Thank you very much for attending the financial results briefing of KDDI Corporation for the first half of fiscal year ending March 2027. Before the briefing, Matsuda will explain the fire that occurred in connection with the activities of our subsidiary, MobiCom.
I am Matsuda from KDDI. I would like to first talk about the grass fire that occurred in Mongolia. In relation to the activities of our subsidiary, MobiCom, on October 8th, a grassland fire broke out in [Nömrög] Nature Reserve in Mongolia. We would like to sincerely apologize for causing significant distress and concerns to the Mongolian government and the people of Mongolia, as well as to those who have supported Japan and Mongolia's bilateral friendship and ties over many years. We also sincerely thank the people who are engaged in firefighting under severe circumstances and those within and outside of a country for their efforts on this incident. For three decades since its founding, MobiCom has worked to develop telecommunications infrastructure in the vast lands of Mongolia.
Precisely because MobiCom is a company fostered by and deeply rooted in the local community of Mongolia, we will do our utmost to address the incident in a most sincere and steadfast fashion without averting our eyes from the situation. KDDI Group will offer full-fledged cooperation to the investigation carried out by the local authorities and endeavor continuously to fulfill our social responsibility towards restoring Mongolia's natural environment and the confidence of the Mongolian people. I look forward to your kind understanding. Please return to your seat.
Now, attendees for the financial results briefing will enter the room.
We will now begin the financial results briefing. I am Hiraoka of Public Relations Department and will serve as the moderator today. This briefing will be held in this venue and also broadcast live on YouTube and other media. Financial results-related materials for today are posted on our IR website. Please take a look at them. For attendees in the venue, please check your handout. Let me introduce the four participants today. President, Representative Director, and CEO, Hiromichi Matsuda. Senior Managing Executive Officer, Director, and CFO, Nanae Saishoji. Managing Executive Officer, Director, CSO, and CDO, Tomohiko Katsuki. Executive Officer, Deputy General Manager of Corporate Sector, Kenji Aketa. Now, President Matsuda, please.
Ladies and gentlemen, thank you for taking time out of your busy schedules to join us at this briefing. Allow me to explain our performance for the second quarter of fiscal year ending March 2027. There are three key highlights, as you can see from the slide. First, on the consolidated financial results for the first half of the fiscal year ending March 2027. In the first half of the year, operating revenue and profit were off to a stronger start, both overachieving the initial targets. As is on the left, operating revenue was JPY 3,052,800,000,000 , up 4.7% year-on-year. Adjusted operating income was JPY 633.1 billion, as shown in the middle, up 13.9% year-on-year. As is on the right, adjusted profit for the period was JPY 390 billion, up 13.6% year-on-year, progress of 53.4%.
Following the first quarter, we were able to make a very solid start with our new midterm management plan. Next, operating revenue by segment, which we have started to disclose from this fiscal year. This is a reflection of our determination to grow each segment steadily. All segments grew in terms of operating revenue. Mobile communication revenue, which is a component of Telecom Core, as well as key growth areas such as finance, AI Integration, and data centers are successfully expanding. Here are the factors for change behind the adjusted operating profit. Starting from the left, Telecom Core increased by JPY 62.4 billion, up by 16.7% year-on-year. Mobile communications revenue posted an increase of JPY 28 billion. Others grew by JPY 34.3 billion.
As a result of the effects of both the growth in the mobile communication business and the cost structure transformation, exhibiting favorable signs that expanding a profit will continue into the second half. Personal Growth segment rose by JPY 4.1 billion to secure an increase despite some transient impacts from finance and energy. Business Growth segment saw an increase of JPY 6.3 billion, up by 18.8%, with increased profits across areas showing strong developments. With all these combined, adjusted operating profit rose by JPY 77.4 billion, up 13.9% year-on-year. From this slide onward, I will explain each segment. First, from Telecom Core. In the Telecom Core segment, sustainable growth of our mobile communications business that we have endeavored as a pioneer in the industry and cost structure transformation efforts are bearing fruit.
Mobile communications revenue in the first half was up by JPY 33.5 billion, over half of which was driven by organic growth, as indicated in the factors described. This will be expanded further in the second half. As is on the right, business other than mobile communication was up by JPY 34.3 billion, largely due to cost structure transformation. Since last fiscal year, we have controlled costs rigorously to win. The impact of changes in the accounting treatment of sales promotion costs from reviewing the strategy also contributed. With all the indicators improving across the board, I just want to highlight that our structure for growth is becoming more stable.
Next on IDs and churn rate. Smartphone subscriptions totaled 33.34 million, an increase of 420,000 year-on-year. Churn rate improved to 1.18%, down by 0.03 percentage points year-on-year.
We declared that we will take on the challenge of tomorrow together, and as a result of implementing a strategy to place emphasis on long-term business with our customers, au and UQ mobile, short-term churn rates under one year declined. povo's churn rate is also going down. In au, UQ, and mobile, toppings that we offer to meet the needs of diverse customers whom au may not be able to reach is being reached, and users are expanding in number. Mobile ARPU is also robust, up by JPY 70, a 1.6% growth year-on-year. Let me explain the important trends that support this growth.
The first trend we see is brand migration. Migration between au to UQ to au, and migration to au continues to have net increases on a monthly basis. Second is the progress in the penetration of au and UQ's higher-tier plans.
The two combined exceeded 4 million subscribers, which was a significant growth. This is underpinned by the sales capabilities on the ground. The actual migrations to higher-tier plans in the real physical shops are three times greater than those done online. So that the sales staff can bring out the best of their capabilities, they are equipped with expertise and service templates provided by AI, and by adding a sense of human warmth to it, they assist customers as they make their choices.
And the results of these initiatives are steadily manifesting at the front lines of 2,000 au shops. Now, this is about initiatives for Japan's and Asia's firsts in the era where we must compete on the basis of value creation. First on au Hikari Plus. 5G is incorporated into home gateway for this service.
Subscribers can use this immediately after application, and this is portable even if you move. This solves all the problems customers have had before. It's unique to KDDI, not offered by our peers, and is received very well. On the right is satellite communications. We have been collaborating with SpaceX from five years ago to launch a variety of services introduced in Japan for the first time. This time, we signed a service provision agreement with SpaceX to enable high-speed communication and voice calls even in out-of-coverage areas. And this is going to be Asia's first Starlink Mobile V2, and we are aiming to launch the service by the end of 2027. KDDI is talking to SpaceX on potential partnerships in a variety of fields, including AI. We would like to evolve this relationship further.
The second point in terms of value creation is communication quality, which is the foundation of competition. As is on the left, at the end of October, in Opensignal's global mobile experience analysis, we achieved five consecutive wins, the largest number of awards to be won. Since October 1st, the quality of communication has further improved, with about 30% reduction in data transmission stall rate in congested areas, mainly in urban centers such as Yokohama and Fukuoka City. This strength is penetrating into corporate as well as individual customers. MNP net increase for corporate customers in the first half grew 1.5x year-on-year.
We are rated high by construction companies who need to communicate in various construction sites around the country for the quality of communication we offer across broad areas. povo, where customers can try out the communication quality casually, is also very popular.
Its net increases from September to October were up by 30%. povo's brand recognition is rising quite rapidly. It has earned its status as a casual second choice. What sustains this communication quality, which was awarded five consecutive times, is our field capability strengthened for building networks. Having won five times, we are being chased, and we are always under pressure because of that. In such circumstances, we are brushing up on our capabilities by fully leveraging AI. I am very proud of the engineers we have for their constant endeavors to train themselves.
From building areas, optimizing communication quality, and to restoring operations by identifying the causes of failures, our engineers are enhancing their capabilities by leveraging AI as their weapon to support high communication quality. Next, on growth areas. This shows the progress of business in the Personal Growth segment.
In terms of performance, as is on the left, it was brisk with device-related business, seeing an increase of JPY 9.6 billion year- on- year, and Ponta Pass growing by JPY 7.3 billion. On the other hand, finance due to impacts from increased deposits and valuation losses, and energy because of impacts of the cooler summer in the electricity retail market and timing differences, saw drops in profits respectively. However, energy is expected to turn around to increased profit in the third quarter when timing differences are eliminated.
As shown on the right, major KPIs are moving favorably, and our customer base is expanding in a steady fashion. Now, this is regarding our initiatives in key areas. Finance is expected to see a declining trend in profit until the third quarter because we must work to normalize the loan-to-deposit balance, which is an issue for us.
But the positive effect of interest rate revision for mortgage, we already announced, will begin to manifest, and in the fourth quarter, it is expected to bounce back to greater profit. On top of that, we will strengthen au PAY Gold Card promotions and au Money Activity Plan enrollments. Regarding devices, we will turn higher device prices into business opportunities. We strengthened our product support service for repair and are offering Tsugi Toku Ticket, which is a reward for staying accident-free, making the customer's next device change more affordable. By being friendly to our existing customers, we aim to establish longer business relationships with them.
Next is AI Integration for Business Growth. First half operating revenue increased by approximately 29% year on year, driving Business Growth. By developing a customer base with KDDI iret from this fiscal year, cloud infrastructure sales is expanding. Furthermore, AI development projects built on top of that also grew by approximately 20%. Over 50 KDDI sales team members joined, significantly improving our project creation capabilities, and the number of AI development projects roughly tripled.
Next is Connectivity DC, data center. In the first half, both operating revenue and EBITDA grew, with EBITDA up 20.1% year on year and margin of 44.5%, achieving high profitability and growth. Demand is steadily materializing, with AI inference use accounting for approximately 60% of new orders. To reliably meet this growing AI demand, we will expand our London data center.
In addition to opening our sixth building in FY 2028, we newly secured the adjacent land and plan to double our power capacity. Next is the progress of our mid-term management strategy, Power-to-Connect 2028. Initiatives for Digital Belt and social implementation, which serves as the foundation for the AI-enhanced workforce and lifestyle, are progressing. I will now explain our data center strategy in the AI era, which supports the Digital Belt. Our commitment is not to pursue scale in terms of megawatt, but to layer value on top of facilities.
In addition to the connectivity model cultivated at TELEHOUSE, we will establish a value-layering AI factory model at Osaka Sakai. By layering the value of number one connectivity among telecom carriers and demand areas close to urban centers, we achieve high profitability per megawatt and low churn rate. Next is AI factory, proposed by NVIDIA.
Factory is production process itself that converts data into value, in other words, token, with computing resources. We will create new value called token by layering our proprietary sovereign AI computing resource on top of facility. This is Sakai, Osaka, which is our demand area and the place for implementation. We will promote social implementation as launch base for AI implementation. Here, partners from various fields will pool their technologies and expertise. First, as computing resources, we plan to introduce the next-generation Rubin GPU as part of the leading group in Japan. In social implementation, we established a new company, ELYZA Robotics, to promote the Physical AI business. Our target is R&D investment of JPY 30 billion, over 300 Physical AI specialists, and introduction of over 1,000 robots.
Another example, we signed a capital alliance agreement with newmo, the largest taxi company in Osaka, operating 1,900 taxis centering on Osaka for social implementation of autonomous driving taxi today. We will realize an operate in Sakai, learn in Sakai loop, where operational data is fed into AI learning and the learning results are fed back to the field. Next is drones. Skydio's AI drones, which provide the inspection function, are active in routine monitoring and inspection work, as well as emergencies.
In Kumamoto earthquake in July and heavy rain damage in Ishikawa in August, we contributed to emergency survey at the request of the prefecture. This time, we will venture out into drone delivery. We formed a strategic alliance with Wing Aviation, Alphabet subsidiary born from Google Lab, for a full-scale rollout of drone delivery in Japan.
Wing has a commercial track record of over 1 million operation and can deliver within 30 minutes from order. We will combine the cutting-edge technology of these global partners with the nationwide assets of domestic partners. In addition to Lawson, we are also collaborating with Japan Post, aiming to realize drone as a service, where AI drones are dispatched from the nearest drone port. I explained the stabilization of our business structure and growth to date, which we believe is the result of our past infrastructure investments and our value creation as an industry first mover, executing new initiatives ahead of the rest of the industry.
We need to continue this to the next cycle. Infrastructure investment and partnering toward the next cycle based on our technology discernment, including drones, partnering, and our commitment to deliver on our promises are the key components that will generate the next virtuous cycle.
This is the progress on growth investments that will support the next cycle. As announced in the medium-term management plan, we revamped and strengthened our review structure. Previously, our fragmented promotion structure by investment target and deal process and our priority on feasibility led to fewer and smaller-scale deals. Going forward, we will consolidate the strength and specialists of each department to handle everything from deal sourcing to execution in an integrated manner.
We will pursue quantitative and qualitative expansion of sourced deals and actively consider disciplined growth investments. To strengthen growth group governance, we are building an organization where misconduct is less likely to occur by utilizing both dry rules and framework and wet relationship building. Left side, the dry initiatives progressed steadily in the first half and will enter a phase that includes strengthening monitoring. We plan to submit an improvement status report in December.
Right side, the wet initiatives are carefully promoted as we believe that employees' sense of belonging to the company based on mutual trust between KDDI and group companies leads to deterrence and autonomous prevention of misconduct. Please refer to the appendix for details on the progress of each initiative. In June, we experienced a security incident involving our email system. Despite rapid technological advances, we continued to operate under legacy processes, resulting in the leakage of address information involving 12.23 million records.
We are working on cybersecurity measures to make full use of our lessons and experience. First, we will suspend services without hesitation when necessary for vulnerability remediation. Second, we will minimize damage through early detection even if an intrusion should occur. The starting point of this process is the observation and analysis of cyber threats, known as the threat intelligence.
We keep track of signs and methods of attack on a daily basis and reflect them in each process while sharing information with the government and related agencies. Finally, based on what I've explained, the slide summarizes the progress of FY March 2027 in the midterm, left side. In the first half, we achieved double-digit growth centered on Telecom Core and Business Growth, with KPIs also progressing steadily. Additionally, revenue related to Rakuten roaming that was not included in the initial forecast will materialize from the second half onwards, and we are confident of achieving this fiscal year's operating income target.
We understand that profit for the period is below consensus, partly due to the defense tax increase and higher interest expenses. We will remain focused on driving stronger growth in profit for the period as well.
Please note that the difference between IFRS accounting figures and adjusted profit is primarily non-cash, and our future cash generation capability is growing steadily. Right side, for the second half, we will effectively utilize the profits and cash generated to achieve 5%+ alpha organic growth in the medium term. In Telecom Core, to stabilize the revenue structure, we will firmly adhere to our policy of not engaging in excessive sales promotion competition that leads to short-term churn, encourage long-term usage through model changes, and strengthen channels to expand customer touchpoints.
At the same time, we also anticipate upfront investments to strengthen growth and respond to changes in the external environment, such as security measures. This is today's summary. What I have explained so far is listed here. The interim dividend is JPY 42, up 5% year-on-year.
We are increasingly confident in the stability of our earnings and business structure. After carefully addressing changes in the business environment, we will reassess the situation again at fiscal year-end. Thank you very much.
Thank you for your attention.