KDDI : Posted Performance Highlights and Q&A of the Financial Results for the First Half of the Fiscal Year Ending March 2021

The Presentation of the Financial Results

At the financial results meeting, President Takahashi described four points: '5G for Everyone,' 'Multi-Brand Strategy,' 'KDDI Accelerate 5.0,' and 'Aiming to Expand Growth Fields and Achieve Medium-Term Targets.'

1. 5G for Everyone

As announced previously, au will roll out a broad lineup ranging from high-end to middle-range models, with all models supporting 5G. A new 5G-compatible iPhone has also launched, showing steady sales.
au will accelerate area expansion for 5G, utilizing existing frequencies. About 10,000 5G stations are to be opened by March 2021, and about 50,000 by March 2022, aiming to cover 90% of the entire population. Furthermore, all 47 prefectures are scheduled to be covered by the end of December 2020. In terms of frequencies, we want to expand into the new 28GHz, 3.7GHz and 4.0GHz bands with extremely high frequencies, and achieve 5G capability with 700MHz, 1.7GHz and other existing bands as soon as possible, to expand our area.
As for pricing plans, we have expanded the unlimited data plan for users to fully enjoy 5G. With Data MAX 5G as a base, we have bundled services like the Netflix Pack, Television Pack and ALL STAR Pack. We will also launch the Students Discount, expanding eligibility to customers 29 years old or under as the bundled services are popular with this age group.
We will also promote the au 5G Experience, realized by the strength of unlimited data plans and a wide 5G area. The new 5G iPhone carries a feature that automatically identifies if it is in a 5G area. For example, customers on an unlimited data plan can enjoy new value as their handsets automatically switch to full HD in a 5G area.

2. Multi-Brand Strategy

The Multi-Brand Strategy involves the entire Group working to meet a wide range of customer needs. The au brand will offer 5G-based unlimited data services for additional comfort. UQ mobile will serve as a simple and affordable brand with a new 20GB plan, and BIGLOBE mobile, J:COM MOBILE and the DX new brand will offer unique services. We have diverse price plans to accommodate diverse customer needs.
UQ mobile will offer price plans with high quality services that are comparable to international price levels. The 20GB SUMAHO Plan V will be 3,980 yen, and bundled with a call option it will be 4,480 yen with up to 60 minutes of calls. This is equivalent to New York and Seoul that offer similar plans with high quality like Japan.
The new DX brand will offer a new UX for digital natives. Together with Singapore-based Circles Life, it will have simpler and faster procedures, it will be fully online using eSIMs, and customers can customize fees as they like. In November 2020 a new MVNO company KDDI Digital Life will be established. The brand name will be announced at a later date.
To summarize the multi-brand strategy, we will enhance our ID base and promote further up-selling. First, using au, UQ mobile and the Group MVNO, we will prevent au users from flowing to non-Group providers. Second, we will acquire new users by offering an attractive lineup from each brand. Third, we will enhance up-selling from UQ mobile and the Group MVNO to au, enhancing ARPU as a group. Since the UQ mobile integration in October, up-selling from UQ mobile to au has been successful, over 3.5 times during a two-week period in October year on year.

3. KDDI Accelerate 5.0

Aiming to realize Society 5.0, we set up KDDI Accelerate 5.0 for 2030 and released it in August. Society 5.0 is an initiative that aims for a sustainable society as proposed by the government, and it seeks to achieve an enriched society by merging physical society with virtual space. It aims to bring a circulated society by collecting data in physical space, analyzing it in cyber space with AI, and then feeding the results back to the physical space to improve it. We consider 5G to constitute the foundation for this idea, and KDDI Accelerate 5.0 embodies a message to accelerate Society 5.0 with the power of 5G. To accelerate Society 5.0 through 7 technologies and 3 layers centering on 5G, we are pursuing research with KDDI Research. We have launched and will engage in a joint research project with prominent overseas universities and researchers in the fields of AI and wireless communication.
In initiatives for KDDI Accelerate 5.0 we have launched the KDDI 5G Business Co-Creating Alliance with partnered companies to drive DX in the 5G era. We will also link 3 sites in the Toranomon area to bring new business development. These sites are the corporate sales division to support clients' DX, KDDI DIGITAL GATE which is our business development hub, and in December we will open the KDDI research atelier which will engage in applied research and development. These three locations will work together to pursue DX.
In the business and capital alliance with Toyota announced today, we will strengthen our partnership for a society where towns, homes, people and cars are all connected. Up until now we were partnering to offer connected car services at home and abroad, but now we are going to develop this further and launch new initiatives that go beyond the 'mobility' and 'telecommunications.' Together, we will work on R&D for a telecommunication platform, operational and management systems for next-generation connected cars, services and platforms that pursue safety and security, and in solving social issues with big data.

4. Expanding Growth Fields and Achieving Medium-Term Goals

In the first half of the fiscal year's consolidated sales, operating revenue was 2,537.2 billion yen, down 1.1% year on year. This was affected by a drop in device sales but we will strengthen sales toward the second half of the year, centering on 5G. Meanwhile, the second quarter saw expansion in the Life Design Domain and Business Services Segment, both growth fields.
Operating income was 588.8 billion yen, up 6.4% year on year driven by growth fields. We will aim to expand the growth fields to achieve the medium-term management plan targets.
Consolidated operating income in the first half of the fiscal year was up 35.4 billion yen year on year, largely due to the growth fields (the Life Design Domain and Business Services Segment) accounting for 30.9 billion yen. In the Personal Services Segment, mobile telecommunication revenue from au and the Group MVNO dropped below that of the previous year. In 'Others,' income was up 6 billion yen due to temporary effects such as the lower au device sales cost and lower gross profit from device sales. We will strengthen our activities toward the next term and aim to meet the original forecast by expanding growth fields to cancel out the effects of lowered telecommunication fees.
In the growth fields that underpin consolidated performance, the operating revenue of the Life Design Domain was 603 billion yen in the first half of the year, up 46.7%, and 476.2 billion yen in the Business Services Segment, up 50.1%. Both are progressing steadily toward meeting the medium-term management plan targets.
As for shareholder returns, we have resolved to repurchase up to 200 billion yen of our own shares.
We will aim to achieve the medium-term targets by pursuing 5G and growth fields.