Q&A at Earnings Investor Briefing for FY2021 | About Us

Date	Wednesday, May 11, 2022 6:00 pm - 7:00 pm
Speakers	SoftBank Corp.: Kazuhiko Fujihara (Board Director, Executive Vice President & CFO) Takashi Naito (Vice President, Head of Finance and Accounting Division) Osamu Akiyama (Head of Strategic Finance Division)

In the Consumer segment, against a 2.9% decrease in segment income in FY2021, you are forecasting a 25% decrease in FY2022. What are the main factors for this enlarged income decline?: In FY2022, we are forecasting a negative impact of JPY 90 billion year on year due to mobile service price reductions. In addition, we estimate there will be a year on year increase of JPY 60 billion for sales-related expenses, of which JPY 40 billion is due to deferred acquisition costs. We started capitalizing acquisition costs from FY2018 and applied the accounting treatment of amortizing the costs over the device usage period. Though we spent a large amount of acquisition costs in FY2021, since the deferred amount from FY2019 and FY2020 was small due to the Amendment of the Telecommunications Business Law and COVID-19 pandemic impact, the overall amortized amount in FY2021 was lower than that of FY2022 where the larger amortized amount will be deferred into. Moreover, positive factors such as rise of device unit prices and strong performance of the electricity business in FY2021 are not estimated in FY2022. We also estimate a cost increase of JPY 15 billion due to PHS service termination.

While terminating the 3G service, have you factored any impact of migration of 3G users to 4G or 5G into FY2022 forecasts?: We do not secure it explicitly, but we have prepared for a flexible way to deal with the situation.

What is your forecast for the number of subscribers in FY2022?: In terms of net additions, we are considering the same level as that of last fiscal year. We are not optimistic. However, as our business foundation, the number of subscribers is important, and we would like to keep the momentum.

You expect ARPU to decrease JPY 270 year on year in FY2022. What is the impact due to mobile service price reductions? And does that include impact due to the migration to Y!mobile?: Among the JPY 270, JPY 180-190 is due to mobile service price reductions. First-year/half-year discounts were an year on year positive factor in FY2021, but they will turn into a negative factor in FY2022. Since brand migration, including the migration to Y!mobile, is due to a series of events caused by mobile service price reductions, we consider the brand migration to be part of the impact of mobile service price reductions.

Regarding the impact of JPY 60 billion of sales-related expenses in FY2022, you did not give such a stringent tone in the Q3 earnings announcement. Was it a decision during Q4 that you increased the sales-related expenses, which is reflected in the forecast?: It was not a sudden change in Q4 because maintaining net additions has always been our priority. As the situation of COVID-19 started to ease, we were able to proceed with specific acquisition measures.

Among the JPY 60 billion increase in sales-related expenses, JPY 40 billion is due to deferrals. Is the remaining JPY 20 billion due to the cost of mobile devices sales increase?: It is not due to the cost of mobile devices sales increase. We had strong mobile devices sales in FY2021, and we forecast a normal level of mobile device sales in FY2022.

In your operating income forecasts by segment for FY2022, you plan to increase by JPY150 billion year on year in the Yahoo! JAPAN/LINE segment. Is that mainly from PayPay Corporation (“PayPay”) consolidation impact?: Yes, you are correct.

Is your forecast on gain from remeasurement related to PayPay consolidation conservative? Is there a possibility that it might not be realized?: The amount is uncertain and undecided. But we have invested in PayPay, which has been losing money so far. The book value of our ownership is very close to JPY 0 considering the accumulated loss. When we consolidate PayPay, we expect the remeasurement will bring us certain amount of gain.

In FY2022, if excluding PayPay consolidation impact, operating income will decrease year on year. If this kind of one-time factors is excluded, how long do you need to recover to operating income increase?: In FY2023, it will still be difficult to return to an operating income level of FY2021. We will work on bringing it back as soon as possible.

After you achieve JPY 1 trillion of operating income in FY2022, will it decrease year on year in FY2023?: That is basically correct. But as we will achieve JPY 1 trillion of operating income and JPY 600 billion of adjusted free cash flow, we will be able to drive growth further. Please understand that we are committed to our announced targets and they show our intention to meet your expectations.

I understand that you will bring down your CAPEX to JPY 330 billion in FY2023 onwards. Will this level of CAPEX be enough to cover the investment for 5G stand-alone and MEC (Multi-access Edge Computing)?: Yes, the investments on 5G stand-alone and MEC are included in the CAPEX of JPY330 billion. We have achieved 90% population coverage for 5G. We will achieve our planned coverage going forward.

Looking ahead to the profitability of PayPay, do you have plan to increase the take rate from 1% to a higher level. And what is your target for GMV?: With regards to PayPay's targets, we would like to refrain from disclosing details. We are keeping in mind that it is important to raise the take rate while providing various services including value-added services. PayPay has entered a stage where it can achieve breakeven once we step on the brakes for customer acquisition investments. But we want to further scale up customer base so that even with continuous investment in acquisition cost, PayPay can still secure profitability.

Many carriers are aiming to increase their dividends year on year. What are your thoughts on your dividend growth and share buybacks in the future?: We are paying JPY 400 billion dividends annually, the second highest amount in Japan. I appreciate your understanding that we are proactive in providing dividends. The policy to implement flexible share buybacks does not change. After paying out a total shareholder return ratio of 85% over three years till FY2022, we will discuss seriously the future shareholder return policy with full understanding of our shareholders' expectations.

As you are aiming for the total shareholder return ratio of 85% from FY2020 to FY2022, in terms of share buybacks, do you include the stock options exercised by your employees and management in the total shareholder return portion?: We do not count the shares that go out to market, including the exercised stock option portion, into shareholder returns. If we multiply our target of net income^*1 from FY2020 to FY2022 by 85% of total shareholder return ratio, and subtract the annual dividend payment of JPY 400 billion per year for 3 years, the remaining amount will be JPY 70 to 80 billion. This JPY 70 to 80 billion will be fulfilled by treasury stock retirement. We implemented share buybacks of JPY 100 billion in FY2020, which we will either retire or maintain going forward, contributing to EPS growth.