Face change with a future-oriented mindset
and become a compass that illuminates
the destination in difficult times

The fiscal year ending March 31, 2023 is the year in which the impact of the mobile service price reduction will peak. Profit would be lower year-on-year if there were not remeasurement gain from making PayPay a subsidiary. Even though SoftBank has increased revenues and profits continuously since its listing, we are fully aware that our shareholders and investors are anxious about the decline in earnings from our Consumer segment, which is the backbone of our business.

At this juncture, I am reminded of the time when we once posted a loss of nearly ¥100 billion due to our upfront investment in the ADSL service “Yahoo! BB”. At that time, our President Masayoshi Son (currently Representative Director, Chairman, and CEO of SoftBank Group Corp.) related the following story: “In a dark sea, you can't tell the size of the waves, the depth of the water, or where the shore is. Investing in a loss-making company is like swimming in such a sea, and nothing is more unsettling. At such times, you need a light to illuminate the sea.”

To me, the fiscal year ending March 31, 2023 resembles that “dark sea.” Therefore, the reason we have decided to openly disclose our plan for the fiscal year ending March 31, 2024 and beyond is precisely to “illuminate the sea;” in other words, to enable shareholders and investors to understand the future outlook by explaining everything, including the time frame in which the impact of the mobile service price reduction will run its course, our cost reduction measures, and the growth of businesses that drive the “Beyond Carrier” strategy, such as the Enterprise and the Yahoo! JAPAN/LINE segments.

First, the negative impact of the mobile service price reduction is expected to be ¥90 billion (¥77 billion in the previous fiscal year). This is because many customers rethink their price plan when they get a new phone, so we expect the impact to peak as this cycle plays out. In addition, sales-related expenses, etc, are expected to increase by ¥60 billion, of which ¥40 billion is due to the deferral of customer acquisition costs (non-cash). Customer acquisition costs are capitalized at the time of their expenditure and are amortized (recorded as expenses) over the period that the device is used. The customer acquisition costs incurred in the fiscal years ended March 31, 2020 and 2021, which were kept low due to the amendments to the Telecommunications Business Act and the COVID-19 pandemic, were deferred to the the fiscal year ended March 31, 2022. In contrast, the increased customer acquisition costs associated with increased sales activity in the fiscal year ended March 31, 2022 will be deferred primarily to the fiscal year ending March 31, 2023 and thereafter. We therefore anticipate an increase in sales-related expenses in the fiscal year ending March 31, 2023 compared to the previous fiscal year.

We are also factoring in a decline in gross profit on handset sales due to a decrease in the number of handsets shipped compared to the fiscal year ended March 31, 2022; a downturn in Electricity following its strong performance in fiscal year ended March 31, 2022; and a cost increase of ¥15 billion due to the termination of PHS service. The Consumer segment is facing a combination of these negative factors in the fiscal year ending March 31, 2023. However, the negative impact of the mobile service price reduction is expected to peak in the fiscal year ending March 31, 2023, shrink to ¥50 billion in the following fiscal year, and then flatten out in the subsequent fiscal years.

On the other hand, the cumulative number of smartphone subscribers is on the rise, with our smartphone users accounting for 47% of “Yahoo! JAPAN” Shopping transaction value^*1 and 43% of “PayPay” GMV (gross merchandise value). I want to emphasize the point that our smartphone users are an important foundation for the growth of the Group's various businesses, not limited to the telecommunications business.

For the fiscal year ending March 31, 2023, the average total ARPU (average revenue per user per month) is expected to decrease by ¥270 from the previous fiscal year. ARPU declined by ¥280 in the fourth quarter of the fiscal year ended March 31, 2022 compared to the same period of the previous year, which means the decline in ARPU is expected to narrow down in the fiscal year ending March 31, 2023. Going forward, revitalizing the “SoftBank” brand will be a major theme. To make people feel the value unique to the “SoftBank” brand, we need to link the various services within the Group and increase the number of attractive services that 5G offers. I believe that this will increase the number of unlimited data plan users of “SoftBank” brand, and increase the number of users switching brands from “Y!mobile” to “SoftBank”, which will boost our ARPU.

We expect the cost reduction to become more pronounced from the fiscal year ending March 31, 2024 onwards. First, with regard to fixed costs, the depreciation of large capital expenditures at the ¥700 billion level that were made after 2012, when the company acquired the wide-coverage frequency band (what we call the “Platinum Band”), has come to an end, which means depreciation and amortization expenses are entering a contraction phase. Furthermore, PHS, 3G, and ADSL services will be phased out one by one, and the associated equipment will be decommissioned promptly. By consolidating our networks into 4G/5G and optical lines in this way, we expect to reduce their operating costs by approximately ¥20 billion in total. The negative impact of the mobile service price reduction in the fiscal year ending March 31, 2024 will be largely offset by the decrease of depreciation and operational costs, and we intend to return to an earnings growth trend with business growth in the Enterprise and the Yahoo! JAPAN/LINE segments.

I also serve as head of the Purchasing Department, where we are also promoting cost reduction through our purchasing strategies. I always tell my team to think of themselves not as a purchasing department but as “Purchasing Inc.” I constantly guide the team so that they always aim to expand “Purchasing Inc.'s revenue, which means transaction volume, and its profit, which means cost reduction amount,” by thoroughly involving themselves in every aspect of the Group's businesses and increasing the transaction volume of the Purchasing Department. We have accumulated a wide range of purchasing know-how through various purchasing initiatives, such as using a reverse auction system in which SoftBank, the buyer, presents the starting price and terms and condition and then selects a supplier, as well as through joint Group purchasing and by having our Purchasing Department employees undertaking the tasks for the Group companies or work on loan for them. Based on this know-how, we have been actively working to reduce costs across the entire Group since 2019, when Yahoo Japan became a subsidiary. In the fiscal year ended March 31, 2020 the results of such cost reduction measures amounted to about ¥7 billion, mainly for Yahoo Japan, but each year we covered more Group companies, and by the fiscal year ended March 31, 2022, the annual savings reached ¥16 billion. Our aim is not to meddle in the cost reductions of Group companies as the parent company, but rather to encourage each Group company to take the initiative to be more effective, realizing that the pursuit of smarter purchasing activities can generate a considerable amount of money and lead to business improvement, and in fact this is exactly what has been happening recently.

As a basic policy, when we execute investments, we use the internal rate of return (IRR) as the hurdle rate. Because the Company makes maximum use of its liabilities, our weighted average cost of capital (WACC) is roughly 5%, but when making investment decisions, we look for investment returns that are commensurate with business risks well above that level. In calculating the IRR, the Corporate Planning Division, which I head, carefully examines the business plan from the business unit, takes into consideration multiple risk scenarios, and calculates the IRR based on approximately five years of cash flow and terminal value. After the investment is executed, Board Directors and Audit & Supervisory Board Members are dispatched as necessary and quarterly monitoring is conducted to check the progress against the approved business plan and take necessary measures.

Regarding dividends, in the fiscal year ending March 31, 2023 we are committed to a total annual dividend of ¥86 per share, maintaining a total shareholder return ratio of approximately 85%^*2. Our target for adjusted FCF is also based on this assumption. From a cash management point of view, there is a trade-off between growth investments and shareholder returns, but we want to be a company that pursues both. We have been consistent in this approach since our listing as a publicly traded company. While our policy of high levels of shareholder returns will remain unchanged in the fiscal year ending March 31, 2024 and beyond, we will be setting and disclosing new medium-term targets amidst the current abundance of business opportunities, and we will continue to consider where to strike the balance between growth and returns, taking into account the dialogue with the capital markets.

An ancient Japanese proverb cautions us to “cut your coat according to your cloth,” or in modern terms, “consider your income before spending.” In other words, you must reliably anticipate revenues and keep costs in line with your budgets. I believe that the basic principle of any business is to first generate proper cash flow through solid operations. On the other hand, when a great opportunity presents itself, you must seize it, even if you have to leverage it with borrowing. In other words, I believe that the most important role for a CFO is to set a firm target and then serve as a compass to guide the company on a growth trajectory by controlling cash while judging when to use the gas pedal and the brake.

The fact is that Yahoo Japan and LINE are indispensable for advancing the “Beyond Carrier” strategy, and the Finance Division played a central role in making them subsidiaries of SoftBank. The same is true of our investment in PayPay. In the future, if there is an opportunity to acquire a major growth engine, we want to be able to allocate funds and invest them without hesitation, and for this reason, we thoroughly manage our cash flow on a daily basis.

SoftBank is a unique company that has grown by spotting trends early and changing its business domain accordingly. This is why our DNA is rooted in a spirit of freedom and challenge, with no barriers between the possible and the impossible, and this dynamism is our strength. While I am committed to building a sound and stable financial foundation, I also place great importance on the DNA that compels us to rise to these challenges.

I believe it is very important to face change with a future-oriented mindset. Thinking about this from the standpoint of the Finance Division, I think there are three components of this mindset: (1) Analyze change as the accumulation of differences; (2) Shorten the clock cycle; and (3) When in doubt, look further ahead.

To navigate as a compass, you must be clear about where you are going, measure the path from your current location to the goal, and consider what it will take to reach it. However, the business environment changes from moment to moment. I define this change as the accumulation of differences. It is important to “Analyze change as the accumulation of differences” to consider what actions are necessary, that is, to compare your situation to the initial budget, the previous month, and the previous year, carefully analyze the extent of the difference, why it occurred, why it has grown, what will happen if we ignore it, and discuss what actions we should take to achieve the goals. That is the first component.

The second, “Shorten the clock cycle,” means shortening the cycle in which the forecast is revised. Rather than being forcibly tied to a budget decided at the beginning of the period, I believe it is more important to respond to changing conditions and frequently revise our forecasts based on our analysis.

Finally, “When in doubt, look further ahead,” is really more like SoftBank's slogan than my personal philosophy. For example, by discussing what is coming 10 years from now, we can have a common understanding of what we should aim for in the long term and what we should be working on to achieve that, rather than just facing the issues that are currently piling up in front of us. Having a long-term perspective for the future is extremely important for a group like ours to move forward. With this future-oriented mindset as my personal philosophy, I would like to fulfill my role as a compass guiding SoftBank's sustain­able growth.