Q&A at Earnings Results Briefing for Q3 FY2021

< Back

Date Thursday, February 3, 2022 4:00 pm - 5:15 pm
Speakers SoftBank Corp.:
Junichi Miyakawa (President & CEO)
Kazuhiko Fujihara (Board Director, Executive Vice President & CFO)
  • In which specific business fields are you expecting an earnings contribution from 5G, and about how much of a contribution?

    For the smartphone services, currently, there is no big difference from the 4G era. Going forward, however, we expect to see growth in IoT devices such as AR and VR, and later we also expect 5G to be connecting to the metaverse and so forth. Right now there are no killer applications for 5G yet, and we are currently at the stage of rapidly constructing the network. We launched standalone (SA) for 5G network during this fiscal year, and this movement to SA will facilitate the development of services that utilize the features unique to 5G. We therefore expect 5G services to mature over the coming two to three years.

  • What is your outlook for the competitive environment among telecommunication carriers in the 5G era?

    There may be some differences among carriers in terms of speed and stability, but if limited to communication with smartphones, there probably will not be much change in the competitive environment between 5G and 4G era. As for 5G unique features, each carrier has its own strategy, and I expect that in two to three years we will see the emergence of distinctive services offered by each carrier.

  • You have mentioned that each carrier's distinctive 5G services will probably emerge in two to three years. What is the distinctive aspect of SoftBank in your medium to long-term strategy?

    The 5G SA means that the core network is dedicated to 5G, which opens up various possibilities from technology perspective. Now we are actively discussing what type of services we want to realize. For example how we should build security for 5G and how we can use tunneling technology tailored to each customer or service.

  • What is the reason for the good performance for the Y!mobile brand?

    The Y!mobile brand offers services with low monthly communication charges. The cheapest plan starts from \900 (excluding tax) per month. The Y!mobile stays competitive compared with services by other carries, therefore the Y!mobile is an attractive option for customers to switch from our competitors through Mobile Number Portability (MNP). We have two services with low monthly communication charges: Y!mobile and LINEMO. While LINEMO is an online-exclusive brand, the Y!mobile has the advantage of being offered in a large number of stores, dual branded with the SoftBank brand. The environment, in which customers can visit the physical stores and have a consultation when they sign up, links to the good performance of the Y!mobile.

  • How are the trends for brands other than the Y!mobile?

    Subscriber net additions for LINEMO are growing little by little. The SoftBank brand experienced a continued outflow of subscribers to low-cost brands of our competitors, but the outflow has finally stopped. There are still a large number of subscribers switching from SoftBank to Y!mobile. But if we regard this as a movement within our company's brands, the SoftBank brand ceases to be in a negative situation. The stop of decline in the SoftBank brand coupled with the good performance of Y!mobile has led to the recovery of the net additions this time.

  • What is the trend of subscriber growth for LINEMO, and what is your policy for LINEMO going forward?

    The number of subscribers for LINEMO has neither decreased, nor increased explosively. Currently, the differentiation between the Y!mobile and LINEMO has not been emerged clearly. We are constantly reviewing the differentiation between the two brands and will show what it will look like when the time comes.

  • You mentioned an increase in mobile device sales as one of the factors for the increase in revenue in the Consumer segment. Which models have been sold well, specifically?

    The reason for the increase in mobile device sales mainly lies in the previous fiscal year. In FY2020, the impact of COVID-19 caused us to reduce the operating hours of our stores, resulting in decrease in mobile device sales. This fiscal year, the mobile device sales recovered. This recovery became the factor for higher year-on-year revenues. There is no notable growth in sales numbers of any particular models in this fiscal year.

  • Does the resurgence in the spread of COVID-19 have any impact on your target for the 5G deployment progress?

    Our 5G population coverage has achieved over 85%, and the number of 5G base stations exceeded 23,000 by the end of January. We are rapidly proceeding with installation, with a target of increasing the 5G population coverage to 90% this spring. In particular, right now we are focusing on the expansion of 5G coverage, so that we can eliminate connection difficulty that occurs when going between 4G and 5G at an early stage. This year and next year, we will put our full effort into constructing the 5G network.

  • Could you talk about the scale and the key themes for CAPEX in FY2022?

    Our CAPEX plan for the next fiscal year is expected to be about the same as that for this fiscal year. Though CAPEX plan will be formally confirmed when we decide the budget for the next fiscal year, our current ongoing construction projects are placing orders based on this outlook. Our plan is to expand 5G coverage first, and then to increase the number of base stations further to meet the needs of traffic increase. However, while ARPU (Average Revenue Per User) continues to decrease, if we continue to maintain the plans for the same level of CAPEX and operating costs as before, our earnings will lose momentum. How to ensure the profitability while investing for growth for our telecommunications business in next ten years, this is the point we are discussing most deeply in our medium to long-term strategy. In some cases, investment for 5G may be lower than that for 4G.

  • How do you reflect semiconductor shortages and high raw materials costs in your CAPEX plan?

    The semiconductor shortages have had a slight impact on base station construction. However, as we anticipated this situation beforehand and placed orders in advance, the semiconductor shortages are not a significant hindrance at this moment.

  • In the report “Study Group on Governance in the Telecommunications Business” dated January 14, 2022 by MIC (the Ministry of Internal Affairs and Communications), the request has been postponed regarding “mandatory publication of the name of the country of location of servers storing user data”. I would like to hear your view on this matter at this stage. What does SoftBank Corp. want to advocate going forward?

    We are working seriously and with a sense of urgency on handling personal information. We have appointed a chief officer and are working with Z Holdings Corporation to create detailed rules. We agree to the direction of personal information management being promoted by the government. Our basic position is to comply with everything that is required.

  • Why did you handle BALMUDA Phone exclusively?

    We have appreciated BALMUDA Inc. as a unique manufacturer. If Japanese manufacturers want to take up the challenge on smartphones, our position is to support them as much as we can. There may be various views on this, but we believe that without taking up challenges, there is no way to reach the next stage. Personally, I am pleased that we are handling BALMUDA Phone.

  • You said that profitability at PayPay Corporation has improved by introducing payment system fees for small and medium-sized merchants. When do you expect PayPay Corporation to become profitable?

    Since October 2021, we have seen an increase in payment system fee revenue at PayPay that has significantly improved its profitability. In the month of December, we saw good figures. The timing PayPay achieves profitability depends on when the acquisition cost is narrowed down. PayPay is now really growing. We do not think PayPay will stop growing with 45 million users. As long as we expect it to have room for growth, we will invest in PayPay to aim for its growth, even if we curb other investments. However, it depends on returns whether we will continue the investment for two or three years. We do not stick to certain numbers until the investment efficiency becomes worse.

  • How will you structure and launch the financial business of the group, including PayPay Corporation going forward? Could you give us an indication?

    For PayPay, we are exploring lateral collaborations with other financial businesses, aiming to make it a super app standing at the core of all the financial businesses. Our plan includes any kind of financial businesses such as PayPay Bank Corporation, PayPay Card Corporation, the insurance business and so forth. Among these, there are group companies under Softbank Corp. as well as those under Z Holdings Corporation. Now we are earnestly discussing what the entire financial business of the group should be, which is in line with the Group's management strategy. We aim to develop our financial business into a major business through synergies centered on PayPay.

  • PayPay Corporation has already reached 45 million registered users, and some people are still strongly rooted in cash culture. How far do you think you can grow the business going forward?

    Our main focus in regard to business expansion is cost efficiency. We are constantly measuring the effects of investments in sales promotion expenses to see the amount of money invested for a certain sales promotion and the number of users increased as a result of that promotion. Right now, PayPay's cost efficiency up to reaching 45 million users has been very satisfactory, and gross merchandise value (GMV) has actually grown more than expected. We would like to continue our current approach for as long as we can. Of course, at some point, we expect that the efficiency will deteriorate. At that point, we will move to the next phase. Regarding cash culture, compared with overseas countries, there is still a lot of room for growth in QR code payments in Japan. Going forward, we will be watching carefully to discern how many users we can attract in Japan's payment market and how far we can expand QR code payments.

  • When will SoftBank Corp. consolidate PayPay Corporation?

    SoftBank Corp. holds preferred stock of PayPay Corporation that can be converted to common stock from FY2022. However, at this point we have not set a specific timing for the conversion.

  • Will PayPay Corporation go public after it turns black? Is there any connection between the IPO and the consolidation?

    Nothing has been decided at this moment. We aim to make PayPay Corporation a listed company. We are carefully considering the timing of its IPO, while taking into account the balance with its break-even and consolidation. Right now we are discussing the timing of the break-even and the best business structure.

  • Please tell us your thoughts on increasing wages for employees.

    We would like to raise wages. There are various approaches that could be taken. Our human resource strategy is to proactively transfer employees from the telecommunications units, in which profits are decreasing, to non-telecommunications units that are growing. PayPay Corporation is a successful case of this transfer. Currently, we are aiming to establish and launch new businesses at the same scale of PayPay Corporation that we can call something like the second or the third PayPay Corporation. I believe that the way of giving incentives is a driving force for corporate growth. Rather than raising wages by a uniform 2% across the company, I would prefer to set up a contingent fee system, which is not found in other listed companies, for employees who contribute to the growth of such new businesses. I would also like to try to offer shares of our company as part of compensation to certain level of employees, so that the employees become our shareholders. These are the ideas to raise wages as a total package, including shares.

  • How do you strengthen the Enterprise segment for its growth in the next fiscal year?

    Our strength lies in our robust sales forces. Up until now, we have focused our sales activities mainly on large corporations in Japan. Going forward, we want to expand our scope of activities. Specifically, we are getting ready to create a direct sales force to target the small and medium-sized business (SMB) market. As ASKUL Corporation and PayPay Corporation are already developing their business in this SMB market, we aim to increase our group synergies by having SoftBank Corp. enter into this market as well. We are also working to strengthen our global sales.

  • When will the profit in the Consumer segment stop declining? When will the decline in profit be turned around by 5G? Could you tell us from a medium to long-term perspective?

    I think that the mobile service price reductions will continue to affect the profitability of the Consumer segment from this fiscal year through the next fiscal year. However, I am determined to definitely restore the Consumer segment on a standalone basis. Personally, I want to see the next fiscal year to be the bottom. We are reviewing strategies to achieve this.

  • With regard to accelerating collaborations among various services within the group, although you have many major brands such as SoftBank, Yahoo! JAPAN, LINE, and PayPay, up until now, they seem to have been operating separately. The point system has finally been unified. Now it is ready to set ID collaboration from the next fiscal year. How quickly do you think these collaborations will proceed going forward?

    Nearly one year has passed since the business integration of LINE Corporation and Yahoo Japan Corporation. We originally expected to achieve the ID collaboration at an earlier stage. We have worked to solve various issues, such as the one regarding personal information management at LINE Corporation, one by one and have finally sorted out those issues. Now it is the time for Z Holdings Corporation to grow their businesses. SoftBank Corp. will also look to further strengthen various collaborations with its subsidiaries and to utilize their assets to create new business models. I am delighted that the time has come to talk about these collaborations.

  • How will SoftBank Corp. be involved in the management of PayPay Corporation going forward?

    The collaboration with PayPay Corporation is based on the fact that, like Z Holdings Corporation, PayPay Corporation is a separate company with its own governance. Originally, SoftBank Corp. and Yahoo Japan Corporation were sister companies under the SoftBank Group Corp., and during that time both companies did not have the detailed collaborations that we have now. Subsequently, SoftBank Corp. consolidated Yahoo Japan Corporation. This consolidation continues to enable more robust collaborations between the two companies. We want to build the same strong parent and subsidiary relationship with PayPay Corporation. SoftBank Corp. has been deeply involved in PayPay Corporation since its establishment. and the two companies exchange information in detail. Going forward, we aim to continue this good relationship and further enhance group synergies.