Q&A at Earnings Results Briefing for Q1 FY2022

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Date Thursday, August 4, 2022 4:00 pm - 5:00 pm
Speakers SoftBank Corp.:
Junichi Miyakawa (President & CEO)
Kazuhiko Fujihara (Board Director, Executive Vice President & CFO)
  • What was your reaction to the communication failure at KDDI Corporation?

    We didn't see it as somebody else's problem. Instead, we saw it as our own problem. We conducted a detailed investigation to determine whether a similar communication failure could occur at SoftBank Corp. We don't think such a failure could happen because we have already dealt with the factors that were involved in KDDI Corporation's incident. In the future, however, a communication failure could happen at SoftBank Corp. for other reasons. A task force has been set up, and it is reassessing these matters from the ground up.

  • What are your thoughts on roaming (interconnectivity of mobile networks among telecommunications carriers) when a communication failure occurs?

    In the past, SoftBank Corp. has commented on roaming in times of a communication failure or an emergency, but discussions among telecommunications carriers had not been progressing at the time. Mobile services are taking on increasing importance as a form of public infrastructure, as these services are also used for such purposes as personal authentication through short messaging services and payments including “PayPay.” Currently, discussions are primarily focused on emergency calls to police, firefighting, and other such services. However, I don't think the disruptions in society that could arise when there are communication failures will be resolved by ensuring that only emergency calls can be made. Going forward, the Ministry of Internal Affairs and Communications (MIC) will start to lead discussions on roaming. When there is a communication failure or emergency, I believe that we should enable users to at least carry out a minimal level of communication, including sending and receiving messages via telephone, e-mail and LINE, by providing a framework that will allow users to switch to the mobile networks of other telecommunications carriers through a mobile virtual network operator (MVNO) format. I would like to propose such an arrangement in future discussions.

  • How do you rate KDDI Corporation's refund with apology of ¥200 (per eligible customer) for the communication failure? Is there any need to revise the refund standards in SoftBank Corp.'s future agreements?

    We'd like to refrain from commenting on whether the amount of the refund with apology offered by KDDI Corporation was appropriate. Currently, we don't believe that there is any need to revise SoftBank Corp.'s agreements.

  • MIC has requested revisions to incentives for mobile phone dealers. What is your response? What do you think is the ideal relationship between telecommunications carriers and mobile phone dealers in this respect?

    SoftBank Corp. is constantly revising how incentives work. I don't think we will be changing anything drastically right away, but if things that should be improved come up as we deepen our discussions, I'm eager to make those improvements. In addition, mobile phone dealers are partners of SoftBank Corp. Within the environment that we currently find ourselves, I'd like to advance discussions further, with the aim of creating a sound industry that will ensure that contracts do not harm customers' interests.

  • You stated that SoftBank Corp. is laying the groundwork for a return to profit growth in FY2023. Which businesses do you expect to contribute to profit growth in FY2023?

    First, in the telecommunications business, which is our core business, the negative impact on profits from mobile service price reduction in FY2022 is around ¥90 billion year on year. We are forecasting that this impact will diminish to around ¥50 billion in FY2023. This negative impact of around ¥50 billion should be outweighed by the positive effects of cost reductions through a decrease in depreciation and amortization and other factors. We believe that other businesses will contribute to higher profits because we will be able to steadily grow those businesses.
    In FY2022, the amount of capital expenditures is expected to peak due to 5G-related investments. Capital expenditures are then expected to subside in FY2023. For this reason, we should be able to reduce capital expenditures by around ¥100 billion.

  • Which brands are experiencing an increase in the number of subscribers in the mobile business? What impact did KDDI Corporation's communication failure have on net additions of subscribers?

    Most of the contribution to net additions of subscribers has come from the Y!mobile brand. However, since the discontinuation of Rakuten Mobile's zero-yen plan, the LINEMO brand has also contributed to net additions of subscribers. Immediately after KDDI Corporation's communication failure, the number of customers switching to KDDI Corporation through mobile number portability (MNP) temporarily decreased. We are monitoring the situation closely to see if there will be a long-term impact.

  • How do you see conditions after the announcement of the discontinuation of Rakuten Mobile's zero-yen plan?

    Following the announcement of the discontinuation of the zero-yen plan, outflows of users to Rakuten Mobile have decreased while inflows of users from Rakuten Mobile have increased. Therefore, the number of users has been steadily increasing.

  • While outflows to Rakuten Mobile have decreased, the churn rate is at the same level as the previous fiscal year. Is this because of intensifying competition with other mobile carriers?

    The conditions for switching mobile carriers have been relaxed, so customer fluidity among mobile carriers has been increasing. We have many businesses that are highly compatible with smartphones, as highlighted by steady growth in “PayPay” and LINE Corporation becoming a Group company. Therefore, leveraging these businesses, we will put strong emphasis on net additions of smartphone subscribers. If the positive impact of an increase in subscribers surpasses the negative impact of a decline in average revenue per user (ARPU), communications charges will increase, so we will target such an increase.

  • What impact will surging energy prices have on business?

    We don't expect business management to rapidly deteriorate, because surging electricity costs have already been factored into our current business plan.

  • At its previous earnings announcement, SoftBank Corp. set forth a policy of continuing to make proactive upfront investments in PayPay. With the announcement of the conversion of PayPay Corporation into a consolidated subsidiary, have there been any changes in your thinking?

    The number of “PayPay” users has continued to increase. Therefore, we believe that if we continue upfront investments, this will lead to improvement in the corporate value of PayPay Corporation in the future. Gross merchandise value (GMV) is growing, so we would like to control the business as we seek to make it profitable even while carrying out investments. We'd like to determine the timing for achieving profitability while managing the business.

  • You stated that SoftBank Corp. will add the Financial Business as a new segment. What kind of prospects does the Financial Business offer for the future?

    Currently, companies such as PayPay Corporation and SB Payment Service Corp. provide financial services within the Group. With the PayPay ecosystem expected to continue growing even further, we hold extremely high expectations for the Financial Business. We would like to develop the Financial Business into a sizable business that can serve as the backbone of SoftBank Corp.

  • I believe that if PayPay Corporation can be turned into an enterprise that wholly owns and operates banking, credit card and securities businesses, it can become extremely strong. Is that the targeted course for this company? If that happens, what will be your approach to the structure of the Group?

    We have a wide range of options for the course of group reorganization to enhance the corporate value of PayPay Corporation, but no specific course has been decided at this time. PayPay Corporation will convert PayPay Card Corporation into a wholly owned subsidiary, and we have involved Z Holdings Corporation closely in this process by establishing an intermediary holding company together with Z Holdings Corporation. The purpose of these measures is to maximize the corporate value of PayPay Corporation. Hypothetically speaking, if PayPay Corporation is publicly listed, investors will be able to directly purchase shares of PayPay Corporation, instead of shares of SoftBank Corp. Therefore, I believe that investors will want to know the significance of investing in SoftBank Corp. SoftBank Corp. has defined itself as “a company that implements digital technologies in society.” In this role, we will collaborate with a variety of companies to achieve the digitalization of all manner of industries. In this process, PayPay Corporation is positioned as the core of the Group's financial services.