KDDI's Value Creation Story

A year ago KDDI created a medium-term management plan to help develop a truly connected society, which is a feature of the KDDI Group Mission Statement, and to achieve sustainable growth while swiftly responding to changes in the business environment.
In this section, we have highlighted four of the seven areas we are focusing on in the business strategy.
As these four areas are of particular interest to investors, we explain them below in more detail.

Business Strategy

  • Creating innovation toward the 5G era
  • The integration of telecommunications and life design
  • Further expansion of global business
  • Utilizing big data
  • Expanding the fi nance business
  • Growth as a Group
  • Sustainability

Customer-Oriented Value Provision

Aiming to Maximize Group IDs

"au PAY" Targets

Leading the Way on Going Cashless


KDDI Accelerate 5.0

Accelerating Society 5.0 with 5G to create an even brighter society for the future

The Sustainability Expected of a Telecommunications Company

Customer-Oriented Value Provision

Aiming to Maximize Group IDs

Aiming to Provide Customer-Oriented Value

We are promoting strategies centered on engagement with the aim of maximizing Group IDs, engagement, and total ARPU, which comprise the axis of KDDI's sustainable growth.
Engagement refers to trust-based relationships with customers.
If we enhance engagement, customers will more frequently use our services and use them for longer. We can expect that, as a result, the churn rate will improve and Group IDs will further expand. In addition, we can work to maximize total ARPU in tandem with the expansion of both telecommunications ARPU and value added ARPU by providing new experience value through further promoting the "integration of telecommunications and life design" as a basis for these robust trust-based relationships.
With the aim of enhancing engagement, KDDI will continue operating its businesses with the top priority of building trust-based relationships with customers by improving all points of contact with customers, such as a brilliant network, easy-to-use pricing plans, exciting content, and attractive devices.

Maximizing Group IDs and Enhancing Engagement

To build a robust ID base across the entire Group, KDDI promotes three specific initiatives to strengthen its momentum.
First, [01] we stem outflow from the Group by leveraging the KDDI Group's brands, including MVNO, for customers wanting to move from "au" to a budget smartphone. Then, [02] we maximize Group IDs by more actively making new acquisitions from the highly liquid MVNO market while enhancing the competitiveness of the KDDI Group brands, including MVNO.
Furthermore, [03] for customers who want to use large capacity telecommunications without stress, we aim to ensure the high quality telecommunications and experience value of "au," establish a Group-wide circulatory structure by upselling to au, and further strengthening our momentum.
Furthermore, to accelerate these Group strategies, KDDI will integrate "UQ mobile" in October 2020. "UQ mobile" is already used by more than 2 million customers because it provides high-quality yet low-cost services. By creating a double brand with "UQ mobile," we will first 1) reinforce our sales organization by reorganizing and integrating the nationwide sales organizations and sales channels for "au" and "UQ mobile." In addition, we will 2) leverage the unique characteristics of both brands to provide easy-to-understand pricing plans that meet customer needs and thereby offer new value. And, finally, we will 3)
streamline overlapping tasks and operations with the aim of strengthening our competitiveness through the consolidation of the Group's management resources.

Aiming to Further Expand Our Growth Area

Deepening engagement with customers while expanding our points of contact will also help further expand our Life Design Domain, which is a growth fi elds for KDDI.
First, regarding customers who use the KDDI Group's telecommunications services, we aim to maximize total ARPU mainly by promoting rich content with the shift to 5G while expanding Group IDs, which form our foundation.
In addition, going forward, with a foothold in our alliance with Ponta, which is an open platform, we will continue reinforcing our approach toward new points of contact with customers.
Specifically, we want customers to feel the merit of using KDDI's value added services by using payments and points with the aim of enhancing engagement through "au PAY" and other services, leading to further expansion in growth fields.

"au PAY" Targets

Leading the Way on Going Cashless

KDDI's Initiatives in the Settlement and Financial Fields

Smartphones have become an essential tool in people's lives now. In today's "smartphone-centric" world, people can conduct and manage settlement and financial services with their smartphone.
KDDI has spearheaded initiatives in the settlement and finance fi elds ahead of industry peers. Examples include starting Jibun Bank for internet banking specialized for mobile phones in 2008 and developing "au WALLET" as a new settlement function that earns points and can be used at brick-and-mortar stores in addition to online stores thanks to the electronic money card connected with "au ID" in 2014.
Then in 2019, we launched the Smart Money Concept to comprehensively provide "smartphone-centric" settlement and financial experiences to customers with the "au PAY" app serving as an entry point to various services, namely deposits, settlements, investments, loans, and insurance. In addition, to realize this concept, we founded au Financial Holdings.

KDDI's "au PAY" Smartphone Payments

In Japan, the government is promoting cashless payments with a 2025 goal of having 40% of settlements being cashless. In line with this, the market for smartphone payments is significantly expanding due in part to ad campaigns rolled out by telecommunication companies.
In April 2019, we started smartphone payments using barcodes and QR codes under the name "au PAY." As of March 31, 2020, membership rose to 23.5 million with 1.9 million locations where customers can use points and smartphone payments.
Our number of members, payment users, participating retailers, and transaction volume are steadily expanding.

Helping Enhance "au" Engagement

One reason KDDI focuses on "au PAY" is to help enhance customer engagement.
Analyzing the last few years, we see a correlation: the more contact we have with customers, the higher NPS*1 rises. In addition, we discovered that of the numerous life design services we have, "au PAY," which is used daily by customers, had a particularly large effect.
At au shops, contact with customers is limited to the handset purchase cycle, which is usually once every two or three years.
But by expanding services, including the "au PAY" app, "au PAY" card, and "au PAY" market (online shopping mall), we are able to have daily contact with customers.
Furthermore, we aim to build robust, long-term engagement with customers by using tie-up services with long-term contracts, such as "au Denki" and financial services, becoming an indispensable part of customers' lives.

  • *1
    Net Promoter Score (customer recommendation score)

Helping Expand the "au Economic Zone"

Ponta Points (formerly "au WALLET" Points) are given to customers when they pay "au" telecommunications fees and use "au" services, such as "au PAY" or "au PAY" card.
KDDI is building an ecosystem where points circulate within the "au Economic Zone" by setting up the "au PAY" market as a place to use saved up points.
Going forward, we aim to create a more virtuous cycle for points and maximize the "au Economic Zone" by focusing on "au PAY" to promote the use and charging of "au PAY" card and giving bargains to customers who use saved up points at "au PAY" market.

Two Initiatives to Expand "au PAY" Contact Points

Carrying Out the "Anybody! Can Get ¥1 Billion Per Week! Campaign"

To raise awareness of "au PAY," over a seven-week period from February 2020, we carried out a campaign to award "au WALLET" Points equivalent to a maximum of 20% of settlement amounts. That had a significant effect, greatly helping to enhance the presence of "au PAY," such as by significantly raising awareness and getting many non-"au"customers to sign up.

Creating New Contact Points by Integrating Ponta Points

In May 2020, we integrated "au WALLET" Points into Ponta Points, creating a point member base of over 100 million, one of the largest in Japan.
With this member base as a foundation, we combined both groups' assets, such as KDDI's advanced technologies and around 14,500 Lawson stores,*2 to continue providing new experience value to customers. In addition, with a foothold in the Ponta open platform alliance, we aim to expand contact with non-"au" customers and further expand transaction volume of settlement and loan.

  • *2
    As of May 2020

Synergy with the Financial Business Expecting Future Profit Growth

We will continue connecting "au PAY" to the various settlement and financial services held by the KDDI Group.
For the fiscal year ended March 31, 2020, transaction volume of settlement and loan*4 exceeded ¥6.5 trillion. Going forward, we aim to expand earnings and expand circulation between financial services in part by connecting "au PAY" to the use of securities services from banks and banking services from credit cards.

  • *4
    "au PAY" settlement amount + "au PAY" card settlement amount + "au Carrier Billing" settlement amount + au Jibun Bank settlement amount + loan execution amount

Aiming to Make "au PAY" a Super App

The super app that KDDI aims for is one that will be the most used by customers and serve as a launchpad for their daily lives.
Going forward, we aim to further evolve as a super app by further expanding the function of "au PAY" and connecting it with daily life services, such as hailing taxis and making restaurant reservations.

Summary of Characteristics of KDDI's Settlement and Financial Fields
1. Launch of the Smart Money Concept, centered on "au PAY"
2. Point member base of over 100 million
3. Further earnings expansion with an over ¥6.5 trillion transaction volume of settlement and loan

KDDI Accelerate 5.0

Accelerating Society 5.0 with 5G to create an even brighter society for the future

1. Background

As the effects of the COVID-19 pandemic drag on, the need has grown rapidly for telework, online education, remote healthcare and the like, highlighting the social importance of the ICT infrastructure that maintains economic activity and consumers' peace of mind and safety in Japan. In addition, each industry is expected to create a resilient business model, supporting economic growth in Japan and an even brighter society, bursting with vitality, for the future. Against this social backdrop, we put together KDDI Accelerate 5.0 with the aim of contributing to the era of the new normal by actively working to build networks and platforms and to create business models.

2. Upgrading the environment in three layers

To realize KDDI Accelerate 5.0, we will upgrade the environment in three layers.

1. Network Layer:

The network layer forms the base of a new social foundation.
To engrain 5G in Japanese society and industry, we need to quickly roll out highly reliable networks based on the latest technologies across the country.
KDDI will introduce the technologies of overseas companies to maintain Japan's international competitiveness and will lead efforts to adopt world-class advanced technologies in Japan.
In addition, KDDI will accelerate the nationwide rollout of its 5G network mainly through proactive forward-looking investments and infrastructure sharing in rural areas.

2. Platform Layer:

The platform layer is built on top of the network layer. It creates unprecedented new value by using cyber spaces to analyze data collected from physical spaces and to then provide feedback on forecast results in physical spaces. KDDI will upgrade the open platform of advanced technologies for each industry in Japan through domestic collaboration with Japan's corporate platforms and venture companies while integrating its 5G network and the advanced cloud technologies of global IT companies.

3. Business Layer:

The business layer is positioned on top of resilient networks and open platforms to create new services and solutions. By integrating cyber and physical spaces through open innovation with companies in other industries, we aim to enhance engagement with customers, evolve into a resilient business model. KDDI will accelerate Society 5.0 with the aim of creating economic growth in Japan, as well as an even brighter society for the future.

Technologies in Seven Fields that Unify Physical and Cyber Spaces

To accelerate Society 5.0, technology evolution is required to further accelerate the integration of physical spaces, where real people and things exist, and cyber spaces, which are the world of computers.
Data is collected from physical spaces, analyzed in cyber spaces, and then fed back into physical spaces again.
This cycle is supported by technologies in seven fi elds and close collaboration (orchestration) between those technologies.

Technologies in Seven Fields that Support KDDI Accelerate 5.0

The seven technologies refer to network, security, IoT, platforms, AI, XR, and robotics.
Networks connect physical and cyber spaces, and security ensures the safety of both spaces.
IoT sends information collected from physical spaces to cyber spaces. Information accumulated on platforms in cyber space is analyzed by AI, which then provides guidance on how to utilize it in physical spaces.
XR and robotics enable the use of this information in physical spaces. XR makes use of human senses, and robotics physically animates drones and robots.
Repeating these cycles will increasingly optimize social and economic activities.
The proliferation of 5G service will drive the integration of physical and cyber spaces.
And when we enter the beyond 5G era, the feedback from cyber spaces to physical spaces will be enhanced.
These kinds of changes are being accelerated by research such as AI, XR and robotics that spur changes in human behavior; and the Life Design Business platform that KDDI is promoting.

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