Main Q&A at Earnings Investor Briefing
for Q1 FY2024

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Date	Tuesday, August 6, 2024 6:00 pm - 6:50 pm
Speakers	SoftBank Corp.: Kazuhiko Fujihara (Board Director, Executive Vice President & CFO) Osamu Akiyama (Vice President, Head of Strategic Finance Division) Wataru Onoguchi (Head of Finance and Accounting Division) Yudai Sasaki (Deputy Head of Corporate Planning Division)

The number of net additions of smartphones in Q1 FY2024 was 180,000, a decrease of 140,000 year on year, while there was a noticeable increase in sales commissions and sales promotion expenses. What is your outlook on the net additions and these expenses?

The net additions were slightly affected by the discontinuation of 3G services, which lasted until around mid-May, but we have been seeing a recovery in June and July. We are expecting good results from Q2 onwards and our goal of 1 million net additions for this fiscal year remains achievable. As for sales commissions and sales promotion expenses, we are carefully controlling them to strike a balance towards achieving our annual profit target. The customer acquisition-related cost, which was a negative factor of JPY 18 billion mainly due to deferral effects, is expected to turn around in the latter half of this fiscal year. Therefore, we do not expect sales commissions and sales promotion expenses to have a negative impact on profits.
Do Rakuten Mobile's net additions have an impact on the net additions of smartphones? Also, how do you evaluate Q1's net additions, sales commissions and sales promotion expenses, and mobile ARPU excluding value-added services?

While it would not be accurate to say that Rakuten Mobile and SIM subscribers have no impact on the number of net additions or churn rates, we do not see them causing a significant damage to our operations. Regarding mobile ARPU, we consider it as one with the ARPU of telecommunications and value-added services, and its positive-to-flat trend overall is a good sign. The ARPU of value-added services is slightly positive while that of telecommunications is slightly negative. However, we aim to earn solid revenues by multiplying ARPU and the number of subscribers. As for the relationship between net additions and sales commissions and sales promotion expenses, we believe the balance is not bad and we will continue to work diligently to achieve the annual profit target for Consumer segment and profit increases for the following year.
In the event of changes in the market environment, which of the following metrics - net additions, ARPU, or profit - would be most prioritized in steering your management strategy?

We do not prioritize just one, rather we maintain a balanced approach. If you look only at the number of net additions of smartphones in Q1, you might feel the situation is more challenging than before. However, the brand transition between SoftBank and Y!mobile has been greatly improved, having a positive impact on ARPU as well. From a management perspective, the most important factor is the total revenue generated by the product of the number of subscribers and ARPU. Meanwhile, expanding the user base is also extremely important as SoftBank Corp.'s services, inclusive of its group companies, have smartphones as the entry points. We are working with both of these aspects in mind.
The profit from the Media & EC segment is strong and seems to outpace the overall plan. What is the policy to utilize the surplus?

While the segment income (i.e. operating income) of the Media & EC segment shows strong performance, its contribution to net income is limited. While it is true that we have increasing options as progress is being made in other segments as well, we place importance on net income, so it is still too early to comment on a specific direction for the future.
You invested JPY 43.9 billion in AI computing platform in Q1. What does that involve? How much do you expect it to be annually?

The breakdown of the JPY 43.9 billion partly includes the GPUs from NVIDIA purchased within FY2023, but the majority is the amount invested in the GPUs we decided on in FY2024. The investment in AI computing platform we have decided on thus far, net of the government subsidies, totals about JPY 120 billion. Of this, we anticipate just under JPY 100 billion as CAPEX for FY2024.
What is the difference between the JPY 150 billion in growth investments, certified by the Ministry of Economy, Trade and Industry's “Cloud Program” supply security plan, and the JPY 120 billion in growth investments explained in this briefing.

Against the JPY 150 billion growth investments in AI computing platform announced in May 2024, there are subsidies of JPY 42 billion from the government and the real investment amount after deducting the subsidy is JPY 108 billion. This amount will be recorded as CAPEX after compressed entry. The total of the investment amount of JPY 13 billion (net after subsidy) decided for the AI computing platform in FY2023, and the JPY 108 billion is JPY 121 billion. This approximately equals to the JPY 120 billion raised through the Bond-Type Class Shares issued in November 2023.
With the public tender offer of its own shares by LY Corporation, will the dividends received from A Holdings Corporation be utilized for growth investments?

In terms of our primary free cash flow management, the cash flows of LY Group and PayPay Corporation, etc. are managed separately, while dividend payments from A Holdings Corporation are included in the primary free cash flow. If we generate a large amount of primary free cash flow, we could potentially allocate it towards growth investments.
Do you plan to continue issuing Bond-Type Class Shares at this pace in the future? Could you explain the relationship with the dividend policy for the next fiscal year and beyond? Is the strategy dependent on Bond-Type Class Shares sustainable?

First and foremost, I would like to clarify that our dividend policy does not directly depend on Bond-Type Class Shares. We focus on three points in our dividend policy. The first is consolidated net income sufficient to justify the dividend payout ratio, which we will continue to generate. The second is the fund resource used for dividend payouts by SoftBank Corp. in its standalone capacity. Bond-Type Class Shares, which are recorded as capital surplus, are expected to have a backstop effect, but our policy is to cover dividends primarily with retained earnings, and we believe that we can generate sufficient retained earnings from our business. The third is cash flow. We intend to cover dividends with business cash flows, independent of Bond-Type Class Shares. Therefore, Bond-Type Class Shares are issued purely for future growth capital and should be seen as a funding method that matches strategic long-term investments. Regarding our future issuance policy, we have resolved amendments to the Articles of Incorporation at a general meeting of shareholders that allow us to issue up to five times without specifying the timing. We are keen to consider issuance if there is a timing necessary for future growth.