Q&A at Earnings Results Briefing for Q3 FY2022
Date | Friday, February 3, 2023 4:00 pm - 5:00 pm |
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Speakers | SoftBank Corp.: Junichi Miyakawa (President & CEO) Kazuhiko Fujihara (Board Director, Executive Vice President & CFO) |
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What are your thoughts on the decision to implement a merger policy to integrate the three companies, Z Holdings Corporation, LINE Corporation and Yahoo Japan Corporation?
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We believe that the policy's direction is quite correct, and we have high hopes for it in the future. We previously expressed to Z Holdings Corporation's management team our desire for them to speed up the decision-making process, and our opinion that decision-making speed has not increased, possibly due to the complexity of the process. Last month, we received a proposal from Z Holdings Corporation's management team regarding their policy for the merger of the three companies and changes in the management structure. We have a feeling that things will change dramatically from here on.
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As part of Z Holdings Corporation's changes in the management structure, Mr. Idezawa will be appointed as President and Representative Director, CEO, and Mr. Shin will be appointed as Representative Director, Group Chief Product Officer (GCPO). Both individuals are from LINE Corporation. Does this mean that LINE Corporation will lead the management of Z Holdings Corporation?
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The core message of this announcement is that Z Holdings Corporation's management structure will transition from a Co-CEO structure to a single CEO structure and that decision-making will be accelerated through the merger of the three companies.
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I believe that the merger of the three companies will also have an effect on SoftBank Corp.'s businesses in the future. Could you please explain your thinking about the future?
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We are currently finalizing the details ahead of our earnings announcement in May 2023, so we cannot discuss this in depth at this time. In FY2023, we aim for profit to rise across all segments, including the Yahoo! JAPAN/LINE segment, and we are closely examining our forecast figures.
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Could you please explain the areas covered and the size of cost reductions in the Consumer segment?
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Going forward, we plan to terminate three telecommunications services (3G, PHS and ADSL) and expect to reduce the network operation costs associated with those services. In addition, the depreciation of large capital investments that we have made since 2012 will end, and depreciation and related expenses are expected to decrease by around ¥50.0 billion in FY2023 relative to FY2022. Apart from this, we will work on priorities such as reducing outsourcing costs. However, in the telecommunications sector, excessive cost reductions can lead to communication failures. For this reason, we will balance our priorities as we implement cost reductions.
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How do you view your progress in the Consumer and Enterprise segments?
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In the Consumer segment, the progress rate was 90%, indicating steady progress. Therefore, we will seek to implement measures that will lead to growth in the coming fiscal year and beyond. In the Enterprise segment, the progress rate was 77%, which we also consider to be solid progress. We are stepping up sales activities to achieve our targets.
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Which segments do you expect to make notable contributions to profit growth in FY2023?
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In FY2023, we don't expect any particular segment to drive profit growth. Instead, we expect that all segments, including the Yahoo! JAPAN/LINE segment, will support overall growth. In the Consumer segment, the main impact of mobile service price reduction will remain for one more year, so the best we can realistically hope for is to maintain a profit level that does not fall below FY2022. In the Enterprise segment, business results have been steadily increasing, so we would like to keep growing without losing any momentum. In the Financial segment, PayPay Corporation's operating income before acquisition costs is already positive. Meanwhile, PayPay Card Corporation will incur upfront acquisition costs to expand its customer base. Therefore, while balancing our priorities, we will target substantive profit growth in the Financial segment.
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What is your approach to shareholder returns in FY2023?
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The shareholder return policy for FY2023 has not yet been determined at this time, but we have no intention of making any significant unexpected changes.
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There have been growing calls for pay raises throughout society. What is SoftBank Corp.'s position on pay raises?
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Although it is difficult to provide pay raises in the current business environment, we are finalizing our plans to offer a 5.4% pay increase. We will offset the additional cost of pay raises by reducing other costs by the same amount.
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Could you please provide an update on your progress with 5G (5th generation mobile communication system)?
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Our design policy is to first expand the coverage of the 5G service area. We have set up base stations centered on 700 MHz, achieving a population coverage ratio of more than 90% at the end of FY2021. In FY2022, we have continued to increase the number of base stations, and our area coverage continues to expand. The 3-4 GHz band (Sub6) has faced issues in terms of interference with satellite communications. However, as a result of relaxation trend of the rules made possible by various adjustments, we have started to build out this frequency band to expand telecommunications capacity, mainly in Tokyo, Nagoya, and Osaka. Meanwhile, we are currently studying the 28 GHz band, which is also known as the millimeter wave band, to verify whether we can obtain investment returns.
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What events led to your announcement about providing Dual SIM service (a service that allows customers to use the networks of two different telecommunications carriers on a single smartphone) together with KDDI Corporation?
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We do not consider the communications failure that occurred in July 2022 at KDDI Corporation to be somebody else's problem. After SoftBank Corp. disclosed its stance on Dual SIM service at its previous earnings announcement, Mr. Takahashi, who is President, Representative Director of KDDI Corporation, contacted us about creating such a service. Subsequently, we moved extremely quickly to develop a Dual SIM service, leading to this announcement. While specific service details are being finalized, we aim to begin providing the service by the end of March 2023.
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Are you in discussions with NTT DOCOMO, INC. and Rakuten Mobile, Inc. about providing Dual SIM service?
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We would like to refrain from commenting on the status of any discussions with other companies on providing Dual SIM service. SoftBank Corp. sees Dual SIM service as a way to deal with events such as communication failures and natural disasters. As soon as the conditions are in place, we believe that we should begin providing the service with every telecommunications carrier.
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