The Japanese Market and KDDI

As of March 31, 2020, cumulative mobile communications subscriptions in Japan totaled 184.80 million, [*1] up 4.0% year on year.
The mobile market continues to grow, driven by the spread of smartphones, further advances in the trend of single users owning multiple devices, and increased use in business, including IoT.
Of this total, the KDDI Group’s share expanded 0.7 points year on year to 31.7% [*2] (around 58.64 million contracts).
There has also been continued growth in the number of service contracts for MVNO, [*3] up 14.7% from a year earlier to 24.65 million. [*1] The percentage of SIM card-based contracts reached 10%. [*4]
Of this total, the KDDI Group’s MVNO service contracts (UQ mobile, BIGLOBE mobile, J:COM MOBILE) expanded 25.4% year on year to 3.07 million.

• [*1]

  Source: Offi cial Announcement of Quarterly Data on the Number of Telecommunications Service Subscriptions and Market Shares (FY2019 Q4 (End of March 2020)), Ministry of Internal Affairs and Communications

• [*2]

  The KDDI Group includes KDDI, Okinawa Cellular Telephone Company (au), and UQ Communication. The SoftBank Group includes SoftBank and Y!Mobile. In addition, the fi gure includes subscriptions related to providing services to each company’s MVNO.

• [*3]

  MVNO: Mobile Virtual Network Operator

• [*4]

  Percentage of MVNO contracts = MVNO service contracts ∕ mobile telecommunications contracts Percentage of SIM card-based contracts = SIM card-based contracts ∕ (mobile telecommunications contracts - telecommunications module contracts provided by MNOs (29.85 million contracts))

In Japan, 5G service started in March 2020. With the aim of quickly popularizing 5G services, each company is proactively working to upgrade their networks.
KDDI aims to quickly roll out its 5G services nationwide, expanding its 5G base stations to 10,000 nationwide in the fiscal year ending March 31, 2021 and up to 50,000 in the fiscal year ending March 31, 2022.
In addition, to expand base stations into rural regions, we established 5G JAPAN as a joint venture with SoftBank. By sharing mutual base station resources, we will continue accelerating the expansion of base stations into rural areas.

As growth in the telecommunications business alone becomes more difficult, each mobile telecommunications company is using its domestic telecommunications business customer base to ramp up initiatives aimed at expanding earnings in non-telecommunications business fields, including in settlement, finance, and commerce, to secure new sources of income.
Of these fields, the market for smartphone payments is expanding significantly. To achieve the 40% cashless payment ratio targeted by the government by 2025, we carried out a campaign to give points (cashless point provision business, October 2019 to June 2020), which became a tailwind.
In April 2019, KDDI began smartphone payment services under the name "au PAY." These services are expanding steadily as demonstrated by members exceeding 23.50 million and point-accepting locations surpassing 1.90 million as of March 31, 2020.
In addition, KDDI will continue providing new experience value to customers through "the integration of telecommunications and life design" by developing the life design business with concentric rings entailing commerce, finance, energy, entertainment, and education, around a core of the domestic telecommunications business and its customer base.
Furthermore, we aim to achieve sustainable growth in Japan and overseas by leveraging the knowhow we cultivated in Japan mainly in the consumer business in Myanmar and Mongolia.

As of March 31, 2020, the number of fixed-line broadband subscriptions was up 2.4% year on year to 41.20 million. [*1]
The market for fixed-line broadband service continues to expand gradually, driven by sales of discount bundled mobile and fixed-line services and the opening of new markets by new operators using the wholesaling fiber access service of NTT East and NTT West. In addition, we expect the fixed-line broadband service business to remain firm due in part to increased demand, including for telework, remote learning, and video streaming, caused by the COVID-19 pandemic.
The number of KDDI’s domestic broadband subscriptions (FTTH subscriptions + CATV services for RGU households) slightly increased at 10.11 million, up 1.9% year on year.
By cross-selling FTTH and CATV to the au and the Group’s MVNO services, we expect the KDDI Group customer base to continue growing stronger and expanding.

• [*7]

  Cumulative FTTH subscriptions: au HIKARI + Commuf@-hikari + au HIKARI Chura (OCT) + HIKARI J + BIGLOBE HIKARI and others (Personal Services segment basis)

• [*8]

  RGU: Revenue Generating Units. Each household’s subscription to CATV, high-speed Internet connection, or telephony services represents one RGU.

Due to the proliferation of smartphones and tablets, and the increased performance of such devices, along with increasingly diverse mobile content services and evolution of telecommunications technologies, mobile traffic in Japan continues to grow, with both average monthly traffic and peak traffic rising by about 20% in the most recent year. (Source: "The State of Mobile Communications Traffic in Japan," Ministry of Internal Affairs and Communications (December 2019))Going forward, we will continue working to promote 5G and expand networks that support telework, online education, remote healthcare, and more, in addition to expanding new domains, including IoT business.