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- (b) Trends in Telecommunications and the KDDI Groupfs Response
In the mobile communications market, carriers are facing sharp decline in the unit sales of handsets as pricing plans that separate tariffs from handset prices become mainstream. Other factors include rising prices of handsets, proliferation of multiple-year service contracts, and the current economic recession. At the same time, competition to acquire customers is becoming more and more intense due to emergence of low-priced service plans, wide variety of handsets, and various content-based services incorporating music and video. In the fixed-line communications market, in addition to ongoing broadband services, the convergence of fixed and mobile communications and broadcasting is gaining momentum. Competition in services is seeing a new phase in the rapidly changing business environment. Facing these conditions, the KDDI Group modified its mobile service pricing plan gSimple Course,h which separate tariffs from handset prices, with the introduction of installment payment options for handset purchases. Also in the Mobile Business, the Group strove to enhance the services by developing a rich lineup of handsets and offering new content. In the Fixed-line Business, the Group worked aggressively to increase the number of fixed access lines by promoting FTTH services and otherwise, while enhancing solution services for corporate clients.
Operating expenses declined 141.5 billion, or 4.4% year on year, to 3,054.3 billion. In the Mobile Business, expenses were down due to a decrease in cost of sales of handsets stemming from a fall in unit sales volume, as well as a decline in sales commissions. In the Fixed-line Business, by contrast, operating expenses increased for the same reasons that boosted segment operating income, namely the inclusion of CTC into the scope of consolidation and the incorporation of the JCN Group, overseas fixed-line subsidiaries, and others into the Fixed-line Business. Accordingly, operating income climbed 42.8 billion, or 10.7% year on year, to 443.2 billion.
Consolidated Operating Income/Margin
(Billions of yen) (%)
500 400 300 200 100
(Years ended March 31)
25 20 15 10 5 0
n Operating Income
In FY 2009.3, total operating revenues amounted to 3,497.5 billion, down 98.8 billion, or 2.7% year on year. In the Mobile Business, despite an increase in total number of subscriptions, revenue decreased due to the decline in the units sold and revenue of mobile handsets, stemming from the increase in prices of handsets as separate tariff/handset price plans became the mainstream. Other reasons included a fall in telecommunication revenue as KDDI introduced more low-priced service plans and discount options. By contrast, revenues from the Fixed-line Business increased, thanks to the inclusion of CTC into the scope of consolidation and the incorporation of the JCN Group, overseas fixed-line subsidiaries and others into the Fixed-line Business due to segment reclassification.
Consolidated Operating Revenues
(Billions of yen)
4,000 3,000 2,000 1,000
(Years ended March 31)
Despite receiving 36.3 billion in dividend income associated with the termination of a silent partnership, other expenses (net of other income) totaled 48.3 billion, up 27.1 billion year on year. This was mainly due to an increase in interest expense and equity in loss of affiliates. Other reasons included a 46.8 billion increase in impairment loss and a 5.1 billion rise in loss on valuation of investment securities stemming from turmoil in world financial markets sparked by the subprime loan crisis in the United States. Income before income taxes and minority interests grew 15.7 billion, or 4.1% year on year, to 394.9 billion. Current income taxes, consisting of corporation, resident, and enterprise taxes, amounted to 200.9 billion against deferred income taxes of 30.6 billion, which together amounted to an increase of 12.6 billion year on year. Minority interests in consolidated subsidiaries declined 1.9 billion, to 1.8 billion. As a result, net income rose 5.0 billion, or 2.3%, to 222.7 billion.
n Operating Revenues
KDDI CORPORATION Annual Report 2009