KDDI HOMECorporate InformationInvestor RelationsIR DocumentsPresentationsFY 2018.3Performance highlights and Q&A for the First Quarter of the Fiscal Year Ending March 2018

Performance Highlights and Q&A for the First Quarter of the Fiscal Year Ending March 2018

Date Tuesday, August 1, 2017 5:00 pm-5:45 pm
Location 20F Conference Room, Garden Air Tower
Respondents Hirofumi Morozumi, Executive Vice President; Makoto Takahashi, Executive Vice President; Yuzo Ishikawa, Executive Vice President; Yoshiaki Uchida, Senior Vice President; Takashi Shoji, Associate Senior Vice President; Shinichi Muramoto, Associate Senior Vice President; Keiichi Mori, Associate Senior Vice President;Hiroki Honda, General Manager, Corporate Management Division; Keita Horii, General Manager, Investor Relations Department (MC)

Performance Highlights

The Presentation of the Financial Results

In the presentation of the financial results, Executive Vice President Morozumi described two points; "Financial Results for the First Quarter of FY18.3," and "Toward Achieving the Medium-Term Target."

1. Financial Results for the First Quarter of FY18.3

For the first quarter of the fiscal year ending March 2018 consolidated operating revenue increased 6.0% year on year, to ¥1,198.7billion.
Consolidated operating income was up 2.3% year on year, to ¥281.4billion, mainly due to the revenue increase of mobile communications revenues and value-added ARPA revenues and profit increase of the Business services segment, no matter the strategic cost increase of promoting measures for growth next year and beyond.
Profit for the period attributable to owners of the parent rose 3.8% year on year, to ¥173.5billion.
We have achieved 29.6% of our consolidated operating income target for the full fiscal year, meaning that we are well on progress.

2. Toward Achieving the Medium-Term Target

In our domestic telecom business, the number of "mobile IDs," which is the sum of the number of "au accounts" and "MVNO subscriptions," was 26.03 million as of the end of June (+1.1% year-on-year). "Mobile communications revenues" saw a year-on-year increase of +1.3%, out of which "au ARPA revenues" also increased compared to the figure from the previous term. "au ARPA" is growing stably at 5,970 yen (+2.8% year-on-year) with the expansion of high-volume data needs.
KDDI aims to increase customer experience value by promoting the "au STAR" membership program along with the new price plans, "au Pitatto Plan," "au Flat Plan," and "Upgrade Program EX" to support the long-term use of au customers.

In the life design business, "gross merchandise value in the au Economic Zone" amounted to 406 billion yen (x1.5 year-on-year) along with "value-added ARPA" of 560 yen (+19.1% year-on-year), demonstrating significant growth. As primary growth drivers, the combined number of "au Smart Pass" and "au Smart Pass Premium" memberships reached 15.29 million (+4.4% year-on-year) and 21.30 million of "au WALLET prepaid cards and credit cards" have been issued and valid (+12.7% year-on-year) as of the end of June, both seeing steady growth. The merchandise value in the shopping mall service "Wowma!" increased 2.8 times compared to the previous term. The number of subscriptions to "au Denki" is also steadily increasing.

In the global business, the total number of subscriptions in the Myanmar telecom business has reached approximately 24 million, four times over the three years since KDDI entered into a joint operating agreement with Myanma Posts and Telecommunications (MPT) in July 2014. MPT recently acquired a new license for the 1.8GHz bandwidth to launch LTE services in three large cities at the end of May. The current plan is to expand this service to cover more than 30 cities by the end of September. The introduction of the 4 X 4 MIMO technology has actualized a maximum communication speed of 150Mbps, which is a part of our achievement in business promotion to be carried on into the future.

Questioner 1

Questioner 2

Questioner 3

  • QCould you tell us about the aims and expected profit impact of the new rate plans and Upgrade Program EX?

    We recognize that the key to realizing sustainable growth in the domestic telecom business is to maximize au telecom income, in other words, "ID x ARPA." As for the current state, au ARPA and value-added ARPA are both showing a steady increase. While the number of IDs is increasing in the group as a whole, the number of au accounts is declining and the churn rate during 1Q was high.
    We presume that there is a significant volume of customers who are concerned about running costs and switch over to MVNOs. Based on the recognition that maintaining au IDs is the top-priority issue, we aim to put a stop to the decrease in the number of au accounts by means of au Pitatto Plan, rate applied according to the amount of data used which offers a low price standard comparable to MVNOs for months with a low volume of data use.
    On the other hand, to control the impact of decrease in income bound to occur with the new rate plans, these are not eligible for the Monthly Discount. Instead, KDDI provides customers with the Upgrade Program EX, which is an option that can give a maximum discount of 50% on the price of the device. In the initial sales, 84% of the customers who subscribed to a new rate plan on an installment basis when switching models chose the Upgrade Program EX, which speaks well for its acceptability.

  • QDoes the decrease in income from the new plans forecast, i.e. 20 billion yen, include the increase in profit from non-application of Monthly Discount?

    Yes, it does.

  • QIs the mobile communications revenues for the fiscal year ending in March 2019 going to increase?

    That depends on how we operate in the near future. As long as we can keep the number of au accounts from dropping below our estimate, we can expect this to be a factor for increased income; on the other hand, we also expect a negative impact on au ARPA from the shift toward new rate plans. Customers are provided with two options: au Adjust Plan and au Flat Plan. Currently, we are promoting au Pitatto Plan, but we are also aware of the need for operation to boost au ARPA by raising the rate of au Flat Plan selection in the future. We are only two weeks from the launch of the new rate plans, but we do believe that au ARPA can be sustained through precision operations.
    We see good performance in this introductory period of the new rate plans and aim to continue increasing mobile telecom income during the fiscal year ending in March 2019.

Questioner 4

Questioner 5

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