Thank you for waiting. We would like to start a meeting on financial results for the second quarter of the fiscal year, ending March 2021, of KDDI Corporation. We appreciate your joining us today via internet out of your busy schedules, as well as those of you who are here. I will be your emcee today, Hongou with IR Department. Great to be here. Japanese, English simultaneous interpretation is provided for the meeting. Please be advised that the meeting will be made available for on-demand distribution later on our IR website.
Allow me to introduce today's participants. From the left, in the center, Takahashi, President. Muramoto, Executive Vice President, Executive Director of Corporate Sector. Next, to the right, center in the front, Shoji, Executive Vice President, Executive Director, Personal Business and Global Consumer Business Sector. Mori, Senior Managing Executive Officer, Director, Executive Director, Solution Business Sector.
To the right in the back, Yoshimura, Executive Officer, Director, Executive Director, Technology Sector. Lastly, left in the back, Saishoji, Executive Officer, General Manager, Corporate Management Division.
Three materials on business results, presentation, flash report, detailed materials, and two documents for TSE disclosure. In total, five items have been posted on our IR website. Regarding what's described in the materials, performance we may mention in Q&A session and subscriber targets, please check the disclaimer in each material. President Takahashi will brief you on the results, followed by questions and answer session. Mr. Takahashi, the floor is yours.
Yes, thank you. Ladies and gentlemen, thank you very much for taking time out of your busy schedules to be at KDDI's earnings meeting. Thank you for viewing the program. I would like to explain about the results of the second quarter for the year ending March 2021. There are five topics I would like to cover, 5G for Everyone, multi-brand strategy, KDDI Accelerate 5.0, and how we aim to expand growth fields and achieve medium-term targets. First, on 5G for Everyone. For this, as you are aware, au's models, all of them, are to be 5G capable. We're going to have a broader lineup of products, ranging from high-end to middle-range models. There's a new iPhone capable of 5G. It's already launched and it's being sold quite successfully. Next on 5G service areas. By using existing frequencies, we would like to extend 5G service areas.
In terms of the number of 5G base stations, by March 2021, we would like to increase the number to 10,000 stations, by March 2022, to 50,000 stations. By March 2022, population coverage will reach 90%. Not just the number of base stations, but we would like to work towards coverage of 90%. By the end of the year, we will be covering all 47 prefectures. In terms of applicable frequencies, new frequencies include 28 GHz band, 3.7 GHz, 4.0 GHz. These will be utilized effectively. Existing frequencies are going to be used for 5G as well. 700 MHz , 1.7 GHz, these will be used in stages so that we can expand our coverage and service areas.
Regarding the 5G pricing plan, as you know, we want the consumers to enjoy the full benefits of 5G, we're offering unlimited data plans. The basic plan is Data MAX 5G. We have variations thereof, Netflix, TV pack, All Star pack. These services are bundled in with these, we would like to drive increase. On top of this, we are starting au Wide Gakuwari, or student discount, those who are up to age 29 are eligible. For these younger people, services that are bundled with a discount attached is very popular. If you're age 29 or lower, you will be offered a discount. Monthly charges will be lower by JPY 1,600 per month for six months. Next au 5G experience. We have an unlimited data plan. We also have wide coverage of 5G area. These are going to be drawn upon as strength.
We have new iPhone compatible with 5G, incorporating identifying functions. We have close discussions with Apple for Data MAX plan. It's an unlimited data plan. The users, if they go into 5G area, they will be able to access a new experience. Specifically, for example, TELASA unlimited data plan customers. Once they enter the 5G area, they will be able to access and enjoy full HD visuals and videos. We would like to offer a new experience with that arrangement. This is unique to au. Other companies, they do not have similar plans, so we would like to expand on this. SPORTS BULL, this is sports video service. Starting from December this year, smash and au Smart Pass Premium. By expanding into these, we want to achieve augmented services. Next, I would like to discuss multi-brand strategy of ours.
For the group overall, we would like to meet a broad range of customer needs as an entire group. We have multiple brands. We refer to it as multi-brand strategy. Specifically, stress-free unlimited plans, that's for the brand au, 5G for Everyone. We have strong focus on 5G. On the other hand, we have UQ Mobile, which offers simple and accessible prices. We have added a 20 GB plan that is simple and accessible, which is UQ Mobile. BIGLOBE Mobile, J:COM MOBILE, advantageous and distinctive services. We're going to launch a DX new brand. It draws upon the unique features of MVNO. In the world, there are a broad range of diverse customers. For these diverse customers, we would like to offer diverse plans. In order to sort them out, we have this multi-brand strategy, au, UQ Mobile, BIGLOBE, and J:COM MOBILE.
Regarding UQ mobile, the prices of which are comparable to international level. For 20 GB, JPY 3,980. That's Smart Plan V on top of a Smart Plan R and S. You can see that the plan is very easy to understand. I hope the customer will be able to embrace this and enjoy this. There's a core option, core pack of JPY 500. This is a plan that is comparable to international equivalents. As you can see on the right-hand side, this is a comparison of 20 GB monthly price compared to Seoul and New York, where the quality of service is said to be good. You can see that the price that we offer is quite comparable to those offered in New York and Seoul. The new DX brand for digital natives, we are to offer a new brand.
There's a company called Circles.Life based out of Singapore, which is a digital telco. They have UX improvement with high-speed cycle, achieving high NPS. I think they have achieved NPS of 50, so very high customer satisfaction. In 2019, they have entered into Taiwan and Australia with its own platform. We're having a partnership with this company, Circles.Life, as they offer this new brand and new service. It's going to be an exciting service. As you can see, it's completely online with eSIM, simpler and faster procedure to apply and become a subscriber, and customer pricing customization is possible. To offer a new brand, new service, we're going to establish MVNO company together with the Singaporean company, KDDI Digital Life, in November 2020. Of course, although we call the company KDDI Digital Life, we would like to offer a service that is unique.
Multi-brand strategy. We're going to further expand ID base and promote upselling au, UQ mobile, MVNO, BIGLOBE, J:COM MOBILE, new DX brand. With these three brands, we would like to stem the outflows of customers from the group. Secondly, we have such an exciting new lineup. UQ mobile, as I said, is on par with the international equivalents. I think we can strengthen new sign-ups. Thirdly, UQ mobile, BIGLOBE, au, where we focus on 5G, I think upselling from these brands to au is going to be possible. We will be very much focusing on these three so that we can raise our ARPU as a group.
Upsell from UQ mobile to au, upsell effect is expanding last fiscal year. If we compare in October year-on-year, upselling rate is increased by 3.5x year-on-year. How can we offer very attractive 5G? Of course, therefore, we will be focusing much on that.
Next, KDDI Accelerate 5.0. Regarding this, looking towards 2030, we formulated KDDI Accelerate 5.0 with the aim of realizing Society 5.0. It was released in August 2020. Society 5.0 centers on sustainable consumers. This has been defined by the government, realizing a rich society by blending with virtual spaces. From the physical layer, data is collected, and in the cyberspace, data is analyzed using AI. Using this data, once again, in the physical space, feedback is given, so the physical space is going to be improved. This is a circular society, and we call this Society 5.0. As the foundation, there is 5G. Looking at Society 5.0 with the 5G, we would like to accelerate. With that, we call this KDDI Accelerate 5.0. KDDI Accelerate 5.0 centering 5G.
We are promoting seven technologies centering on 5G. I'm not going to read all of them. These are defined and centering on the KDDI Research Inc., we are doing the research activities. Right-hand side, layers to realize. Network layer, platform layer, and business layer. Regarding the network layer, that's none other than 5G. As for the platform layer, new businesses to be created on the business layer. The platform layer is to help do this. Together with the partners in the business layer, develop new businesses. On the very bottom, KDDI Research Inc. We launched a joint research project with prominent overseas universities and researchers in the fields of AI and wireless communication. Promoting KDDI Accelerate 5.0 with the aim of achieving world-class research results.
Next, KDDI Accelerate 5.0 initiatives. There are many partners. In the 5G era, we would like to promote DX and KDDI 5G Business Co-creation Alliance. With partner companies, we are doing this. With the logo mark, you can see the names of the partners. Together with this, we would like to create a network in the era of 5G. Right-hand side, please. In Toranomon area, especially to c reate new business development team for the corporate department was established in August to help support companies in DX. We also have KDDI Digital Gate for development and newly opened in December this year, KDDI Research Atelier for applied R&D. We have KDDI Research, Inc. in Fujimino.
There are basic research and applied research. For the basic research, 5G and beyond 5G is done. That's mostly done in Fujimino. As for the applied R&D, centering on Toranomon area, we would like to promote those activities.
We call this Toranomon Triangle. With Toyota, business and capital alliance with Toyota was announced today, strengthening the alliance for society in which towns, homes, people, and cars are all connected. As on the right-hand side, we have been promoting joint building of a global communications platform to provide safety and comfort by the fusion of cars and communication. Together with Toyota, we would like to develop them, accelerating new initiatives that go beyond mobility and telecommunications, joint R&D focused on telecommunications platform, joint development of operating management system for next-generation connected cars, and co-building of services and services platforms to enrich people's lives and to ensure their safety and security without being chained to the inside or outside of vehicles, and joint promotion of solving social issues by using big data. With these as themes, we concluded the business and capital alliance with Toyota.
Lastly, let me explain aiming to expand growth fields and achieve midterm targets. First half consolidated business results. Operating revenue was JPY 2,537.2 billion, down 1.1% year-on-year. It's been affected by a drop in handset sales, but we'll boost sales of 5G and others towards the second half. On the other hand, life design domain and business services segment, which are growth fields, continued to expand in the second quarter after the first quarter. The operating income was JPY 588.8 billion, up 6.4% year-on-year, driven by growth fields. To achieve targets under the midterm management plan, we aim to expand growth fields further. Let me explain factors for JPY 35.4 billion increase year-on-year of the consolidated operating income of the first half.
Life Design domain and Business Services segment, the growth fields, significantly contributed with plus JPY 30.9 billion. In the personal segment, mobile telecommunications revenues, which consist of au and group MVNO, was in the negative. Others include au handset sales, cost reduction, and decrease of gross profit of handsets, which are temporary effect, and it was +JPY 6 billion. Towards the next term, we will boost our efforts by absorbing telecommunications price decrease through expanding growth fields, and we aim to steadily achieve the forecast at the beginning of the term. Next concerns growth fields that support consolidated performance. Left, Life Design domains. Operating revenue in the first half was JPY 603 billion. The progress ratio was 46.7%. Right-hand side, Business Services segment. It was JPY 476.2 billion. The progress ratio was 50.1%. Both show a steady progress against mid-term targets. Lastly, today's summary.
We are aiming to achieve mid-term targets through promoting 5G and growth fields. In business strategies, 5G for Everyone. Expand services that leverage our strengths by having all au handset models be 5G compatible, offering unlimited data plans, and expanding 5G areas. Meet wide range of customer needs through multi-brand strategy. Formulate KDDI Accelerate 5.0 to realize Society 5.0. Agreement on business and capital alliance with Toyota for society in which towns, homes, people, and cars are all connected. Financial results and mid-term targets. For our first half performance, growth fields are the driving force. We aim to achieve a mid-term target through further expansion. Resolve to repurchase our own shares up to JPY 200 billion. This concludes my presentation. Thank you so much for your attention.
At this moment, we would like to take questions from the audience. We would like as many people as possible to ask questions, so let us limit the number of questions per person to two. If you have two questions that you wish to ask, please ask your first question, and that will be answered, and then the next question will follow. Questions will be answered one by one. Those of you with questions, please raise your hand.
Ando-san of Daiwa Securities, please go ahead.
Thank you. I have two questions that I would like to ask. Question number one, with respect to Life Design domain. In the second quarter for three months, operating income was JPY 60 billion. Compared to JPY 48 billion last year, it's been growing quite substantially.
Why are you increasing in income? What are the factors behind this, and what is the outlook going forward? If you could also mention the specific names of services that are contributing to growth as well.
Well, thank you. I would like to turn to Shoji-san for an answer.
Allow me to answer. Well, thankfully, the performance of this business is successful. To give you the specifics, first, there has been increased income from energy, electricity business. The number of electricity customers is increasing, revenue as well as income from the electricity business are growing and contributing. As you can see from the detailed data, value-added service, Smart Pass, au Smart Pass as well, overall is growing. Smart Pass Premium now accounts for 67% of the total. Year-on-year, an increase of 12 basis points. That has had a positive impact, quite substantially. Other than that, with respect to financial services, settlement service, the amount that we handle has exceeded JPY 4 trillion. That is trending quite positively. Repairs and repair guarantee service, they are contributing, too. To give you the conclusion, almost all the services we offer are increasing and improving.
What is the outlook, then?
Outlook going forward? Well, the successful performance in the first half, we would like to continue that into the second half. I don't think the numbers are all that much stretched. We believe that we will be able to nicely achieve the initial targets.
Well, thank you. My second question is as follows. That has to do with the prices. With UQ mobile, you have launched a new plan with a 20 GB service. Basically, at that price that you are offering, the government's request, over the short term, do you think that you will be able to satisfy the government's request? Do you expect that the pressure from the Japanese government will be alleviated?
Well, in the stock market, that's been somewhat of a challenge. Mr. Takahashi, if you can share what your sense is on this, please.
Well, thank you for the question. Originally, the Prime Minister as well as MIC, the Ministry of Internal Affairs and Communications, have been talking about this.
MIC has come out with an action plan. We have to offer something that is comparable to what's offered internationally. We've been thinking how to provide that. We're talking about multi-brand strategy. It's not main brand versus sub-brand. The customers are so diverse. With one single brand, are we able to meet all the customers' demands? We thought that it would be difficult. Multi-brand strategy is the concept that we came up with. As you know, au will be specializing in 5G. Unlimited 5G plan, that's what we're offering. Bundling with the services that will be promoted even more. That's what it is. UQ Mobile is about simple, easy to follow. We thought that we wanted to offer something comparable to what's offered internationally.
Rather than JPY 5,000, we wanted to offer JPY 1,980; JPY 2,980; JPY 3,980, t hese are easy-to-understand prices, and they're received well by customers. Once we announced this, what's been the reaction? The MIC Minister had a press conference today. We announced these plans quite early. I think they're being viewed favorably by the Minister. We have Pitatto Plan, MVNO services and prices. I think the prices we offer are quite diverse. For customers, I think they can review these different prices and choose the one best for them. That was what the Minister said. From those remarks, I take it that what we're doing is quite received well by the ministry. DOCOMO is still a midst of TOB.
We don't know how they're going to react or take action. You may have concerns about that. Personally speaking, DOCOMO's price strategy and our price strategy, unlike in the past, our strategy is quite different. They have a single-brand strategy. We have a multi-brand strategy, offering something different for different customers, au brand and UQ 20 GB . Just because we are offering this doesn't mean that DOCOMO will follow suit right away. All of us in the private sector will each be creative. It's not just a competition based on prices. We will do what we think is best.
Thank you. Nomura Securities, Masuno-san, the floor is yours.
I have two questions. First, multi-brand strategy, 20 GB, its impact on 20 GB. I think it's good, but in terms of impact, probably. Not everyone wants unlimited service. From downgrading from au is likely to happen to a certain extent. UQ becomes more competitive, getting new customers. Two things in my mind. Certain upselling has been happening since before, but in total, au to UQ and also UQ new acquisitions. In total, what's your view of the overall picture?
Thank you for your question. Let me see. As I said before, UQ price, it's simple, very easy to understand, I think. In this plan from au, to a certain extent, some customers might move to UQ. Because of this price, naturally, we have to forecast that. As Masuno-san, you said, this is a good plan. The new customers, acquisition of new customers, naturally, yes, we would like to do that. In addition, 20 GB plan, it's pretty good. UQ- S, UQ- R customers, there might be upselling from to UQ- V. That could happen, in our opinion. au 5G, this is a major product. wide student discount, Gakuwari plan.
Going forward, to enhance 5G attractiveness, we are thinking of various other services, improve our 5G services and doing this upselling. For instance, UQ or MVNO, upselling from those. That's what we are aiming at. Looking at the balance, somehow as a group.
I don't know whether I should call it a kind of a mix-up, but we would like to increase it in the total picture. In terms of the ratio, yes, we have done some simulations, but we still have to wait and see. Forgive me for not mentioning this. Yes, we would like to see it in the positive area.
I think it's possible that you don't suffer from decrease. My question is, you could have done this earlier, but in this term, I don't really think there's going to be impact. My second question, UQ changes since October, and about the new MVNO, UQ, since October. For instance, handsets, terminals and services, network speed, those shops. What are the changes about UQ? Are the new MVNO, is it going to have very low price? Those are my questions.
Since the UQ employees become our employees, I think they have higher motivation. There's another main brand, so I think they are happy. About the details, Shoji, the floor is yours.
About services and others, what's going to be the change? First, about the services, as Takahashi mentioned, au, this is a stress-free unlimited 5G, and we are really focusing on this. As for the UQ, simple and accessible price. That's the sales point. Two multi-brand main brands that we have. Regarding UQ, yes, it's 4G, and there are some differences in terms of services. As you have already heard, as for the pricing, the UQ and au's unlimited, you can see that this is pretty well organized. As for the handsets, as you already know. Concerning au, iPhone 12 Pro, those are the kind of products that au has.
As for UQ, more reasonably priced handsets available. That's another difference. As for the value-added services and others, we've tried to make it common between the two so that the customers can use them. The support system is the same. As for the network prices and the devices, there are differences, but other than that, we would like to commonize them as much as possible so that it will be convenient for customers. Thank you.
UQ shops and the new MVNO prices, what about those?
About the UQ shops, UQ Spots, we have about 190. We would like to increase that number. Au, UQ, the number of shops that carry the products, 22 directly operated stores. We started offering services there. We would like to still study what we are going to do with them. As for the general merchandising stores, au, UQ, they're different stuffs, but both for au and UQ, now they can sell both products. They have been trained, so the efficiency has been improved. Are you asking me about the digital brand? Regarding that, we haven't come up with a pricing system, but looking at the Circles.Life example, it's not just MVNO with very, very low, cheap prices. As Takahashi mentioned, it has management based on NPS.
Services are good for digital native people who can pay certain prices, where they can have certain up, of course, from the lower range to the higher range. We would like to see that stream, but it's not going to be a service that's just focused on lower prices. I hope you'll understand. Thank you. That's all.
Next question, Takahashi-san of UBS, please go ahead.
I have two questions. First, regarding the multi-brand strategy, just to seek clarification, au is for 5G and unlimited data plan with service bundling, Pitatto Plan, a s opposed to UQ mobile's plan, how are you going to differentiate the two? What about the plan to make 5G available for UQ mobile?
Thank you for your questions. Regarding the multi-brand strategy of ours, regarding UQ, we wanted to focus on 4G, so we have not discussed any plan to make 5G available for UQ yet. Differentiation between Pitatto Plan and UQ, we're thinking about it. As I said, in principle, au is for 5G and UQ is simple and accessible price. Pitatto Plan somewhat overlaps There's overlap between the two, but we would like to sort that out soon.
Thank you for your answer. My second question has to do with the prices. In the last few years, regularly, the government makes requests and demands to telecom carriers. Considering that, going forward, something similar may happen, government making requests. Considering that, it may be difficult to grow consumer business given government's demands. You have the medium-term business plan that you have, do you think that some potential changes may happen with the plan given the government's tendency to make requests?
Several years ago, there were discussions about price reductions, and that's why we introduced the Pitatto Plan. Taking several years, JPY 400 billion of impact on our income was seen. We are a private sector operator. We have to pursue profitability.
As we promised, we have to achieve sustainable growth, so cost reduction efforts are made and expanding into business areas outside of telecom, we would like to make up for that. We are living in competition. The fourth player is Rakuten, who's entered the market, and the government is saying that prices should be brought down in competition. That's something that we have to embrace. As a company, we have to achieve sustainable growth. That's our promise. In the medium-term business plan, we are going to grow EPS, we said. We're going to create a favorable cycle with our multi-brand strategy and with the mix of our brands, we would like to achieve growth. If there's a shortfall, we would like to expand other businesses other than telecom, so that we can ensure growth.
Life Design Domain, Business Service Segment, in these areas, a growth is seen centering around 5G. We would like to elevate these businesses even further so that we can ensure growth. We will do our best.
Mitsubishi UFJ Morgan Stanley Securities, Tanaka-san.
Tanaka from Mitsubishi UFJ Morgan Stanley Securities. I have two questions. First, about alliance with Toyota. Page 16, please. I think there'll be some new things, but if I look at the second one for the next-generation connected cars operation management system, joint development of that. Existing global communications platform on that, I think to a certain extent you have certain functions. Do you have to do something totally new? What will be the scope? Regarding what you're mentioning here, joint research, that's fine, but what is the difference here?
There are four things here. The specifics will be discussed going forward. For instance, the connected situation. Using LTE, they are connected not just in Japan, but looking at worldwide regarding the communications platform, not just the current mobile, but connections in a diverse manner, it's something we have to think. The implementation of joint development is something we will have to do. The next generation connected cars. We have those connected ones, but in the next generation, as for the specific functions, I think some are confidential, so I cannot mention that, unfortunately. We need to enhance the level. Along that line, the communications world have to be operated and managed. Regarding this management system for that, we would like to concretize them. As for the third item, it says inside and outside vehicles. Not just vehicles, cars themselves.
On Toyota's side, they need to be connected with core customers, not just through vehicles. Smart city, smart home, smart house for the safety and comfort of lives. Yes, we are providing customers with various services, so Toyota can utilize those things we have. The next generation of connected world, any comment from Mori-san?
The quality management of communications, we are already doing this. As President mentioned, the ways of connection will increase, and as for the substance of data, it's going to increase. Even in that environment, end-to-end connection must be ensured and providing them in a wider scope. There are various challenges, and that's one of the areas where we would like to do some joint research with them.
Some follow-up. Many things are connected in this society. Business-like, are you trying to get profitability? What about the stance? Are you trying to do something really profitable? More or less, it's going to be focused on the R&D.
I don't really think, so it's going to have a direct impact on profitability right away, but in connected world, they are using this telecommunication service, and we are receiving a certain consideration, and jointly providing things, not just in the world of vehicles, that's going to be business. We would like to study the business model there as well. Yes. Please take a long-term view. I don't think it's going to be reflected in the profitability right away.
Second question. In the business services segment, KDDI Matomete Office, and the COVID-19 may have a negative or a positive effect. What's the effect? In relation to IoT Soracom, what's the current status of Soracom? Update please, Mori-san.
Regarding the impacts by COVID-19, customers who are SMEs, because of telework needs or digital transformation, those needs are increasing. Partly because of that, our subsidiary, Matomete Office, performance has been very brisk. Going forward, I think that it's likely to stay.
IT and digitalization, I think the Japanese companies need to work more and more, and that's one of the areas where we would like to extend our support. IoT as a whole has been very good. Regarding Soracom, according to the plan or even better than the plan, the progress has been good. IoT that we provide and the IoT provided by Soracom, I think the combination has been very effective, very good. More or less, large volume or big projects are handled by us. On the contrary, Soracom is agile. Both in Japan and abroad, Soracom can offer its service, but starting small, for instance, or an ad hoc manner, the opening it or closing it, that's something that they can handle.
Catering to such needs, Soracom can offer services. In combination, overall, it's been increasing. Thank you. What about the profitability and loss of Soracom? We are not disclosing them, but in principle, it's in the positive area. Thank you.
Let us move on. Kikuchi-san of SMBC Nikko Securities.
Well, thank you. Kikuchi speaking. I have two questions. The first half performance, looking at that, well, is quite good. In the second quarter of last year, it was good, but it seems that it's good. If we are to achieve targets in the second half, all you have to do is business as usual. If you have any special initiatives with respect to cost reduction or something else, could you share them with us? Will there be an upside to profitability?
Well, that's a question that's hard to answer. At this moment, we are doing quite well. With respect to cost, acceleration of 5G, we would like to spend our cost on accelerating 5G. Centering around au PAY, our settlement service is doing very well. We have to reinforce efforts to increase the number of merchants, where we will have to spend our cost. We have announced a new price plan for UQ mobile, and we have to see what the impact of that on our cost is going to be. Of course, we envision having a favorable cycle, but we would like to watch that, monitor that, to think about it. At this moment, as far as our disclosed performance and the targets, I think we will be able to meet the targets quite nicely.
Thank you. Last year, you spent a lot of costs on au PAY-related initiatives. This year, are you going to do something similar or even beyond that? Well, you did quite a bit last year.
Well, we have no specifics laid out yet. In the past, we had quite a dip in the fourth quarter. That's because of incentives that we provided. Now, there are upper limits for incentives, and so I don't think the fourth quarter will see a drastic change. We would like to have good control.
My second question has to do with your capital alliance, business alliance with Toyota, and perhaps this is a question for Toyota Motors, but why did Toyota need to hold shares of yours?
I think you've always had a very close relationship with each other. This is a similar discussion that we have with NTT or NEC. NEC is working hard for NTT without being rewarded, and something similar could happen to you. Toyota is going to purchase JPY 50 billion worth of share from you, and you may have to reward that with something or IoT services to be provided to Toyota at a very low cost by you.
Those potentialities, those possibilities are a concern. What is the background to this alliance partnership, its significance, and how are you going to deal with Toyota? What's going to be the relationship?
We started to discuss this initiative with Toyota. It's not just about cars or vehicles. We're going to go a step further in our relationship to strengthen our relationship. We're including not just vehicles, cars, but we're going to cover towns, homes, and people as well. That's why we defined four areas of collaboration. These four areas that we defined, including R&D, how much investment are these going to take? Our project team considered that. We understood that JPY 50 billion of investment will be required for this. It must be the same with Toyota, but for us as well, we thought that we have to increase the corporate value, enterprise value, through this alliance, and we also wanted to focus on R&D. To achieve this, we decided to have this capital alliance. JPY 50 billion is like equity finance from what I see.
With this, we will work to raise enterprise value for both Toyota and KDDI, which is going to be crucial. That's the direction that we will be pursuing. Just because we have an investment from Toyota, are we going to provide telecom services or infrastructure free of charge? Of course not. For what we paid, we are offering shares, so that's not the kind of relationship that we foresee. Now that investment is strengthened, we would like to steadily work toward increasing the enterprise value of both KDDI and Toyota.
Well, thank you. Just to clarify, in these four areas, in the next few years, you will be spending JPY 50 billion on R&D. Is that correct?
Well, yes. This is an estimated amount of JPY 50 billion. We will be scrutinizing and reviewing what to develop through research, and we will determine the specifics. I think the overall size will be somewhere around JPY 50 billion. Thank you.
Mizuho Securities, Hori-san.
Thank you. I have two questions. Business results as a whole. Yes, it was voluminous presentation. Many things are happening, but you want to grow profitability, you want to enhance the shareholders' values. That's how I understood your presentation. About Toyota, about DX new brand. Going forward, new things, new changes are expected.
Aren't you preemptive? About the DX new brand, what's the timetable you have in your mind regarding this new area? How long will it take before it becomes really active? Or the competitive environment or regulations change then? Or are there any conditions, a scenario for this area to become very active? For instance, the realignment of platinum band, and if Rakuten gets that, then they might be really revitalized according to some.
Those people who have high literacy, for such people, shops or handsets, not getting from those, you are showing a new perspective with this. Competition, conditions, environment, if you could share with me any timetable?
That's a very difficult question. About revitalization, yes, that's going to happen. Regarding this new DX brand, a company called Circles.Life is based in Singapore. They don't have devices. They just have application. People can join the service just by the application. As for the price plan, every day, every month, people can choose, and the service can be bundled within the smartphone just by using your one hand. That's the kind of service they offer. We don't know whether we are going to do this, but the next series, they are offering series one, so let's have this unlimited this month. Next month, season something will be finished, so I want to come back to 1 GB plan. On the month after the next, there's going to be series two, so let's get into this particular program. You can do all this in application.
When I look at what they offer, Japan is not necessarily ahead. On a global basis, such services are offered. We need to get them ahead of others. This is a challenging thing.
I mentioned this before, regarding this new company, English is the language. In principle, this is a company where people converse, in principle, in English, the global new initiative can be more easily introduced. That's the kind of company we envision so that we can realize them here in Japan. It's difficult for me to say when it's going to vitalize. Rakuten, they have eSIM. They're offering such services. With UQ, we are offering 20 GB services. We are handling that. In eSIM world, we want to be preemptive and introducing services on a global standard. To diversified customers or preparing diversified menu, I think is essential going forward. Going a bit away from your question about the vitalization moment, that's what we want to do.
Thank you. Second question. Maybe I'm not well-informed, but existing frequency, so one can use this for different purpose, but CapEx, your image about the CapEx, 5G increase, 4G decrease. Overall, not so much increase. Is that the story that we still have or any changes? Is that already incorporated in the overall CapEx, or will we get to see some more improvement or efficiency?
It's already been factored in principle. As for CapEx, it is about JPY 610 billion in this year, JPY 610 billion in the midterm. We believe that much investment percentage versus sales, that's how we look at it. Compared to the global scale, it is not that high. It's about comparable to the global level. In a way, we have to keep that level of CapEx. About existing frequencies in our New Radio, yes, in principle, it's already been factored in. Thank you.