KDDI HOMECorporate InformationInvestor RelationsIR DocumentsPresentationsFY 2021.3Performance Highlights and Q&A for the First Quarter of the Fiscal Year Ending March 2021

Performance Highlights and Q&A for the First Quarter of the Fiscal Year Ending March 2021

Date July 31, 2020 (Fri), 5:00 - 6:00 PM
Location KDDI Hall, (Otemachi)
Respondents Shinichi Muramoto, Executive Vice President; Takashi Shoji, Executive Vice President; Keiichi Mori, Senior Managing Executive Officer; Kazuyuki Yoshimura, Executive Officer, Technology Sector; Nanae Saishouji, Executive Officer, General Manager, Corporate Management Division; Ikuko Hongou, General Manager, Investor Relations Department (MC)

Performance Highlights

The Presentation of the Financial Results

In the presentation of the financial results, Vice President Muramoto described three points;
"Entering the Era of New Normal", "Financial Results for the 1st Quarter", "Business Strategies".

1. Entering the Era of New Normal

First of all, we would like to express our heartfelt sympathies to those people and their families affected by the torrential rain in July. The KDDI Group will continue to do all it can for the reconstruction of the affected areas.

With the spread of COVID-19, a new normal living style is promoted across the world, and major changes are also expected in the business environment surrounding KDDI. In order to simultaneously achieve the prevention of the spread of COVID-19 and sustainable economic activities, it is indispensable to build a resilient social infrastructure. Towards the era of new normal, KDDI will further promote digital transformation (DX) by utilizing 5G, IoT, and AI.

To enhance the resilience of companies, the high levels of autonomy and growth of employees and organizations are indispensable. While advocating “human resources first” in management, KDDI has been internally communicating that employees should be highly self-driven and continue to grow. Currently, we have formulated the “declaration of new work styles” to realize a work style where every employee can achieve results without being tied to particular times and places. To support this, we will promote personnel system reforms and in-house DX. In the era of new normal, we will accelerate reforms to be a “human resources first company” and build a management base that can adapt to drastically changing environments.

Under the state of emergency declaration, about 90% of employees utilized teleworking. Currently, we are analyzing the effectiveness of and issues with teleworking. Going forward, we will make a new hybrid work style take root by using teleworking to further enhance the efficiency of operations. Specifically, based on the “declaration of new work styles,” we have categorized employees’ work styles and roles in the organizations into four model cases. As a company, we will support each employee in finding and realizing their optimum work style solution that best fits their environment.
We have introduced a new “KDDI version job style” human resources system that supports employees' self-driven career development by providing them with various growth opportunities in the KDDI Group's diverse business fields, while clarifying job boundaries and fully utilizing the advantages of “job-type” personnel management, with an evaluation and reward system based on performance, ambition, and capabilities. We will promote in-house DX to upgrade the office and IT environments to create a hybrid work style combining teleworking and in-office work, and we will further accelerate the implementation of the new-work style in our organizations and environmental development.

In May, we announced our basic policy for COVID-19, based on which we have taken various measures. In the startup support by KDDI ∞ Labo, MUGENLABO Support Program 2020 has been launched, in which 46 partner companies offer their assets. We also provided support for business operators through crowd funding by collaborating with CAMPFIRE which is the investee of KDDI Open Innovation Fund. At AEON, we have supported young children and students who cannot attend classes due to schools shutting down to prevent the spread of infection. While exploring means to live with COVID-19 in entertainment and sports, we provided “Sound VR”, an interactive audio and video technology that offers a new platform for artists to connect with their fans. We also provided training support using AI and IoT for “Team au” that has been affected by the one-year postponement of the Tokyo Olympics. Through our businesses, we will continue to contribute to the stability of society and people’s lives.

2. Financial Results for the 1st Quarter

The highlights of the consolidated results for the first quarter of the fiscal year ending March 2021 (from April to June 2020) are as follows: consolidated operating revenue was 1,242.7 billion yen, which is 23.7% of the full-year target, and the consolidated operating income was 290.7 billion yen, which is 28.2% of the full-year target. We are carefully analyzing the impact of COVID-19 on operating results from the second quarter onwards, and we are maintaining the full-year forecasts unchanged.

Operating income in the Life Design Domain and the Business Services Segment, which are growth fields, achieved an increase of 20.6 billion yen in total and is making steady progress. On the other hand, due to COVID-19, the sales volume of mobile handsets decreased significantly, which led to a reduction in sales costs, resulting in operating income increasing by 24.1 billion yen. Further, a decrease in the gross margin for mobile handset sales and others contributed to a 9.8 billion yen decline in income. Handset sales decreased by 450,000 units year-on-year. The initial migration from 4G to 5G is not on track as planned. From the second quarter onward, we will promote our businesses to achieve the initial plan.

To summarize the impact on performance of COVID-19, in the first quarter we enjoyed a temporary increase in income due to a decrease in costs of mobile handset sales in the Personal Services Segment and an increase in teleworking demand in the Business Services Segment. From the second quarter onward, we will promote our businesses and invest in growth areas to achieve the initial plan, while thoroughly examining the pandemic’s impact on our performance.

3. Business Strategies

[1] Personal Services Segment
In order to maximize “Group ID × engagement × total ARPU,” again this year, we have placed engagement at the core, prioritize relations of trust with our customers, and we are promoting business strategies across the entire group.

Through the double-brand strategy between au and UQ mobile, au started offering the Data MAX 5G ALL STAR Pack on June 25 to cater to customers who want to use a large volume of data comfortably, while UQ mobile started offering the SUMAHO Plan R on June 1 for customers preferring a middle level of volume. au and UQ mobile together will provide services that are chosen by a wide range of customers.

The number of Group IDs is growing steadily, led by UQ mobile, and reached 27.2 million at the end of June. The net increase of the number of UQ mobile IDs increased by 1.5 times year-on-year in the first quarter and by 2.4 times year-on-year in the single month of June when the SUMAHO Plan R started its service, and it is gaining popularity among users.

For the au PAY service, which is positioned at the center of engagement improvement, as a result of the campaign conducted in February and March this year, the service became widely used even by non-au customers and the awareness of it, as well as the number of payments increased significantly, which had been rising after the campaign. We also started Ponta Point, a common point program, on May 21. We will continue to promote its usage to further improve engagement.

In the first quarter, au Total ARPA was 7,790 yen, up 4.6% year-on-year. In particular, the growth of au Denki ARPA was prominent. With the steady increase in the number of au Denki subscribers and the extended time at home due to COVID-19, au Denki’s APRA was 640 yen in the first quarter, up 31% year-on-year.

The number of au Smart Pass Premium members is growing steadily and currently exceeds 10 million contracts. The number of Life Design service users is also increasing steadily.

[2] Business Services Segment
Along with the growing demand for teleworking, the number of KDDI service applications increased cloud applications by five times, remote access by four times, and video conferencing by eight times. During the state of emergency declaration, the KDDI Matomete Office, which offers one-stop solutions to companies, also increased the number of new smartphone contracts by 1.6 times, tablets by 1.8 times, and mobile routers by 1.9 times in April compared to the same period of the previous fiscal year. Measures to prevent the spread of infection spurred the expansion of teleworking and other contactless forms of work and digitalization, in large as well as in small- and medium-sized companies. KDDI is also promoting DX that supports new ways of working, including teleworking, and it started offering a new highly secure security system based on the zero-trust concept. We will propose optimal solutions for our customers’ work styles and system configurations.

As a 5G service for corporate customers, SORACOM will launch an MVNO business adapted to au 5G network by the end of this fiscal year. In order to create use cases leveraging 5G, in July 2020 SORACOM started a demonstration experiment jointly with KDDI for ultra-low latency applications using AWS Wavelength. To utilize 5G for office solutions to resolve issues in office buildings and to support work style reforms, we will promote DX leveraging the characteristics of 5G through our partnership with Mitsui Fudosan Co., Ltd.

[3] au 5G
For the au 5G infrastructure layer, we plan to deploy approximately 10,000 base stations by the end of March 2021 and approximately 50,000 by the end of March 2022. We will accelerate the early deployment of 5G services nationwide and promote 5G consumer use and IoT market penetration in each industry.

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