SoftBank Corp.

This is Fujihara. Thank you so much for attending today.

We've just ended earnings results presentation. Now I would like to explain in details of the presentation, followed by Q&A session.

First, I would like to give you the executive summary of the presentation. So revenue and profits increased making steady progress towards full year forecasts.

Second, mobile net additions continue to show good performance and mobile revenue is turning to a recovery trend. Third, PayPay achieved positive EBITDA for 2 consecutive quarters.

So these 3 points are the ones to be focused. Let me go into details.

Here is the overview of the figures.

From revenue to net income, we have provided guidance. So all toward full year forecasts and operating income, 65.9% of progress and net income is 71.9%, which are both strong.

Let me break down. First, revenue.

As for the revenue, JPY 2,933.8 billion by JPY 125.2 billion, up by 4.5% and progress toward full year forecast is 48.9%. Non-telecommunications businesses are doing well.

For this financial business is doing really well, supported by a PayPay consolidation and mobile is recovering.

So I would like to talk about each business segment. And here is the EBITDA.

JPY 32.4 billion up, up by 3.8% towards progress -- progress towards full year forecast is 56.7% showing steady progress. This duplicates so we would like to explain in operating income.

And so this is also doing well and at JPY 514.4 billion, JPY 27.5 billion, up and 5.7% up. And the progress rate is 65.9% towards full year forecast, and consumer is recovering.

So this slide shows that you can see the full year target. And for consumer, SO is returning -- is recovering.

As for enterprise distribution, media and EC, these areas show double-digit growth which are driving the growth. As for financial, since PayPay has been consolidated, and it shows a little bit minus in operating income, but assuming PayPay have been consolidated from last fiscal year Q1 and the Financial segment achieved improvement in profitability.

Now let me break down into each business segment. Now Consumer segment revenue minus JPY 5.2 billion, down minus 0.4%, JPY 1.3 trillion and sales of goods and others JPY 11.7 billion up, and this was contributed by the mobile device unit price increase from last fiscal year.

So as for electricity, revenue decreased due to decrease in electricity trading showing minus JPY 13.4 billion. And as well broadcast, revenue increased from subscriber increase as well as from diminished discount campaigns, which contributed to the positive revenue as for mobile, minus JPY 6.3 billion.

And last second half was minus JPY 29 billion. So this fiscal year shows narrowed and mobile service price reductions and subscriber increase and others contributed.

It shows minus JPY 6.3 billion. And this -- the figure for this mobile is very important.

I would like to explain by quarter. So the left side shows mobile revenue quarterly trend.

So customer acquisition measures has been deducted and year-on-year, first Q1, and was minus JPY 5.8 billion and second quarter, minus JPY 0.5 billion.

So you see that it is recovering. So as for full year, we were planning to recover.

So therefore, the second half, we should be able to say that we will have recovered. So consumer segment, segment income.

So electricity profit increased as a whole minus JPY 6.1 billion.

So last fiscal year, so compared to the last fiscal year, we have improved a lot. So the sales of goods and others cost of goods sold, minus JPY 13.9 billion.

As for electricity, the service minus JPY 13.4 billion, so which contributed to the incremental income.

So depreciation contributed by JPY 15.8 billion. So as for sales promotion expenses, minus 6.2%, which has the impact of depreciation.

So is the total.

Now enterprise segment. Revenue was JPY 379.4 billion, up by 4.6% year-on-year.

Solution was the main driver of the growth for segment income, up by JPY 10.7 billion to JPY 81.9 billion, progress today, 53.7% to the goal. In the second quarter of last year, JPY 2.9 billion, onetime impact was there.

Without that, JPY 7.8 billion increase or plus 10.8% so double-digit growth is the -- our performance in near term.

In year when we IPOed, Enterprise business was JPY 76 billion. And for the full year forecast, it will be double the number that we posted in the first year of IPO, we have been focusing on reaching to doubling the rate of the income of the enterprise segment.

Solution business growth was really apparent and up by 17.6 -- excuse me, 15.4%.

Media and EC segment. [indiscernible] made an announcement yesterday, so I'm not going to go into detail.

Revenue, up by JPY 17.9 billion or 2.4%. For income, up JPY 23.8 billion or 29.9% -- 27.9% rather.

Progress to date toward a goal is 61.9%. But there were some onetime incidents, but they focused on core businesses and consolidate a lot of business, and that effort contributed to the result.

And going forward, we, as the parent company support them to really deliver the benefit of group reorganization.

Financial segment. Revenue increased significantly, thanks to PayPay consolidation for income, JPY 5 billion last year.

And now this year, we are looking at JPY 6.9 billion lower than last year, mainly due to PayPay's consolidation and also payment service performance was also taken into account. As to PayPay, we didn't consolidate last year.

But if we assumed that PayPay had been consolidated last year, then decrease was JPY 9.2 billion. So in real time, we should look at improvement by JPY 7.3 billion compared to last year.

Distribution segment and others, which we are looking at steady growth, both revenue and income grew.

ICT business for enterprise companies are enjoying seeing steady growth. And the full year forecast, outlook of 10% increase is something that we are confident to achieve.

Now net income. Of course, operating income contributed a lot in this area and also financial income had a big contribution.

SoftBank last year accounted for valuation loss or impairment, which we don't have this year.

And when it comes to shares our profit and loss for affiliates using equity market, [ Jamecom ] and Line affiliates made a loss and that was last year, and it has been recovering. When it comes to income taxes, the holding increased due to tax effects from reorganization.

Net income attributable to noncontrolling interest increases in Z Holdings net income. All in all, we posted JPY 302 billion or 29% increase year-on-year.

Progress to date, 71.9%. Of course, there were some onetime effects, and we anticipated risk factors at the beginning of the year, but we are fully ready for competing in the last half of this year with some relay.

CapEx decreased year-on-year. And this year, our plan -- excuse me, JPY 330 billion and progress so far is 39.4%.

So adjusted free cash flow, so steady progress toward adjusted FCF generation. So on the right side shows operating cash flow year-on-year is JPY 14 billion.

And so last year, we made investments. So therefore, it shows minus.

But as a net, it is plus. So free cash flow, we would like to achieve JPY 580 billion level.

So over 2 years, like JPY 1.2 trillion is what we are seeing in the scope, and we are handling towards debt. And next is net interest-bearing debt and net leverage ratio, which we are focusing on.

So on the left side shows JPY 3.09 trillion compared to the previous year, it's minus INR 0.07 trillion, so down by JPY 70 billion year-on-year. So the net leverage ratio is 2.5.

So we would like to keep this level. And next balance sheet on the right -- on the third one, total assets is JPY 15 trillion.

We have grown this level.

And so the shareholders' equity ratio is about 15% and 0.3% up. And so Equity is up JPY 173.7 billion.

As for the event, we issued the Series 1 bond type class shares. On November 1, we listed on the TSE prime market.

So here is the details of the listing. So I would like to talk about the relationship of free cash flow and the use of proceeds.

As you can see, and in the middle, adjusted free cash flow here, but now leveraging this bond type class shares, investments that contribute to mid- to long-term growth are covered by bond type class shares, and we would like to report to you, including this and including -- considering the dividend, we would like to achieve the stable management and also maintaining the -- to achieve our mid- long-term management plans.

So today, I just wanted to introduce you the concept of the relationship between bond type class share and adjusted free cash flow. So next operating data of telecommunications.

And as of September, we achieved JPY 30 million and which is growing steadily. So a couple of days ago, achieving JPY 30 million was what we had targeted a few years ago.

So we are very proud of reporting that we were able to achieve that. Due to the market change, the churn rate hasn't changed much.

And this is by quarter.

Smartphones, as you can see, it's been stable. And the main subscribers net additions, as you can see, is growing.

So in the presentation, CEO Miyakawa introduced also about Pay-Toku plan. So we're often being asked, this is to grow our group companies.

But -- so the Smartphone churn rate is just one example that to show that as usage overlaps, group services effectively curve Smartphone churn rates.

So as you see, the user of one group service or 2 or 3, you can see the churn rate goes down, where you can see there is a synergy generated. And next is about ARPU.

JPY 3,750 minus JPY 140. On the right bottom, so minus JPY 140 compared to the previous year, recovered.

And so due to the recovery, we were able to target minus JPY 130, which we revised. So from Q1, JPY 30 improvement due to the voice.

So this JPY 30 has been contributed.

Now broadband and electricity. For electricity, steady growth in the user number and -- sorry, there was broadband and electricity, marketing activities to acquire customers is gradually slowing down.

And Media NEC. So it was disclosed by Z already.

E-commerce advertisement, we bottomed out last year compared to the previous year. And in the second quarter, we are looking at the positive number.

So we are seeing the sign of recovery.

So taking advantage of integration, we want to really deliver tangible results. And PayPay.

The number of users increased by 17%, so continuously enjoying growth. More importantly, number of payments, which grew 30.4% is something that we are proud of.

So we are really stimulating the use of the PayPay service. GMV of PayPay stand-alone basis, 36.8%, and PP card included increased by 28.1%, which contributed a lot to our plan.

Revenue increased by 33.1%. EBITDA on -- in the second quarter in a row, they increased by 8.6% year-on-year.

SB Payment Service. Again, GMV increased by 21.3%.

Especially non-telecom area grew by 2 -- excuse me, 29.4%. So it shows how we are really serious about beyond 5G.

SB Payment Service revenue and income both increased. This slide shows our ESG topic summary.

That's all for my presentation. Thank you very much.

And we will start taking questions, and please stay on, if you can -- thank you.

This is Kikuchi. I have one question.

So this quarter, you being progressing well. And the income is also upward due to the contribution, partly Line and Yahoo.

When you are in a positive mode, I feel like you intend to spend more. And from the next year and the unit price will be controlled, which will make competition even fierce.

This has been discussed in the industry people. So in the third quarter, incremental cost or to give impact the business performance, is something that we don't have to concern about or not?

I would like to hear your thoughts on that.

Well, in any business segment, we see growth opportunities like Line Yahoo!, PayPay as well as mobile. And the second half and the high demand season will be more active but we are not going to do anything to damage the next fiscal year.

Even the next fiscal year onwards, we would like to make sure that we will be able to grow. And so we would like to make balance in terms of where to spend where to emphasize.

So we are paying attention to it.

So this fiscal year's lending and next fiscal year, we would like to make appropriate decisions. So under Slide 8, as you mentioned.

So in the last second half, so we were expecting that it will be increased in both revenue and income. So there will be no cost -- incremental cost.

So it could be one option compared to the previous year. The first half, we are progressing as we planned.

So this -- the remaining depreciation is from the previous fiscal year, which will be minimized onwards. So the initiatives in the second half will be, of course, impacting the next fiscal year.

I have 2 questions. First, Slide 34, segment operating income.

Z Holdings, from operating income standpoint, you have to look at you -- we have to look at you rather than Z Holdings. Finance and other adjustments, it's shown in consumer and enterprise is as we thought.

And for the full year, finance is big and others are big.

And you already spent expenses for potential strategic initiatives in the second half of the year. Last year, marketing fee for the card was big.

From accounting perspective, something technical like depreciation or write-down or provisioning? Are there because of that?

Or do you plan to spend actual money like marketing expenses.

So based on the performance or results of the first half, what's your view for the rest of the year?

Our Page 6 shows full year forecast. Media NEC, of course, Line Yahoo, at the time of integration and ID linkage is something that we are working on.

So for the rest of the year, it's a good time for them to be a little bit aggressive for future growth. And for finance, our card business is not -- was not ready for accelerating the efforts.

And once they are ready, then I think there is an opportunity for to accelerate the activities. We need to look at the balance of lifetime value and acquisition costs.

So we are not going to be too aggressive. But we still have some options that we can choose.

For consumer business, current growth is steady and the progress is 65.9%, so there are other opportunities for us to do a lot of stuff. But we need to make sure that we have a good lifetime value and the business should be able to contribute to not only next year but also going onwards.

Even though we spent some money for campaign activities still, I think we can absorb such expenses and cost. So within each segment, they have some leeway, but other is kind of black box and tens of billions yen of loss was you anticipated.

Well, for other segments at the beginning of the year, we thought we should suffer from some losses still, but there are some unexpected positive contributions.

And also last year, there were a lot of onetime losses we suffered. So we were a little bit conservative at the beginning of the year.

Yes, you're right. We can afford to do something that we didn't plan, but new price plan, how it will be responded by customers, we will keep watching.

In the second quarter, JPY 9 billion of loss from subsidiary and JPY 4 billion was from Yahoo! and the other, I don't know what was from.

There were small subsidiaries that posted positive like JPY 5 billion, which we did not anticipate at the beginning of the year. So that contributed to some leeway in the other section.

Line Yahoo! announced capital allocation for 3 years, and they had the so-called buffer of JPY 500 billion.

And parent company in neighbor from money perspective, if you do share buyback together with the Yahoo! Line, you can make cash on a stand-alone basis.

When DoCoMo was listed and when NTT was listed because they were a parent and subsidiary relationship, special tax scheme was applied.

And Line Yahoo! had JPY 500 billion of leeway and you, from a perspective of making cash as a stand-alone, maybe you may want to utilize such scheme.

The parent company subsidiary like Yahoo! Line to do some share buyback altogether well together with NAVER, we own 64% of Line Yahoo!.

So from economic holding 32% or 33%, which may be a little bit small, we wish to have more than 32% or 33% from economic interest perspective.

And I wonder if we should be actively doing share buyback?

Of course, share buyback is always one option. But unless there is a specific reason why we are not rushed to do share buyback.

On the other hand, if parent company holds too much, which could be obstacle to be listed in the prime exchange. In either way, if we have plenty of cash and if there are a lot of options to take, that's a good thing.

So I think we are becoming a group to be able to positively think about the future.

In terms of Pro Rata, our capital ratio is neutral. Isn't it?

Yes. That's something that we can leverage.

But again, we need to make a decision accordingly from the perspective of which exchange we list to.

This is Su from Citigroup. I have 2 questions.

One, very close to [indiscernible] question. Yesterday's Line Yahoo!

Corporation's presentation and management equity. And I had a very good impression on the presentation yesterday.

So I see that SoftBank Corporation is handling really well with a very tight grip and how you have been handling and taking initiatives towards Line Yahoo! at the same time.

As for ID integration, SoftBank Corporation also have supported and what other supports you are thinking about to provide? So this is my question.

So Z Holdings last year had a difficult time in terms of achieving revenue. And -- so the management structure integration and these were considered seriously, which we, as the parent company, provided support.

And once merged, some duplication overlap and also concentrated and intensive discussion was made and also set up the target.

And we also gave the final decision on the Z Holdings side, but -- so at the end that they were able to land at a very preferred structure, capital allocation and also balance sheet. And for that, we've heard that we needed to -- they need to pay attention to it.

So the management side also paid attention to it. So now PayPay to be involved.

So NYP needs to be focused on first, but SoftBank Corporation together, we would like to also work hard on that so that we could generate the advantages of these integrations, and they would be able to also expand their business opportunities. When you start something new, like back then when they started to Yahoo!

Shopping.

And so their users became the driving force and PayPay users became also a driving force. So we were supporting each other.

So from the -- as for the strategy onward, we will also like to learn from the past experience. So the second question is about ARPU.

Page 24. So minus JPY 170 million to minus JPY 130 million.

So this JPY 40 adjustment. I would like to hear more in details and the ARPU moving forward be flat -- flattish, which Miyakawa-san said, what sort of ARPU you are thinking about?

So if you could provide us some hint it will be great.

So the JPY 30 differences between Q1 and Q2. So the voice was really good and the international roaming with incremental number of overseas visitors.

So also the support services accumulated little by little contributed to this. And from the time we had expecting -- if we had expected, so the outcome was a little better, which showed the positive outcome in our business results.

So we were a bit conservative in a way. However, this big difference is due to the movement on the customer side.

So in addition to this positive side and new price plan. So this JPY 140 towards the second half, it will be improved even more.

And further, it should land at flattish, which Miyakawa mentioned. So when that will be, it depends on how new price plan would go.

So -- but this would -- this improvement.

I have 2 questions. First, related to previous person's question, ARPU.

You mentioned something related to ARPU, but price plan change or downgrade and upgrade, which are more a major impact on ARPU. And the Pay-Toku new price plan, what kind of impact this could have on ARPU and revenue.

And if the new plan is going well, what kind of contribution would you expect in the future?

For Y!mobile, it continues to be strong, but SoftBank brand is also getting stronger. From SoftBank brand to Y!mobile, there was very obvious, but it's been decreasing.

And we are seeing more customers from Y!mobile to SoftBank. So that's the overall trend.

But we already anticipated that.

And we improved the guidance from JPY 170 to JPY 130. And that's related to the good performance in the second quarter.

But trend-wise, SoftBank brand is taking back our strength. With a new brand like Pay-Toku, we will talk more about how we treat it from accounting perspective in the future.

But the point part was treated as expenses in the past.

But according to IFRS rule, we started treating it as a discount from revenue. So that is something -- that is the line that you should look at.

And the point was counted outside ARPU. So point will not be included in ARPU, but reduction from sales is something that we will -- how we count the point.

But in detail, I will explain more in the future announcement of fiscal -- sorry, financial results.

Next question, Slide 9. Consumer business, waterfall chart.

You talked about first half of the year. But looking only at the second quarter and compared to the first -- excuse me, first quarter, I have 2 questions.

First, about electricity. Of course, our service revenue was down, but electricity's cost improved a lot.

Is my understanding correct for the second quarter because it's year-on-year, so compared to the first quarter of this year, I don't know how much improvement this service cost was. So again, electricity.

Yes, it looks like so revenue went down, cost improved. And you may wonder what has happened on the cost side, but reality is sales improved.

As of last year, the limit of fuel cost was not lifted, which later was lifted. On top of that in June, we revised price or specifically increased the price in June.

So in the second quarter, I'd say JPY 8 billion worth of contribution we see, in the first quarter, probably negative JPY 2 billion. So net-net, JPY 6 billion contribution in the first half of the year.

So that's the rough number that you may want to look at. So in the second quarter, electricity contributed a lot to growth in income.

That's for sure. But electricity, I think should be able to be profitable again for the full year?

For devices in the second year compared to last year, revenue didn't increase a lot and cost was lower than last year.

So again in trend of the income from devices, how should I look at it compared to last year or compared to the first quarter?

Well, cost. So last year, in July, price increased driven by the manufacturer.

So cost wise, we didn't do something special this year. When we do marketing campaigns, there are options like changing device price or providing some subsidies to promote sales.

So sometimes, again, we reduced the device price for our marketing campaign.

This is Moriyuki from SBI Securities. I have a question about mobile churn rate.

So Slide 23 shows that as usage overlaps, the churn rate goes down. So if we could see more breakdowns, I would like to also hear more explanation and...

So depending on the service, for example, broadband service more than half of our customers have joined and other services not that high level yet, but actual number is shown in this graph. So the overall figure shows in this graph and the more services contributed to the improvement.

But overall, compared to the past. So in overall, the industry, the more liquidity of customers have been seen.

And on our end, Y!mobile is higher and SoftBank has been stable.

So in such a situation and liquidity has contributed it. So that's why the churn rate also had some positive impact.

And as a result, and you can see a -- the churn rate shows the flat.

So do you think that the liquidity has been improved. So -- do you -- so you say that the churn rate will be more stable and improved?

And so if you use PayPay and SoftBank will be the best choice. So something that other brand users would be envious of us.

So that's what we are trying to achieve. And our service needs to be even polished further.

The second question is about PayPay. So you mentioned that the CEO, Miyakawa mentioned that PayPay is not something that you are in a hurry to do.

But the 2 consecutive quarters EBITDA has shown profit.

So as for EBITDA so you would like to record profitability, and this may have a potential to turn negative figure. So since this is a positive now, and we would like to focus on maintaining this trend as the -- if we have a bigger growth opportunity and then we could anticipate.

But this positive figure, we need -- we should pay attention to it to make it more important.

And we would like to conclude our Q&A session. We would like to conclude SoftBank Corporation, Investor Briefing of earnings results for the 6 months ended September 30, 2023.

Please refer to our website for today's briefing, which will be available on demand on our website later today. Once again, thank you very much for taking time out of your busy schedule to participate in SoftBank Corporation investor briefing for earnings results for the 6 months ended September 30.