Q&A at Earnings Investor Briefing for Q3 FY2023

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Date Wednesday, February 7, 2024
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 (Vice President, Head of Strategic Finance Division)
Yudai Sasaki (Deputy Head of Corporate Planning Division)
  • Please tell us the forecast for the profitability of the Consumer segment in the coming fiscal year and beyond, including the impact of customer acquisition measures and acquisition-related costs.

    As mobile revenue improved, the impact of reduced depreciation expense will become less significant. The acquisition-related costs were most impactful in FY2021, but it is in a declining trend. We anticipate these costs will decrease and positively contribute to an improving trend.

  • Please tell us the reasons for the upward revision of ¥20 billion in the operating income of the Consumer segment for the full year of FY2023.

    The upward revision in operating income was primarily due to improvements in ARPU. Impact of a new pricing plan, not anticipated at the start of the period, was large. Additionally, various sales efforts, including value-added services and brand-specific initiatives, have been made. It's also noted that mobile revenue is expected to increase a year ahead of the forecast made in the medium-term management plan announced in May 2023.

  • In terms of the net additions in main subscribers, how significant were the impacts of the 3G service termination and the decrease in enterprise tablets? Additionally, is there an expectation for a recovery in the fourth quarter?

    The impacts were temporary, affecting only tens of thousands of cases, with minimal impact on performance. From the fourth quarter onwards, efforts are being made to ensure that there will not be any similar concerns.

  • Regarding acquisition-related expenses, will there be customer acquisition campaigns in the fourth quarter similar to the previous year, where costs are deducted from mobile revenue?

    The performance is progressing smoothly, so it could be considered as an option.

  • Regarding the sales-related expenses of the Consumer segment, specifically advertising and promotion expenses, they have become a factor in reducing profits by ¥6.9 billion in the third quarter. What kind of expenses are these? (An increase in profits of ¥3.9 billion in the first half, with a cumulative decrease of ¥3 billion in profits by the third quarter)

    The primary reason for the increased promotional activities in the third quarter was the amendment to the Telecommunications Business Act and the introduction of new pricing plans.

  • Please tell us whether the business structure will change from proceeding customer acquisition by spending acquisition-related cost because of the amendment of the Telecommunications Business Act.

    In response to the amendment of the Telecommunications Business Act, we anticipate an improvement in the revenue from device sales, and how we utilize sales commissions becomes a challenge. As various options emerge for management, we are considering ways to continue increasing net additions in the Consumer segment.

  • Regarding the 310,000 smartphone net additions in the third quarter, how much of this do you see as last-minute demand before the amendment of the Telecommunications Business Act? About a third?

    It is true that there was growth in December because of the last-minute demand, and as a result revenue dropped in January. Quantification is difficult, but it's understood to be less than a third. Currently, there's a significant recovery in progress, truly a struggle, so we're hoping for additional improvements.

  • Please tell us the impact of the 3G service termination on subscribers and costs. Will there be a net decrease in smartphones in the fourth quarter?

    The termination of the 3G service has been postponed until April 2024, taking into account the effects of the Noto Peninsula Earthquake. As a result, the net decrease in subscriber numbers will occur in the first quarter of FY2024, not the fourth quarter. However, the impact on performance for customers who have been transitioned is expected to be minimal. Revenue impacts are also estimated to be minor, based on past experience, and no significant effects are anticipated.

  • I had been expecting the total ARPU for mobile to start improving, but is it remaining flat? Will the increase in acquisition numbers contribute to mobile revenue?

    This fiscal year, even with a YoY decrease in consumer ARPU, an increase in profits has been achieved. Looking ahead, as ARPU becomes more robust, it will be easier to achieve further profit growth compared to this fiscal year. Acquisition numbers are also strong, and we aim to maintain this momentum, working towards discussing ARPU in a positive territory.

  • From this upward revision, we anticipate an increase in FCF. What kind of capital allocation are you considering?

    After generating adequate FCF, growth investment remains one option, and financial improvement is naturally another option. Regarding generative AI, given its long-term perspective, we would like to consider options including the use of previously issued Bond-Type Class Shares.

  • Regarding the cost reduction forecast for this fiscal year, is there an anticipation of additional cost reductions for the next fiscal year?

    We are working to offset the approximately ¥50 billion impact from mobile service price reduction through cost reductions, and we evaluate that this has been successfully implemented. Despite facing inflation and an increase in personnel costs in the coming fiscal year, we aim to prepare for profit growth.

  • As ARPU improves and the ROI for the Consumer segment gets better, is there a possibility of increasing investment in telecom infrastructure?

    There are no specific discussions on this matter.

  • In a situation where performance is strong, are there plans for early investments in AI, looking beyond the medium-term management plan that concludes in FY2025?

    We are undertaking significant initiatives for long-term growth, including investments in generative AI and Cubic Telecom. The medium-term management plan's message is to reverse the situation from hitting the bottom in FY2022 and continue increasing revenue and profits thereafter. Beyond FY2024, we aim to solidly grow both revenue and profit while tackling themes aimed at mid to long-term growth.