Thank you for waiting. We would like to start a meeting on financial results for the Q2 of the fiscal year ending March 2021 of KDDI Corporation. We appreciate you all 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, Hongo with IR Department. Great to be here.
Japanese English simultaneous interpretation is provided for the meeting. Please be advised that 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 and 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 2 documents for TSE disclosure. In total, 5 items have been posted on our IR website. Regarding what's described in the materials, performance we may mention in Q and A session and subscriber targets, please check the disclaimer in each material.
President Takahashi will brief you on the results, followed by questions and answers 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. So I would like to explain about the results of the Q2 for the year ending March 2021. There are 5 topics I would like to cover: 5 gs for everyone, multi brand strategy, KDDI Accelerate 5.0 and how we aim to expand growth fields and achieve medium term targets.
First, on 5 gs for everyone. For this, as you are aware, AU's models, all of them are to be 5 gs capable. We're going to have a broader lineup of products ranging from high end to middle range models. And there's new iPhone capable of 5 gs. It's already launched and it's been sold quite successfully.
Next on 5 gs service areas. By using existing frequencies, we would like to expand 5 gs service areas. And in terms of the number of 5 gs base stations, by March 2021, we would like to increase the number to 10,000 stations and by March 2022 to 50,000 stations. So by March 2022, population coverage will reach 90%. And so not just the number of base stations, but we would like to work towards coverage of 90%.
And by the end of the year, we will be covering all 47 prefectures. And in terms of applicable frequencies, new frequencies included 28 gigahertz band, 3.7 gigahertz, 4 point gs hertz, these will be utilized effectively. And existing frequencies are going to be used for 5 gs as well. 700 megahertz, 1.7 gigahertz, these will be used in stages so that we can expand our coverage and service areas. Now regarding the 5 gs pricing plan, as you know, we want the consumers to enjoy the full benefits of 5 gs.
And so we're offering unlimited data plans. The basic plan is Datamax 5 gs. We have variations thereof: Netflix, TV pack, All Star pack. These services are bundled. And with these, we would like to drive increase.
On top of this, we are starting AU wide Gakori or student discount. And those who are up to age 29 are eligible. For these younger people, services that are bundled with discount attached is very popular. So if you're age 29 or lower, you will be offered a discount. Monthly charges will be lower by 16 100 yen per month for 6 months.
Next, au5 gs experience. We have unlimited data plan. We also have wide coverage of 5 gs area. These are going to be drawn upon as strength. And we have new iPhone compatible with 5 gs incorporating identifying functions.
We have closed discussions with Apple for data max plan. It's an unlimited data plan. And the users, if they go into 5 gs area, they will be able to access new experience. Specifically, for example, Telasa, unlimited data plan customers, once they enter the 5 gs area, they will be able to access and enjoy full HD visuals and videos. And we would like to offer new experience with that arrangement, and this is unique to AU.
Other companies, they do not have similar plans. So we would like to expand on this. Sportsball, this is sports video service. And starting from December this year, SMASH, au Smart Pass Premium, by expanding into this, 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, 5 gs for everyone.
And we have strong focus on 5 gs. Now on the other hand, we have UQ Mobile, which offers a simple and accessible prices. We have added a 20 gigabytes plan. This is simple and accessible, which is UQ Mobile. And Big Globe Mobile, Jcom Mobile, advantageous and distinctive services.
We're going to launch 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. And in order to sort them out, we have this multi brand strategy, au, UQ MOBILE, BIG GLOBE and JACOM MOBILE.
Next, regarding U. K. Mobile, the prices of which are comparable to international level. For 20 gigabit, JPY 3,980 at Sumaho Plan V on top of Sumaho Plan R and S. And you can see that the plan is very easy to understand.
I hope the customer will be able to embrace this and enjoy this. And there's a core option, core pack of 500 yen. So 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 gigabit 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. And the NIO DX brand for digital natives, we are to offer a new brand.
There is a company called Circles Life based out of Singapore, which is a digital telco. And they have UX improvement with high speed cycle achieving high NPS. I think they have achieved NPS of 50, so very high customer satisfaction. And in 2019, they have entered into Taiwan and Australia with its own platform. We're having a partnership with this company, Secoo's 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. So to offer new brand new service, we're going to establish MVNO company together with the Singaporean company, KDDI Digital Life, in November 2020. And of course, although we call the company KDDI Digital Life, we would like to offer service that is unique. And multi brand strategy, so we're going to further expand ID base and promote upselling, au, UQ Mobile, MVNO, Bigelow, J.
K. Mobile, new DX brand. With these three brands, we would like to stem the outflows of customers from the group. And secondly, we have such an exciting new lineup. And UQ Mobile, as I said, is on par with the international equivalents.
And so I think we can strengthen new sign ups. And thirdly, UQ Mobile, Big Globe, well, au, where we focus on 5 gs, I think upselling from these brands to au is going to be possible. So we will be very much focusing on these 3 so that we can raise our ARPU as a group.
Upsell from UK! 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. And how can we offer very attractive 5 gs? And of course, therefore, we will be focusing much on that.
Next, KDD Accelerate 5.0. Regarding this, looking at towards 2,030, we formulated KDD Accelerate 5.0 with the aim of realizing Society 5.0. It was released in August 2020. Society 5.0 centered 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 cyber space, data is analyzed using AI. And 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.
On the foundation as the foundation, there is 5 gs. Looking at Society 5.0 with the 5 gs, we would like to accelerate with that. We call this KDDI Accelerate 5.0. KDDI Accelerate 5.0 centering 5 gs. We are promoting 7 technologies centering on 5 gs.
I'm not going to read all of them, but these are defined. And centering on the KDDT 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 5 gs. As for the platform layer, new businesses to be created on the business layer and 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 and promoting KDD Accelerate 5.0 with the aim of achieving world class research results. Next, KDD Accelerate 5.0 initiatives. There are many partners.
And in the 5 gs era, we would like to promote DX. And KDDI 5 gs Business Co creating alliance with partner companies, we are doing this. And you can see with the logo mark, you can see the names of the partners. Together with this, we would like to create a network in the area of 5 gs. Right hand side, please, in Toranomon area, especially the new create new business development for the corporate department was established in August to help support companies in GX.
And we also have KDDI Digital Gate for development. And newly opened in December, this year, KDDI Research at LIE for Applied R and D. We have KDDI Research Inc. In Fujimino. There are basic research and applied research.
For the basic research, 5 gs and beyond, 5 gs is done, but that's mostly done in Fujimino. As for the Applied RNG, centering on Toranomon area, we'd like to promote those activities. We call this Toranomon triangle. With Toyota, business and capital alliance with Toyota was on us today, strengthening the alliance for society in which towns, homes, people and cars are all connected. On the right hand side, we have been promoting joint building of a globe for 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 and 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 vehicles and joint promotion of solving social issues by using big data. With these as themes, we concluded Business and Capital Alliance with Toyota. Lastly, we explained aiming to expand growth fields and achieve midterm targets. First half consolidated business results. Operating revenue was €2,537,200,000,000, down 1.1% year on year.
It's been affected by a drop in handset sales, but will boost sales of 5 gs 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 Q2 after the Q1. The operating income was 588,800,000,000 yen 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. Next, let me explain factors for JPY 35,400,000,000 increase year on year of the consolidated operating income of the first half.
Life Design Domain and Business Services segment, the growth fields has significantly contributed with plus 30,900,000,000 yen 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 temporary effect and it was plus €60,000,000,000 Towards the next term, we'll 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 603,000,000,000 yen The progress ratio was 46 point 7 percent. Right hand side Business Services segment, it was 476,200,000,000 yen The progress ratio was 50.1%.
Both show a steady progress against midterm targets. Lastly, today's summary. We are aiming to achieve mid term targets through promoting 5 gs and growth fields. In Business Strategies, 5 gs for everyone, expand services that leverage our strengths by having all au hotshots models be 5 gs compatible, offering unlimited data plans and expanding 5 gs areas, meet wide range of customer needs through multi brand strategy and 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.
And financial results and the midterm targets. For our first half performance, growth fields are the driving force. We aim to achieve a midterm target through further expansion and resolve to repurchase our own shares up to 200,000,000,000 yen This concludes my presentation. Thank you so much for your attention.
At this moment, we would like to take questions from the audience And we would like as many people as possible to ask questions. So let us limit the number of questions per person to 2. If you have 2 questions that you wish to ask, please ask your first question and that will be answered. And then the next question will follow. So questions will be answered 1 by 1.
Those of you with questions, please raise your hand. Ando sanado of Daiwa Securities. Please go ahead. Thank you. I have two questions that I would like to ask.
Question number 1, with respect to Life Design domain. In the Q2 for 3 months, operating income was JPY 60,000,000,000. So compared to JPY 48,000,000,000 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. And to give you the specifics, first, there has been increased income from Energy, Electricity Business. The number of electricity customers is increasing and revenue as well as income from the electricity business are growing and contributing. And as you can see from the detailed data, value added service, Smart Pass, au Smart Pass as well, overall is growing. And SmartPass Premium now accounts for 67% of the total.
Year on year, an increase of 12 points. So 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 4,000,000,000,000 yen and so that is trending quite positively. Repairs and repair guarantee service, they are contributing too. So 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. And I don't think the numbers are all that much stretched. So we believe that we will be able to nicely achieve the initial targets.
Well, thank you. My second question is as follows and that has to do with the prices. With UQ Mobile, you have launched a new plan with 20 gigabit 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? And 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. So Mr. Takahashi, if you can share what your sense is on this, please? Well, thank you for the question. Well, originally, the Prime Minister as well as Mick, the Ministry of Internal Affairs and Communication, have been talking about this.
Mick has come up with an action plan. And we have to offer something that is comparable to what's offered internationally and 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 1 single brand, are we able to meet all the customers' demands? We thought that it would be difficult. So multi brand strategy is the concept that we came up with. As you know, au will be specializing in 5 gs. So unlimited 5 gs plan, that's what we're offering.
And bundling with services will be promoted even more. So that's what it is. And UQ Mobile is about simple, easy to follow. So we thought that we wanted to offer something comparable to what's offered internationally. So rather than 5,000 yen we wanted to offer 19 80, 2,980, 3,980.
These are easy to understand prices, and they're received well by customers. Now once we announced this, what's been the reaction? The McMinister had a press conference today. And we announced these plans quite early. And I think they're being viewed favorably by the minister.
And we have Pitatto plan, MVNO, services and prices. I think the prices we offer are quite diverse. And so 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 a sole missed TOP. We don't know how they're going to react or take action. You may have concerns about that. But 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 multi brand strategy offering something different for different customers, au brand and UQ 20 Shiga. Just because we are offering this doesn't mean that DOCOMO will follow suit right away. So all of us in the private sector will each be creative. It's not just competition based on prices. And so 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 giga, its impact on 20 gigabytes. I think it's good.
But in terms of impact, probably, au not everyone wants unlimited service. So from downgrading from au is likely to happen to a certain extent. UQ becomes more competitive, getting new customers. So 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. So 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.
But 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 giga plan, it's pretty good. So UQS, UQR customers may there might be upselling from to UQV. That could happen, in our opinion.
Also, AU 5 gs, this is a major, major product. So wide student discount, Gakubari plan. And going forward, to enhance 5 gs attractiveness, we are thinking of various other services, improve our 5 gs 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, 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. So 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. Then my question is, you could have done this earlier, but in this term, I don't really think there's going to be impact.
Now my second question, UQ changes after October 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 IUQ employees become our employees, I think they have higher motivation.
This is another main brand, another main brand. So I think they are happy. About the details, Shouji san, 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 5 gs, And we are really focusing on this. And as for the UQ, simple and accessible price, that's the sales point. So 2 multi brand main brands that we have. Regarding UQ, yes, it's 4 gs, but and there are some differences in terms of services. And as you have already heard out for the pricing, the U.
K. And AUs Unlimited, you can see that this is pretty well organized. As for the handsets, as you already know. Concerning au, iPhone 12, 12 Pro, those are the kinds of products that au has. As for UQ, more reasonably priced handsets available.
So that's another difference. But as for the value added services and others, we've tried to make it common between the 2 so that the customers can use them. The support system is the same. And then 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 Sports, we have about 190. We would like to increase that number. And 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 are different stuffs, but both for au and UQ, now they can sell both products. They have been trained. So the efficiency has been improved. As for are you asking me about the digital brand?
Regarding that, we haven't come up with a pricing system. But looking at the Circle's Life example, it's not just MVNO with very, very low cheap prices. As Takahashi mentioned, it's from NPS has management based on NPS. So services are good for digital native people who can pay certain prices where we can they can have certain ARPU, 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 5 gs and unlimited data plan with service bundling. Pitatto plan, as opposed to UQ Mobile's plan, how are you going to differentiate the 2?
And once 5 what about the plan to make 5 shi available for UQ Mobile? Well, thank you for your questions. Regarding the multi brand strategy of ours, regarding UQ, we wanted to focus on 4 gs. So we have not discussed any plan to make 5 gs available for UQ yet. And differentiation between Pitatto plan and UQ, we're thinking about it.
As I said, in principle, au is for 5 gs. UQ is simple and accessible price. Pitata plan somewhat overlaps there's overlap between the 2, but we would like to sort that out soon. Well, 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. So considering that, going forward, something similar may happen, government making requests. So considering that, it may be difficult to grow consumer business given government's demands. And you have the medium term business plan that you have. And do you think that some potential changes may happen with the plan given the government's tendency to make requests?
Well, several years ago, there were discussions about price reductions, and that's why we introduced Pitatto plan. And taking several years, JPY 400,000,000,000 of impact on our income was seen. But we are a private sector operator. We have to pursue profitability. And 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 4th player is Rakuten, who's entered the market. And the government is saying that prices should be brought down in competition. So that's something that we have to embrace.
But as a company, we have to achieve sustainable growth. That's our promise. And in the medium term business plan, we are going to grow EPS, we said. And 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, businesses other than telecom so that we can ensure growth. Life Design, a domain business service segment in these areas, growth is seen centering around 5 gs. So 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 will be some new things, but if I look at the second one the next generation connected cars operation management system joined development of that. Existing global communications platform on that, I think to a certain extent, you have certain functions. But do you have to do something totally new? Or what will be the scope? Regarding what you're mentioning here, joint research, that's fine, but what is the difference here?
There are 4 things here. The specifics will be discussed going forward. But 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. And 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.
But we need to enhance the level. And 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 3rd item, inside and outside of vehicles, not just vehicles, cars themselves. On Toyota side, they need to be connected with core customers, not just through vehicles.
So smart city, smart home, smart house for the comfort and safety and the 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 really doing this. As President mentioned, the ways of connection will increase. And as for the substance of data, it's going to increase. So 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. So many things are connected in this society. So 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 and 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 certain consideration and jointly providing things, not just in the world of vehicles, that's going to be business. So 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. 2nd question. In the Business Services segment, KDDI Matometry Office and the COVID-nineteen may have a negative or a positive effect, what's the effect? In relation to IoT Solacom, what's the current status of Solacom?
Update, please. Mori san? Regarding the impacts by COVID-nineteen, customers who are SMEs Because of the telework needs or digital transformation, those needs are increasing. Partly because of that, our subsidiary, Matometry Office, performance has been very brisk. Going forward, I think that it's likely to stay.
And 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 Suracom, I think the combination has been very effective, very good, more or less. Large volume or big projects are handled by us.
Now on the contrary, Solacom is agile. Both in Japan and abroad, Solacom can offer its services. But starting small, for instance, or an ad hoc manner, the opening it or closing it, that's something that they can handle. So catering to such needs, SORACOM can offer services. So in combination, overall, it's been increasing.
Thank you. What about the profitability and loss of Solacom? We are not disclosing them, but in principle, it's in the positive area. Thank you.
Let us move on. Kikuchi san of SMBC Securities. Well, thank you. Kikuchi speaking. I have two questions.
The first half performance, looking at that, well, is quite good. In the Q2 last year, it was good, but it seems that it's good. And if you are to achieve targets in the second half, all you have to do is business as usual. But if you have any special initiatives with respect to cost reduction or something else, could you share them with us? And 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 5 gs, we would like to spend our cost on accelerating 5 gs. And centering around 8 U. P.
E, our settlement service is doing very well. So we have to reinforce efforts to increase the number of merchants where we will have to spend our cost. And 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. And of course, we envision having a favorable cycle, but we would like to watch that monitor that to think about it. But 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 EU 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, Yae.
In the past, we had quite a dip in the Q4. That's because of incentives that we provided. Now there are upper limits for incentives. And so I don't think the 4th 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. And 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? Well, Toyota is going to purchase 50,000,000,000 yen 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. So 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. And so we're including not just vehicles, cars, but we're going to cover towns, homes and people as well. And that's why we defined 4 areas of collaboration.
So these four areas that we defined, including R and D, how much investment are these going to take? Our project team considered that. We understood that JPY 50,000,000,000 or so 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 corporate value, enterprise value through this alliance. And we also wanted to focus on R and D.
So to achieve this, we decided to have this capital alliance. And JPY 50,000,000,000 is like equity finance from what I see. And with this, we will work to raise enterprise value for both Toyota and KDDI, which is going to be crucial. So 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 to us. We are offering shares. So that's not the kind of relationship that we foresee. So 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, so in these four areas, in the next few years, you will be spending JPY 50,000,000,000 on R and D. Is that correct? Well, yes. This is an estimated amount of JPY 50,000,000,000.
And we will be scrutinizing and reviewing what to develop through research, and we will determine the specifics. And I think the overall size will be somewhere around JPY 50,000,000,000. 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 shareholders' values. That's how I understood your presentation About Toyota, about DX New Brand, going forward, new things, new changes are expected and you are preemptive. About the DX New Brand, what's the timetable you have in your mind to 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 or scenario for this area to become very active? For instance, the realignment of Flatten and Banff and if Rakuten gets that, then they might be really revitalized according to some. So those people who have high literacy for such people, shops or handsets, not getting from those, you are showing a new perspective with this. But competition conditions, environment, if you could share with me any timetable.
That's a very difficult question about the vitalization. Yes, that's going to happen. But regarding this new DX brand, the company is called Circles Life based in Singapore. They don't have devices. They just have application.
People can join the service just by the application. And as for the price plan, every day, every month, they can people can choose. And the service can be bundled within 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 next series, they are offering Series 1.
So let's have this unlimited this month. Next month, season something will be finished. So I want to come back to 1 giga plan. And on the month and after the next, there is going to be Series 2. So let's get into this particular program.
And then you can do all do this in application. So when I look at what they offer, Japan is not necessarily ahead. On a global basis, such services are offered. So we need to get them ahead of others. This is a challenging thing.
I mentioned this before, but regarding this new company, English is the language. In principle, this is a company where people converse in principle in English. So the global new initiative can be more easily introduced. And that's the kind of company we envision then so that we can realize them here in Japan. I don't it's difficult for me to say when it's going to revitalize Rakuten.
They have e SIM. They're offering such services. So with UQ, we're offering 20 giga services. We are handling that. And in ECM world, we want to be preemptive and introducing services on a global standard.
So to diversify customers or preparing diversified menu, I think, is essential going forward. So going a bit away from your question about the vitalization moment, but that's what we want to do. Thank you. 2nd question. Maybe I'm not well informed, but existing frequency, so one can use this for a different purpose.
But CapEx, your image about the CapEx, 5 gs increase, 4 gs 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, in principle.
As for CapEx, this is about 610,000,000,000 yen in this year, 610,000,000,000 yen in the mid term. We believe that much investment percentage versus sales, that's how we look at it. Compared to the global scale, this is not that high. It's about the comparable to the global level. In a way, we have to keep that much that level of CapEx.
But existing frequencies in our new radio, yes, in principle, it's already been factored in. Thank you.