02/16/2021 | Press release | Distributed by Public on 02/16/2021 04:13
|Date||Thursday, February 4, 2021 6:00 pm - 7:00 pm|
Kazuhiko Fujihara (Board Director, Executive Vice President & CFO)
Takashi Naito (VP, Head of Finance and Accounting Division)
Osamu Akiyama (Head of Strategic Finance Division)
Could you tell us the reasons for the year-on-year decrease in mobile communications revenue in the Consumer segment? Excluding one-time factors, has mobile communications revenue continued to increase?
A1 While the decline in ARPU has had an impact, mobile communications revenue in the nine months ended December 31, 2020 rose firmly by ¥13.2 billion year on year, excluding the effects of Half-price support and First-year discount. In this context, the one-time factors of revisions to long-term loyalty benefits for mobile communications subscribers and contract cancellation fees in October 2019 had a total negative impact on revenue of more than ¥10 billion for the nine months ended December 31, 2020. One year has passed since each of these one-time factors emerged. Therefore, these factors are expected to have a smaller year-on-year impact from Q4. The overall business trend is stronger than what would be suggested by revenue growth of ¥13.2 billion.
I believe that SoftBank was partly affected by announcements of the price plans of other telecom carriers in Q3. Has customer activity settled down at this time and are you in a position to grow your three brands? Could you share your outlook for trends in net increases in subscribers going forward?
The SoftBank brand's Student Discount has proven hugely popular and Mobile Number Portability (MNP) is also crucial. The overall picture including the trend in new subscribers is satisfactory. In December, it seemed very much like DOCOMO users were taking a slightly wait-and-see approach. Currently, I believe that interest has shifted to how the spring shopping season in February-March will be approached.
Following the announcement of Y!mobile's revised price plans in February, I don't think there has been a specific announcement on 'SoftBank on LINE.' What are your thoughts regarding your next announcements and sales promotions?
The Y!mobile brand has only recently made its announcement, and we would like to effectively implement it. 'SoftBank on LINE' will not be built from scratch. We will leverage the strengths of LINE to provide something different than what other companies offer. We are getting 'SoftBank on LINE' ready as we speak. Announcements will be made in the future.
When the price plans were announced in December, you suggested that operating income next fiscal year (FY2021) would be higher than the beginning-of-period (BOP) forecast of ¥920 billion for the current fiscal year, but may decrease depending on the operating income result for FY2020. On the other hand, at the financial results briefing held today by President Miyauchi, SoftBank explained that it would aim to increase earnings. What factors were behind this change in message?
The message is that both President Miyauchi and the incoming new president, Mr. Miyakawa, will aim to increase earnings. Since the time of the announcement of price plans in December, we have believed that we can harness strengths in the Enterprise segment and other areas. We are also considering cost reductions. With the scheduled business integration of Z Holdings Corporation and LINE Corporation, the impacts of purchase price allocation (PPA) and integration will arise. We are currently at the stage of critically assessing the price plans of other companies, user trends and other factors. Expansive discussions are being held on those matters. We will announce our policy in May.
In an environment without population growth, SoftBank will need to capture users from other companies in order to increase the number of subscribers. I assume that Y!mobile is an effective vehicle for getting that job done. Do you see the role of 'SoftBank on LINE' as preventing subscribers from switching to other telecom carriers, or will it be used to actively capture subscribers from other telecom carriers? The 'SoftBank on LINE' plan seems to be mostly on par with the plans of other companies. What are its strengths? Will you limit the target of 'SoftBank on LINE' to MVNO users?
We believe that we have a variety of options in hand. The key theme will be to implement the right plan in the right place. Rather than a one-size-fits-all approach, we will harness the unique strengths of our three brands as we grow each brand individually. With 'SoftBank on LINE,' we will properly ensure network quality and other features as a mobile network operator (MNO), not a mobile virtual network operator (MVNO). We also think that it would be great if we could promote the user-friendliness of the LINE platform, its key feature, front and center. As the things that people want to do and can do with smartphones increases, it will be essential to get a wide range of people across the user base to use the platform. The LINE brand is being championed as a user-friendly app for many different environments, including the COVID-19 crisis and natural disasters. We believe that this fact will allow the LINE brand to fulfill a certain critical role in society.
Which factors have had a positive impact during the COVID-19 crisis, but will not have an impact next fiscal year and become one-time factors?
One-time factors are limited. Most factors are related to businesses based on a subscription model.
Could you tell us about the factors behind the increase in mobile revenue in the Enterprise segment? Was the main factor ARPU growth, not the number of subscribers? What impact will this have from next fiscal year onward?
Smartphones have been slow to gain widespread adoption among enterprises in comparison to individual consumers, and enterprises still use a lot of feature phones. Under the current circumstances, enterprises have been encouraged to implement telework. This has made smartphones essential to enterprises, along with spurring widespread adoption of tablets and other devices. These factors have contributed to the increase in mobile revenue in the Enterprise segment. Because an increase in the number of subscribers will lead to expansion in the foundation for next fiscal year, you can expect firm growth in the Enterprise segment.
Was the increase in revenues from sales of goods and others in the Consumer segment temporary? Will there be an impact on profit?
In Q2, sales volume recovered, but unit prices decreased in connection with increased sales of iPhone SE. In Q3, volume and unit prices both recovered because of the impact of the new iPhone. In FY2019, the corresponding period followed last-minute demand ahead of a consumption tax hike and the impact of the amended Telecommunications Business Act, so I believe a year-on-year comparison will show a notable change.
Can I assume that the main factor behind the increase in the Distribution segment was personal computers (PCs)?
The main catalysts for growth were PCs and tablets.
The full-year forecast for CAPEX has been increased by ¥20 billion from ¥400 billion due to accelerated 5G investment. How long will this condition continue?
While the details will be explained in May, we plan to maintain CAPEX of ¥400 billion. Please understand that the CAPEX of ¥20 billion was added only in the current fiscal year, and it is not part of a continuing increase.
Could you tell us what the additional CAPEX of ¥20 billion was used for?
We used the additional CAPEX to accelerate the expansion of 5G base stations. We would like to take the initiative in 5G at the earliest possible opportunity. We now expect to be able to effectively use existing 4G facilities for 5G purposes. We are eager to expand our 5G coverage area so that users can experience what 5G is like as soon as possible, and to make it one of our strengths.
SoftBank has achieved continued growth in the Enterprise segment. Could you tell us what factors allow you to differentiate yourself from other companies?
SoftBank believes that its strength lies in being very open to new technologies, including those from overseas, and having honed a discerning eye for technology since its founding. SoftBank has become a 'showcase.' It has realized paperless operations and made telework possible for more than 90% of its workforce. It has pushed ahead with digital transformation (DX) in the office, while reducing costs. SoftBank's success and role as a 'showcase' has also been a source of confidence for sales. In addition, we believe that SoftBank's B2B2C approach will become a major strength. Making the most of our extensive customer interfaces, we expect to serve a wide range of customers from many different angles, including the users of LINE Corporation, Yahoo Japan Corporation, and PayPay Corporation and the smartphone users of the SoftBank brand.
Revisions to voice call charges from fixed-line telephone to mobile phones are being considered. Against this backdrop, SoftBank Corp. has set higher prices than other telecom carriers, so if it revises its prices going forward, will there be a large impact? Could you tell us what kinds of discussions are being held right now?
While we are aware that these kinds of trends are happening now, we would like to refrain from providing a detailed response. We believe that this issue will not have a significant impact on earnings.
Will the profit margin in the Enterprise segment improve next year?
I believe there is potential for improvement. At present, we are growing Business solution and others while absorbing upfront investments. Mobile has also been growing. Looking at sales growth in Q3, I believe that you can confirm that sales increase has contributed to profits.
What is the current status regarding the acquisition of 5G subscribers? Could you please share your outlook for the acquisition of 5G subscribers at this time?
We expect to acquire 2 million plus several hundred thousand 5G subscribers as of the end of March. We have learned that other companies expect to acquire a similar number of 5G subscribers as of the end of March.
Could you tell us about your competitiveness in acquiring 5G subscribers? What aspects are being highly evaluated and chosen by consumers?
Almost all the devices we currently sell have become compatible with 5G, so volume is expected to increase. From March to April, consumers will finally be able to experience a 5G network environment. We have also made a range of content available. Although there are still many areas where further development is needed, we have made the fullest possible preparations, so we would like to harness our strengths in this area.
In your latest upward revisions to forecasts, net income was not revised very much, due to the impact of factors such as impairment and valuation losses. Does this mean that you will consider your policy on the total shareholder return ratio on the basis of net income including impairment and valuation losses?
There has been no change in the basis of net income including impairment and valuation losses. In the current fiscal year, we believe that shareholder returns will be relatively high, as we conducted a share buyback and set the annual dividend at ¥86 per share. We have not changed our overall approach of considering shareholder returns over a three-year period.
Since the announcement of price plans in December, you noted that your overall confidence has been increasing. Could you tell us the reasons for your heightened confidence? Could you also tell us about the topics you may be discussing? For example, you may now have a clear picture of the fields where you will compete with other telecom carriers now that their price plans have been announced in detail, or you may now have increased certainty about business results for January or predictions.
There is still some margin of uncertainty. In some areas, we cannot tell how things will turn out until we try. In the Consumer segment, we expect to face some pressure. We have not gained confidence about our prospects for fully regaining the lost ground from that pressure. We have thoroughly discussed matters within this margin of uncertainty. We are eager to accelerate not just operating income in non-telecommunications fields, but also net income and other metrics in those fields.
With cost reductions, what kinds of specific measures are conceivable besides reducing office space?
While controlling costs throughout the Company, we will consider a wide range of measures and streamlining for networks. Sales promotion and subscriber acquisition costs are on an improving trend, and we are conducting 360-degree inspections in many different fields.