KDDI(KDDIY) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 of the fiscal year ending March 2024, consolidated operating revenues were JPY1,332.6 billion, achieving 23% of the full year forecast, while operating income was JPY266.7 billion, representing 24.7% of the full year forecast [6][36] - Operating income decreased by JPY30.6 billion due to a drop in Group MVNO revenues and roaming revenues by JPY10.5 billion, a decline in multi-brand communications ARPU revenues by JPY2.9 billion, and a decrease in financial business by JPY12.9 billion [7][37] - Excluding the negative impact of JPY18.2 billion from accounting changes in the previous fiscal year, the financial business would have shown a growth of JPY5.2 billion [8][37] Business Line Data and Key Metrics Changes - The NEXT Core segment reported operating revenues of JPY281.3 billion, with a significant contribution of JPY106 billion from NEXT Core, marking a year-on-year increase of 21.8% [18] - Business DX drove revenue and profit growth, particularly in IoT, with IoT connections expanding by JPY8.5 million year-on-year [19] - Multi-brand communications ARPU revenues experienced a year-on-year decline of JPY2.9 billion, while multi-brand IDs increased by 190,000 year-on-year, and 5G penetration rates reached about 60% [15][16] Market Data and Key Metrics Changes - The company is expanding its connectivity data center business globally, with overseas sales accounting for about 70% of data center business sales [22] - The financial business saw a steady increase in customer base, with transaction volumes totaling JPY3.9 trillion and au PAY Card members reaching JPY8.8 million [25][26] Company Strategy and Development Direction - KDDI aims to strengthen its infrastructure and partner collaborations to enhance connectivity, with a focus on satellite growth strategies and management strengthening [30][31] - The company plans to promote initiatives towards a decarbonized society and the utilization of generative AI for sustainable growth [29][31] - The consolidation of the CATV business with J:COM is expected to maximize business strengths and contribute to industry development [27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the profit was affected by roaming revenue decreases and accounting treatment impacts from the previous year, but focus areas showed solid results [30][31] - The company expects to see improvements in ARPU revenues and overall profitability in the second quarter, driven by new pricing plans and strategic initiatives [43][90] Other Important Information - KDDI has signed a disaster agreement with Kanto Regional Development Bureau for disaster response cooperation and is deploying vehicle-mounted, portable, and shipboard base stations using StarLink [11][12] - The company is actively working on enhancing its financial services, which have shown synergies with telecom operations, contributing to value-added ARPU revenue and reducing churn rates [26] Q&A Session Summary Question: ARPU revenue growth in Q1 - Management indicated that while June showed close to year-on-year growth, they have not yet reached positive territory, but expect improvements in July [42][43] Question: Roaming revenue expectations - Management confirmed that they expect a JPY10 billion to JPY20 billion improvement in roaming revenues due to new agreements, aligning with their revised forecasts [46][48] Question: Focus areas for profit growth - Management highlighted that the DX and financial sectors are key focus areas, with IoT and mortgage loans being significant growth drivers [51][56] Question: Churn rate concerns - Management noted that the churn rate for multi-brand was 0.96, with UQ pushing it up, but they are implementing strategies to improve retention [58][60] Question: Profitability from new UQ mobile plan - Management reported that the new UQ mobile plan is performing positively, with a significant increase in customer adoption [70][72] Question: Share buyback policy - Management confirmed that the JPY250 billion share buyback is part of their strategy to achieve EPS targets, and they remain flexible in their approach [75][77]