Thank you very much for waiting. We will now begin the financial results briefing and Q&A of KDDI Corporation for the first quarter of fiscal year ending March 2026. Thank you very much for taking time out of your busy schedule to join us today. I am Miyakawa of IR Department and will serve as the moderator today. This briefing will be broadcast live on the Internet with simultaneous Japanese to English interpretation. The presentation will be available on demand on our IR website at a later date. Thank you for your understanding in advance. Let me introduce the participants today.
Kuwahara, Executive Vice President, Representative Director and Executive Director of Business Solutions Sector; Saishoji, Senior Managing Executive Officer, Director, CFO and Executive Director of Corporate Sector; Takezawa, Senior Managing Executive Officer, Director and Executive Director of Personal Business Sector; Katsuki, Managing Executive Officer, Director, CSO, CDO and Executive Director of Corporate Strategy Planning Division; Yoshimura, Senior Managing Executive Officer, CTO and Executive Director of Core Technology Sector; Aketa, Executive Officer and Executive Director of Corporate Management Division. We have three financial results related materials and TSE timely disclosure material. Total four materials are posted on our IR website. Please refer to the disclaimer in the material regarding statements made in these documents, performance targets and projected subscriber numbers explained in the Q&A session today. Saishoji will first explain the financial results summary followed by Q&A. Ms.
Saishoji, please
let me explain our first quarter financial results for the fiscal year ending March 2026. First is our consolidated results. Revenue increased and profit decreased on a consolidated basis, but progress is in line with the initial forecast. Top row operating revenue was JPY 1,436.3 billion, up 3.4% year- on- year. Middle row operating income was JPY 272.5 billion, down 1.6%. Bottom row profit for the period attributable to owners of the parent was JPY 171.1 billion, down 3.3%. Next is factors for change in consolidated operating income. From the left, mobile on personal services segment basis aims for a year- on- year profit increase of JPY 1.9 billion and our initial forecast of full year profit growth of over JPY 30 billion. Financial and energy businesses combined were up JPY 6.2 billion.
Lawson's equity-method profit was up JPY 5.7 billion, DX was up JPY 2.9 billion, technological structural reform was up JPY 3.2 billion, and the impact of prior year's promotional expenses including a JPY 7.3 billion one-time expense was negative JPY 21.4 billion, including others such as returns to shareholders, stakeholders, and decrease in Rakuten roaming revenue. Operating income was down JPY 4.4 billion. However, as mentioned here, our core businesses are progressing steadily, and the impact of sales promotion expenses was factored in at the beginning of the year, so it is in line with our forecast. In the full-year results briefing in May, I touched on two points on the left regarding our commitment for the next growth. Digital data and AI will generate new values. As you see on the right, we will focus on growing our foundational power to connect and making it a strong competitive foundation of KDDI.
To achieve this, we will provide the value of connected experience and expand the Telecom Business foundation, both toC and toB . As the outcome of these business activities is, it is important to grow our mobile revenues, which is communications plus value-added services in both personal and business service segments. To show the progress of our growth to all our supporting stakeholders, we will change and promote our KPI disclosure. The detail on KPI disclosure, please look at the appendix. This shows the mobile revenues status for personal and business services segments combined. Left side, mobile revenues were JPY 550.6 billion, up JPY 7.6 billion year- on- year. In the center, mobile ARPU was JPY 4,340, up JPY 60. Right side, the number of smartphone subscriptions increased by 450,000. Personal segment basis, mobile revenues is promoting the communication and added value services.
Year-on-year, it is up JPY 2.3 billion.
We're making steady progress.
Right side Q1 mobile ARPU.
And smartphone.
Subscriptions are steadily increasing and new plans.
Offering connected experience value is well received and is off to a good start.
Both grand migration and churn rate trends have improved. We expect significant growth in the second.
Half, including the impact of service revisions.
We will continue to aim to achieve a virtuous economic cycle.
The new plans launched in June are off to a good start. On the left-hand side, new value of connected experience such as au 5G, Fastlane, Starlink Direct, and unlimited data overseas have been extremely well received. As a result, about 80% of customers choose the au Value Link Plan and Unlimited Data Max, which combine reliable unlimited data use with the value of connectivity. On the right, at UQ Mobile, due to the increased data usage, about 40% of customers choose Komikomi plan value, which offers the largest capacity. Due to value of connected experience and data demand, high-capacity plan is very well accepted. This is the effect of the multi-brand strategy we redesigned along with our service revisions. It has worked as expected, with both au and UQ Mobile seeing improved trends.
On the left, as au's attractiveness has increased, brand migration trend has improved, and its flattening is in sight. For FY March 2026, the number of migrations from UQ Mobile to au continues to increase, expanding 1.4 times year-on-year. We will continue to strengthen efforts to make au more attractive, aiming for further growth. The number of migrations from au to UQ Mobile decreased significantly in June. On the right, churn rates have also been positively affected, with that of au remaining low and that of UQ Mobile showing a significant improvement in June. The trend continues in July as well. Recently, we have seen a trend within the industry toward focusing on contracts with highly engaged customers. We too will transform our structure to one that is more conscious of lifetime value.
While many companies are focusing on finance, I'd like to reiterate the strengths of KDDI's financial services. On the left, KDDI has been a pioneer in creating a synergy model between telecommunications and finance. In the fall of 2025, we will begin collaboration with SBI Securities to strengthen alliance between banking and securities. In addition to Mitsubishi UFJ e- Smart Securities, SBI Securities will join as a partner for this alliance. By using real-time direct debit setup with au Jibun Bank, customers will receive preferential interest rates. This will also help us increase our bank deposits. We will continue to expand our collaboration with securities firms in order to strengthen our financial functions. Together with our partners, the financial business's performance and KPIs are progressing smoothly. On the left, au Financial Holdings operating income increased 33% year-on-year to JPY 11.7 billion.
On the right, au Money Activity Plan, which has now exceeded cumulative number of subscriptions of 1.6 million, has been successful expanding our customer base including au PAY Gold Card members. Next we will look at the performance of the business services segment. On the left, consolidated operating revenue JPY 349.7 billion, up 4.5% year-on-year, and operating income was JPY 57.5 billion, up 5.4%. For base revenue grew with growth in mobile revenues and both ID and ARPU were solid, resulting in an increase of JPY 3.9 billion or up 2.5% in gross area. Operating revenue was up 6.2% due to delays in the integration progress at Altios link to the end of the fiscal year. We aim to expand growth in focus areas such as security and IoT and to bottom out and accelerate BPO performance.
Finally, today's summary as to the first quarter consolidated results: despite the decrease in profit compared to the previous fiscal year, progress is in line with our initial forecast. New plans are off to a good start and the new connected experience value has been well received. A multi plan redesign has been successful and we continue to aim for a full year profit increase of over JPY 30
Billion yen in mobile in the personal.
In the financial services business, we will strengthen bank securities alliance and further expand the value we provide by combining telecommunications and finance. In the business services segment, we will strengthen initiatives in focus areas and accelerate our growth trend. That's all. Now we'd like to move on to Q & A.
Thank you, Ms. Saishoji. We will now take your questions. If you have questions, please tap the Zoom raise hand icon or Raise Hand button in the reaction. When you are nominated, please tap unmute and ask your question. After the presenter mentions your company name and name, to receive questions from as many people as possible, please limit your questions to two per person. If you do not have your name or company name, we cannot appoint you, so please mention your names. We will now take your questions.
First question is from Daiwa Securities Kazuki Tokunaga.
San, please unmute yourself and ask your question.
Hello, this is Kazuki Tokunaga from Daiwa Securities.
I have two questions. First is about the sales promotion expenses.
One reason profit declined is because the sales promotion was big excluding the one-off basis, and all players are having strong results. This means that you have this result in the ARPU, and this competition will continue on a full year. You're not using much expenses now; it's just this past year factor that is.
Impacting your results this time.
Thank you for the question. I mentioned in the increase decrease.
Of profits.
The sales promotion expenses increased, which pushed down the profit for the one-off factor JPY 7.3 billion and for.
Was this spent this year or prior years?
I think your question is on that point. This is personal services segment. Takezawa would like to explain. Thank you very much for your question. Takezawa would like to answer.
First of all, as you rightly said, JPY 7.3 billion is the promotion expense related gain on the reversal of the provision, so that was one-off factor. It will not be incurred from now.
On and for the others.
Our smartphone Tokusuru Program, the program that we offer, this is the expense increase for the past existing customers and this Tokusuru.
Program.
This started in September 2021, and with the installment receivables, we had the customers who purchased using the installment increased, and so from the device purchase two years or after three years from the purchase, this benefit is executed. When this benefit is exercised, the residual value portion tends to rise. That is where we are now.
Going forward.
This benefit will end among some customers, and the customers who will newly join.
Will become better balanced.
The year-on-year impact will improve. For this year, we will gradually improve. This was factored in at the beginning of the year as we planned. For the full year, we will continue our efforts to achieve the target.
Thank you. In this quarter, the smartphone subscriptions net addition is slowing down. It's a bit weak, but the expense was not injected in this quarter. For the new injections, you are being rather restrictive, suppressive?
Yes, you're right. We're not really restraining but looking at the profit situation. Right now, we are in the middle of the service revisions. We will watch the market condition and use our promotional expenses accordingly. For now, on the payment basis, we are not dramatically increasing this year. Thank you.
My second question is about mobile revenues, personal segment, around JPY 2 billion increase in Q1 on the full year JPY 30 billion profit increase I think you said. Profit increase means how much mobile revenue increase are you anticipating for the full year? I think it's partially due to the service revisions. This will increase as we go through Q2, Q3. Are you in line with the profit increase plan? The JPY 30 billion full year forecast for mobile revenues.
Thank you for the question.
Full year JPY 30 billion profit increase.
Is the target in the personal services segment. Q1 profit increase seems a bit weak. I think that is the gist of your question. This is again personal business related. Takezawa will answer. Thank you for the question. Let me answer. JPY 2.3 billion profit increase. As you see in the waterfall chart, the profit JPY 1.9 billion. The revenue was not converted 100% into profit. There was added value revenue included in the mobile revenues. That's the reason. JPY 30 billion profit increase.
On the.
profit basis, we need to increase profit by JPY 40 billion. From August 1, we started our service revisions and some price revisions. The new pricing plan started in June is now seeing an upside compared to the plan. We hope we can maintain our momentum until the end of the year. Net additions of smartphones need to accelerate. From summer to fall and towards the end of the year, we will try to promote and drive this business and keep the momentum so that we can increase the profit by JPY 40 billion to achieve the JPY 30 billion target.
Thank you. My follow-up question is, this revision on August 1, the progress given that your new pricing is off to a good start. Second, third week mobile revenue value added, I think this is a good progress. Can I see it that way, including the subscriptions?
Yes. The base telecom revenue will rise and the added value will also be offered to our users accordingly. The mobile revenues overall can grow, we think. Thank you.
Thank you.
Next question.
Please tap the raise hand button. Masuno-san from Nomura Securities, please.
I have two questions.
First, about Personal section mobile revenue, so 2.5% and 9.7% increase for Business. Altogether, 1.4 goes ARPU plus 1.4, so as to Personal 0.5% increase, that's rather limited, so it's not really a real growth. As to ARPU in the first quarter, maybe not so much growth, am I right?
In the simple calculation about the repricing at the even months from October, JPY 300 and the other JPY 70 million, that's from other smartphones, so the JPY 350 or so the increase.
From the June in Q, the gross.
New, the 4 million assumed and over 10 times, maybe 8 billion or so altogether, the JPY 40 billion also increase revenue. From the repricing, JPY 40 billion increase, then the personal section, and we'll see increase in profit. I think that's your plan as the overall structure. Of course, the financial business and Lawson are continuing the positive growth. Am I right to understand that that is going to be the biggest change for the other personal sector? The current ARPU and the JPY 40 billion increase in revenue because of the repricing. Am I right?
Thank you for your question. For the first quarter actuals, in the first quarter mobile revenue ARPU, it doesn't look like growing so much. In order to achieve the initial target of profit, is it mainly by the impact coming from repricing?
That is, I think, the intent of the other question, and Takezawa-san is going to answer your question. Thank you for the question. Our view is more or less in line with your comment. As I mentioned earlier, ARPU revenue itself in the other service region, some of them are doing very well. The other middle capacity, low capacity zone, with the current service revision to that zone, we decided to make more focus on the LTV and more engaged users. The net increase there in that zone is not really satisfactory as the basis for a team. With this repricing and service revision within this fiscal year, we would like to make another challenge, and with that included ARPU. As to ARPU revenue, as I mentioned earlier, in terms of revenue, about JPY 40 billion and profit JPY 30 billion plus. That's the idea to stick in our minds.
We would like to take necessary measures going forward as well.
Thank you.
Thank you. As the Business Services sector, in the first quarter, mobile revenue increased 10%, plus JPY 5.3 billion. I think profit came here, came from here. ARPU grew by about 1%. In terms of number of business volumes, must have been increased a lot. Data center and BPO are not growing really. The growth area is doing well. IoT or data center business, BPO excluded, the rest I think must be growing. Other than the area, other than these three highlighted areas, what is really growing and if it is growing, that's good. Is it contributing to profit? Mobile is doing well and the volume is driving the profit. In the gross area, other areas. My intent is to know more about the other area.
As to business related revenue, while the mobile revenue is increasing, data center and BPO are not really growing.
What about the rest of the business? What is growing? What is the current status of gross area? That was the question. Kuwahara-san answers your question.
Thank you for the question. The base growth separately, starting with base, mobile is performing very well. ARPU and the mobile value-added services are positively affecting to produce profit. As to grow side, there are good news and bad news. Starting with the good ones, there's something which is not shown here. Our new focus, namely cybersecurity and facility solution with Starlink drone, they are growing very steadily. Meanwhile, Digital BPO is not doing so well. year-on-year, both revenue and profit decreased. The turnaround there will be a key point. As to data center, it's somewhat weakening. In the first quarter last year, had some other one-off factor and also FX impact as well. That is why it is a bit weaker.
On a full year basis, the profit is expected to grow by double digit. Thank you.
Digital BPO, the situation remained the same from last year. In the past, you said that they had, on the customer's side, the size of orders was decreasing. You said in the past that trend continues. Could you please elaborate on the background?
Thank you, Digital BPO. Here is what we are doing. As to existing customers, we are digitalizing those customer bases. That means that the revenue decreases to some extent. To set it off, we are going to acquire new customers so that the ultimate results will be positive. From last year, the progress is kind of slow. Comparing last year and this year, the number of transactions increased 1.6 times. In the second half of the year, we will see some positive growth in results.
Thank you.
Thank you. Masuno san, next question. Please tap the raise hand button on Zoom. Okasan Securities, Okumura san, please tap the unmute button and ask your question.
Thank you.
I'm Yusuke Okumura from Okasan Securities. Can you hear me?
Yes.
Thank you. I have two questions. First is on the new pricing plan. Since it was introduced, how is the competitive landscape? You mentioned that you are doing good. In the short term perspective, since June 3, since the plan was introduced, smartphone subscription has been positive. How is M N P moving? In addition to that, which brand, which attribute customers are changing or showing some changes? You mentioned what is happening in the brand. Vis a vis competitors, have you seen any changes in the competitive landscape? Thank you.
Thank you for the question. After the new pricing plan was introduced, how the competition changed subscriptions, M N P brand and vis- a- vis competitors. This is Personal Services Sector so Takezawa will explain. Thank you for the question. Takezawa will answer your question.
First.
On June 3, the new pricing plan started in au Value Link Plan.
Mentioned in the presentation.
About 80% of au users joined this.
In UQ side, Komikomi Plan Value and.
Tokutoku Plan 2, the two new pricing plans are launched.
The Tokutoku Komikomi Plan Value 40% have joined.
We are seeing an upside compared to our plan.
On the other hand, vis-à-vis.
Vis competitors, the mid volume and above we are fully competitive. In UQ the low volume area, we have many, many plans. We closed the new applications for this lowest bracket, so it's not so much churn. In terms of acquisition, we're seeing an impact. For this part, Tokutoku Plan 2 appeal product attractiveness is being pursued. How we compete in the low volume area is the key. Smartphone Knit Edition is not strong enough as mentioned earlier. We are trying to come up with comprehensive measures to address this. First, starting today, some new pricing plan was introduced. This new pricing plan that is off to a good start will be used to compete effectively with our competitors.
Thank you. Thank you. Compared to April and May, June smartphone subscriptions on MNP has settled somewhat.
Yes, churn in June was stabilized compared to April and May.
In terms of acquisitions, we were a bit behind. The key is how we reinforce that part.
Thank you. My second question is on business services segment, so this may be repetitive.
Repetitive.
In the growth domain excluding lack consolidation, the actual real term profit is down or so you're struggling with digital BPO, but you are expecting positives in the second half as you've been explaining from the past. What is the probability of the growth accelerating in the second half? Thank you.
Thank you. In the growth area excluding lack, it seems that it is negative growth, so you want to know the probability of the growth in the second half. Kuwahara will answer your question. Thank you for the question. First, what we do in the second half in our plan, looking at first and second half as every year, we are second half heavy, especially fourth quarter. The one-off money, sorry, the seasonality wise, we have this ramp up in the fourth quarter.
For example, mobile, smartphone, IoT, the monthly revenue is progressing steadily, so the remainder is the temporary factor. Excluding security, we look at security together, so this security is contributing to positive, and we think we can continue growing security. Thank you. I hope this answers your question. Thank you. Just one follow up question on the business services segment. The corporate mobile price revision, what is your thinking, plan, or progress? Anything you could share with us? Thank you. On the corporate side, we have revised our plan. New pricing plan has been introduced, but on the corporate side, we have a one-on-one bilateral contract with companies, so the number of connections, subscriptions, we discuss with customers and revise accordingly. Starlink Direct or remote Zoom that companies use or Teams, the additional, we have a plan where we add the giga, so this is highly welcomed by corporates.
This is a bilateral negotiation and contract, so we negotiate and revise accordingly. Thank you very much. That's all from me.
Thank you. Next question, please.
Please tap the raise hand button from Morgan Stanley here.
Can you hear me?
Yes, we can.
I have one question. The net increase of smartphone subscriptions quarter on quarter was extremely small growth by changing prices.
In the market.
That is because of the repricing and the churn rate has risen, and in August there's the other price hike for the existing plans. Some users understand it, but other users don't. The quarter starting in September, maybe you cannot expect a lot for the net increase for this fiscal year in the personal area mobile revenue, and the design and structure, not the number of users but the migration to large capacity plans. Is that your focus? In June, that net increase was very small and the churn rate going up, and with the other rate hike in August, maybe could be an additional risk. What is your thought? Thank you.
Thank you for your summary.
Takezawa-san answers your question, thank you.
you for the question. As you mentioned, this net increase level, the small changes in the market.
And.
Some changes in our count measures vis a vis customers because of these changes and that we need to wait for those changes to pay off to be effective. We did make some pricing change and the changes that we announced in May, what will be the timing for them and to what extent? Of course, we will watch closely market conditions to make decisions in that area. When the right time comes, we would like to talk about it to you. As to the overall structure, here is our thought. There are customers who could change the carriers or the plans. It is a very good thing for us to have customers who are very loyal to us. We are afraid of the engagement with customers becoming weak and that would have some impact on churn rate as well.
As we announced at the beginning of the fiscal year and we started this new au Value Link Plan from June and also for UQ, Tokusuru and Komikomi Plan Value centering around those other programs or plans, we would like to make advancements as to the competitiveness or competitive edge for low capacity side. How should we think about it? Some countermeasures include it. We are thinking about how to maintain or recover our momentum in the competition. I think it is quite possible that we move on to that direction. In any case, we are going to watch closely the market to make the next move.
I'm sorry, could you please make some follow ups? The ARPU revenue or mobile revenue increase that comes mainly from the repricing of existing customers. Once the first is completed, beyond that, the plan change only will bring about the ARPU increase.
If that's the case, then the organic pricing change is good. I think the number of subscription contracts is also important and also pricing prices for the plan. What will be the good balance once this repricing that has completed its data cost then what will be your next step?
Basically, revenue ID Times, the ARPU that is for telecommunication that remains unchanged and for ARPU we have been working on ARPU and we have accumulated to some extent.
This time, in addition, along with the provision of values, we also changed prices and as you pointed out, the remaining element is the number of customers and I think I have been saying this repeatedly though we are looking at ID as an important element as well because that will lead to more revenue ID times ARPU and we need to maximize the result of that calculation and that way we need to operate our business. Thank you.
Thank you.
It is exactly time. We will close KDDI's first quarter briefing of fiscal.
Year ending March 2026.
Thank you very much for your attendance.