Q&A of FY2015.3

In our 3M Strategy, we have made some progress with Multi-Network.
As for Multi-Device, there has been growth in smartphones, routers, and tablets, and further expansion is expected in the IoT field. The au ARPU is completely different for each device. Moving forward, instead of simply expanding the au ARPU for each device, we would like to increase the number of mobile devices per person, and expand the communications revenues per account (au ARPA).
As for Multi-Use, we have established the settlement platform. The number of au WALLET applications has exceeded 12 million, and we would like to bolster efforts to expand the gross merchandise value, as well as the number of users.
Although I cannot discuss the details today, basically we would like to expand not only the online services centered around au Smart Pass, which we have worked so hard on up to this point, but also develop products in financial services, commerce, and real-world stores. We would like to expand the economic zone through these efforts, and work on increasing the settlement commissions and gross margin of sales.
As for the health care industry, KDDI will launch the service which enables users to check their own health at home from coming summer. Local governments are actively promoting the prevention of disease among citizens. KDDI will initially work with 20 local governments to offer the service. Since demand for a general-use device or equipment of this service would grow, we would like to remain actively engaged in these efforts.

On the IFRS basis, the profit on sales of investment securities is not booked on the net income attributable to KDDI.

Corporate users make more calls than individual users, but they use less data, so the new price plan had impact and caused to the reduction in revenues for the fiscal year ended March 2015. This trend is expected to continue for the fiscal year ending March 2016. Furthermore, the profit decrease is attributed to the decreased intersegment sales compared to the previous period due to changes in our in-company business rules.

There will be growth in value-added revenues due to the increased number of au Smart Pass members. In addition, the incoming value-added ARPA along with the growth in transaction volume due to au WALLET (prepaid card/credit card), and IFRS (non-amortization of goodwill) also will have an impact.

The IFRS-based results for the fiscal year ended March 2015 are just for reference, but we are confident that we can reach the 10% operating income growth called for in the medium-term plan. At the same time, we also recognize the need to achieve further growth.

What sets KDDI apart is the au customer base. KDDI is not just a telecommunications operator. We are establishing a strategy to expand the value-added economic zone of the top layer, and are working to develop tools for introducing services to this large customer base. We are continuing to develop au WALLET, and are engaged in efforts aimed at effectively driving customers to stores and improving customer satisfaction.
When we see that other companies are following our lead, we feel certain that our efforts are aimed in the right direction. We believe that our business model in Japan is unique compared to overseas. We would like to continue using our accumulated expertise to move forward with our business while reflecting our business on the medium-term plan for the next period.
In this respect, this fiscal year will be an important one. In the telecommunications business, the launch of the Hikari Collaboration Model by NTT East and NTT West, and the penetration of new rate plans are changing our surrounding environment. However, we recognize that there has been no change in the strategy to expand the value-added economic zone since we announced in 2014. We will steadily execute our plan, and if a problem occurs, we know that it must be resolved through operations. We will discuss further details of the next medium-term plan at the time we will announce the financial results for the fiscal year ending March 2016.

First, the introduction of NTT DOCOMO's new rate plan and the launch of the Hikari Collaboration Model by NTT East and NTT West happened sooner than expected. Competition in the telecommunications market has intensified more quickly than expected, and the market is becoming more homogeneous. These are the differences between now and when the 2012 medium-term plan was firstly announced. At present, we are successfully overcoming this difference. Next, we see the voluntary adoption of the International Financial Reporting Standards (IFRS) from the fiscal year ending March 2016 as a valuable weapon, and recognize that we have prepared an environment where we can make quick mergers and acquisitions due to the elimination of the burden of goodwill amortization.
We want to quickly overcome these many issues so that we can fully utilize the adoption of the IFRS and execute our strategies to grow from next period.

We would like to refrain from any discussion of the details at this time.

One factor is the increase in equipment investments for the Myanmar business, which are classified as lease obligations. Another is the increased obligations of KDDI Financial Service Corporation, resulting from the launch of the au WALLET credit card business.

The au ARPA is calculated from the number of all mobile contracts, excluding prepaid and MVNO. It is different from the previous definition of au ARPU. From the fiscal year ending March 2016, the au ARPU will no longer be disclosed, but we would like for it to continue to grow.

We would like improve the growth of dividends. Our commitment to increasing shareholder returns has not changed.

In the third quarter of the fiscal year ended March 2015, the au WALLET credit card business was launched and there were favorable results in terms of acquiring users, and this decreased the margin due to increasing related costs. Starting in this period, we will enter into real-world product sales, which tend to have a smaller margin than online sales of digital content. We will maintain a balance as we move forward, with a target margin of 30%.

We have been preparing to adopt the standards for a long time, and we have completed our preparations and adopted them on schedule. The purpose is to potentially avoid the heavy burden of goodwill amortization, while promoting M&A activities in the future.