Aiming for Sustainable Growth

In the mobile market in Japan, competition is being spurred by an expansion of budget smartphones, including MVNOs, and the market entry of a fourth telecommunications provider.
We will continue meeting customer needs, including pricing plans aligned to customer usage styles, as we aim to achieve growth in Multi-Brand Total ARPU by expanding 5G services and the "au Economic Zone."

Multi-Brand Strategy

KDDI began offering "povo" with free-to-choose "toppings" from March 2021 in additional to unlimited-use "au" and the simple and secure price "UQ mobile." UQ mobile will begin providing 5G service from September.
We will continue providing pricing plans that meet various needs and lifestyles and quickly create environments that enable the "AUGMENTED EXPERIENCE" value only possible with 5G. In this way, we aim to actively promote 5G use through multiple brands and increase data use by acquiring more new contract users and expanding 5G coverage.
In addition, from the perspective of "au Economic Zone" plus, we are bundling mobile services with services in the Life Design Domain, specifically financial services, including au PAY Card and mortgage, as well as energy services from au Denki, commerce services from au PAY Market, and au Smart Pass Premium. In this way, we will enhance engagement with customers as we strive to maximize the "au Economic Zone."
We aim to achieve Multi-Brand Total ARPU growth by actively promoting 5G use and maximizing the "au Economic Zone."

The Trusted au Network Building 5G Areas and Rolling Out Service Nationwide

As for building its 5G areas, KDDI is developing areas with an emphasis on the places our customers frequent most. From June 2021, we enabled use of our 5G network on all stations of the Osaka Loop Line and the Yamanote Line. In addition, we announced the au "Rail Line 5G Conversion" Declaration[2] with the aim of turning rail lines into 5G areas.
By the end of fiscal year 2022.3, we aim to create 5G areas at major stations along 5 lines in Kansai and 21 lines in Kanto (including JR and private railways), the platforms of those stations, as well as the trains that run on the lines.
In addition, when rolling out 5G nationwide, we will convert existing frequencies into 5G, in addition to utilizing new frequencies specifically for 5G. We expect to expand base stations to around 50,000 in March 2022, nationwide population coverage ratio 90%.
Under the slogan Zutto, Motto, Tsunagu Zo, au (Connecting more and always with au), we aim to provide communications services that continuously connect people, and we will continue providing 5G experiential value to customers going forward.

Simple and Secure Price "UQ mobile"

povo, Can Choose Freely with Toppings

The Significance of Promoting the Life Design Domain

Utilizing its telecommunications business base, KDDI is more aggressively taking measures aimed at expanding non-telecommunications businesses as the Life Design Domain, including settlement and finances, energy, content, and commerce, with the aim of being a lifestyle partner for customers.
As competition in the telecommunications business heats up, we are promoting the Life Design Domain to enable the construction of an earnings structure not dependent on telecommunications, expecting the effect of enhancing engagement with customers.
KDDI has long promoted initiatives to enhance NPS.[1] After analyzing the last few years, we saw a correlation where the more contact points we have with customers the more NPS improves. We have provided various life design products to enrich customers' lifestyles, helping expand our contact points.
Going forward, we aim to build robust, long-term engagement with customers. To this end, we will continue to further strengthen contact points that customers regularly use, like au PAY, and will become indispensable to daily life as customers use the type of services that are contracted over the long term, such as au Denki (electricity) and financial services.

• [1]

  Net Promoter Score

Growth Strategies in the Life Design Domain and the Expansion in the "au Economic Zone"

au PAY is Steadily Expanding Centered on Customer Contact Points

With customer contact points as our center, the number of payment users, participating locations, and transaction volume are steadily growing.
As of March 31, 2021, members of au PAY, which is the key to the "au Economic Zone" expansion, exceeded 32 million and the number of locations accepting smartphone payments and points exceeded 3.98 million.
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 Ponta partner Lawson's around 14,600 stores [3], to further expand contact and provide new experience value to customers.
In addition, the number of users is increasing as we promoted Ponta Point reward campaigns with Lawson, Uniqlo and other companies as well as drugstores, supermarkets, and other industries. Going forward, we will continue actively expanding the number of participating stores, especially those that customers regularly visit.

• [3]

  As of May 2021

au Smart Pass, a Customer Contact Point and Robust Subscription Model

Contributing to the "au Economic Zone" in Tandem with an Expansion in the Number of Contracts, Including au Denki

Settlement and Financial Business Leading Expansion in the "au Economic Zone"

The settlement and financial business is driving growth in the Life Design Domain.
The code settlement transaction amount expanded in the settlement business. Due in part to the effects of people isolating at home because of the COVID-19 pandemic, au Kantan settlements, which are au Carrier billing, grew significantly. As for the financial business, the au Jibun Bank settlement amount also grew significantly, including au Jibun Bank mortgage.
As a result, the transaction volume of settlement/loan in FY2021.3 exceeded ¥9 trillion, and operating income in the settlement and financial business significantly grew ¥49.8 billion, or 1.6 times, year on year.

The Settlement and Financial Business Expect Further Growth

KDDI's Unique Product and Service Strengths
In FY2021.3, KDDI released unique, highly competitive products, such as Mortgage "au" mobile preferential discount of au Jibun Bank, enhanced au PAY gold card privilege, and au Kabucom Securities points investment. These were very well received by customers and helped steadily expand the number of contract customers.

• [5]

  A total of "Mortgage Jibun Denki preferential discount" (down 0.03% annually) and "Mortgage "au" mobile preferential discount" (down 0.07% annually)

Growth Strategies Going Forward
Going forward, based on au PAY, we will connect it with use of various settlement and financial services. To make it more convenient to use au PAY in daily life, collaboration between au Jibun Bank accounts and au PAY cards' au PAY charging is important.
Amid this situation, if the use of au PAY Card increases, it will also benefit bank account balances, and we expect finances to expand. In addition, possibilities of cross sales, such as mortgages, securities, and insurance, are expanding, and the base of the financial business will further expand.
Through au PAY, KDDI will continue to perpetuate this virtuous cycle.

New Services in the New Normal Era

In June 2021, we started smartphone-centric services for new lifestyles. Through collaboration with menu inc., we enhanced food and beverageservices, including food delivery which is expected to see demand rise during the COVID-19 pandemic, and enabled total support for health and medical experiences through au Wellness.
With the aim of being closer with customers going forward, we will continue striving to create new value.

"DX Partner" Creating Businesses Together to Solve Customer Issues

Changes in the Environment Surrounding Companies and Expectations for KDDI

Japan faces increasingly diverse and complex issues. These include responding to the COVID-19 pandemic, a declining working-age population, issues related to employee working styles (namely balancing work with childcare and nursing care), and business issues related to achieving sustainable growth amid a challenging economic environment. Solutions to address these issues are essential.
Until several years ago, most customer demands centered on reducing telecommunication costs. Today's demands are far wider ranging, from "flexibly responding to diverse workstyles that balance employee satisfaction and enhance cost efficiency" to "creating new businesses through digital transformation (DX) to nurture future growth pillars."

KDDI is a DX Partner Creating New Businesses to Address Customer Issues

KDDI provides stable telecommunications services under any circumstances—24 hours a day, 365 days a year—to garner customer trust.
As a result, we are also being chosen as a DX partner to create businesses with our customers as we work to genuinely solve their issues.
Aiming to further enhance initiatives, we renamed the Corporate Business Division the Business Design Division in April 2021. The new name is imbued with the meaning of "actively visiting customers' frontlines to uncover issues and contribute to business growth," or in other words, "designing customer businesses." Every employee will enhance their ability to understand customers and to solve issues. By combining KDDI Group assets, including 5G, IoT, and AI, we will solve customer issues through DX.
At the same time, we are integrating global divisions and establishing a system to globally roll out initiatives as a DX partner.

Business Services Segment Growth Strategies

As for the Business Services segment, we aim to achieve sustainable growth through double digit growth of the NEXT core business, which comprises corporate DX, business DX, and business infrastructure services, centered on the stable growth of the core business, which comprise mobile and fixed telecommunications.
In the process of focusing on the NEXT core business, we need to enter our customers' frontlines and gain a deeper understanding. To this end, we see a trend of greater engagement building up for customers who have contracts in the NEXT core business.
Furthermore, there are many cases of these kind of customers expanding contracts of the core business, leading to a virtuous cycle of generating synergy among the core business and the NEXT core business.

Focusing on NEXT Core Business (DX)

In the NEXT core business, operating revenue in the fiscal year ending March 31, 2022 will expand to over 30% of Business Services segment operating revenue.

• 1.

  Corporate DX

  Through teleworking and zero trust solutions,[1] we will continue supporting companies' various workstyles.
  Due to the COVID-19 pandemic, teleworking has become engrained in many companies. However, companies now face the urgent need to address looming threats in the existing perimeter-based security.[2]
  KDDI provides Managed Zero Trust in a one-stop place by optimally combining devices, networks, and security to solve customer issues by leveraging the know-how cultivated by practicing zero trust in its own operations.

  • [1]

    The concept of strengthening security by not trusting any internal or external traffic, inspecting each device when its accesses service, and makes a log.

  • [2]

    A security measure that blocks external attacks and ensures the safety of internal networks by constructing obstacles along the perimeter between external networks and internal networks.

  

• 2.

  Business DX

  We will continue to help grow customer businesses through DX by leveraging 5G, IoT, cloud services, and other technologies. We have expanded the capabilities needed to support customer DX in order to address all the issues of different customers depending on their industry and business.
  KDDI has supported customer businesses by providing machine-tomachine (M2M) services ahead of competitors from around 2000.
  Driven by automobiles, gas, and electricity, cumulative IoT connections grew significantly to over 21 million in March 2021, including connections with the Group company SORACOM.
  Going forward, we aim to achieve further growth by globally rolling out the successful models we cultivated in Japan.

  

  

• 3.

  Business infrastructure services

  To support customer business growth, we are providing business infrastructure services, such as data and call centers that support business.
  We have expanded our data centers to over 40 sites in 10 cities around the world, mainly in Europe. We are working to strengthen our base as a premium data center operator using high connectivity. In addition, as for our call centers, the Group company KDDI Evolva, Inc. has expanded its business base, and operating income in FY2021.3 has significantly grown 29% year on year.
  Going forward, we will continue growing globally with customers and actively expand our business base.

  

Entering the Real 5G Era

In October 2020, we established the KDDI 5G Business Co-Creation Alliance. We will form a community with DX Business Partners who have various assets, such as technology and devices related to 5G, and will continue to support customer DX leveraging the special characteristics of 5G networks.

In December 2020, in collaboration with AWS, we began providing AWS Wavelength, the first telecommunications carrier in Japan to do so. By combining the au 5G network with AWS's mobile computing services, we will realize ultra-low latency telecommunications and continue providing new business chances for 5G to customers.