Thank you for waiting. We'd like to start the questions- and- answers session for the Financial Results of the First Quarter of the Fiscal Year Ending March 2023 of KDDI. Thank you for joining us via internet out of your busy schedules. I'm your MC today. My name is Hongou of IR Department. Please be advised that the Q&A session will be made available for on-demand distribution on our IR website later. Let me introduce today's participants. Executive Vice President, Representative Director, Muramoto. Executive Vice President, Director, Mori. Executive Vice President, Director, Amamiya. Senior Managing Executive Officer, Director, Yoshimura. Executive Officer, General Manager of Corporate Management Division, Corporate Sector, Aketa.
Today, business results related materials of three items, presentation plans changed, detailed materials, two items for TSU-related disclosure, five items are made available on the IR website regarding what's covered in the materials and per-performance we will share in the Q&A and subscriber targets. Please check the disclaimer of each material. Now we would like to entertain your questions.
To allow as many of you as possible to ask questions, please limit your questions to two. If you have two questions, wait for the answer to your first question and state your second question, as you have already been informed. Among those of you who are connected after the registration, we would like to entertain your questions one by one. If you have a question about how to raise a question, if you have a question, please tap the Raise Hand icon of the Zoom application.
When you are called upon, the moderator will announce the name of the company and name. You're going to see the pop-up says, "The host would like to ask you to unmute yourself." Please tap the unmute. We are planning to conclude the Q&A session at 7 P.M. We would like to entertain your questions until 7 P.M.
The first question, Daiwa Securities, Ando-san, please unmute yourself. Raise a question, please.
Daiwa, Ando is my name. Thank you. I have two questions. First, net addition. 3G termination, if you could make a judgment, 200,000, that's the net addition, I think. Churn rate is 0.92%. Can you hear me?
Yes, we can hear you.
That's 0.92%. Comparing these numbers, you were able to get a good performance in net as a result. I suppose there are various factors behind. Your competitors changed the pricing. In addition to that, UQ had a strong performance, and the devices, prices of those devices. I think there are various factors, but which factor contributed to the net addition? If you could sort of share with us that and the orders of the influence, please let us know. What would be the outlook for those factors going forward?
Ando-san, thank you. First quarter IDs related questions. As you said, -50,000 net decrease. 3G churn was about 250,000, so Q-on-Q, 0.2 million net addition. What are the factors of this good results? I think that was your question. Amamiya is in charge of personal business. Amamiya-san, please.
Well, you've already pointed them out. First, UQ was pretty strong. There was a discount price like support discount. On UQ, we are competitive in the market and MNP and for the new ones, they made us good contribution. On the other hand, other companies, they equated zero yen plan. Concerning those, since that timing, the tide was changed to MNP. The number has been pretty brisk. Concerning others, MNP has been doing well, and it's not just Rakuten, Docomo, SoftBank. Against these carriers, our numbers have been relatively well. Good. Now, going forward, with this communication failure, we did have this as a stumbling block in July, but we will be trying hard to recover trust, and we would like to recover the business. That's what we want to do. Thank you.
Thank you very much. My second question. Energy business. In relation to energy business, there was a waterfall graph, and the focus area is JPY 15.2 billion, and business finance, when subtracting that, -JPY 3.8 billion versus previous year. Whether this is 100% energy or not, I don't really know, but it looks likely. Am I correct in my guess? In addition to that, second quarter and onwards concerning energy, fuel adjustment, what is it going to increase? Or how much is it going to increase? What will be the general image? Your company's forecast, you haven't changed the forecast by your company. Are there any factors for change or consistency? Would you like to elaborate on that, please? Thank you.
Slide five, energy business. First quarter, as you said, year-on-year, the income decreased. Regarding the detailed numbers, I would like to refrain from touching upon them, but as Ando-san mentioned, those are the numbers. Your numbers are not far away from what actually happened. As it says, compared with the previous term, we increased the private power procurement. Compared with the previous year in terms of the unit, there have been changes. In the first quarter, the income decreased. The fuel prices are now soaring, and the fuel adjustment cost, it might actually hit the ceiling. Regarding what's likely to happen going forward, I think that's what you asked. Amamiya is in charge of personal business. Pass the microphone to Amamiya.
First, on the first quarter, as you heard from Muramoto, we are trying to ensure business, the energy from private producer. We reflected on what happened. We wanted to lower the volatility, so we had more bilateral contracts, private power business. First quarter, we are controlling them appropriately. It's in the negative territory compared with the previous year, but the effect is limited, we believe. The fuel adjustment cost, from the second quarter, it's increasing. We anticipated that, but ENERES, among others, utilizing ENERES, we would like to do this business. We would like to closely monitor what's going to happen. On a consolidated basis, we would like to control it. Our holdings from July 1st, it started its operation, and we are trying to come up with creative ideas. Overall, we would like to have a firm control over the businesses. Thank you.
Thank you.
We will take the next question. Nomura Securities, Masuno-san, please. Please unmute yourself and ask the question.
This is Masuno from Nomura Securities. One by one. One is ARPU. This time, support discount impact is my question. In revenue or in ARPU, or the cumulative subscriber, how much was the impact? And after there are some who finished the six-month discount period, are they staying in au or are they in the natural churn? I think you have a good view on June and July, so if you could elaborate on this, please.
Yes, au support discount, six-month discount campaign. Customers joined with this campaign. Your question is what the impact is on our ARPU currently and in the future. Amamiya-san, please.
Yes, the support discount just ended in May. It's not that we are seeing a big impact at present. In July and August and in the second half, we will probably see a bigger impact. Regarding ARPU, in the first quarter, 3,970 JPY. This is in line with our projection. For the first quarter, UQ and Povo, ID zone was big. ID increase was big. Telecommunications is being secured. And the ARPU may seem a little low, but overall, we think we are moving forward steadily. Thank you very much.
If we look at the support discount alone for ARPU, how much? Or a few hundred million JPY or billion JPY, what was the result in the April-June quarter?
On a year-on-year basis, a few dozen JPY. That is the impact of support discount on ARPU in the first quarter.
This is the peak, and second quarter and third quarter year-on-year will be down gradually. Is that the right assumption?
Yes. Yes, you're right.
Understood. My second question is, in the communication failure briefing, this was touched upon. Regarding the failure, the corporate customer, I think, you are still holding back on sales for the corporate customers, but your proposals or the deals that are under negotiation, you will add BCP measures to continue your negotiation with corporate customers, I think. As you normalize, how long will it take for you to normalize your sales activities? In the earlier briefing, you talked about network mesh. You said you will review the network mesh, which means you need a CapEx other than building capacity. Or, will this be covered with software? The impact when you change from the mesh structure. Thank you very much.
Thank you for the two questions related to communication failure. First is from Mori-san in charge of corporate clients.
Let me first talk about the corporate client sales activities normalization. Right after the failure occurred, about one week, we mainly visited corporate clients apologizing what happened, and this is continuing. Gradually, we are making new proposals including BCPs. This is increasing. We are visiting more customers than usual and finding new things. There are new discoveries. We hope to continue this. In terms of the normalization of our sales activities, including our apologies, we are working hard to visit and do sales activity that is close to a normal level.
Regarding our capital expenditure policy, Yoshimura-san, please.
First of all, revisiting the mesh structure, it does not mean we immediately need the capacity building. Software can address this. For the entire capital expenditure, we will work with a validation committee where external experts serve as the member. This will be discussed in the committee to decide on the final CapEx. As mentioned, just be- Just because we review mesh does not mean that we need to add capacity or add facility. I talked, asked about the normalization of the individual side users.
Yes, there was a big impact at the time of failure. The users who visited au shops gave us some very strong words. We take them seriously to first establish solid measures to prevent the recurrence. The visit declined at one point, but now it's settled. It seems like we're in a gradual decline. My Number Card application started at the end of this month, so we want to give momentum to the market. We just had a briefing on communication failure today and also submitted a report to MIC. From next week, we will bring our activity back to normal. We think we can do this rather quickly. Thank you very much.
Thank you.
We would like to entertain the next question. SMBC Nikko Securities, Kikuchi-san. Please tap unmute icon. Ask a question, please.
Kikuchi speaking. Thank you. Two questions, please. Regarding the corporate, could you elaborate on that, please? Regarding individual, the impact by this failure was not that significant. Now on corporate, I think there are different views, positive factors, negative factors. Positive factors, various countermeasures. Because no matter which carrier you use, it will be the same, so that you will, it's possible that you will have more opportunities to utilize what you have. On the negative side, by users using other carriers, are you going to suffer decreased revenues, or are there other options? Do you see some specific pros and cons, negative factors and positive factors?
Thank you for your questions. Mori-san, who's in charge of corporate business?
Well, positive and negative factors. Regarding positive factors, positive sides, from the viewpoint of BCP, for instance, multi-carriers having redundancy, trying to have redundancy, or even before that, cellular network and non-cellular, for instance, OTT voice service, for instance, LINE or Cisco, Webex calling by Cisco, those are available services. On fixed line and mobile, combining them both once again and with one same number, receiving calls, I think that's going to increase as well. With these, even more than before, combining many things, different things, we could make proposals. That's the positive side. Negative side, make sure that negative side would not become significant, and we would like to keep making efforts.
With the other side of the coin, those customers who are just using our network with this multi-carrier, if it's positive, that would be okay. Switching to some other carriers for some of the usage, I think that could also happen. We would like to minimize the impact from those and OTT and other options included. The having redundancy in the BCP and making proposals to that direction is what we should really focus on.
Thank you. Second question. Financial business, some questions for clarification. Significant increase, one of the factors, this affects accounting process effects. Other than that accounting effects, I think you still enjoy increasing income. What contributed to that increasing income? Financial Group, in addition to that, Financial Group recurring profit, ordinary income, IFRS operating income's difference from them from the last fourth quarter, I think it had the difference widened. In the first quarter, what's the difference? That's my second question. Thank you.
Well, this time, show the slide, please. Left-hand side. Home mortgage loan, the fee income, the accounting-wise, it was treated differently from the previous year. The fee income last year for 13 years, it was deferred recognition before it's listed as income. In the past two years, the liquidation of the receivables, we have accumulated experience. This is listed en bloc. The past ones, about JPY 17 billion worth for the past, that's listed as the temporary income. IFRS and JGAAP difference. Aketa-san, would you like to address this?
Right. Compared with JGAAP and IFRS, especially in the first quarter, there is a significant difference, as Muramoto explained it to you. That's significant. Based on the JGAAP, it's one time home mortgage loans. When it's done, then fee income was listed. But under the IFRS, it's deferred. The deferred portion, including the past ones, just like JGAAP, when loan was dispersed, it's recognized as revenue. But this time, the past portions were then handled, and that's significantly reflected.
Right. Accounting effect, that contributed to the increase in income. In your policy, I think this is the focus area. Excluding accounting effect, where can you expect to see the growth in the second quarter and onwards? What's your outlook?
If I could just give you some additional information. Excluding temporary effect, first quarter financial business is concerned year- on- year based on IFRS, slight decrease, but almost the same as before. In terms of the actual operation indicators, especially the Jibun Bank loan, the outstanding balance Y-o-Y increase of 15%. It's a very brisk business. Now, concerning credit cards, 1.2 million increase Y-o-Y. That's the membership increase of credit cards. In terms of operation, we believe that there's momentum, there's good growth. In the first quarter, slightly the income was not that robust. Interest rate cost for mortgage loans and also from sales promotion cost, those have some impact. Overall, these are the drivers, and we believe that we can enjoy good growth. Thank you.
Thank you.
Time is almost up, so I would like to take the last question. Mitsubishi UFJ Morgan Stanley Securities, Tanaka-san, please unmute yourself and ask your question. Thank you.
Hello, this is Tanaka speaking. I have one question. Multi-brand, value-added ARPU growth is stronger than I thought. Could you give us the breakdown here and the sustainability going forward? Thank you.
Thank you. Value-added ARPU. Personal, Amamiya-san, please.
Yes. Value-added ARPU is growing. In general, the financial settlement, au PAY, and credit card is growing. In contents, Netflix, we have bundled contents with Netflix, and that is growing. Others, power is also growing. Compensation is also growing, repair and compensation.
What is the ARPU for electricity?
That is not disclosed. I'm sorry. I see. Just for clarification, in finance, au Financial, this is loan, and other revenue is included. It's not included.
Thank you very much. We will now close the financial results briefing for the first quarter fiscal year ending March 2023. Thank you very much for your attendance.