SoftBank will seek to
President & CEO
Triggering Japan's digitalization
The Japanese economy is currently on the verge of a major turning point. The global economy in recent years has been driven by foreign IT companies, which have grown drastically over the past 30 years. Meanwhile, Japan's adoption of digital technology has markedly lagged that of other developed countries, a trend that is undermining its competitive advantage in the international marketplace. There are still many challenges for Japan to overcome, such as the lack of awareness of the usefulness of digital technology and a low smartphone penetration rate, which indicates that not all people are enjoying the benefits of digitalization.
“Information Revolution — Happiness for everyone” is SoftBank's corporate philosophy. Making people's lives better with the power of technology has been our plan of action ever since the Company was founded. Fortunately, our group has not only the digital foundation developed in the telecommunications business, but also top-class services in every digital field in Japan, from e-commerce, portal sites, and messaging apps to cashless payments. In fact, we are in the best possible position, as a corporation, to harness the power of technology to propel Japan's hitherto sluggish digital transformation. So that Japan can make its presence felt in the international community over the next 20 to 30 years, I believe we must first act as a detonating agent to trigger a wave of digitalization across the entire nation.
“Beyond Carrier” Growth Strategy
Tapping the enormous market that lies beyond digitalization
If we are asked why we are so focused on digitalization, it is, of course, because we see greater business growth opportunities in the future beyond digitalization.
The digitalization of every aspect of people's lives means information that has been scattered around the analog world should be transformed into data all at once. And by combining such a large amount of data, new added value and new markets will be created. For example, if traffic and human flow data can be used to create highly accurate digital maps, self-driving vehicles will spread rapidly, and if digital space-based remote medical care systems can be established, the concept of community healthcare will be revolutionized. The next 10 to 20 years should be a time when digitalization will fundamentally change the way every industry takes its place.
In this era of change, I have no intentions whatsoever of letting SoftBank remain just a telecommunications company. We have our sights set on a much bigger market in which all people and things are digitally connected. We will combine our strengths including e-commerce, messaging, and payments with the foundations of telecommunications infrastructure to drive the digitalization of various industries. This is the “Beyond Carrier” worldview that we at SoftBank are aiming for.
Importance of Telecommunications
Smartphones are key to connecting people with digital technology
Telecommunications are essential to the future of digitalization that we envision. No matter how much a company or local government digitalizes its services, the benefits of that digitalization cannot be enjoyed if the environment on the receiving end is still in an analogue state. Telecommunications fulfil the key role of connecting people with digital technology and smartphones as that point of contact will likely grow increasingly important going forward. Given that SoftBank aims to facilitate the digitalization of society, it is inevitable, in a way, that we must endeavor to expand the number of smartphone subscribers.
The role of mobile phone stores is also crucial to the increased uptake of digital technology in society. In the telecommunications industry in recent years, we have seen the closure of many stores nationwide and customer services have also been migrated to online channels. However, stores at which customers can obtain face-to-face assistance from professional staff members are an important entry point to digitalization and a source of support for many people. At SoftBank we want to ensure that no one is left behind in the shift to digitalization. If we deprive people of the opportunity to go digital by prioritizing cost reductions, we would be missing the point.
As CEO, I must always examine what needs to be done now for the benefit of society the next 20 to 30 years down the track and which choices will be more advantageous for the Company's business growth from a long-term point of view. Given that we are going to get involved in the digitalization of all industries in the future, the telecommunications customer base is still important, and if we consider the store as an important customer contact point rather than just a cost center, the business opportunities will still be wide open. In fact, we have assigned enterprise sales personnel to some of our mobile phone stores to start offering digital products and services to sole proprietors and small or medium-sized enterprises (SMEs) in each area.
Digitalization of industries underpinned by 5G
One elemental technology of digitalization is 5G. 5G's ultra-high speed, large capacity, ultra-low latency, and multiple simultaneous connections are indispensable to industrial digitalization. As Japan tries to catch up with the rest of the world in digitalization, it simply cannot fall behind other countries in 5G, a fundamental element of digitalization. At the end of March 2022, our 5G population coverage exceeded the target of 90%. Once the stand-alone communication network is in place, 5G will finally come into its full strength. We have set the fiscal year ending March 31, 2023 as the year of intensive investment in 5G, and we are thoroughly working toward the further advancement of 5G networks.
Growth Potential of Enterprise Segment
Digitalization of Japanese companies yet to hit full stride
One reason behind Japan's poor progress on digitalization is the slow uptake of digital technology by Japanese companies. Even though the COVID-19 pandemic has brought companies online, digitalization of SMEs in Japan has only just begun. Only the major corporations in Japan have finally taken steps to incorporate digital technology into their existing operations, but this does not mean they have built a whole new industry powered by digital technology. In other words, the adoption of digitalization in Japanese corporations has yet to go full tilt and the time to transform existing businesses into new digital tools is just around the corner.
In fact, in the first fiscal year after I was appointed President and CEO, I devoted a lot of my time to the Enterprise segment. I was involved deeply in a variety of projects, I engaged in sales activities myself, and I participated in discussions with corporate managers from many different industries. Although SoftBank entered the Enterprise segment after initially selling fixed-line communications and business mobile phones to enterprise customers, we are now taking on more and more large-scale digital transformation (DX) projects to digitalize entire factories with the use of 5G. This largely owes to our ability to offer a one-stop service, from consulting through to systems integration, because we took steps to bolster our ranks of digital professionals and I personally feel that the response from the market has been very telling.
Harnessing Group synergies to
promote digitalization at mid-tier
firms and SMEs
In the fiscal year ending March 31, 2023, we are also focusing our efforts on the market for mid-tier firms and SMEs. It is said that the total amount of IT spending at Japanese mid-tier firms and SMEs is comparable to that of the major companies. At long last, the time for the full-fledged adoption of digital technology among SMEs is drawing near, helped along by heightened demand for digitalization during the COVID-19 pandemic, the commercialization of 5G, and official support from the Japanese government, including the establishment of its Digital Agency. Up until now, we had chiefly focused on digitalization for large corporations, but within the Group there are many companies that specialize in the SME market, such as Askul Corporation and PayPay. We hope to leverage the customer bases of each Group company to keep costs to a minimum and efficiently open up a market for mid-tier firms and SMEs.
High Potential of Group Companies
“LINE” and “PayPay” are the “treasures” vital to Japan's digitalization
Z Holdings and “PayPay” are subsidiaries indispensable to our plan to carry out the “Beyond Carrier” strategy. Z Holdings owns the smartphone messaging application “LINE”, which boasts approximately 92 million users. You could say it is the national messaging app because it is used by almost all smartphone users in Japan. Meanwhile, the number of users of the cashless payment service “PayPay” now stands at around 50 million; “PayPay” commands a nearly 70% share of Japan's QR code payment market.
Given that we have come this far, the digitalization of Japan without “LINE” and “PayPay” is no longer conceivable. For instance, any company or local government entity in Japan would probably turn straight to “LINE” as the platform of choice when it needed to communicate directly with every individual. And with some 86 million users, we cannot forget “Yahoo! JAPAN”, the country's largest Internet portal site, together with “ZOZOTOWN”, a fashion e-commerce site that has gained a strong following. These dominant services are essential to Japan's digital transformation—they could even be seen as items of treasure in the digital world. The services like “LINE” and “PayPay” should never settle down small. We would like to maximize business value by consistently refining the strengths of our existing services.
The role of a leader is to clearly
show the way forward
The driving force behind a company's growth will always be its human resources. In the past 12 months I have carried out my management responsibilities with an emphasis on engaging in dialogue with employees. The Company has long conducted employee satisfaction surveys and “pulse” surveys in order to gain an understanding of every person's situation and boost their motivation, but in addition to those measures, immediately after I was appointed President & CEO last year I launched a monthly online morning meeting to be attended by all employees. This is not just with a few quick words, but for a good 30 minutes. I put together a presentation and directly communicate in my own words about the circumstances the Company is currently in and my own thoughts on it.
In my mind, the role of a leader should be to clearly show the way forward. People should naturally act, once they clearly understand what direction they are heading in and what is required of them. People work way more effectively on tasks they choose to undertake themselves than the jobs simply assigned to them. Even though the subject of my morning meeting changes every month, I have consistently communicated the message that if you lose your way or encounter difficulties, you should take a step back and look at the bigger picture. And especially because of the chaotic times we are experiencing right now, I want our employees to first imagine the next 20 to 30 years from now and then count backwards from there. Creating a presentation every month can be hard work sometimes, but I consider it to be one of my roles. It has been very well received by our employees, and it soon became the number one viewed content at our company.
Diversity, Equity and Inclusion
Becoming a dynamic company with diverse talents
When looking at talents, another key element is our commitment to diversity. At SoftBank we promote Diversity, Equity and Inclusion with the aim of building an organization conducive to spontaneous innovation in which all employees understand each other's differences, leverage the strengths of one another, and express opinions with an open-mindedness.
One theme we are particularly focused on is the empowerment of women. Last year we announced that we would aim to have women account for 20% of all management positions by the fiscal year ending March 31, 2036, which equates to a three-fold increase from the fiscal year ending March 31, 2022. To help us achieve this target, we first set up the Committee for the Promotion of Women in the Workforce. I myself assumed the role of chairperson on this committee. We have so far invited external experts to committee meetings to facilitate in-depth discussions about how to best reform our existing business model and working environment from the ground up. Also last year, we added two female external directors to the Board as part of our efforts to strengthen corporate governance. Not only have they brought their own specialized knowledge to the Board, but I really feel that their presence is contributing to multilateral and lively management discussions. We would like to continue to make SoftBank a dynamic company by actively promoting Diversity, Equity and Inclusion and realizing a corporate culture in which diverse talents can play an active role.
Seeking to solve social issues
To help bring about a sustainable society, we are actively undertaking initiatives geared towards the achievement of the Sustainable Development Goals (SDGs). SoftBank's sustainability initiatives aim to solve social issues through business. We believe that working to solve issues in society will ultimately lead to business growth for the Company, which is why we are seeking to make various contributions to society through our business activities. We hope to close the digital divide by expanding the use of smartphones, transform industries through digitalization in companies and local governments and solve issues concerning community healthcare and regional transportation, and contribute to the increased uptake of cashless payments through “PayPay”. All these initiatives seek to solve the social issues Japan currently faces with the power of technology, yet at the same time, they are also our mainstay businesses that drive profit growth.
Our high-altitude platform station (HAPS) business is but just one initiative with which we seek to contribute to society through business. My involvement in the HAPS business goes back 11 years from now to the time of the Great East Japan Earthquake in 2011. At the time, I headed up the on-site disaster recovery team in my capacity as CTO for a period of two months. Together with our engineers, we went around to inspect, one by one, all the base stations that had been damaged by the earthquake, but the scenes of destruction we saw with our own eyes were just indescribable. Telecommunications are a lifeline connecting one person to another. Even during times of disaster, they must be maintained no matter what, so that all people, wherever they may be, can equally benefit from telecommunication services. The strong desire to make that happen was the starting point of today's HAPS business. The fact that telecommunications is our core business is the very reason why I think there are still many things we can achieve for the benefit of society.
Natural disasters and other problems caused by climate change are also growing increasingly severe year after year. To help realize a decarbonized society as soon as possible, in May 2021 we released our Carbon Neutral 2030 Declaration and committed to reducing our greenhouse gas emissions to net zero by the year 2030. While switching to virtually 100% renewable energy for our own power use, we are also making maximum use of cutting-edge technologies such as AI and IoT to reduce power consumption in its data centers and telecommunication facilities.
Strongly generating cash as the source of shareholder returns
Shareholder returns has been a key management issue for SoftBank since our public listing in 2018. Actively deploying measures to drive business growth whilst also maintaining healthy shareholder returns is never easy, but personally I will do whatever it takes to uphold the promise I once made to stock market participants.
To that end, we are focused on the stable generation of cash flow—the source of shareholder returns every year. Even though we face some headwinds in the business environment from the impact of mobile service price reduction, we expect to be able to stably generate adjusted free cash flow of around ¥600 billion annually going forward from growth in other businesses and the various endeavors of management, including financial action measures. Given that our dividend payments presently total around ¥400 billion, I believe we have sufficient capacity to maintain the current level of shareholder returns.
On a daily basis I hear and read various opinions from investors regarding our policy on shareholder returns. Even now the management team is discussing our policy for the fiscal year ending March 31, 2024 onward, but my basic view is that we should continue with the high level of returns next fiscal year as well. Even if a time comes in the future when we drastically change our approach to shareholder returns, it will probably be accompanied by a major game-changing moment for the Company. For now, I remain firmly committed to paying all shareholders the healthy returns we promised to them as the management team of the Company.
Turning adversity into the driving force behind new challenges
The Enterprise segment, the Yahoo/LINE segment, and services such as “PayPay” are certainly benefiting from rapid growth right now. On the other hand, it is also true that this is a difficult time for the Company's overall profits due to the impact of mobile service price reductions in 2021. I believe my true value as CEO is being tested as to how we can overcome this challenging period and whether I can firmly prepare for the future without losing sight of the course we should take. I also made the decision to step up our 5G investments this fiscal year after backcasting from the future and concluding that it must be done now.
We expect the negative impact on profits from mobile service price reduction impact to peak in the fiscal year ending March 31, 2023 before declining sharply thereafter. If we can get through this difficult time, then all we need to do is go on the offensive again, so in a sense, it was probably my destiny to be appointed President and CEO at this time. This adversity is motivating SoftBank to take up new challenges and all employees are working together to maximize corporate value. SoftBank is currently on the cusp of a transformational period, and we will do our utmost to live up to the expectations of all stakeholders.
- Junichi Miyakawa
- Founded an Internet service provider (ISP) in 1991, serving as president for about 10 years. Joined what is now SoftBank Corp. in 2001 and was appointed Director & Executive Vice President (CTO) in April 2006. Contributed to the growth of the Company primarily as head of the Technology Unit. Appointed Representative Director & CTO of SoftBank in April 2018. More recently, served as president of multiple Group companies and spearheaded the Institute for AI and Beyond in partnership with the University of Tokyo. Has served as President & CEO of SoftBank since April 2021.