KDDI HOMECorporate InformationInvestor RelationsIR DocumentsPresentationsFY 2019.3Performance Highlights and Q&A for the First Half of the Fiscal Year Ending March 2019

Performance Highlights and Q&A for the First Half of the Fiscal Year Ending March 2019

Date Thursday, November 1, 2018 5:00 pm-5:50 pm
Location Conference Room, Garden Air Tower
Respondents Makoto Takahashi, President; Yuzo Ishikawa, Executive Vice President; Yoshiaki Uchida, Executive Vice President; Takashi Shoji, Senior Vice President; Shinichi Muramoto, Senior Vice President; Keiichi Mori, Associate Senior Vice President; Kei Morita, Associate Senior Vice President; Nanae Saishouji, 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, President Takahashi described four points; "Highlights of Financial Results for the 1st Half", "Domestic Telecommunications Business", "New Fields of Growth" and "Sustainabilty".

1. Highlights of Financial Results for the 1st Half

Consolidated sales for the first half of the fiscal year ending March 2019 (April to September 2018) increased by 1.9% YoY to 2,462.3 billion yen.
For consolidated operating income, even though mobile communications revenue fell due to lowered tariff of new price plans, increase of value-added ARPA revenues together with the Business and Global Services segments, resulted in 561.2 billion yen, up 3.4% YoY.For the consolidated operating income in the annual plan, this represents steady progress at 55.5% of the target.

2. Domestic Telecommunications Business

In the Japanese telecommunications business, we have been revising the previous price plans designed for customer needs. Due to a favorable response from customers to the "au Pitatto Plan" and the "au Flat Plan" introduced in July of 2017 as plans for separating communications fee and handsets, the number of subscriptions exceeded 10 million as of September 2018. Going forward, we aim to achieve sustainable growth by providing new forms of experience value to customers through the "Integration of Telecommunications and Life Design" centering on the "telecommunications", our infrastructure business as a core, together with provision of the optimal plans according to customer usage conditions.

3. New Fields of Growth

The Life Design Business is progressing smoothly with the au Economic Zone gross merchandise value reaching ¥608 billion in the second quarter, the total for the first half of the year at ¥1.168 trillion, and the full-year target at ¥2.46 trillion. In addition, the au Economic Zone sales was ¥167 billion in the second quarter (up 28.5% YoY), and the value-added ARPA was ¥690 (up 21.1% YoY) to post double-digit year on year growth for both results. The Life Design Business provides various services including energy, commerce, entertainment, and settlement services with the goal of (1) improving retention by increasing the level of customer satisfaction, (2) strengthening touchpoints with the customers, and (3) expanding the base of stable revenues by promoting customers to use telecommunications and non-telecommunications services together.

Furthermore, as the market environment and services are changing sharply due to technological advances, we announced a new framework of "cooperation and competition" in which we simultaneously cooperate and compete with Rakuten. The primary initiative involves both companies "utilizing each other's assets" with KDDI providing the telecommunications network and roaming to Rakuten while KDDI uses the payment and distribution platforms owned by Rakuten. This initiative enables more efficient infrastructure development in each layer and allows KDDI to accelerate the expansion of the au Economic Zone and the growth of value-added ARPA.

The creation of new forms of experience value is an important theme for KDDI as the digital transformation accelerates within IoT, which is another growth area. We established "KDDI DIGITAL GATE" in September as a base for developing new forms of experience value through innovation, with customers starting new IoT businesses.
In the field of mobility, we are launching initiatives with many partner companies beginning with Toyota Motor Corporation, and we are working hard to create safe, reliable, and exciting services by adding value through KDDI assets and capabilities in self-driving and big data utilization initiatives.
For the official launch of 5G services in 2020, we are promoting the roll out of service areas covering the Olympic and Paralympic venues and surrounding areas to meet the needs of local governments and partners with the goal of solving regional challenges and contributing to regional revitalization, through new 5G services.

4. Sustainabilty

The construction of a safer and more resilient connected world is our top priority. During the Hokkaido Eastern Iburi earthquake, the "KDDI Ocean Link" was dispatched to the disaster area to maintain the telecommunications infrastructure through an ship-mounted base station while ferrying emergency supplies to assist the disaster response.

Furthermore, in October we established a partnership with KCJ Group, the operator of KidZania, to jointly promote "learning while having fun = edutainment" by combining KDDI's 5G and IoT technologies.

In addition, KDDI was selected consecutively this fiscal year for inclusion in several ESG-related composite stock indexes. KDDI was selected for multiple indexes including the MSCI World Women's Leadership Index by MSCI in the U.S., the global and Japan indexes by FTSE, and the "S&P 500 Carbon Efficient Index" global environmental stock index in September. Going forward, we will continue to improve the corporate value for medium to long-term.

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