Q2 2023 KDDI Corp Earnings Presentation
Tree.
Today My presentation will cover three points are first on progressing towards a resilient telecommunications infrastructure second consolidated financial results and lastly, progress Amit management strategy I will be following.
Disorder.
Our first progressing towards a resilient telecommunications infrastructure I would like to discuss our efforts that we are taking based on the lessons learned from the communication failure. These are the efforts we have undertaken to prevent the recurrence of their communication failure on the left shown as a structure that cuts across our organization with the operation engineer.
And construction customer services P. R until sept departments collaborating with each other or to promote the efforts on the right hand side of the slide.
In September on top of the regular disaster response, so drill a reorganized the company wide training on telecommunications a failure.
This was an opportunity for us as a company supporting People's living infrastructure to verify any event of a disaster, what would happen and how we should behave.
The telecommunication accident verification conference hosted by the Ministry of Internal Affairs, and communications had discussions on improving when an accident occurs how under what stretch or information is handled in the P. R disseminated and reported and setting of rules regarding these incidents.
So for the industry in general based on these discussions we submitted a report one of the measures for prevention from the six perspectives as I described on the slide.
All of them as two improvement appear content and methods are seeking alternative means for emissions and calls and others.
There are ongoing discussions at the ministries working group.
Yeah.
To meet our customers' expectations, we are making an additional investment of 50 billion yen.
In the medium term, mainly on the virtualization technology to improve the level of quality.
As this is correct on the left hand side of the slide by front loading our long term investment ahead of schedule.
We will achieve early migration to a virtualized infrastructure strengthen congestion control and automate operations.
As is shown on the right, we will promote operational sophistication as well <unk>.
<unk> speeding up abnormality detection and restoration response.
Next I would like to explain the consolidated financial results.
So these are the highlights from the first half financial results progress made in the consolidated operating income against the plan was 58% consolidated operating income in the first half declined due to the.
The communication failure and high fuel costs.
But the next school of business and our financial business in the focus areas are performing very well with strong kpis. Therefore, we will continue to aim for increasing our consolidated operating income and expanding the focus areas.
Okay.
Next.
Let me discuss the factors for change in the first half consolidated operating income.
In the first half.
Yes.
Our consolidated operating income also due to a negative impact of $14 8 billion yen of cost associated.
What the communication failure and fuel price hikes, if we exclude that impact starting from the left hand side of the chart multi brand communications ARPA revenue was down by 53.9 billion Yen Group N V. I know revenue our roaming revenue declined by $6 9 billion yen focus areas were up by.
At $10 6 billion yen that would also cost savings related to closing three G services in total a slight increase in income year on year.
Our next door multi brand RP revenue as shown on the left despite the increase in the number of Ids.
So the impact from the brand mix multi brand communication <unk>.
A dropped by $53 9 billion year on year on year, excluding the impact of a refund on the REIT multi brand value added ARPA revenue increased by 68 billion yen year on year due to growth in the electricity payment content and product support services businesses.
Next on multi brand Ids.
As of end of September the number of Ids was 39 3 million an increase year on year in July because of the communication failure new.
Subscriptions are contracts are sucked, but August and onward are they are on a recovery trend mainly with U K mobile.
Our efforts will continue to talk about meeting the initial goals set at the beginning of the fiscal year.
Our next on progress on the midterm management strategy next is on sustainability management.
Our aim is to build a favorable cycle of our business are making a positive impact on society. They have a new social value created as a result to be fed back into our future business strategy.
To cite some of the representative components of our sustainability targets the number of regional disparities solved was.
A 2.75 million again stay mid term goal of $15 million in relation to your human capital to develop a dx personnel Dx training courses are now held in earnest stuff for employees to participate.
The cumulative number of I O T connections that are mainly growing in mobility has grown to 28 million.
To strengthen our management foundation, starting from the left on the next page. Please Katie I issued its first.
Sustainability bond amounting to a total of 100 billion yen.
Yeah.
The fund raised affirmed the bond will be spent primarily on five she capital expenditure, which is going to be at the core of the satellite growth strategy and also on the promotion of carbon neutrality and others.
As in the middle of the slide about investing in start ups, we will support cutting edge technology and advancing green innovation.
On the right.
In light of rising global awareness and human rights, we revised the human rights policy to clearly demonstrate our concrete human rights initiatives.
Yeah.
So let me choose lessons learned from the communication failure, which had impacts in various industries and living infrastructure bring to shift in mindset and clarity to you on the right shows the satellite group strategy.
Are these cool in addition to resilience with a communication that works, we even have to providing solutions to further improve society with in depth analysis deep investigation on screens, where our customers to use our services even to the impact on their customers people are customers are corporations, we are working to build the regionally in foundry.
And to create new values towards strengthening the foundation of social infrastructure.
From here, let me explain about the progress in focused areas in Gx finance and energy, where you have a full line of food.
With digital divergence holdings.
All things and do your energy holdings for each with each exercising synergy with communications, which is created you had strength.
We intent to maximize corporate value.
Next I would like to share with you the progress of mergers for group.
And the business services segment.
Next to cool drove the increase in the operating revenue.
And the operating income next core grew driving an increase in the operating income in particular corporate T X and business Gx contributed greatly.
And business Dx.
Helping customers achieve D X, we laid the groundwork for industry specific gx with development product.
C P.
The left shows clarity to your digital divergence group, which aims to expand development projects by connecting operating companies that have capabilities required for Chi X promotion, including cloud and all child development.
The center shows that we're also working on enhancement of <unk> X products, who through partnering strengthening provision, Nevada values such as a.
Video data and utilization of location information the right to choose how we're working to reinforce BCP response.
Oh Gee so broken.
Tim can be combined going forward, we will further reinforce its P. C P responses menu.
By having reserve lines as well.
Next let.
Let me introduce business co creation.
D. G. I video management service is a platform where you can manage video data from surveillance cameras in multiple locations in an integrated manner on highly secure clubbed.
By combining it with a video analysis, we would realize advanced operations.
Hitachi transport system or introduce due to after a demonstration simulation expressing their support for the service.
Fighting the following point to important highly reliable security BCP response with distributed data storage on convenience.
One can see the data anywhere using a smartphone.
We will enhance proposals for audit valleys in an era, where communications blend in the next.
Concerns finance the lift chute financial business, which had a significant increase in income influenced by temporary effect from an accounting change in housing loan fee in the first quarter. The right shows major kpis, namely transaction volume of settlement.
Lou and loan products volumes, which have been expanding nicely in particular regarding cod Lou.
Its balance exceeded 200 billion yen in September.
However.
Concerning synergy with K G D I the left to choose the path to members of the platform with more than 100 million.
With this partnership points can be used on safety. In addition, we are promoting cooperation with other financial services. The right shoes, hi evaluations in various satisfaction surveys. We received we fly to continue to offer attractive financial services, mainly to EU customers.
<unk> members.
In addition to making services more attractive. We also started working with you paid merchants to expand their usage they'll have to choose au pay group pack, which can deliver coupons to Ah you paid members in a detailed manner.
We support merchant sales promotion activities responding to such voices as we want to acquire new customers, who we'd like to have customers with rainy day as well with these we aim to further expand the au pay and also group profitable credit card business.
And digital twin well working on creating a fantastic virtual world to expand the living zone.
Economic June.
They'll have to choose a food virtual Halloween festival in collaboration with government and startups.
The center shows how precise simulation is made possible by collecting real world data and reconstructing urban space in three.
As I mentioned.
We aim to offer a data platform that can be utilized for various industries.
The right shows how high definition real time, ACH saw with which we offer our government featuring experienced by virtual human and apparel industry were aiming to realize a world where we achieved diversified purchase experience unsustainability in exciting shopping.
Next on regional co creation, the left tissues that we're promoting regional Gx Corporation with two coupons C. G.
You know work with drones, we verify logistics service with our combination with automated delivery robots.
Visualizing flight patterns of drones, and creating a skyway will lead them to the utilization to real meta first.
Moving to the right at au shops nationwide, we value connections to communities.
Many customers have experienced a smartphone clos and mobile phone reboot.
Leveraging satellite telecommunications Starlink.
There are more than 16000 mountain send over 6000 islands in Japan, we able to approve them to natural disasters. In addition to its use in Baku lines of <unk> base stations, we agreed to offer it to domestic operations and local governments, we intend to erase digital divide.
Aim for society, where people feel safe and secure.
We started entering a tie up commercial with suits a minimal put your money on new work by director macro to Shanghai.
Work community communicating our message together with the community to explore.
Extraordinary.
Combining our brand and also this concept of community.
So here is the summary of the first half business results.
In the midterm management strategy concerning satellite growth strategy steady progress was made in Katy is in focus areas T X and financial business.
Regarding communications business in the centers centering on five G. A a continued aim is to realize a bottoming out of multi brand communications AVO in March 2023 period.
Having learned lessons from the communication failure, we are promoting hub airports. In addition to building a resilient network Foundation, we aim to create new value for the betterment of society.
We are promoting operations looking at the mid term.
Thank you for your kind attention.
Thank you for coach Inc. We now would like to start to meeting on <unk> financial results of the second quarter of fiscal year, ending March 2023 questions and answer session.
Thank you for joining us out of your busy schedules.
And she Congo from IR Department.
Yes.
This meeting is broadcast live on the Internet with Japanese and English simultaneous interpretation. Please be advised to that meeting will be later made available on our IR website for on demand distribution.
Yeah.
Let me introduce today's participants.
From your left.
In the center President Takahashi.
Yes.
Executive Vice President Executive director corporate sector Muramoto.
Next.
From your right in the center.
Vice President Director Executive Director solutions business sector Moody.
Executive Vice President Director Executive director of personal business and global consumer business Victor on EMEA.
Next to your right in the Buck Senior managing Executive Officer Director Executive Director Technology sector Yoshimura.
Lastly to your left in the Buck Executive Officer General manager Corporate Management Division <unk>.
Today.
We have uploaded three items related business results, one presentation tongue gene detailed materials on our IR website.
Please read the disclaimer in each document about what is listed in the material outperformance, including what will be shared during the Q&A session.
Subscriber targets.
First President Takahashi will brief you on the summary of the business results followed by questions and answers session.
Mr. Takahashi please.
Yeah.
Thank you.
Before Q&A session here.
Here is the summary of the first half vision business results for the term ending in March 2023, and the midterm management strategy concerning satellite growth strategy steady progress was made on keep your eyes in focused areas G X.
So business.
<unk> communications business in the center.
Centering on five G or continue the aim is to realized bottoming out of our multi brand communications ARPA in March 2023 period.
Now having learned lessons from a communications failure, we are promoting our effort. In addition to building a resilient network Foundation, we aim to create new value for the betterment of society.
We are promoting operations looking at the mid term.
Thank you.
At this moment and we will like to take questions from the participants so we would like to take as many questions as possible from as many people as possible. So we would like to limit the number of questions to two questions. If you have two questions. Please wait until you get.
The answer for your first question before moving onto it.
Second question.
We are planning to end.
This Q&A session are six P M.
Unless incentive Nomura Securities. Please go ahead.
This is not gonna speaking from memory I think it is question number one.
Regarding mobile communication Kpis.
Yeah.
In terms of the number of multi brand Ids are between July through September in September It was flat and it seems that it's sold it's growing.
So what would be the reasons are if this is going to recover and are too.
With the refund cost of 60 yen is.
It's a 3980 yeah.
That Samantha month decline of six eight percentage points in the third and the fourth quarter. How much decline do you expect that is C. On a full year basis your.
Our target is.
4000, and so.
It would be 15 in our defense and so what's your view on that.
Yeah.
So allow me to answer that with respect to multi band of I D numbers, just as we have disclosed in the first quarter. There was a slight decline in the second quarter. It was flat.
In July because of the impact from kidney patients of Hey, there are.
There was negative growth, but recovery was seen in August and it's back to normal in September.
In October.
We just closed the numbers net increase in October was very strong.
And.
So.
The.
In order to meet the target I believe that we will be able to perform well.
Now, let me turn to my colleague.
For additional comments just says President Takahashi just said.
For the second quarter in August.
Or rather in July there was communication failure, so our performance thus sagged, but thereafter, there was recovery and in October are it's almost back to normal so as far as the number of Ids is concerned.
Toward meeting the targets are for the full year I think we are moving quite successfully and regarding our IP.
Oh on RP.
What you just mentioned.
In the second quarter, there was impact from the refund.
Therefore, if we exclude that impact.
Yeah.
<unk> thousand 980, and that was the Rps in the second quarter in the.
First quarter it was 2970 yen.
I believe so.
The third to the fourth quarter Q on Q, there was an increase of 10 yen.
Therefore.
Yeah.
Oh.
Overall, our communication ARPA in.
In the first quarter and if we compare that to the second quarter Theres, a clear decline and quarter on quarter. Our appeal at this time, we have been able to increase it by 10 yen. So in October.
The report that I received is that it's moving quite favorably. So other full year target of 4000 is something that we believe we can meet.
Yeah.
My second question is.
So towards meeting the targets under MTP, you're going to.
Target communication RP revenue to hit bottom this year.
<unk> pivotal are growing about Ah Ah can you drill a five G.
If the numbers are going to go up of course, they will be reflected in the revenue, but you keep hover.
The growth in our U K apopa, what's its impact on <unk> and ASI She plan.
Do you think that you will be able to meet the plan a into.
Into the next year.
We're actually having discussions with respect to M. T. P midterm management plan and those are the topics that we intend to take up.
As part of those discussions in terms of the composition. The three brand composition is a amazing according to our plan.
A you accounts for a little less than 80% of the total in terms of the brand mix among the three brands on top of that.
Puzzle and UK with the two combined.
Ah the numbers up to $7 5 million and therefore, I think the balance is quite good.
And on top of that I think are two meetings to go what was pointed out.
Ah foresee a potato plan uses.
They are decreasing a number and Oh five G. Max set plan uses to grill if.
That is to happen then we will be able to recover our RP are that is our expectation. So P type of plan.
It uses a dasher or that ratio is gradually declining on the other hand.
Assange Amax mine users are on the increasing trend. So so far I think our the trend that we're seeing is quite good and those who are not yet users Apache amax. Upon I think others, so quite a bit of potential to capture those.
Users since.
We would like to maximize I D at times, our peers are toward our next year, but having said so of course, it's not want to be or that simple.
We need to micromanage. This business so that we can drive the RFP or a achieved a favorable.
<unk> ratio or composition.
Okay understand.
Please go ahead.
This is Andy speaking from Daiwa Securities I would like to ask two questions as well.
So dx in financial business are doing quite well according to your presentation.
So.
These are the businesses who are looking to grow.
In the medium term.
One would be are the.
Obstacles. If you will that you should be able to overcome in order to grow them exponentially if you have.
Anything in mind.
Well, then I mean I tend to my colleague Who's responsible for Dx, which is granting most for an answer.
Well.
And the number of Iot aligns agree.
I agree with 228 million.
That's why we said in our presentation.
And.
Well, we would like to steadily grow this number going forward.
According to our plan.
Yeah.
Surrounding the Iot.
Lines.
And that would be six four D X business.
And that is what we're trying to address and capture.
And we're putting together a structure and a framework to catch it the CS of Dx around Iot Dx promotion Department.
Digital diversions, so holding our subsidiaries are being.
Our consolidated for that so around Iot lines are we believe that we can provide.
Our solutions.
And once that becomes a successful I think this will start to go quite successfully.
On the financial business, if he could please answer.
Well, we have a financial holdings as an entity and we have a number of elements or parameters that we're looking at.
So at the base of our business is au pay settlement business, plus our credit card business.
And then to reach us whether to the banking business and economic zone business. So PE and credit card uses our members how can we grow that is going to be the primary crusher.
And that we need to address if we are to see exponential growth.
We have 30 million user base for our telecom business. So.
We need to put them out and realize cross he is a west said the 30 million users and by so doing we believe that we can scale up the size of our business. That's been the idea, but we have not been able to leverage this idea fully so we're going to continue to expand on this idea and I think they are.
Ample potential to grow our business in that manner.
My second question on page nine.
Yeah.
There's a chart.
That chart.
Yes.
Yes.
So $14 8 billion that's highlighted in red.
I don't think that was included in the forecast. So if you could please clarify whether it was part of the forecast or not.
And in the second half that could be further.
Fuel price hikes and so.
Those factors are explained.
In principle, all your aiming to increase your operating income you've always said, so and I'm sure that our plan remains unchanged, but is that correct.
On page 27, others.
There's a summary so.
Oh, you're going to invest in our cost and focus on M. T. P. So there are factors that would push down our the income and does that push up our income.
So two groups of such factors are alright, mixed and you looked at both are to keep the forecast are unchanged I believe and so if you could just sort out all of that and share your thinking on it.
Yeah.
So.
Got you.
Mentioned upfront well in terms of our stance.
Of course, so well continue to aim at increasing our operating income that remains unchanged.
But as it's written here and there.
Impact from communication failure, and fuel price hikes and these were factors that we could not a forecast.
Well in the second half that could be subsidies from the government for a field price hikes, but.
Are these have had as a that cannot be avoided. So there would be some level of impact that that will continue but having said oh well, we'll continue to stick to our plan to increase our operating income absolutely operate into the second half.
And.
What you mentioned towards the end well, we would like to maximize our revenue and minimize cost.
So at the core of satellite I agree with that strategy, there's telecom business.
EE times are two.
The status as just a as I explained earlier, so we would like to have RP bottom out this year, a Q on Q, it's starting to grow and kill Q.
Our price decline Ah is stopping so we would like to continue with that and the growth areas for both Saudi accident financial business are growing quite successfully so we will like to achieve a double digit growth in those areas.
And our energy related business.
In the first half as you can see if you calculate our there's a decline in income operating income but into the second half because the business was not good last year.
And so there are factors that would push up operating income. So we believe that it's going to fare quite well on the cost side. They were unexpected costs that occurred, but even considering that oh, we're looking to increase the operating income.
Okay.
So in growth areas.
More so than before you all.
Uh huh.
Redouble your efforts to drive the numbers is that what you're saying.
Well on telecom business 4000, ER Janow, if we can achieve that are that would be according to plan and four growth areas are all well continue to follow the plan.
The target is a double digit growth are quite high so we would like to make a steady efforts to meet that plan right. Thank you.
Yeah.
It shouldn't be seen Ecosecurities, who kikuchi sound. Please.
Kikuchi. Thank you all.
I have two questions first about China right.
Second quarter regarding shouldn't read.
Zero point to nine 4% too.
So that's a cyclical I think this is a high almost unprecedented.
No Theres done there was just communication failure I think there was an impact from that but with this communication failure.
In the first quarter, you gave us your explanation.
And because of their communication was not the reason that the churn rate increased to I don't really think so there might have been some problems Indian acquisition, but not the churn rate.
Okay.
So with the competition increase.
The increase of churn rate.
Continue to on the other hand, you did.
July you couldn't acquire people both in August and September you keep making airports. So you worked so hard to earn.
That's where the net addition, do.
Well I think you're working so hard in the upfront.
Sure. This is do subscribe a cost increase.
And.
And customer facing area intense.
Competition.
Intense competition you also in cereals.
So you view, how do you look at the current competitive landscape now regarding.
Other companies you might say that is because of your peers are working so hard but how would you like to see you do move into the future.
EMEA Sam would you like to address that question.
First about the churn rate to zero nine pool.
Compared with the first quarter, it's almost flat Q on Q now.
In July the there was impact from that communication failure. That's included is slightly budget. The intensification of competition might be one reason, but they might see the ministry.
He's been working.
On the reduction of the switching cost and I think that's having an effect.
That's for the competition.
Yeah.
Is it intensifying not necessarily.
Susan limited to local areas, yes, that's true.
But.
Is it a full bloom is to fight that smoked turkeys.
In the competitive environment, we cannot afford to lose so of course, we have to work against them, but oh.
Can we sort of control the fight in the sort of local area.
That's what's happening and in addition to that.
This time, the new iphones.
Been introduced and there have become pretty expensive and the customers.
Although the slow to make a move compared with the past.
The pixel is communicated upfront, but to Android, but less costly perhaps can be utilized to move.
So by controlling cost we would like to.
Fight in this competition.
Thank you.
My second question.
If you look at page six of this material.
Frontloading of investment.
Could you give us more information.
So there was a communication failure.
In responding to that what about the capex, what's going to happen.
What about the scale and what about the substance.
In the midterm investment plan have you increased it or where this frontloading have you actually changed the substance of this investment can you give me a little more substance about this.
About 50 billion yen regarding.
The substance cost onto Capex Booth I included.
Yeah.
More than 50%.
Please about.
The Virtualized network the Farfetch in core network, that's all Virtualized it is.
This place in the Virtualized volt and news.
They have become pretty old.
And that's actually caused a communications failure.
The virtualization, we need to.
Do the frontloading compared with the plan.
And that's.
It's a more than 30 billion yen.
More than half.
The capex that needs to be Frontloaded and that's included in the 50 billion yen.
Naturally.
The five G area expansion is something we must do but in terms of priority make the facility's equipment more resilient to regarding this investment we would like to do this in a front loaded manner that hasn't been decided.
As for Capex, how are we going to control it.
In principle.
Typically versus a capex to sales.
Around 12%, we plan to control at around 12%. According to a mid term plan.
And we plan to keep this plan unchanged too and with the allocation in the investment do we plan to.
Through this in the midterm, so 50 billion.
50 billion here and it does that mean that the newest addition to the capex knew that smoke than necessarily the case.
Clarification, when you say fruit to loading.
In this mid term plan.
Is it going to be after that just started this midterm blends that's right to this 50 billion on a year over 50 billion in the three yeah.
Tim on the Virtualized network devoted news.
Function, we were planning to do this later, but within the next three years, we plan to do this.
That's one of the major factors.
Understood.
This down over the next year.
Not something that we can do this year or the next year within these three years.
Somehow we would like to manage to do that within the next three years. Thank you.
Okay.
And when you sign of Spi Securities. Please go ahead.
This is mohit here versus the ice skating. Thank you I have two questions as well question number one regarding five G user trend.
Outside she offers higher RP, that's because migration from heavy users. So it's only natural but if the same users migrate what is the increase Athenian Saatchi art, who is it accelerating.
In terms of data usage, and what kind of content.
At this moment is leading the increase.
Oh, it's a psychological limit that's being lifted our users are watching videos extensively or is there a new factor that comes into play.
Yeah.
Sure.
So among the customers who are moving from so as she decides she or no no.
She average that traffic and probably average share traffic if we compare the two oh, there's a difference of two five times that is the reality.
Well, that's because of the migration of heavy users and therefore that should be that level of difference, but once they migrate to five she what happens is my question well there are a variety of different users. So it's hard to generalize.
And it's not just the heavy users who are migrating toward five chi the others as well in the dialogue coffee conveys concept.
Sure.
Without five she killer a content AR or killer up a the speed doesn't go up but that's not necessarily the case with Rajiv. The road. If you will becomes wider broader and five she's performance itself is also up.
That'd be it a iPhone or Android of Hershey performance is our improved so even if you watch the same video the download speed is increased if you're using five G. So without knowing youre watching video a lot more than you used to do with Oh, Gee I myself wassa start watching.
Take talk I can't stop that does happen doesn't it so.
I think that that is happening.
In general so killer applications.
It's centering around just fit is so with killer applications are the usage of video is.
Ah pushing they use a fuzzy and therefore, the ARPA difference between four and five she is two five times, that's the trend in Japan in Korea, and other countries, where they have advanced of Hershey that seems to be the case and so how can we efficiently build are the telecom network and translate that into increase.
Art too.
Well, there's no more psychological a pressure in terms of the limit of usage, yes, that's a factor as well I think so.
So my second question.
Well, the our competitors support us, but I think puzzle has say differentiating point are there any new developments with respect to cover.
So.
After six months of no payment there could be termination and so what would be the impact of that.
Among the puzzle users adopt a variety we do analyze who they are so those who start using pillar, though at zero Yan there those who do not use paper very much after that or are there others rock tenn users, who migrate to a vote are not very high in <unk>.
<unk> of our peers.
So the so called influences.
Sure.
Actually we're having some influences our recommend depth over there are young people.
And the so called a Z Jen.
Youth are they have a different values.
And so we're asking influences to recommend and introduce a puzzle to.
Are there peers. So those users are too.
And the usage of tapping services that is starting to rise we're seeing that trend and so we are analyzing the trend.
We are working with circles license Singapore.
And so after a quantum that we need to increase the value and that's the kind of technology that this company has experienced in operating and so with that Ah I do hope that we can see increased our pud.
So at this moment.
Yeah.
Don't have to consider having a significant negative impact on RPC six months down the road I don't think we need to worry about that too much.
Well rock Tenn has its own pricing scheme and some of the users are migrating to approval.
More so than initially expected, it's true that all users with lower RPT than we expected, but with the multi brand is scheme and we're trying to make up for that so that our multi brand. The ARPA average can be raised.
So users cellphone rakuten, they're not using a puzzle very much that lots of uses suffer pain zero, yes, yes are there a lot of such users and yes. Some of the Rakuten users who come to pivotal have lower RPT than initially expected. That's also true right. Thank you.
Yeah.
Next.
UBS Securities <unk> San please.
Thank you for giving me this opportunity I have two questions previously.
About network Capex.
Virtualization was mentioned too and then later.
About your operational cost.
I think it might actually go down.
What about the effect or the scale.
I didn't really knew how.
Fixed stood out east, but any suggestions are welcome.
I can't really share with you specific numbers, but as you rightly said.
With this Virtualized network and also using AI and Big data, we tried to automate the operation then operation cost apparently we believe will come down.
So in this mid term target do you, yes, we would like to make it to target, but yoshimura sudden anything else.
As you.
Rightly said in terms of operations close to.
Regarding the members monitoring members and other members.
They are likely to come down.
Especially by virtualization.
Efficient.
Yeah.
Increase of facilities can be.
So in total in the midst to them, yes, we've tried to come up with the good cost numbers. Thank you second question.
<unk> revenues.
Page nine I think.
Minus 6.9 billion yen.
At the beginning of the time about 50 billion yen degrees.
Was mentioned.
What actually happened.
Should I interpret this number.
As you rightly said.
At the beginning of the term minus 50 billion yen that was expected at the beginning of the term but actually.
Rooming, 70% direct and since when the coverage is higher than 70% then that's to be discontinued this room and so at the movement. It excuse me it has reached 70% already.
But with L. T E widows, such a level of base stations.
There are some remaining areas with poor quality.
So they would like us to extent is a little more and we are responding to that so compared with what we anticipate due to the decrease of roaming revenues ease.
Less significant to phone home flu year, we said 50 billion yen degrees, but its little less than that in terms of their folks too but with rakuten.
It really depends on how they built their network and we respond to that.
If they.
We'd like to rent more than we would like to use our roaming services, that's okay with us and we would like to respond to their needs.
A follow up question at the beginning of the term.
First half and second half of second half degrees was more significant.
According to estimates on to that to estimate where I would look at it remains unchanged that's rage gradually.
Please.
Reduced to Xavier and reduced thought they were when they said that we will respond to the compared with the first half to second half that will be more significant.
That was about.
Any other questions. Please.
Yeah.
Second round of questions if.
Anyone who's already asked good questions I would like to ask additional questions. Please go ahead.
Unless so no sign of Nomura Securities. Please go ahead.
Nothing of Nomura Securities.
Oh, we heard about the personal business, but our corporate business are they in terms of our profit are under the medium term management plan you may be on track, but that means that in the second half. So you will have to grow operating income more so than in the first half.
So a is that the plan to increase operating income in the second half.
Procurement of handsets has become difficult are in the industry in general perhaps a that is a factor or is that not the case are you looking to increase our income in the second half.
Yeah.
Yeah.
Yeah.
Against the plan.
I think the way, we're more or less on track that's the way we are.
In the first half.
Yeah.
Our gross our income may appear small.
With fishy closure in April well this was according to plan.
I O T terminations cancellations.
And handset cancellations there were.
Some of those that happened that was the starting point and are in the second Oh or in the first half of this cancellations that negative impact was initially expected and we can recover from that and one or two months at that time. So the trend that we're seeing is according to plan.
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And other D X a project sometimes actions Oh, we do have kpis that we set for ourselves and we are accumulating a numbers. So these are the kpis and so as you rightly pointed out are our plan is to increase income in the second half and we.
Preparing to do so we're preparing to achieve that.
So we have come closer to the target that's where we stand right now thank you.
My second question I'm, sorry for asking a detailed question about the impact of electricity.
In the first half with a refund a combined negative impact of $14 8 billion.
Well.
Refund of $5 9 billion smaller than expected and if you subtract that then the remainder is $8 9 billion and so I think oh that Trinity costs. The impact was $2 billion to $3 billion in the first quarter and so in the second quarter of 2002, a six or 7 billion.
And with a price revision in November that can be eliminated unless there was a loss. So year on year, you may be able to see an increase in income.
In December is that the correct interpretation I'm sorry is that about electricity. So that's about.
Au denki or electricity business I'm sorry.
Yeah.
Yeah.
Yeah.
So are you asking about au denki.
Well one of the slides.
A negative factor of $14 8 billion are you talking about page nine yes.
So this includes being fun to correct.
Kind of 5.9 billion somewhere around 6 billion and excluding that I think the remainder would be.
Around $9 billion, so that was the negative impact from electricity the $14 8 billion feel a price hike.
Included in that is because of electricity price hike.
And.
It's a separate from au Denki au Denki is impact is not included in this number.
So refund for telecom.
This and our distributors sell support and increase the electricity cost.
Well in terms of the essentially what's happening is a although we're not disclosing those if you can calculate.
More than 10 billion yen of negative impact is caused because of that energy related costs in the first half of au denki performed very well and.
Because of Hill, a price hike or there was a reactionary fall.
This time.
And.
There's a cap, but that used to be placed on our fuel cost adjustment.
These are the customers. So there's a limit to how much we can pass on in terms of the costs, but for the purchasing side that there was no cats, then because of that our performance deteriorated and that continued until September.
And that is why we saw a negative number in the first half but in the second half of the cap on fuel cost adjustment was lifted it's the same with all the other companies and because of the cap was lifted and eliminated a we will be able to pass on the full cost that's a known impact from that and you were talking about are what's going to.
Happened from November onwards, well last year in the second half because of a rapidly rising fuel price are our business performance deteriorated, but now that the cap on fuel cost adjustment.
Assessment is lifted we don't have to worry about that and I think we will start to see increased our income. So a net total on a full year basis, I think we will be able to increase our income.
So 10 billion yen of a negative impact in the first half fun next year, you won't see that Oh, so if.
There's zero impact from a fuel price fuel cost or energy cost well, we'll have to run a simulation.
Oh that tier city right.
Increases are that's been happening of late so we'll have to watch that and see what the impact will be on our business next year in principle I don't think we will see as large of a negative number as we saw in the first half of this fiscal year, but let us analyze so we need to take time to analyze that thank you.
Yeah.
JP Morgan cheaper zone.
This will be the last question because its time, thank you Chi by J P. Morgan.
I had one question about this inflation its impact on the AVO.
You mentioned that iphones have become rather expensive.
But if this situation continues entrance to the consumers' behaviors.
There might be a tendency to go to more cheaper ones the word about D. A.
Impacts on the brands makes it in terms of do you pick up a C. G I.
I think you've mentioned is likely to go up do you think that can be offset by that.
Your thoughts on this please.
But you mentioned it.
Proceeds are increasing in terms of our communication to you customers psychologically would like to know what they pay for communication.
On a part do we have to closely monitor that.
About the brand.
Competition compared with you what we expect it from you too.
You do there are customers migrating and yes, it's possible that what you said has an impact on that.
Regarding the brands makes up a we are pursuing that.
Carefully.
And each.
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We need to make sure that that will bottom out and we can.
Recovery it's another.
Its coming on truck, so we need to control those numbers in both aspects.
So that we can see the group for in communication as well and that's the kind of operation we would like to focus on thank you.
Thank you very much for asking so many questions so with that.
We would like to conclude the earnings briefing session for the second quarter.
End of the fiscal year, ending March 'twenty, two 'twenty three for K D. D. I. Thank you very much for your participation.