Notice Concerning Conversion of
PayPay Corporation into a Consolidated Subsidiary
through Share Delivery by our Subsidiary

1. Objective and Aim of the Transactions

Under the “Beyond Carrier” strategy, the Company aims to grow beyond a telecommunications carrier by developing its business that utilizes the forefront of technology. Since the listing in 2018, through the acquisition of Z Holdings (former Yahoo Japan Corporation), as well as the business integration of Z Holdings and LINE Corporation (present A Holdings Corporation), the Company has become a corporate group with one of the largest customer bases in Japan in area of not only mobile, but also e-commerce, media, communications and cashless payment services.
In particular, “PayPay”, a cashless settlement service, has acquired 48.65 million cumulative registered users in 3 years and 9 months since its inception and has 67% share of domestic market of code payment^*1 and is achieving rapid growth as a social infrastructure. The Company has decided to conduct the Transactions as it believes that, for the reasons stated below, it is the most appropriate that B Holdings, which is to be a parent company of PayPay, is jointly operated by the Company and Z Holdings in order to maximize the corporate value of the Company and its subsidiaries (hereinafter, the “Group”).

[Note]

1. *1
   Volume of PayPay payments as a percentage of total in-store payments in the code payment market. The Company calculated the number based on “Survey of Code Payment Usage Trends” published on June 5, 2022 by Payments Japan Association.

1. (1)
   Increasing PayPay revenue opportunities

   PayPay, thus far, has actively carried out investments to expand its business foundation. From October 2021 onward, PayPay began undertaking measures for monetization, including charging a merchant fee. Going forward, to further increase revenue opportunities, PayPay will enter a phase requiring the expansion of its customer base and the diversification of revenue sources. The Company believes that PayPay can further expand its customers base by linking user IDs with “LINE”, which is a service provided by Z Holdings group and has 92 million users^*2. Also, PayPay Card Corporation (hereinafter, “PPCD”) is scheduled to be transferred under PayPay, and linkage between PPCD's “credit cards” and PayPay's “smartphone payment services” is expected to strengthen the financial business. Further, the Company expects that the cooperation with the Company and Z Holdings will contribute to diversification of business and expansion of revenue opportunities of PayPay.

2. (2)
   Expansion of PayPay ecosystem and strengthen synergies within the SoftBank group

   The Company aims to expand PayPay ecosystem by developing linkage among various services of the Company and Z Holdings including mobile, e-commerce, media, communications, and above all, “PayPay Point”. The Company believes that expansion of customers base and PayPay ecosystem will contribute to growth of existing businesses of the Company and Z Holdings, as well as growth of the corporate value of entire Group. In regard to the Company's mobile services, the Company expects that expansion of value-added services for customers through further development of linkage will lead to increase of new customers and improvement of churn by enhancement of competitiveness through differentiation from competitors. In regard to the Company's enterprise business, the Company believes that increase of digital marketing utilizing PayPay will contribute to acceleration of growth. In addition, the Company believes that expansion of PayPay ecosystem will contribute to strengthen synergies with SoftBank group companies.

   [Note]

   1. *2
      The number of monthly active users as of April 2022

After the Transactions, the Group intends to make further progress of “Beyond Carrier” strategy through expansion of financial services and aims for further diversification of revenue and growth of the corporate value.

2. Summary of the Transactions

1. (1)
   Summary of the Transactions

   On July 27, 2022, the Company decided to sign the Transaction Agreement related to the Transactions with Z Holdings. The summary of the Transactions is composed of the following transactions described below (refer to the attached materials for details).

   1. (a)
      Z Intermediate shall establish the Intermediate Holding Company, and the Company and Z Intermediate will hold equal equity in the Intermediate Holding Company through investment into the Intermediate Holding Company. (hereinafter, the “Capital Contribution”)
   2. (b)
      Owing to the method for the payout of dividends-in-kind, (i) Yahoo Japan Corporation (hereinafter, “Yahoo Japan”), a subsidiary of Z Holdings, shall transfer all of its common shares and Class A preferred shares in PayPay to Z Intermediate, and (ii) of these common shares, 163,196 shares shall be transferred to Z Holdings (hereafter, (i) and (ii) shall collectively be referred to the “In-Kind Distribution”).
   3. (c)
      After the Capital Contribution and the In-Kind Distribution take effect, the Company and Z Intermediate shall respectively exercise their rights to request acquisition^*3 of PayPay Class A preferred shares the two parties hold. On the effective date of the Share Delivery (however, prior to the effectuation of the Share Delivery), all Class A preferred shares shall be converted into PayPay common shares (hereinafter, the “Conversion of the Shares”).
   4. (d)
      The Intermediate Holding Company shall implement the Share Delivery. The Company and Z Intermediate shall supply the Intermediate with 796,804 common shares in PayPay, which will be held after the Conversion of the Shares held by these two companies on the effective date of the Share Deliver. Based on the share delivery plan, the Intermediate Holding Company will deliver to the Company and Z Intermediate: one (1) Class A preferred share for one (1) common share of PayPay.

      [Note]

      1. *3
         By exercising the rights for an acquisition request, PayPay shall, in exchange for acquiring Class A preferred shares, deliver one (1) common share to the shareholders of each of these Class A preferred shares.

   Owing to the Transactions, the Intermediate Holding Company shall acquire a majority of voting rights in PayPay, making it the parent company. In addition, Z Holdings shall maintain the nomination rights for the majority of directors that will sit on the Intermediate Holding Company^*4. Accordingly, PayPay will be consolidated by Z Holdings through Z Intermediate and the Intermediate Holding Company. Because the Company is a parent company of Z Holdings, PayPay is expected to be a subsidiary of the Company.

   [Note]

   1. *4
      The Company has entered into a shareholders' agreement (hereinafter, the “Shareholders' Agreement”), of which the target company is the Intermediate Holding Company, with Z Holdings, dated as of July 27, 2022. In the Shareholders' Agreement, it is agreed that Z Holdings has the right to appoint majority of members of the board of directors of the Intermediate Holding Company when and after the Share Delivery comes into effect.

2. (2)
   Schedule of the Transactions^*5

   Signing of the Transaction Agreement	July 27, 2022
   Incorporation of the Intermediate Holding Company (Scheduled)	By September 30, 2022
   Effective date of the In-Kind Distribution (Scheduled)	By September 30, 2022
   Payment for the Capital Contribution (Scheduled)	October 1, 2022
   Effective date of the Conversion of the Shares and the Share Delivery (Scheduled)	October 1, 2022

   [Note]

   1. *5
      The schedule is subject to change due to the necessity of the progress of the procedures for the Transactions or for other reasons.