KDDI HOMECorporate InformationInvestor RelationsIR DocumentsPresentationsFY 2020.3Performance Highlights and Q&A for the First Half of the Fiscal Year Ending March 2020

Performance Highlights and Q&A for the First Half of the Fiscal Year Ending March 2020

Date Friday, November 1, 2019 5:00 pm-6:00 pm
Location KDDI Otemachi Hall
Respondents Makoto Takahashi, President; Yoshiaki Uchida, Executive Vice President; Takashi Shoji, Senior Managing Executive Officer; Shinichi Muramoto, Senior Managing Executive Officer; Keiichi Mori, Senior Managing Executive Officer; Kei Morita, Managing Executive Officer; Toshitake Amamiya, Managing Executive Officer; Nanae Saishouji, Corporate Officer, General Manager, Corporate Management Division; Keita Horii, General Manager, Investor Relations Department (MC)

Performance Highlights

The Presentation of the Financial Results

At the Financial result Presentation Meeting, the three topics discussed by President Takahashi were the first-half financial results highlights, ID x ARPA x engagement, and growth fields.

1. First-half financial results highlights

In the first half (April to September 2019) of the fiscal year ending March 2020, the consolidated operating revenue was ¥2,564.5 billion, which is a 49.3% progress rate with respect to the full-year target. Similarly, the consolidated operating income was ¥553.4 billion, which is a 54.3% progress rate with respect to the full-year target. Although there was an income decrease in 1Q of the current fiscal year, it rebounded and became an income increase in 2Q, so that steady progress is being made toward the full-year target.

The income increase in the life design domain and business segment, which are growth fields, contributed greatly to the consolidated operating income, and the size of the increase between 1Q and 2Q also expanded. On the other hand, there was a ¥7.8 billion income decrease in the first half as a result of effects such as the increased intensity in the competitive environment, the increase in handset sales costs due to the migration of 3G users to 4G, the change in the accounting period for the Myanmar business in the previous period, and the accelerated depreciation of 3G equipment.

In the life design domain, factors such as the increase in the number of au Denki subscribers and the increase in the proportion attributable to au Smart Pass Premium made a positive contribution. With an operating revenue of ¥584 billion, which was a year-on-year increase of 38.4%, and an operating income of ¥87 billion, which was a 27.9% year-on-year increase, there was double-digit growth in both sales and profits.

In the business segment, the existing businesses of mobile and fixed-line communications expanded, as did the growth fields such as IoT. The operating revenue saw a 4.3% year-on-year increase to ¥451 billion, and operating income saw a double-digit year-on-year increase of 29.5%, to ¥82.6 billion.

2. ID x ARPA x engagement

KDDI is aiming to maximize lifetime value through ID x ARPA x engagement.

Regarding IDs, there was solid growth in the number of group MVNO subscriptions, and the number of mobile IDs grew steadily to 27.09 million at the end of September. By satisfying the needs of price-conscious customers in the group MVNOs, which have diverse sales channels and customer layers, as well as by offering a wide range of au price plans for customers who wish to use high-capacity data communications without stress, KDDI will continue to expand the number of IDs for the entire group.

All of the constituent elements of the ARPA saw year-on-year growth, so that the total ARPA of 2Q was ¥7,770, which was a 4.3% year-on-year increase. Total ARPA revenues also grew steadily to ¥569.4 billion, which was a 3.6% year-on-year increase.

3. Growth fields

(1) Finance business
The number of au PAY subscribers has surpassed 6 million within the first six months since launch. When these subscribers are combined with our credit card and prepaid card members, our payment platform has more than 33 million users. Moving forward, KDDI will provide financial products that support customers in various stages of life by using the smartphone as the touch point for point balances and our payment platform, which is based on our core business of communications. By doing so, KDDI aims to establish the finance business as a pillar for creating new profit.

(2) au Smart Pass Premium
By focusing on up-selling from au Smart Pass, the number of subscribers increased to 8.51 million at the end of September. With the launch of 5G in March 2020, we are planning to deliver immersive digital content that uses XR technology, 4K video, and smart devices, and further expand the number of subscribers and increase the total ARPA growth.

(3) IoT
The IoT market in Japan is expected to experience 1.8 times growth over the next six years. The KDDI Group has many capabilities that can provide customers with one-stop access to IoT solutions, from data collection to usage, and we aim to grow IoT business that leverages the overall strength of the group to improve market growth.

Since the establishment of KDDI DIGITAL GATE in September 2018 as a base for business development in the era of 5G and IoT, it has been used by over 250 companies. In an environment with expanding needs, new bases were established this September in Osaka and Okinawa. Moving forward, we will continue to accelerate collaboration aimed at achieving the digital transformation of customers in a variety of industries and business categories.

(5) 5G
KDDI is planning to launch 5G services in the spring of 2020 by combining special 5G with our brilliant 4G that has been refined over many years. Our plan is to have over 50,000 5G base stations, which is the most in Japan, by the end of March 2024. We are conducting trial tests involving infrastructure sharing with SoftBank, and we are aiming to effectively and rapidly establish base stations and construct resilient networks.

With 5G, we are aiming to improve the customer experience value. For individual customers, we will deliver entirely new experiences by providing Japan's first unlimited data plan and augmenting the customer experience. For corporate customers, we will begin providing 5G-compatible solutions that combine 5G with high-resolution video, AI, and other technologies, on a trial basis starting in November. As we move into the 5G era where communications will be integrated into all things, we will continue striving to provide new experience value.

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