Q&A for 3Q of FY2016.3

Q&A for the Third Quarter of the Fiscal Year Ending March 2016

Date Tuesday, February 9, 2016, 6:30 pm-7:15 pm
Location 20F Conference Room, Garden Air Tower
Respondents Takashi Tanaka, President; Hirofumi Morozumi, Executive Vice President; Makoto Takahashi, Senior Vice President; Yuzo Ishikawa, Senior Vice President; Tsutomu Fukuzaki, Associate Senior Vice President; Hidehiko Tajima, Associate Senior Vice President; Yoshiaki Uchida, Associate Senior Vice President; Takashi Shoji, Vice President; Hiroki Honda, General Manager, Corporate Management Division; Kenji Aketa, General Manager, Investor Relations Department (MC)

Questioner 1

Questioner 2

  • What factors are behind the cost increase in the Personal Services segment? And what factors underlie the decline in operating revenue in the Global Services segment compared with the second quarter of the fiscal year ending March 2016? Will the decline in operating revenue continue in future?

    With regard to the cost increase in the Personal Services segment, as you know, with the intense competition in MNP acquisition, sales incentives in the third quarter have risen 14 billion yen over the same period last year. However, even amid fiercer competition, our operations are proceeding well and the monthly discount has fallen dramatically compared with the same period last year.
    In the Global Services segment, price competition has intensified in Myanmar and there has been a decline in dealings by DMX, resulting in a fall in income and profit. The decline in revenue compared with the second quarter was affected by the weak kyat from July to September 2015, which is the consolidated accounting period for business in Myanmar, and the partial sale of KDDI America's calling card business. In future, we see the disappearance of temporary factors that contribute to a decline in revenue such as DMX, and continued revenue growth from business in Myanmar where the kyat has stopped falling.

  • What is the cause of the rise in the churn rate? How do you plan to control it in future?

    The cause was heightened liquidity due to the fact that the third quarter is the selling season for specific models and that, following discussions held by the Task Force on mobile phone rates and other provision conditions, customers were motivated to purchase a phone before the regulations came into effect. Churns due to switching over to MVNOs are also steadily increasing. In future, we believe we can reduce the churn rate with au Smart Value and au Denki (electricity service,) which are proving effective in this area.

  • Value-added ARPA has increased by 10 yen compared with the previous term. Are there any signs that it will grow further in future? Which domains are you going to expand to increase value-added ARPA in future?

    It will be quite tough to achieve the term forecast for value-added ARPA of 500 yen. au Smart Pass is doing well and has exceeded the plan. The churn rate is less than 1% and the total number of members is on the rise. On the other hand, sales of Video Pass and other pass services (online up-selling services) are being carefully promoted, so the impact on value-added ARPA is diminishing. In future, as well as continuing to expand our pass services, we aim to devote our efforts to au WALLET Market and other commerce services.
    In addition, our Value Services segment is often compared with NTT DOCOMO's Smart Life domains, but NTT DOCOMO's Smart Life business and other businesses include module services and other services so the two are not comparable on the same level. Smart Life business corresponds to our Value Services segment, but in terms of profit level, it comes out on top. We will bear that in mind in our efforts to grow value-added ARPA in future.

Questioner 3

Questioner 4

Questioner 5

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