Q&A at Earnings Investor Briefing for Q2 FY2022 | About Us

Date	Friday, November 4, 2022 6:00 pm - 7:05 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)

What is the reason for the strong ARPU trend in mobile service?: Revenues from value-added services and voice calls were better than expected. In value-added services, device warranty service has a wide base and solid performance. In addition, we estimated that voice calls would decline more, including impact from the spread of COVID-19. But in light of the current business environment, we have come to the conclusion that we can raise the full-year outlook.

While you revised upward your FY2022 full-year forecast for total ARPU to ¥230 decline year-on-year, the operating income forecast for the Consumer segment remains unchanged. Does that mean there will be an increase in expenses?: Speaking about expenses, the electricity cost alone is expected to increase by more than ¥10 billion annually, but even considering these increases, we are confident in reaching our forecast. In the second half of this fiscal year, we will not hesitate to work on initiatives that will be positive for the next fiscal year, including acceleration of expenses such as service sunsets and sales promotions.

Please tell us about the status on net additions.: Net additions momentum is becoming very stable and strong through FY2022 Q1 and Q2. In Q2 particularly, there have been external factors such as a change in price plan and communication network failures in other companies.

What is the reason for the strong gross profit of mobile device sales in FY2022 Q2? Also, will the trend continue in the future?: The environment has improved compared to Q1 when the number of mobile device sales decreased significantly. In addition, the price revision of Apple products and the composition by brands had an effect. I expect that the good trend will continue in the future.

Please tell us about the Electricity business outlook for the second half of FY2022.: It was difficult in the first half of FY2022 due to deteriorating market conditions, but with the abolition of the upper limit of fuel cost adjustment price, we expect to be profitable for full-year FY2022. We have slowed down Electricity subscriber acquisition, but we would like to make flexible decisions while monitoring the competitive environment.

Customer acquisition-related expenses for the full year of FY2022 were expected to increase by ¥60 billion. What is your outlook for the full year now?: The increase of ¥60 billion includes impact of gross profit from mobile device sales. Gross profit on mobile device sales was tough in Q1, but picked up and slightly improved in Q2. Customer acquisition-related costs are expected to vary depending on the initiatives taken in the second half.

What is forecast for contract costs in the Consumer segment for the next fiscal year?: Customer acquisition-related expenses in the second half of FY2022 will depend on future measures and the use of overall expenses, but there will be no major changes from the initial forecast.

It seems to be challenging to achieve Enterprise segment targets for the second half of FY2022. What factors will enable you to achieve the plan?: The sales activities in the Enterprise segment are extremely active, and opportunities for proposals are increasing. At the moment, it is taking some time to turn projects into reality, but I think it is important to see how much we can work toward the demand season for each company at the end of the fiscal year, including recurring revenue generation projects and one-time solutions. We will keep monitoring profits and control costs a little more strictly.

What is your outlook for CAPEX?: The deployment of base stations is at the stage of expanding 5G coverage, but we are working to complete a certain scope by this fiscal year. We will continue initiatives for core network and SA (standalone). As a whole, we will do what we can do in this fiscal year, and in the next fiscal year we will control CAPEX as we can, so as not to hurt our competitive strength.

Is it correct to understand that the fair value of PayPay Corporation increased by ¥136.9 billion in investment securities at the end of September 2022 and by ¥294.8 billion on October 1, 2022?: Correct. The fair value measurement of the preferred stock has been reflected in the balance sheet at the end of September, and the re-measurement gain associated with making PayPay Corporation a subsidiary was recognized on October 1.

You said that equity increased by ¥318.4 billion due to the retroactive adjustment of the valuation of Z Holdings Corporation due to changes in accounting policies related to transactions under common control. Does this mean that shareholders' equity increased?: Correct. When Z Holdings Corporation was made a subsidiary in June 2019, shareholders' equity was decreased. Due to the change in accounting policy, it has been treated as goodwill, so the shareholders' equity that was previously decreased returned.

To what extent have you factored in the risk of Z Holdings Corporation's performance deterioration in your revised full-year forecasts?: Since Z Holdings Corporation is a public company and has also announced earnings forecasts, we will refrain from providing an explanation. We do not expect the results to fall significantly against our forecasts, but we would like to stick to achieving our full-year earnings forecasts no matter what the performance of Z Holdings Corporation are.

Z Holdings Corporation aims to achieve an adjusted EBITDA of ¥390 billion in FY2023 as a medium-term management goal. But there is a risk that cost reductions will adversely affect the growth rate of e-commerce. Please let us know your thoughts on earnings forecasts as a parent company.: Regarding Commerce business, there are some parts that relied too much on points. I would like them to aim for a figure that efficiently secures a certain level of growth without relying too much on points. I understand that Z Holdings Corporation has a commitment to its goals for FY2023, and of course they must not do anything that will damage the future. On that premise, I would like them to work out the optimal solution.

Regarding the ¥40.3 billion loss in Other of operating income forecast by segment for FY2022, please explain in more detail, such as details of sunset and strategic investments.: As for sunset, we plan to terminate communication services regarding PHS, 3G, and ADSL and we would like to bring forward the expenses for the next fiscal year by carrying out the removal and disposal of facilities as much as possible this fiscal year. We held down customer acquisition-related costs in the first half of FY2022, but we are considering investing in them in the second half if we can expect to see results. We would like you to understand that the details of the allocation of the amount between the two have not been finalized, and that they are still under consideration. The originally anticipated costs have already been included in the plans for each segment. Electricity and various good price increases will be more harsh next fiscal year, so I would like to make various efforts to improve our future plans.