Q2 2026 KDDI Corp Earnings Call
Speaker #1: No. We are going to start KDDI's earnings release conference for the second quarter of fiscal year ending March 2026. I'll be serving as the moderator.
Speaker #1: I am Hiroka from the Public Relations Department, and today this earnings release, in addition to the venue, will be distributed on multiple channels, including YouTube. The three types of documents related to the earnings release are uploaded on the website of KDDI and will be available for those who are in the venue.
Speaker #1: Please refer to the handout . Let me introduce speakers from our end representative , director , president CEO Hiromichi Matsuda . Director . Senior Managing Executive Officer CFO Nanae Saishoji .
Speaker #1: Director . Managing . Executive CSO and CTO Tomohiko Katsuki . Executive officer . Executive Director of Corporate Management . Division Kenji Akita . So four of them now President Masuda , please .
Speaker #2: I would like to make . A presentation regarding fiscal year ending March 20th , 26 . First half financial results . First , let me touch upon this .
Speaker #2: This is about Osaka , Kansai Expo , the expo was a very successfully concluded on October 13th . We presented a joint exhibition on the Future City together with Hitachi Limited , which was visited by approximately 1.9 million people .
Speaker #2: A large number of people, I believe we were able to offer an opportunity for children to think about the future by facing the challenges for the future. I extend my sincere gratitude to all the visitors and to all those who contributed to the exhibition.
Speaker #2: Thank you . Today I would like to explain about the following four points . First , regarding consolidated results , our consolidated financial results are showed increased revenue and profit .
Speaker #2: We are making progress toward achieving the EPs target as planned . On the left hand side , operating revenue was 2,000,000,000,963.2 billion , a 3.8% increase year on year and 46.8% of the full year forecast in the middle operating income was ¥577.2 billion , up 0.7% .
Speaker #2: Progress rate of 49% on the right, and net income attributable to the owners of the parent, or the profit for the period, was ¥377.7 billion, up 7.6%, with a progress rate of 50.5%.
Speaker #2: Second quarter year over year growth was strong , with operating revenue up 4.1% . Operating income up 2.9% and net income up by 18.6% .
Speaker #2: In terms of topics, I will explain the Q-on-Q situation at the performance in the second quarter. During Q2, we saw the effects of our fee revisions become apparent and achieved our solid growth. Quarterly operating revenue increased 6.3%.
Speaker #2: Q and Q and quarterly operating profit increased by 11.8% , and our profit during the quarter grew by 20.7% . Next , I will explain the factors behind the changes in the consolidated operating income .
Speaker #2: Each business grew. Offsetting the impact of prior year sales, promotional expenses from the left, mobile, and the personal service segment increased ¥11.1 billion year over year.
Speaker #2: Income from finance and energy, business, and Lawson Equity method profits combined increased by ¥12.7 billion. This represents an increase of ¥3.9 billion. Technological structural reforms were up by ¥9.6 billion.
Speaker #2: The impact of prior year sales promotion expenses was -¥31.2 billion, but total income growth was ¥4.1 billion. Now, these are the key points for consolidated operating income in the second half.
Speaker #2: To achieve full year targets from the left , mobile business is to accelerate its growth and with the our target to enhance value through service revisions with second half year on year growth exceeding approximately ¥19 billion and over ¥30 billion growth for the full year , combining the .
Speaker #2: With a BPO turnaround , we will be putting it on . The right trajectory and in the focus areas , combining finance , energy and also equity method , profits were aiming for an addition of approximately ¥30 billion and the negative impact from per year sales promotions will end in the first half .
Speaker #2: Next , I will discuss our progress in mobile structure transformation . First , let me talk about the virtuous cycle created by the power to connect in the announcement I made in May , I said that we would like to aim at creating a virtuous cycle of growth .
Speaker #2: I feel that this virtuous cycle is starting to kick in . As shown in the lower left , our company has a consistently pursued , proactive investments in 5G base stations focused on communication quality as well as collaboration with Starlink .
Speaker #2: These efforts are now bearing fruit , leading to the creation of KD , eyes . Unique values such as number one , communication quality and tangible connectivity experience or unique strength of our company .
Speaker #2: This has enabled us to offer new plans bundling these features. Furthermore, we're able to pass on the benefits to our partners and return benefits to our partners through measures such as price adjustments based on these revenue sources and sales channel enhancements.
Speaker #2: Thus, the virtuous cycle is the foundation of our sustainable business growth. We will continue to repeat this cycle to grow together with our partners.
Speaker #2: For value generated by this virtuous cycle, our mobile business is undergoing structural reforms focused on lifetime value (LTV). Customers see the attractions of our services in terms of its value.
Speaker #2: The handsets and monthly charges to subscribe to AEW and UQ mobile. Our focus is to make sure that each brand meets such customer needs so that they will continue to use our offering for Youku mobile customers.
Speaker #2: We would like them to understand the value and the attractions of AEW and are recommending migrating to AEW. We've been continuing with this structural reform for six months now, but we will review plans and social processes that would induce short-term changes that occur as a result of customers going after incentives only in the process of such reforms.
Speaker #2: Some customers who have not used our service for a long time may choose to cancel their subscriptions, but we would like to focus on the long term to drive our growth through value creation and reduction.
Speaker #2: Insurance . By encouraging longer subscriptions so that we can have a leaner business foundation . So the enhancement of our capability to offer connected experience and communication quality form the foundation of value creation .
Speaker #2: KDR will build the industry's premier network through number one communication quality and area coverage. The left-hand side shows the results of our persistent investment efforts.
Speaker #2: According to Opensignal's user experience analysis, following our February global number one ranking, we achieved number one in Japan for the third consecutive time last month.
Speaker #2: On top of that, AEW Starlink Direct began data communication business in August, and by providing a new value, this business is significantly increasing customers.
Speaker #2: The number of connections has reached approximately 2.7 million , with 76 compatible models and approximately 10 million devices . And as announced today , AEW Starlink Direct now supports Apple Watch .
Speaker #2: We have received positive feedback from customers and app development partners as an industry top runner. We will continue to create new value together with all of them.
Speaker #2: This expansion of daily creation is . Based on the connected experience as so . This 5G star lane has surpassed 800,000 by the end of September , and surpassed 1 million users at the end of October .
Speaker #2: And this offers a smooth connectivity even in peak times and during events . Unlimited data overseas on the right , which provides connectivity abroad for your charge for as many as 15 days , is received very well by customers going overseas and people have started to recognize that they no longer need Wi-Fi overseas .
Speaker #2: And net increases are 2.9 million , a loss on is partner and . With a sharp cruise idea , we have added a course where members receive five free coffee coupons every month .
Speaker #2: As part of our preparedness efforts, and in support of those affected by a magnitude 7 earthquake, we will provide a service within the year that deposits ¥30,000 into the pay balance or bank account.
Speaker #2: Customers subscribed to eligible rate plans. This is part of our value plan. On the right, there is a secure messaging app with the iPhone update from the day before yesterday. You can now use RCS without any prior setup.
Speaker #2: You can now securely send photos and videos using only a phone number without worrying about the recipient's device or handset. The effects of structural reforms are beginning to materialize.
Speaker #2: The initiatives we have explained that thus far have borne fruit , leading to growth in mobile app , which contributes to lifetime value and churn rates are showing an improving trend on the left , mobile ARPU reaching ¥4,460 in Q2 , accelerating growth with year on year increase of ¥140 on the right smartphone churn rate improved Q and Q and while on Y increase also narrowed from 0.17 points in Q1 to 0.12 points in Q2 .
Speaker #2: As part of a further effect of such initiatives, brands are switching or migrating from UIQ mobile to a new SAW. A positive.
Speaker #2: Reversal . Finally , in September . This is about switching between brands from UK mobile to AEW , and this positive reversal trend continued into October .
Speaker #2: This is as a result of making our main brand , AEW , more attractive and steadily changing the plans and sales approaches and initiatives to lengthen contracts for UK mobile are also bearing fruit and so improvements in home set discounts as well as handset bundle rates have also been seen substantially at UQ mobile .
Speaker #2: As for you , these structural transformation focus on lifetime value explained thus far . Mobile revenue on a personal service segment basis as significantly surpassed last year's year on year growth in the first half , reaching a positive ¥12.5 billion , accelerating its growth in the second half .
Speaker #2: We expect further improvements in churn rate reduction and upward growth, driven by progress in structural transformation. Further improvements in brand mix and expanding contribution from service provisions.
Speaker #2: The impact of service revisions on mobile revenues is expected to exceed initial forecasts.
Speaker #1: Next, I will explain the initiatives to achieve the full-year target. We aim for a ¥30 billion increase in profit in our focus areas toward achieving the fiscal year.
Speaker #1: In March 2026, our targets are shown on the right. Energy and Lawson are progressing well, while Finance and R&D are recognized as challenges due to changes in the business environment since the beginning of the fiscal year. I will later explain the initiatives for growth for both Finance and R&D.
Speaker #1: Over his finance in the world with interest rates, there is intensifying competition to procure deposits for us. We cannot depend on housing loans.
Speaker #1: We have to be mindful of the loan-to-deposit ratio, and we have to switch our strategy. Individual deposit balances have grown 1.3 times in their steady state; however, in order to strengthen our deposit procurement capability, we must proceed with our initiatives such as the Bank Securities Alliance.
Speaker #1: As for credit cards, we need to urgently increase membership, especially for the Gold Card. We would like to attain 1.72 million memberships and drive growth further, mixed business segment performance in the first half.
Speaker #1: Operating income was up 3.4% year on year . It's a somewhat slow result . Mobile IoT data center progressed well . On the other hand , BPO business as related business had a temporary profit decrease .
Speaker #1: Factors have resulted in our being behind the projections made at the beginning of the fiscal year. However, we have identified the factors, and we have a clear outlook for resolving those issues.
Speaker #1: So, we have addressed the risks and the first part of those businesses, the BPO business, which is about how to use links. We need to defend our share in existing service, and we need to expand the service domain by using AI.
Speaker #1: And we are going to realize integration synergy on the right , various initiatives worked well and in September we increased both revenue and profit and also as a result of activated sales , the new orders taken increased by 2.8 times year on year , and the number of ongoing projects increased by about two times year on year .
Speaker #1: And also that we proceed. We are proceeding with a long-delayed internal system integration, and focusing on efficiency improvement initiatives that are progressing by building on this momentum.
Speaker #1: In the second half of the year, we are completing the turnaround and boosting profit greatly. For growing profit in the second half, in addition to the stable growth of mainstay services, we positioned the expansion of orders for new services, such as mobile IoT, and main services in the first half grew by more than 10% year on year, driving growth.
Speaker #1: In IoT . And we started providing our services to connected vehicles of BMW and all of their vehicles are produced in North America from July onwards , will be equipped with our communication services on the right , new services will contribute to growth as facility .
Speaker #1: Our new office in Takanawa, the Digital Office, has received interest from many clients. By leveraging our know-how in the latter half of the year, we will be steadily completing ongoing projects in sterling and drone technology in the areas of disaster prevention, inspection, and security.
Speaker #1: We are seeing an increase in the permanent and large scale projects . And in the second half of year , we will be exploring and growing in the the government and municipalities market .
Speaker #1: Next, our initiatives for the next stage of growth. Six months have passed since the launch of the new management structure, and the construction of our future business foundation is progressing, including the execution of price revisions.
Speaker #1: Considering this progress , we will discuss the key themes we are focusing on for the next mid , mid-term management strategy . Starting next year .
Speaker #1: On the left in the AI era . In addition to transforming infrastructure including telecommunications into a next generation model , we will further expand our value added and growth areas by leveraging the digital data and AI .
Speaker #1: We will enhance the value of communications security, data centers, and other elements that support the AI era, and accelerate growth in each business domain through AI-driven efficiency and service deployment.
Speaker #1: The second point is on the right hand side , we believe we are entering a phase where business growth centered on telecommunications is possible alongside growth , we will focus on return based capital allocation and capital efficiency .
Speaker #1: So we aim to maximize investment capacity by utilizing leverage while being mindful of credit ratings. We plan to direct growth investments with discipline toward areas that can expect high returns in the medium to long term.
Speaker #1: Conversely , for areas that do not meet the criteria , we will consider a review of the business portfolio , including withdrawal in conjunction with these ideas , we intend to implement agile share buybacks alongside our commitment to stable dividend increases by deepening our strength of sustainable growth in the AI era and pursuing quality with an awareness of capital efficiency , we aim to enhance corporate value .
Speaker #1: The advancement of the next generation of the network, supporting the AI era, is progressing towards the construction of next-generation infrastructure on the left.
Speaker #1: While leading to respond to massive traffic demand, we are building a comfortable service area with the industry's highest number of sub-6 millimeter wave base stations.
Speaker #1: Also, by converting 4G repurposed frequencies, during the fourth quarter, we achieved over 90% population coverage by Q4 of this fiscal year.
Speaker #1: The right the practical about this , but millimeter wave , the other day at Takanawa side , together with partners , we have collected demonstration of use cases with flicks and support from JR East .
Speaker #1: Netflix video: one episode of a drama now could be downloaded in one second. That's what is enabled by millimeter wave. And while showcasing that...
Speaker #1: As for the Sony camera, it can take 80 consecutive shots, with photographs uploaded in seconds. As for the data center initiative, that’s central to the theme of next-generation infrastructure.
Speaker #1: The Telehouse . In terms of the business to business connections , it's a number three globally . And among the carriers , it's number one .
Speaker #1: So they are telehouse has strength is to secure locations close to adjacent to urban areas . This resulted in achievements such as high profitability , profitability per megawatt and efficient deployment of capital , leveraging such expertise , we will construct our sixth data center in London for the AI era , with a total construction costs of about ¥60 billion .
Speaker #1: London's DC power supply will be enhanced by about 50 MW, allowing it to support optimal specifications for real-time processing such as inference in AI.
Speaker #1: And we leverage terahertz expertise to quickly establish a data center in Osaka, Japan. The Sakai Data Center is scheduled to begin operation in January 2026, and we will provide a sovereign development environment based on AI and with such.
Speaker #1: Due to the enhancement of Japan's industrial competitiveness on the right hand side , on the cutting edge GPU . With Google , GDC , Google distributed cloud , that's going to be utilized by a diverse institute of research .
Speaker #1: The strategic initiative with Google Cloud is more expansive. Together, we can create an AI service that will be developed in a manner that's beneficial for both clients and service providers.
Speaker #1: Notable Gallium and Gemini of Google will be utilized as we provide services. However, after our announcement of our service scheme, we received various inquiries from many content-holding companies.
Speaker #1: Also, KDDI Corp's strength is a combination of real-world and technology, and especially let me focus on our initiative with Lawson for the purpose of disaster prevention and crime prevention.
Speaker #1: So we are demonstrating poor deployment of AI where AI drawn response to the site in ten minutes and on the right hand side for Lawson , with no our employees are participating in the demonstration and we have delivered results in crew efficiency improvements such as use frequency data accumulation and one person operations , and also we are conducting various initiatives such as dynamic pricing and meal coupon meal support , coupon .
Speaker #1: So, based upon what I've explained, we will aim to create the next value-creating positive cycle. The investment and partnerships will become our asset that will create value in the future.
Speaker #1: 5G , is G and next generation high quality network that supports AI era and we will be strengthening the partnership to create a added value service in the future .
Speaker #1: And next . Much Kddi will be exhibiting at the MWC Barcelona 2026 . It marks our third consecutive year of exhibition since 2024 , which marked our first exhibition .
Speaker #1: Our theme has been Life Transformation . Specific themes or details will be announced at a later date , so stay tuned . Finally , summary .
Speaker #1: In mobile , our structural , reform , mindful of lifetime value worked well . And then on a full year basis , we have outlook of more for financing .
Speaker #1: We've identified challenges and will be moving into the phase of executing strategy in the second half. This way, consolidated results and mobile have progressed in line with our projections at the beginning of the fiscal year, and we are growing more confident about the delivery of results.
Speaker #1: So, as an interim dividend, we would like to pay out ¥40 per share, which is 50% of ¥80, which is what we announced at the beginning of the fiscal year.
Speaker #1: For the next stage of growth, we will be proceeding with infrastructure advancement and partnerships for service delivery in the next round of the medium-term plan.
Speaker #1: We will be aiming to improve corporate value and sustainable growth in the age of AI. Thank you very much for your attention.