SoftBank’s Strength: Organizational Capability
As COO, I oversee the Consumer segment. I joined SoftBank as a university graduate in 1985, and have spent the last 36 years with it. The Company employed around 100 people at the time I joined. In true startup fashion, we learned everything by trial and error. In the 2000s, I was involved in the startup of the broadband and mobile businesses, which are now at the heart of the Consumer segment. Later, when I managed marketing for the Consumer segment, I accepted the challenge of running revolutionary promotions that had never been attempted before, and after earning my wings in the Enterprise segment, I was promoted to Representative Director & COO in 2017 and still serve in that capacity today.
First-hand experience in several business units has shown me that one of SoftBank’s strengths is its organizational capability. From the managers to each individual employee, people at SoftBank all share a single philosophy, vision, and strategy. When everyone eyes the same goal, we can work backwards from that to take actions, which is the secret to the Company’s strength. That’s why when I took charge of the Consumer Business Unit I gave a lot of thought to what vision I should share with the employees. SoftBank’s corporate philosophy is “Information Revolution — Happiness for everyone.” In the Consumer segment, what matters is what the customers who are using our service want, and what needs they will have in the next several years. We always put the customer first. But at the same time, we are running a business and thus we cannot afford to lose to our competitors. With these ideas in mind, I invented the slogan “Trust Game Winner,” meaning that an enterprise will win out in a highly competitive arena when it boldly continues the fight to earn the deepest customer trust.
If We Deliver Customer-First Services, the Results will Surely Follow
The Consumer segment is SoftBank’s core business and is a stable generator of over ¥600 billion in operating income annually. In SoftBank’s efforts to launch and expand new businesses one after another in our Beyond Carrier strategy, the stable profit generated by the Consumer segment is an indispensable driving force for growth. The operating income of that same Consumer segment was ¥71.8 billion at the time SoftBank acquired Vodafone (Japanese subsidiary) in our full-fledged entrance to the mobile business in 2006.*1 Behind the fact that we achieved a nine-fold increase in operating income in just 15 years is the history of employees working together in one force to make the Company the “Trust Game Winner.”
First, we announced the White Plan in 2007. In the mobile market at that time, there were a lot of complaints because existing telecom carriers were putting out complicated price plans that were hard to understand, so SoftBank focused on this issue. Our simple, reasonably-priced White Plan garnered the support of many of our customers and massively increased our subscriber base. Next, we once again put the customer first when we became the Japan’s exclusive distributor of iPhone in 2008. In the early days of the launch, the iPhone lacked some features which users in Japan needed, so SoftBank approached Apple Inc. to have improvements made, and the iPhone remains a product that Japanese customers still love today.
The “Trust Game Winner” slogan also served the Company on the pricing front, where SoftBank continues to remain a leader. For example, at the time that the competitors were primarily promoting 3 GB and 5 GB monthly data plans, we preempted them by rolling out larger 20 GB and 50 GB data plans. We believed that the number of customers who want stress-free use of videos, gaming and other content that consumes a lot of data on their smartphones was only going to increase. Both of the data plans ended up becoming huge hits for SoftBank. Also, we are the first to introduce multi-brand strategy in which one carrier offers multiple brands with differentiated features. Now the strategy has become a standard in the industry. In 2014, as MVNOs*2 that offered medium- and low-volume data plans for low prices entered the market one after another, we launched the new brand Y!mobile with high-quality MNO*3 communications at price points near MVNO’s. There was a lot of argument inside the Company about whether such unusual price cutting might lead to lower financial performance, but we still ultimately decided that customer needs had to win out. Deployment of Y!mobile definitively caused average revenue per user (ARPU) to fall, but branding the large-capacity SoftBank and low- to medium-capacity Y!mobile each with its own distinct characteristics grew subscribers in both brands on such a steady basis that in 6 years the numbers reached 25.93 million, or 1.8 times the number of smartphone subscribers. This caused mobile revenue to fall for a short time, bottoming out in the fiscal year ended March 31, 2018, when it reversed and has continued to rebound with revenue increases each year since.
SoftBank continues to play offense in ascertaining what is best for the customer and offering services that meet their needs. ARPU does go down when the Company releases an aggressive price plan, but if we build a relationship of trust with our customers, there is no doubt the results will follow. These results mean subscriber growth. Revenue is ARPU multiplied by number of subscribers, so if we can grow the number of subscribers, it leads to higher revenue. Based on this belief, everyone in the Consumer segment is working together on reaching the high target of 30 million smartphone subscribers set for the fiscal year ending March 31, 2024.
- *1Figures for the fiscal year ended March 31, 2006 are the aggregate of Vodafone K.K. and the Broadband Infrastructure and Fixed-line Telecommunications segments of SoftBank Group Corp. (SoftBank Corp. at the time) and are based on JGAAP.
- *2Mobile Virtual Network Operators
- *3Mobile Network Operators
Revenue and Profit Increased, but Competition Intensified in the Fiscal Year Ended March 31, 2021
For the fiscal year ended March 31, 2021, revenue from the Consumer segment was ¥2,770.4 billion, a 2.7% increase year on year, while operating income was 1.8% higher over the previous year at ¥658.6 billion, representing both revenue and profit growth. ARPU fell due to the penetration of so-called “unbundled plans” that separate handset payments and service fees and the increasing proportional share of our relatively low priced Y!mobile brand. On the other hand, smartphone subscribers increased by 1.79 million over the previous year to 25.93 million subscribers. In addition, the growth in telework drove an increase in the number of broadband and electricity service subscribers. Broadband service sales were brisk, especially for SoftBank Air, which does not require fiber-optic installation work. Since time that consumers spent at home increased due to stay at home policy during the outbreak of COVID-19, concern for electric bills increased and boosted our electricity service, which increased its subscribers by 51% year on year to 1.74 million subscribers.
At the same time, the fiscal year ended March 31, 2021 was also a year of intense competition in the mobile market. The spur for this was announcement of the results of a Ministry of Internal Affairs and Communications survey that concluded: “For a monthly data plan of 20 GB, Japan’s telecommunications service charges are the highest in the world.”*4 Partly due to this announcement, there was an increase in demand for more variety of services at lower costs, and all of the major telecommunications carriers launched new 20 GB data plans available exclusively online while lowering telecommunications service charges for existing brands. We also started in March 2021 to offer LINEMO, a 20 GB data plan at ¥2,480 per month (excluding tax), available exclusively online. The Company also lowered prices for SoftBank and Y!mobile at the same time.
- *4“Survey on Differences in Telecommunications Service Charge between Domestic and Overseas Markets,” the Ministry of Internal Affairs and Communications
Lower Profit Anticipated in the Fiscal Year Ending March 31, 2022 due to Mobile Service Price Reduction
For the fiscal year ending March 31, 2022 we anticipate a negative impact of about ¥70 billion due to the ARPU decline caused by mobile service price reduction. Such impacts include not only acquisition of new subscribers in new, lower-cost plans, but existing users transitioning to lower price plans. To overcome this negative impact, we will continue our effort to increase the number of smartphone subscribers, as well as expand the sales of broadband and electricity services, and reduce costs. Despite these efforts, in the fiscal year ending March 31, 2022, we expect operating income in the Consumer segment to decrease by more than ¥10 billion from the previous fiscal year.
Key to Future Growth: Group Synergy
As I said at the beginning, SoftBank’s goal is to be the “Trust Game Winner.” SoftBank’s mobile strategy is to build trust with customers with innovative services that match their needs and achieve growth by expanding the number of subscribers. As reduced prices have made all providers comparable on the cost front, the crucial element to increasing subscribers going forward will be the degree to which we can offer services that make people choose us. That’s where group synergy comes in. Our group includes services like Yahoo! JAPAN, LINE, and PayPay, all of which have the largest user bases in Japan. By strengthening collaboration between these services and mobile telecommunications services, we can offer our customers benefits available from utilizing the synergies only SoftBank can provide. For example, we began collaborating with Yahoo Japan’s e-commerce in 2017 to offer discounts to our mobile users, which led to acquiring new mobile users and customer retention. LINEMO, a new brand launched in March 2021, is well received for service providing unlimited use of LINE, Japan’s No.1 messaging app with 89 million domestic users*5, without consuming monthly data allowance, and steadily growing in subscribers. Then in July 2021, LINEMO added a Mini Plan of 3 GB data allowance for ¥900/month (excluding tax). Central to debate in 2020 was the 20 GB plan, but in a user survey we conducted independently, many customers indicated they wanted a smaller data plan, so the Company set out right away to respond to this need. In addition to the Company’s aim to prevent churn to competitors’, LINEMO led to acquisition of new users. Here again, SoftBank’s aggressive stance that puts customers first achieved results. I think that meeting needs in this way works to differentiate ourselves from our competitors so that we become the provider which customers choose.
It is true that over the short term, the mobile service price reduction is predicted to negatively affect performance. However, I’m confident that by aligning with the needs of our customers, refining our multi-brand strategy, which is our strength, and pursuing group synergy, we will surely be able to increase the number of subscribers and, in turn, put the Consumer segment on a growth trajectory again.
- *5Monthly Active Users (as of June 2021)
One SoftBank: Executing the Beyond Carrier Strategy
Finally, I’d like to explain a bit about the role the Consumer segment needs to fulfill within our corporate strategy. Beyond Carrier is SoftBank’s game plan to launch and grow new businesses one after another in areas outside of telecommunications in order to further increase corporate value. For new businesses, there’s a tendency to focus on the revolutionary nature of the product, but what becomes necessary when you are trying to get that product widely established as a service are dedicated sales efforts. To speak of a specific case, for example, the service PayPay that started in October 2018 now dominates the market for smartphone payment services in Japan, and the people who actually helped it get there were in our Consumer segment. During the PayPay launch, our Consumer segment sent over 200 people including an executive officer to PayPay Corporation. Building on the sales skills that led them to success after launching broadband services from the ground up, they built up a sales organization swiftly, trained several thousand staff and went from store to store one at a time across the country to develop merchants one after the other.
Today, all kinds of companies are attempting to launch new businesses, but few of them are capable of rolling out a large-scale sales effort like ours. It was possible for SoftBank because we have an elite sales force in the Consumer segment. I said that our strength was in our organization, but as you see with the PayPay case, it’s even more apparent that all employees have to band together across segments to work for a common cause to succeed. SoftBank wants to create a second, a third and more new businesses following PayPay. To make that happen, the Consumer segment will continue to do what we can, including sending in our top sales talent.