions

"au Smart Value" has continued to expand its customer base through mutual cross-selling of mobile and fixed-line services.

Looking at the number of au Smart Value subscriptions, the number of mobile subscriptions increased 2.22 million to 11.55 million, while the number of subscriptions among fixed-lined broadband households rose 1.13 million to 5.72 million. These increases partly reflected an extension of the applicable conditions for "au Smart Value" along with an increase in allied partners.

Value Services Segment

Overview of Operations

In the fiscal year ended March 31, 2016, operating revenue rose 14.3% year on year to ¥271.8 billion. This was mainly owing to an increase in value-added ARPA revenues in line with an increase in settlement commissions centered on "au WALLET," in addition to an increase in the number of members online services such as "au Smart Pass."

Meanwhile, operating income increased 40.1% to ¥73.8 billion. The main contributing factor was the increase in operating revenue, which exceeded a higher cost of goods incurred in connection with the launch of the "au WALLET Market" service and the conversion of Jupiter Shop Channel Co., Ltd. into a new consolidated subsidiary.

Value-Added ARPA

In the fiscal year ended March 31, 2016, value-added ARPA grew ¥20 year on year to ¥440. The main factors behind this increase were a steady increase in the number of "au Smart Pass" members, as well as higher settlement commissions from "au Simple Payment" and "au WALLET," and increased revenues from sales of products in the "au WALLET Market."

Number of "au Smart Pass" Members

The number of "au Smart Pass" members rose 12.3% from the previous fiscal year-end to 14.47 million members. This was mainly due to proactive initiatives in line with customer needs, such as "au Smart Pass Day," which commenced in March 2015, and repair services for iPhone and iPad.

Business Services Segment

Overview of Operations

In the fiscal year ended March 31, 2016, operating revenue in this segment decreased 4.1% year on year to ¥632.0 billion. Solution sales such as cloud-related business and IT outsourcing rose, and sales also grew for services from consolidated subsidiary "KDDI MATOMETE OFFICE CORPORATION" targeting small and medium-sized companies. However, the introduction of flat-rate voice communications caused mobile communications revenues to decrease.

Meanwhile, sales commissions, access charges and other expenses declined, despite an increase in handset procurement costs. As a result, operating income declined 19.0% year on year to ¥61.4 billion.

Global Services Segment

Overview of Operations

In the fiscal year ended March 31, 2016, operating revenue was up 5.5% year on year, to ¥294.4 billion. The main contributing factor was higher revenue from the telecommunications business in Myanmar and our "TELEHOUSE" brand of data centers.

Operating income was ¥32.1 billion, a change of ¥47.4 billion from an operating loss in the previous fiscal year. This partly reflected the absence of a loss on business of overseas subsidiaries incurred in the fiscal year ended March 31, 2015.

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