Q&A at Earnings Investor Briefing for Q1 FY2021

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Date Wednesday, August 4, 2021 6:00 pm - 7:00 pm
Speakers SoftBank Corp.:
Kazuhiko Fujihara (Board Director, Executive Vice President & CFO)
Takashi Naito (VP, Head of Finance and Accounting Division)
Osamu Akiyama (Head of Strategic Finance Division)
  • I'd like to ask about the churn rate. Looking ahead, will the pace of net increase in the number of main subscribers return to previous levels as the churn rate decreases? If not, what are the factors behind that?

    We apply the churn rate envisaging the level of June 2021 to business management. With regard to the net increase in the number of main subscribers, we intend to recover the net increase in smartphone subscribers through various initiatives. Factors behind the difference in net increase compared with previous years include an inventory shortfall for tablets during the first quarter and a surge in sales of mobile data communication devices in the same period of the previous fiscal year. The Company already has a strong competitive advantage compared to competitor companies, but this was eroded after each company introduced new plans, and we are currently working to restore it. In addition, our net increase for March and April was impacted by campaigns run by competitor companies, and since then the pace of the monthly net increase has been on a recovery trend.

  • This question is about cost reduction. What is the status of operation in Q1 FY2021?

    We are carrying out detailed initiatives to reduce costs. Since we are conducting new initiatives, there are some cost increase factors; however, these are offset by cost reductions. In Q1 FY2021, the cost increase factors were slightly larger.

  • The target for net increase in smartphone subscribers has been given before as 2 million per year. The net increase in subscribers for Q1 FY2021 was 250,000. What is your forecast going forward?

    The target of 2 million for the net increase in smartphone subscribers was an internal sales target mentioned by former President & CEO Miyauchi. Our earnings forecast is based on a more conservative level. We are envisaging the net increase in smartphone subscribers of 1.68 million, which is from July 2020 to the end of June 2021.

  • What is the status of cumulative 5G smartphone sales, the number of 5G smartphone subscribers, and the 5G population coverage ratio?

    Cumulative 5G smartphone sales have exceeded 3 million, and the number of 5G subscribers is even higher than 3 million. The 5G population coverage ratio is not at a high level, since the number of 5G base stations is still only a few thousand higher than 10,000.

  • Please tell us about Z Holdings Corporation (“Z Holdings”)'s data governance situation and the status of synergies for the future from the business integration of LINE Corporation (“LINE”) and Z Holdings.

    LINE received guidance regarding its handling of personal information, which Z Holdings has taken very seriously. It has established a third-party committee to investigate, which is conducting an investigation. The investigation report is expected in the near future. We will take measures to gain the understanding of the Japanese people and government. After the report is submitted from the third-party committee, efforts to create synergies should be accelerated.

  • The mobile domain appears to be driving an increase in profit for the Enterprise Business. The business solution and others domain does not appear to be contributing much. Could you tell us if the business solution and others domain is contributing to higher profits? Also, can you tell us the status of net increases in enterprise customers?

    For Q1 FY2020, demand for telework was high due to the COVID-19 pandemic, leading to robust net increases in enterprise customers. Compared to that, I think that a recovery is needed. The gross profit margin is lower for the business solution and others domain than for the mobile domain. However, the main method of sales is cross-selling, and we expect a considerable contribution to profit. The profit margin for the Enterprise Business overall is on an improving trend, and with increased revenue and improved profit margin the profits of the Enterprise Business will grow even further.

  • It looks as though you are using the migration to the Y!mobile brand instead of users moving to other carriers to improve the churn rate. If the advantage of the SoftBank brand in being able to use the latest iPhone disappears and the composition ratio of Y!mobile brand increases, ARPU will fall. Are you expecting there will be a time when you focus on ARPU in the future?

    We are aware that there is an issue around the SoftBank brand overrun by the momentum of the Y!mobile brand. In Q1 FY2021, we had only just introduced a new price plan, and as an initial reaction we saw a strong shift towards Y!mobile. However, this trend is gradually settling down. We recognize that the issue to be addressed now is how to increase the appeal of the SoftBank brand. The appeal of the SoftBank brand is large capacity and unlimited use of data. We need to implement measures that promote this appeal while collaborating with Yahoo! JAPAN, LINE, PayPay, and others to enhance it further.

  • The decrease in ARPU in the current fiscal year was around 200 yen. Could you confirm the breakdown of this again?

    Q1 ARPU decreased by around 130 yen year on year. The majority of the decrease, around 100 yen, was due to the impact of new price plans. The decrease due to the new price plans is expected to increase through to the fourth quarter, so reflecting this we are expecting an average annual decrease in ARPU of around 200 yen. So, there is some pressure on ARPU, but we will focus on achieving our earnings forecast of year on year profit growth.

  • The churn rate is expected to trend higher than two years ago. Is this due to factoring in the impact of other companies, such as the new market entry of Rakuten Mobile, Inc. and NTT Docomo's ahamo? What is the status of new subscriber acquisitions?

    There is an impact from competitors. As an overall trend, we are acquiring new subscribers, but churn has increased due to greater liquidity. However, the recent situation has not been as severe as it was in March and April.

  • Revenue for the business solution and others domain in the Enterprise Business increased 9% year on year, less than in the past. Is this a fall back from the demand surge for telework in the same period of the previous fiscal year due to COVID-19? What is your outlook for growth from Q2 onward?

    Revenue for Q1 appears weak due to a rebound, but we aim to reverse the trend from Q2 onward. In FY2019 and FY2020, we achieve full-year growth of around 17%, and we consider the 15% level to be an approximate guide. In Q1 FY2020, there was also an impact from a one-time IoT solution-related sales.

  • The details of the Declaration of Carbon-neutral 2030 seem to be quite ambitious. What kind of impact can we expect on business, particularly in terms of investment and profit?

    Since the declaration has a 10-year time frame, we do not expect an immediate surge in investment. We will engage this under the guidance of our CEO, who has a technology background. We do not consider that it will have a major impact on our current management plan.

  • With regard to PayPay Corporation, could you tell us the reason why SoftBank Corp's share of voting rights (after adjustment for dilutive shares) has increased from 32% to 33%?

    PayPay Corporation has a need for funds due to its aggressive sales promotion activities, and it conducted a capital increase. At the time, Paytm did not participate, and the capital increase was conducted so as to preserve the equity share between SoftBank Corp., Z Holdings, and SoftBank Group Corp. As a result, our holding increased.