Q&A at Earnings Results Briefing for FY2019

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Date Monday, May 11, 2020 3:30 pm - 4:50 pm
Speakers SoftBank Corp.:
Ken Miyauchi (President & CEO)
Jun Shimba (Representative Director & COO)
Yasuyuki Imai (Representative Director & COO)
Junichi Miyakawa (Representative Director & CTO)
Kazuhiko Fujihara (Board Director, Executive Vice President & CFO)
  • Is there any impact from the amended Telecommunications Business Act by the Ministry of Internal Affairs and Communication (MIC)?

    Al Although both the amended Telecommunications Business Act and the consumption tax hike became effective in October, handset sales did not decline significantly on an annual basis due to rush sales in September. In addition, since the mobile devices subsidy was limited to 20,000 yen, sales in mobile devices were well-balanced between different price ranges, and therefore did not have a significant impact.

  • Discontinuation of PHS was postponed. What is the situation of the transfer and what will you do with the frequency after the PHS termination?

    We expected to complete the termination as planned, but due to requests for extension from medical institutions nationwide, we extended the services until the end of January 2021. As the frequency is used in elevators and car modules, it will take a long time to transfer the spectrum for other use. However, we would like to begin the discussions on how to use the frequency in the future.

  • Accelerating growth investment and actively returning profits to shareholders may cause deterioration of your financial situation. What are your thoughts on this? Is there any plan to change the policy to limit dividends?

    There is no plan to change our dividend policy. Our company's policy is to achieve both growth and shareholder returns. We have maintained free cash flow at a level of ¥500 billion. After dividend payment, there will be more than ¥100 billion in cash remaining. Going forward, investments in new businesses will not be in a large scale, but rather will be for business development. Therefore, we believe it is possible to maintain high and stable dividends. The net leverage ratio is also very stable at 2.3x (2.4x before consolidation of Z Holdings Corporation). Currently our company is rated AA-(JCR), and our net leverage ratio is lower than the average of companies with similar credit ratings. There is a stable surplus of over ¥100 billion between dividends and free cash flow, which is also growing in line with profit growth.

  • The Company has achieved record high profits, but growth expectations from the stock market is not rising. What are your thoughts on stock price?

    Although it is a tough environment from a stock price standpoint, our stock price is not affected by the outbreak of the coronavirus disease (COVID-19) as much as other companies. We believe that the situation will change when the results of our Beyond Carrier strategy are visible.

  • What is the status of the number of subscribers after the launch of 5G service?

    Although the number of 5G smartphone subscribers is not disclosed, it is in line with our expectations. Also, although the number of 5G LAB subscribers is not disclosed, there are many applications and a survey shows that the level of satisfaction is high. However, due to the outbreak of COVID-19, some of the new content is not ready yet, and we are working on preparations from an overall point of view.

  • Under the outbreak of COVID-19, do you expect a decline in mobile device sales due to decrease in shop traffic? What is the impact on the deployment of 5G base stations?

    The number of new customers decreased as a result of fewer customers visiting shops due to shortened shop hours, shop staff reduced to half, and asking customers to refrain from visiting shops except in case of urgency. At the same time, churn also declined. We are deeply aware that our services are customers' lifeline, and we will focus on providing even better services after economic activity recovers. As for the deployment of 5G base stations, we are making good progress toward our plan of building approximately 10,000 stations by the end of the current fiscal year, although there is some impact, such as not being able to enter buildings.

  • Your forecast for operating income target is ¥920 billion. How much buffer is available? How should we think about the impact on the telecommunications business?

    We have a slightly higher internal target for operating income. We would like to think ¥920 billion is our commitment. Regarding telecommunications business, as it is a lifeline, and under work style reforms such as remote work, it is possible to make stronger figures, but we are taking into account the impact of COVID-19.

  • What is the impact of COVID-19 on traffic? Is there any impact on user traffic and preference for selecting a price plan?

    Traffic of fixed-line communications nearly doubled during the daytime. Traffic of mobile communications had a 2-digit increase, particularly for up-links, which increased by more than 50%. Peak times have also shifted to daytime, and we believe that video conferencing and online classes are increasing. We asked carriers around the world to share their traffic data with us, and as a result of the measures taken, we were able to deal with the increase in traffic without any problems, but we believe that the situation still requires caution. SoftBank brand has consistently implemented a high-capacity strategy, and we believe that 5G will be used with even higher capacity in the future for work, education, and online classes at universities, etc. We believe that the price plan measures we have been implementing for years will converge in a good direction as traffic increases.

  • Among the 230,000 base station sites, how many of them will be used for 5G?

    Eventually, the number of sites in 5G is expected to far exceed 230,000, so we are going to use almost all of them for 5G.

  • If the outbreak of COVID-19 impact stays longer, is there an impact on activities such as equipment procurement?

    So far, the equipment (antennas, cables, parts around the power supply, etc.) has been delivered on schedule with no problems.

  • As Since shop traffic is declining, have your thoughts on the future of your sales agents changed? Do you expect customers to return to your shops once the situation recovers, or are you considering measures such as strengthening online sales?

    Our sales agents are currently in a very difficult environment, but we believe that their role is to provide support to smartphone customers. The smartphone advisors are also well received, and we believe that they will play bigger roles after the COVID-19 situation is resolved. Even if the situation is resolved, we believe that customer support is necessary, and therefore, we will continue to support our sales agents, including fixed costs. We expect our sales partners to continue to provide support for customers in the future. In addition, we will strengthen our online sales, and consider working with sales agents to provide customer support in parallel.