Face change while focusing
on the future even when
times are tough, and be a
compass that leads the way

We announced our medium-term management plan ending in FY2025. The plan's theme is to rebuild our business infrastructure and to recover from the impact of the mobile service price reductions that took place in the spring of 2021.
In formulating the plan, we determined that net income attributable to owners of the Company (“net income”) is the most important indicator, and set a target of achieving recordhigh net income of ¥535 billion in FY2025. The reason for changing the most important indicator from operating income in the previous medium-term targets to net income this time is that the subsidiaries that make up our Group are not only wholly owned subsidiaries, but also include subsidiaries with minority shareholders such as Yahoo Japan, LINE, and PayPay, and we believe that net income is the most appropriate indicator for measuring our performance.
In addition, we set our operating income target at ¥970 billion for the final year of this medium-term management plan. This is because we firmly incorporated milestones for continued growth beyond the period of the medium-term management plan. We calculated this target by working backward from the record-high ¥535 billion net income target, and it is by no means an easy target to achieve. However, we believe that returning operating income to the level before mobile service price reductions is the least we can do to meet the expectations of our shareholders and investors, and we are determined to achieve our operating income target.

Mobile service revenue in the Consumer segment was greatly affected by the mobile service price reductions, but we are aiming for a turnaround after hitting bottom in FY2023. In terms of segment income, we are aiming for a turnaround after hitting bottom in FY2022, one year earlier than mobile service revenue. The rationale for this is that, although the impact of the mobile service price reductions and higher electricity costs will continue, we expect to be able to offset this through cost reductions, while the decline in ARPU is beginning to narrow, and the factors negatively affecting profits are already factored into the picture. On the other hand, the number of smartphone subscribers is increasing steadily driven by “Y!mobile” as ongoing efforts to acquire users from other companies materialize, and we can expect higher revenue and profits from this. We have three brands, “SoftBank”, “Y!mobile”, and “LINEMO”, and we would like our customers to experience the added value we offer by starting with “Y!mobile”, which offers lower monthly charges for low to medium data usage. Subsequently, we would like to increase ARPU by strengthening our efforts to encourage customers to migrate to the “SoftBank” brand, where they can receive that added value in the form of unlimited data plans.
We will also continue to focus on expanding our customer base. Competition for customer acquisitions in the telecommunications industry is intensifying today, and both new acquisitions and churn are high. Competition will only intensify, and we expect conditions to remain challenging. In FY2022, we spent a lot of money on customer acquisition, but the cost-effectiveness of this investment is verified by setting a lifetime value (LTV) for each brand. Furthermore, the smartphone customer base is very important as a foundation for creating Group synergies through smartphone-related services provided by the Group, such as “PayPay” and “LINE”, to acquire subscriptions and promote continued use. Through these efforts, we will surpass our 30 million total smartphone subscription target in FY2023 and aim to continue adding 1 million smartphone subscriptions each year.

For the Media & EC segment, we are aiming for renewed growth in media, search, and commerce, while also streamlining operations. To consolidate the group's inherent strengths and accelerate synergy creation, we have reorganized the group in October 2023 and changed the company name from Z Holdings to LY Corporation. Taking advantage of this reorganization, we will make decisions more quickly and reduce fixed costs by streamlining overlapping businesses along with other measures. Furthermore, we are preparing to provide services that will delight our customers by integrating the IDs of “LINE” and “Yahoo! JAPAN” and revamping our premium membership program. In addition, we believe we can push for renewed growth in the Media & EC segment by making full use of “LINE” and “PayPay” to improve profitability in the media and search domain and by integrating IDs with “PayPay”, which we plan to do during FY2024.

Given changes in social conditions, such as rising electricity prices and inflation, we expect to see a variety of factors driving up costs during the medium-term management plan period. However, we believe that we will be able to handle this cost increase as our depreciation and amortization will start declining. This is because the depreciation on the major ¥700 billion per year capital expenditures made since FY2012, when we secured the platinum band, is coming to an end. Furthermore, we expect to see lower network operating costs as we gradually phase out services such as PHS, 3G, and ADSL. For these, we aim to accelerate the effects of cost reductions by early removal of equipment. In this way, we will continue to tightly control costs.

Since our IPO, we have maintained a policy of pursuing both growth and a high level of shareholder returns. Our approach remains the same and we plan to continue maintaining a high level of returns. For FY2023, we plan to pay a dividend per share of ¥86, the same as in the previous fiscal year. We have not yet decided on dividends for FY2024 and beyond, but will make a decision after taking into account investor expectations. Looking back at our track record, we have paid high dividends while simultaneously making a variety of investments for future growth. We have invested a large amount of money thus far to incorporate Yahoo Japan, LINE, PayPay, and others into the Group and diversify our business portfolio. At the same time, we have been executing major capital expenditures for rolling out 5G. Going forward, there will be more opportunities for various growth investments, such as those related to generative AI, and we intend to maintain a balance between growth investments and shareholder returns.
We tend to be evaluated solely on the basis of dividend yield, but we believe that total shareholder return (TSR), which includes share price as well as dividends, is more important in demonstrating the balance between growth and shareholder returns resulting from our management efforts. Therefore, a portion of our officer remuneration incorporates medium-term performance-based remuneration, and we use TSR as the performance indicator.

We believe that appropriate capital allocation is extremely important to achieve both growth and high shareholder returns. We use adjusted free cash flow (FCF), which is operating cash flow minus capital expenditures and growth investments, as the starting point for all financial targets in our planning. With regard to our capital expenditure plan, the intensive investment for accelerating 5G rollout implemented in FY2022 has run its course, and we intend to control expenditures by focusing on investments that are necessary, such as expanding spot capacity in response to traffic levels. As a result, we expect capital expenditures to come to ¥330 billion per year from FY2023 onward, a substantial drop from the FY2022 amount of ¥407.5 billion. On the other hand, with regard to the use of adjusted FCF, we will examine what is best for the Company, paying out shareholder returns as well as improving our financial position.

As a basic policy, when we execute investments, we use the internal rate of return (IRR) as the hurdle rate. Since we make full use of debt, our weighted average cost of capital (WACC) is at about 5%. When making actual investment decisions, we look for investment returns commensurate with business risks far in excess of our WACC. 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, we dispatch Board Directors and Audit & Supervisory Board Members when necessary and monitor the business quarterly to check the progress against the approved business plan and take necessary measures.

I believe that the primary role of the CFO is to measure what comes in and control what goes out. 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. There is a widely known saying, “accounting profit is an opinion, but cash is a fact,” and I agree with this saying. I believe that having cash support is a very important factor no matter what you do, including for shareholder returns and growth investments. Even when remaining focused on cash, when a great opportunity presents itself, you must seize it, even if it means taking on debt. Accordingly, I believe that the CFO's most important role as a compass is to navigate the company onto a growth trajectory by carefully setting cash flow and other financial targets and controlling the cash by knowing when to speed things up or slow things down.
Furthermore, I personally believe it is crucial to face change in a future-oriented manner. Thinking about this from the standpoint of the Finance Division, I think there are three key points: Analyze change as the accumulation of differences, shorten the clock cycle by revising forecasts frequently, and looking further ahead when in doubt. Going forward, if we make good use of generative AI, we will be able to quickly analyze changes, significantly reduce the time required for financial analysis, and shorten the clock cycle by making monthly forecast revisions into weekly or daily revisions. However, even with these changes, it is still important to look far ahead when in doubt. I intend to serve as a compass, keeping my eyes firmly fixed on the distant future, while becoming more sensitive to change and making revisions more frequently than ever, so that we can safely sail toward our vision for 2030 and beyond.