|Date||Tuesday, November 5, 2019 4:00 pm – 5:30 pm|
|Speakers||SoftBank Corp.: Ken Miyauchi (President & CEO), Junichi Miyakawa (Representative Director & CTO), Kazuhiko Fujihara (Board Director, Executive Vice President & CFO)|
Mr. Ken Miyauchi, President & CEO of SoftBank Corp., discussed two themes at the earnings results briefing: (1) consolidated results for Q2 FY2019 and (2) progress on growth strategy.
1. Consolidated Results for Q2 FY2019
In the six months ended September 30, 2019 (April-September, H1 FY2019), revenue increased by 32% year on year to 2,373.1 billion yen. Operating income rose by 25% year on year to 552.0 billion yen. Net income attributable to owners of the Company increased by 11% year on year to 327.4 billion yen. SoftBank Corp. made Yahoo Japan Corporation (currently Z Holdings Corporation) a consolidated subsidiary in June 2019. SoftBank Corp. has retrospectively adjusted its results for the fiscal year ended March 31, 2019 (FY2018) under the assumption that Yahoo Japan Corporation was made a consolidated subsidiary at the beginning of FY2018. Even when comparing the results for H1FY2019 with the retrospectively adjusted results for H1 FY2018, SoftBank Corp. still delivered higher revenue and profit. Looking at segment performance, revenue increased across all segments. Revenue from businesses other than mobile communications services for individual customers has been increasing year by year as a percentage of overall revenue, driven by growth in the Enterprise segment and broadband services. As a result of the consolidation of Yahoo Japan Corporation, the percentage of revenue from businesses other than mobile communication services for individual customers has surpassed 60% of overall revenue for Q2 FY2019. Moreover, looking at the progress of the results for H1 FY2019 against the consolidated financial result forecasts for FY2019, the progress rate for operating income was 62% and that for net income attributable to owners of the Company was 68%, indicating steady progress against our forecasts.
2. Progress on Growth Strategy
SoftBank's growth strategy stands on three pillars: drive further growth in the telecommunications business, drive growth of Yahoo Japan, and expand new businesses.
Drive further growth in the telecommunications business
The telecommunications business, including Consumer and Enterprise, has achieved solid growth in its business performance.
In the Consumer segment, revenue increased 4% year on year, supported by strong business performance in mobile communications and broadband services.
In mobile communications services, our company supports a wide range of customer needs through three differentiated brands: SoftBank, Y!mobile and LINE MOBILE. As a result of initiatives for each of these brands, cumulative smartphone subscribers increased by 9% year on year to 23.03 million. In addition, SoftBank Corp. has taken appropriate actions to comply with the amended Telecommunications Business Act, which entered force in October 2019. The amended Act requirement “rectification of binding contract periods” requires carriers to reduce contract cancellation fees to 1,000 yen or less. Conforming to the requirement, SoftBank Corp. announced in September 2019 that it has reduced cancellation fees for both the SoftBank and Y!mobile brands to zero yen. The amended Act also requires “separation of service fees and handset payments”. SoftBank brand has implemented plans that meet this requirement since September 2018. Y!mobile brand also began offering plans that separate service fees and handset payments in October 2019. In addition to conforming to the amended Telecommunications Business Act, SoftBank Corp. has continued to take initiatives to alleviate various “pain points” for users. Under the SoftBank brand, SoftBank Corp. has delivered large capacity data plans at affordable prices. Even after other carriers reduced their prices, SoftBank Corp. has maintained its pricing competitiveness for large capacity data plans. Moreover, Y!mobile brand renewed price plans with reduced prices and increased data capacity on top of separated service fees and handset payments.
In broadband services, cumulative subscribers for our main service SoftBank Hikari increased by 12% year on year.
In the Enterprise segment, revenue increased by 4% year on year, with performance driven by growth in Business solution and others, which includes IoT, robotics, AI, robotic process automation (RPA), security, cloud services and others. In solution businesses, we have launched new services for enterprise customers continuously. One of the services is a positioning service with centimeter-level accuracy that employs a satellite positioning system to realize highly accurate positioning with a deviance of only several centimeters. Another example is application of drone-based infrastructure inspection services.
We have accelerated initiatives on 5G (fifth generation mobile communication) technology, and will roll out services soon. We successfully performed a trial using 5G to realize multi-angle live broadcasting of high definition 8K video for the international basketball games held in August 2019.
SoftBank Corp., as a telecommunications carrier responsible for social infrastructure, also makes daily efforts to ensure our network to be ready with the countermeasure for disasters. We work to strengthen network centers through power outage mitigation measures and fuel stockpiling, implement power outage mitigation measures for base stations, and ensure readiness of various means of service restoration such as mobile base-station vehicles, satellite antennas and moored-balloon wireless rely system. In addition, SoftBank Corp. holds regular drills with the Japan Self-Defense Forces, Japan Coast Guard, and local governments. In October 2019, two days before Typhoon No.19 (Hagibis) stroke with serious damages in Japan, we had set up a disaster mitigation headquarter. In addition, a total of around 10,000 people were in action in the disaster-hit areas, including support teams dispatched from six regions outside the affected areas and those from partner companies. SoftBank Corp. implemented disaster recovery and restoration activities. As part of our support activities for the disaster-hit areas, we provided charging and Wi-Fi services free of charge. We also implemented assistance measures such as extending payment due date for customers affected by the typhoon. Going forward, SoftBank Corp. will continue to strengthen disaster response efforts.
Drive growth of Yahoo Japan
SoftBank Corp. has added the Yahoo segment from the current fiscal year. The segment has posted steady growth, with revenue up 4% year on year.
In the Media Business, where Yahoo provides media-related services such as Yahoo! JAPAN and Yahoo! News, and advertising-related services, the number of monthly logged-in user IDs for Yahoo! JAPAN increased by 10% year on year, indicating steady business expansion. In addition, an integrated team with members from the Enterprise business and Yahoo's Media business was formed within SoftBank Corp.'s Enterprise division. This team has begun implementing initiatives to foster synergies between the two companies, such as strengthening promotions of Yahoo Japan Corporation's services including Yahoo! JAPAN advertisements, in the course of proposing comprehensive solutions for enterprises.
In the Commerce Business, where Yahoo Japan Corporation provides e-commerce-related services, such as YAHUOKU! and Yahoo! Shopping; membership services such as Yahoo! Premium; and payment-related services, e-commerce transaction value rose 12% year on year. Moreover, Yahoo Japan Corporation has rolled out new services continuously, such as PayPay Mall and PayPay Flea Market, as part of its active efforts to develop e-commerce services in collaboration with PayPay Corporation and SoftBank Corp.'s SoftBank and Y!mobile brands. Additionally, in September 2019, Yahoo Japan Corporation announced the commencement of a tender offer for the common shares of ZOZO, Inc. for the purpose of making it a consolidated subsidiary. Yahoo Japan Corporation will collaborate with ZOZO and aim to become No.1 in terms of e-commerce transaction value in Japan targeting first half of 2020s.
Expand new businesses
Our new businesses have also been growing steadily.
Total cumulative registrations for PayPay, a smartphone payment service, exceeded 19 million as of November 5, 2019. The number of payments made with PayPay has been increasing rapidly in the past few months. This increase has been underpinned by progress on encouraging consumers to use PayPay more regularly through monthly revolving campaigns launched since June 2019, as well as support from the Point Reward Project for Consumers using Cashless Payment, a project initiated by the Ministry of Economy, Trade and Industry (METI) in October 2019. Looking at the entire cashless market, a survey of the payment-related consumer awareness has shown that more and more consumers would like to use cashless payment has steadily increased, while fewer consumers would like to keep on using cash for ordinary day-to-day payments. In this manner, the cashless payment market has been generating a lot of excitement. Notably, as a result of growth in the number of stores where PayPay can be used in addition to proactive promotions, surveys show that PayPay is considered to be the most preferred cashless payment method after credit cards, and users have a strong preference for using PayPay compared with other QR code payment services. Moreover, PayPay has successively added new capabilities such as payment of utility bills, and payout to bank accounts. In this manner, PayPay will seek to evolve continuously into a “Super App” that makes various aspects of daily life more convenient with smartphones. WeWork, a provider of comfortable workspaces using cutting-edge technology and data analysis, has been rapidly expanding business in Japan. In one year and seven months since the start of services in Japan, the number of memberships has exceeded 17,000. As of November 5, 2019, WeWork has opened 23 locations in six cities nationwide. DiDi is a taxi-hailing platform that uses AI to predict demand for taxis. For three consecutive months from July to September 2019, the DiDi app was No.1 in Japan in terms of the number of monthly downloads among major taxi-hailing apps. In only the first year since the launch of service in Japan, DiDi has commenced services in 16 cities throughout the country, with plans to expand its service areas to 20 cities in 2019. The overseas DiDi application can be used “as is” to hail taxis in Japan. This feature is expected to help DiDi capture demand from tourists visiting Japan from abroad, whose numbers are projected to increase going forward. SoftBank Corp. has established OYO Hotels Japan G.K. as a joint venture with OYO Hotels & Homes (OYO), a fast-growing global hotel operator that has built the world's second largest hotel chain in terms of the number of guest rooms in only six years since its founding. In only seven months since its establishment, OYO Hotels Japan G.K. has opened more than 5,200 guest rooms in 39 prefectures across Japan. The average occupancy for the hotels reformed under OYO brand has achieved more than 80% after 3 months according to the surveys conducted.
In these ways, SoftBank Corp. will accelerate its new business development through collaboration with its partners inside and outside of Japan, including SoftBank Group portfolio companies, in various business areas.