Q&A at Earnings Results Briefing for Q1 FY2023

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• Why has the Consumer segment made such strong progress?

  Following the lifting of activity restrictions imposed as a result of the COVID-19 pandemic, there has been a resurgence in the flow of people. As a result, SoftBank Corp.'s sales activities, which are one of its strengths, have performed well, allowing it to significantly increase the number of mobile subscribers. SoftBank Corp. aims to restore mobile revenue growth in FY2024 and has been making steady progress toward that goal.

• Why have mobile device shipments decreased in comparison to Q1 FY2022?

  Mobile device shipments have decreased by around 60,000 units, but this is not a large decrease. The number of mobile device shipments we disclose is defined as the sum of mobile device shipments in the Consumer segment and the Enterprise segment. In the Consumer segment, the number of mobile device shipments has decreased only marginally, due to a continued strong performance in customer acquisition since the previous year. The decline in mobile device shipments in the Enterprise segment is transitory, in part reflecting the supply-demand balance.

• Your competitors have successively started to offer new price plans. What effect has this had on SoftBank Corp.?

  There have been no effects that would significantly alter the competitive landscape. Net additions are also performing well.

• What effect did the Rakuten SAIKYO (“THE GREATEST”) Plan offered by Rakuten Mobile, Inc. have on SoftBank Corp.?

  There have been no effects that would significantly alter the competitive landscape. Companies are free to name their services, but service names that cause misunderstanding among consumers might create problems. As appropriate, we will exchange opinions with the Ministry of Internal Affairs and Communications.

• The Mobile Number Portability (MNP) One Stop system allows users to complete porting procedures only at the carrier to which they are switching. What effect did the rollout of this system have on SoftBank Corp.?

  There have been no significant effects.

• Rakuten Mobile, Inc. has launched the One-Click Application service for Rakuten Card users. When a user signs up for a mobile data subscription contract, this service shortens identity verification procedures and other related processes. What do you think about this service?

  From a crime prevention perspective, SoftBank Corp. believes that it is critical to verify the identity of applicants when they sign up for service subscription contracts. Voice calls can now be placed and received from apps even with data subscriptions that do not include voice call options. Therefore, we believe that data subscriptions should be subject to the same level of identity verification as voice subscriptions. We would like to urge the Ministry of Internal Affairs and Communications to conduct a review of the legislative process in this area.

• Has the monetization of PayPay Corporation proceeded faster than expected? Can I correctly assume that PayPay Corporation's listing is coming soon?

  We believe that PayPay Corporation has evolved with just the right balance of growth and monetization. Regarding whether the monetization of PayPay Corporation has proceeded faster or later than expected, we can only say that things are moving steadily. We would like to refrain from answering specific questions about the listing of PayPay Corporation.

• For Q1 FY2023, operating cash flow decreased year on year, while investing cash flow increased. Will you maintain dividend payments even if adjusted free cash flow falls short of the target level? Also, if you are able to issue bond-type class shares, will the proceeds be used to supplement adjusted free cash flow?

  There has been no change to our policy of generating a high level of adjusted free cash flow. Our policy is to reduce capital expenditures for FY2023 by approximately ¥330.0 billion as planned.
  In Q1 FY2023, operating cash flow decreased year on year mainly due to an increase in income taxes paid. Investing cash flow increased due to the payment of capital expenditures that were accepted in FY2022.
  The proceeds from the bond-type class shares will be regarded as a separate source of investment financing from our adjusted free cash flow, and we intend to use the proceeds for growth investments. The bond-type class shares will be the first of their kind to be issued in Japan, so we will make every effort to issue them on favorable terms. Doing so will also help us to set a positive precedent for the future.

• A draft statement on Open Access Guidelines for the allocation of the 700 MHz band (3 MHz bandwidth), which corresponds to the platinum band, has been released. The guidelines are generally believed to be beneficial for telecom operators who do not have the platinum band. How does SoftBank Corp. intend to apply for this spectrum?

  We are currently considering whether or not to apply. We believe that SoftBank Corp. has a low probability of being allocated the platinum band based on the review criteria and scoring system set forth in the comparative review standards. The platinum band is a suitable frequency band for covering Japan's regional areas. Considering the responsibility of a telecommunications carrier to utilize radio waves effectively, we would like the telecommunications carrier who acquires this spectrum to make the appropriate capital expenditures.

• Currently, the upper limit for discounts on mobile devices is uniformly restricted when selling mobile devices and subscription contracts together. How do you view the current situation?

  Regulations on excessive discounts are required in order to curtail the reselling of mobile devices. However, we feel that the actual issue is that progress on the widespread adoption of 5G has stalled. A suggestion has been proposed to raise the upper limit for mobile device discounts to ¥40,000 (pre-tax), including cases where mobile devices are sold to those who are not mobile service subscribers. This, we believe, would be a reasonable level for such discounts.

• The Japanese government is considering selling its shares of NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT) over the long term. What do you think about this?

  The reorganization of NTT has been quickly followed by talk of the full privatization of NTT. First, we would like to monitor how the discussions evolve. Discussions about NTT's place in society have been organized around the perspective of fair competition. We have a strong interest in keeping a close watch on these discussions to ensure that the regulations on NTT are not simply the only thing that is gradually relaxed.

• When will you begin providing generative AI services to enterprises?

  Since May 2023, SoftBank Corp. has provided the Azure OpenAI Service Starter Package to ensure that corporate and local government clients can implement generative AI efficiently. As soon as the preparations are complete, we would like to begin offering Microsoft 365 Copilot, which incorporates GPT-4, a large-scale language model developed by OpenAI of the U.S. We anticipate that the training phase for the computational foundation of SoftBank Corp.'s proprietary homegrown generative AI service will be completed in 2024. As soon as this training is complete, we expect to start providing this service.

• SoftBank Corp. is collaborating with NVIDIA, a major U.S. semiconductor company, on the development of a next-generation platform for generative AI and 5G/6G. What do you hope to achieve through this collaboration?

  The collaboration primarily concerns AI-RAN. By putting NVIDIA's cutting-edge chips into mobile base stations, we will create AI-RAN (a mobile network that incorporates AI into base stations). These cutting-edge chips' memory can be used for more than 5G/6G connectivity. Unused memory space can also be actively utilized as a resource for processing generative AI. We intend to undertake extensive preparations in order to build out the AI-RAN network.

• Can I correctly assume that SoftBank Corp. is in charge of social infrastructure, while LINE Corporation and Yahoo Japan Corporation are in charge of services under your Group structure?

  Although our Group structure can be broadly divided along these lines, we have no intention of focusing solely on infrastructure. We will shape the Group so that SoftBank Corp. serves as social infrastructure that supports the digital society, while it delivers new services created not only by Group companies LINE Corporation and Yahoo Japan Corporation, but also by other subsidiaries and the Consumer segment and other segments.

• Could you please comment on the switchover of Yahoo Japan Corporation's search engine?

  We understand that there are currently no established facts regarding this matter.

• I believe that you have sought to provide low Earth orbit satellite communication services in collaboration with OneWeb. Why are you starting to introduce Starlink Business, a satellite broadband internet service?

  SoftBank Corp.'s policy is to positively adopt excellent services for its customers. We anticipate that each service will have a different position. Starlink Business will be provided as a best-effort service that many customers can use at a low cost. OneWeb is expected to be offered as a service with guaranteed bandwidth. We are focusing on NTN^* services such as satellite broadband internet services because they will be a key component of 6G networks.

  [Note]

  1. *
     NTN stands for Non-Terrestrial Network, referring to communications networks provided from space and the stratosphere.