Standing at the Frontier
in Implementation of
Digital Technologies in Society,
Aiming to Increase Corporate Value

Our corporate vision is to become “the corporate group needed most by people around the world.” When I was appointed as President & CEO, I took some time to think again about what I need to do to make this vision happen.

In the next 10 years, I think we’re going to witness the arrival of a hyper-digitalized society, in which everything in the society will be digitalized. The progress toward a digitalized society will be even more accelerated post COVID-19 which has driven the progress unexpectedly. Going forward, all industries will move toward digital transformation. There’s a demand in the market for someone to lead the implementation of digital technologies in society, a role for which SoftBank is perfectly positioned. The reason is that our Company’s strength is both in the offline arena including 4G/5G communications infrastructure and sales channels for consumers and enterprise and in the online arena including B2C platforms like Yahoo! JAPAN, LINE and PayPay with a user population of tens of millions, and thereby enables us to play the central role of implementing digital technologies in society. I believe we can revitalize industries while solving social issues and contribute to job creation. And I’m certain that facilitating society’s adoption of digital technologies will lead to continuing increase in corporate value.

SoftBank will further promote the Beyond Carrier strategy that’s been in place since the fiscal year ended March 31, 2018. Beyond Carrier is a strategy that aims to expand business fields other than telecommunications, while further growing our core telecommunications business. As part of the strategy, former President & CEO Miyauchi launched the smartphone payment service PayPay, added Yahoo Japan (now Z Holdings) as a subsidiary, which runs Yahoo! JAPAN, one of the largest portal sites in Japan, and integrated Z Holdings and LINE, Japan’s largest-scale social communication service provider. These initiatives brought to our Group huge user bases: 55 million telecommunications service users^*1, 80 million Yahoo! JAPAN users^*2, 41 million PayPay users^*3, and 89 million LINE users^*4, and make us the largest scale telecommunications and IT group in Japan. Building on the success, I will move the Beyond Carrier strategy to Phase 2. As of March 31, 2021, our Company has 335 subsidiaries and affiliate companies^*5, many of which operate platforms that provide online services and deploy a variety of businesses. At present, each company is optimizing their own platform individually, but in Phase 2, we want to create new value by connecting these platforms with the power of cutting-edge technologies to achieve total optimization and make services even more convenient and richer for users.

[Notes]

*1Sum of cumulative number of mobile communications services subscribers (47.285 million) and cumulative number of broadband subscribers (8.139 million) (as of March 2021)

*2Annual number of logged-in user IDs (as of March 2020)

*3Cumulative number of registered users (as of August 2021)

*4Number of monthly active users (as of June 2021)

*5Total consolidated subsidiaries, equity method affiliates and other affiliates (as of March 2021)

Due to the March 2021 reductions in mobile service prices, we forecast a negative impact of about ¥70 billion on operating income in the Consumer segment for the fiscal year ending March 31, 2022. Therefore, we forecast a decrease year on year in Consumer segment income for the fiscal year ending March 2022, but we feel that we’ll make up for this headwind with increase in smartphone subscribers and cost reductions. In addition, SoftBank will seek to expand revenues outside mobile communications charge, such as by offering electricity services and broadband services to consumers and providing optional services like device warranties and security.

There is no doubt that lowering mobile service prices is a headwind in the short term, but I believe that growth in the Consumer segment is still possible in the medium- to long-term. The conventional mobile market in Japan is centered on person-to-person communication, and as the number of smartphone subscribers approaches that of the Japanese population, it will be difficult for the whole market to grow. However, with the spread of 5G, which features “simultaneous massive machine connections,” an environment for the explosive spread of IoT devices is almost ready in terms of technology. Going forward, IoT modules will be installed in a variety of home appliances and other devices, and a wide variety of data will be exchanged. I believe that IoT modules that let you communicate using only button cells will be installed in things that were previously unimaginable, such as shoes and bags. Within the next 10 years, there will be hundreds of millions of devices connected to the Internet, and that will be creating revenue-generating opportunities.

In addition, as society as a whole becomes more digitalized and various convenient digital services become widespread, the frequency of smartphone use and the amount of data used in people’s daily lives will also increase. I am convinced that the Company’s leading role in promoting the digitalization of society will generate a positive impact on the Consumer segment.

Z Holdings does business in the commerce, media, and strategy fields, but what I am really excited about and what our entire Group is working on is the commerce field. Z Holdings has set a target to become No.1 in e-commerce transaction value (merchandise)^*6 in Japan in the early 2020s. The fiscal year ended March 31, 2021 saw high growth in e-commerce transaction value due to increased demand from the outbreak of COVID-19, but I see synergy with the whole Group, such as further collaboration with LINE, closer partnerships with PayPay, and utilization of SoftBank’s telecommunications business customer base, improving e-commerce transaction value. Z Holdings’ strategic FinTech field is still in the upfront investment phase, but it has a lot of potential and I expect that it will be spurred by the partnership with PayPay to reach a scale next to media and commerce.

[Note]

*6E-commerce transaction value related to merchandise

First of all, the business integration of LINE and Z Holdings will create significant synergies in the commerce and media fields we just talked about. Also, the fact that LINE has become a part of the Group means that we now have the last piece of Phase 1 of the Beyond Carrier strategy; the impact of this integration is huge. And I think we’ll see synergy not only between LINE and Z Holdings, but between LINE and our Consumer and Enterprise segments as well.

The Consumer segment released LINEMO, a LINE-affiliated brand available exclusively online, in March 2021. LINEMO offers LINE Giga Free, a service in which LINE can be used without consuming monthly data allowance that is proving popular and has led to gains in subscribers.

The Enterprise segment has the advantage of being able to propose LINE-based solutions that competitors cannot imitate. For example, when a client company develops a new digital service, SoftBank’s Enterprise team can now be the contact point and propose an entire system that contains everything they need, from cloud services to devices. The client could instantly deliver new digital services to consumers on a proven platform used by tens of millions of LINE users.

A Holdings Corporation, a strategic holdings company in which SoftBank and NAVER each invested 50% capital, owns the new Z Holdings that has integrated the businesses of LINE and Z Holdings. These changes further strengthened the relationship between NAVER and SoftBank. NAVER is a company that operates the largest search engine portal in South Korea, but beyond that, it is a very technologically advanced company that develops cutting-edge technologies such as shopping, AI, autonomous driving and robotics. SoftBank established steering committees with NAVER in the fields of advertising, commerce, positioning and maps, cloud, and overseas business to work towards maintaining speedy collaboration and creating synergy among both companies.

I’m very aware that investors have this concern. However, since LINE underwent administrative guidance related to handling of personal information immediately after the business integration, Z Holdings has made the improvement of data governance and security their highest-priority issue. Z Holdings is a listed company and while SoftBank respects this independence, we have requested Z Holdings to accelerate their effort to generate synergies with our support on all fronts, because we have a track record of rapidly generating synergies when we acquire many different companies.

Synergy among the businesses is gradually materializing during the first quarter of the fiscal year ending March 31, 2022 as LINE’s individual performance is becoming profitable on a quarterly basis, excluding temporary factors. Going forward, we expect further growth through synergies based on business selection and centralization and advanced data linkage associated with the business integration of Z Holdings and LINE.

SoftBank began offering 5G service in 2020 and people may be tempted to think that an increase in communication speeds alone is not really a significant change. The reason that’s not true is that the current 5G service, called a “non-standalone mode” service, is provided by linking existing 4G core networks with 5G base stations. There are three major features of 5G: “ultra-high speed and large capacity,” “massive machine connections,” and “ultra-low latency,” but in “non-standalone mode,” only “ultra-high speed and large capacity” are viable. However, in the “standalone mode” scheduled to be released in the fiscal year ending March 31, 2022, fully independent 5G-dedicated core networks will link to 5G base stations, bringing the 5G features I mentioned above to their maximum capacity. The feature I look forward to most is “ultra-low latency,” in which people will be able to use information in real time without feeling any sense of lag even from remote locations. In other words, even when you are far away, things will appear as though they’re right in front of your eyes and you will be able to operate construction machines and medical devices. When “standalone mode” is completely implemented in 2022, within five years the world will change as dramatically as after the switch from feature phones to smartphones. Envisioning a time when “standalone 5G” becomes widespread, SoftBank established a “5G Consortium” in June 2021. The 5G Consortium is an organization comprised of experts and companies from many fields, communications device vendors, suppliers and solutions partners who meet to review and discuss specific ways to solve issues by industry or field and openly carry out proofs of concept (PoC). In this way, we will co-create revolutionary products and services that leverage the features of 5G with all kinds of partners and lay the groundwork for future growth. Please look forward to progress in this area.

Though dividends remain unchanged, we have added the implementation of flexible share buybacks, to keep the “total shareholder return ratio of approximately 85%^*7 for the period from the fiscal year ended March 31, 2021 through the fiscal year ending March 31, 2023” policy unchanged. Our policy to pursuit both growth and shareholder returns will not change, but we will make firm investments in growth to capture the vast opportunities alongside the digitalization of society and the Company intends to reward our shareholders with an increase in corporate value. We have no intention at this time of lowering the amount of dividend per share in the future, assuming there are no extreme changes in the business environment. The Company will continue to actively issue shareholder returns on the assumption of profit growth.

[Note]

*7Total amount of dividends paid and treasury stock retired during the three years from the fiscal year ended March 31, 2021 through the fiscal year ending March 31, 2023/total amount of net income attributable to owners of the Company during the same three years

There is a clear difference between our parent company, SoftBank Group Corp., which is a strategic holding company that invests on a global scale, and SoftBank, an operating company targeting expansion in non-communications fields as it further grows its core telecommunications business. Having SoftBank Group Corp., whose business area differs from ours, listed together with SoftBank allows for a more diverse response to investor needs.

I believe that SoftBank’s status as a SoftBank Group Corp. subsidiary is a great advantage for us as an operating company. SoftBank Group Corp. is invested in unicorn companies around the world directly or through funds. So for us, being able to partner through SoftBank Group Corp. with global unicorn companies that have premier business models and technologies means that we can commercialize excellent business models and technology in Japan while minimizing risk. Of course, we make all decisions on which companies to partner with based on their compatibility with the Japanese market, and we are not forced by our parent company to collaborate with companies that SoftBank Group Corp. invests in. Management decisions are made carefully to ensure that the interests of minority shareholders are not compromised.

As President & CEO, I assume full responsibility for business execution. Chairman Miyauchi is responsible for the partnership with Z Holdings and partnering with AI unicorn companies around the world in which SoftBank Group Corp. invests directly or through funds, and improving internal collaboration within the Group to create even more synergies.

Mr. Son and I have a bond from fighting many battles together since the early 2000s when we began an aggressive entry into broadband. At the time of my appointment as President & CEO, he has given me a lot of advice. He has encouraged me to “let technology lead the company.”

Mr. Son remains on our Board as Board Director, Founder, but he hasn’t attended any internal management meetings for many years now and only attends Board meetings. He provides wonderful insight and shrewd critiques at Board meetings that add greatly to the improvement of corporate value. One example is the multifaceted advice concerning partnering with AI unicorn companies around the world, which largely benefits our business strategy. Another aspect is the solid line Mr. Son draws between SoftBank Group Corp. and SoftBank as they are both listed companies, so there is never any disadvantage to minority shareholders of SoftBank as a result of Mr. Son’s ideas as president of our parent company.

In the short-term, the risk is the impact of mobile price reductions, but I don’t see it as a significant risk because the Enterprise segment, Yahoo! JAPAN/LINE segments, and new business fields such as IoT are growing, so it looks like we’ll be even less dependent in several years on revenue from mobile communications charge.

The growing Enterprise segment is getting inquiries from client companies nearly every day. Rather, we face a problem of securing enough sales and engineering personnel to respond to client expectations and deciding which companies to partner with. These are challenges to maintaining high growth and for which we’re pressed to find an answer.

Hiring AI engineers has become an important management issue, and we are competing human resources with overseas Internet companies. I actually directly handled hiring myself in some cases. The Company is going to overcome challenges and be on equal footing with these companies in hiring.

SoftBank also knows the importance of working to improve governance of appropriate processing of personal information throughout the Group. In light of LINE undergoing administrative guidance for personal information handling, the Company is creating stronger internal control systems to process personal information properly throughout the Group.